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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X]Preliminary Proxy Statement [_]Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PAYMENTECH, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_]No fee required.
[X]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(a) Title of each class of securities to which transaction applies: Common
Stock
(b) Aggregate number of securities to which transaction applies: 16,381,296
shares of Common Stock and 3,605,692 options to purchase shares of
Common Stock.
(c) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): The filing
fee of $86,073 was calculated pursuant to Rule 0-11(c) of the
Securities Exchange Act of 1934, as amended, by multiplying 1/50th of
1% by an amount equal to the sum of (x) the product of $25.50, the
exchange price, and 16,381,296, the aggregate number of shares of
Common Stock outstanding (other than shares owned by either BANK ONE
CORPORATION or its subsidiaries), and (y) $12,640,607, the aggregate
amount anticipated to be paid to certain persons holding options to
purchase shares of Common Stock in consideration of cancellation of
such options.
(d) Proposed maximum aggregate value of transaction: $430,363,655
(e) Total fee paid: $86,073
[X] Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
As filed with the Commissioner on June 9, 1999
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--PRELIMINARY COPIES--
[Letterhead of Paymentech, Inc.]
To the Stockholders of Paymentech, Inc.
A MERGER PROPOSAL--YOUR VOTE IS VERY IMPORTANT
Paymentech's board of directors unanimously approved a merger agreement
between First Data Corporation and Paymentech. The proposed transaction
involves the merger of Paymentech with a newly formed company which will be
jointly owned by First Data and BANK ONE CORPORATION. Effectively, the merger
will enable First Data to acquire all of Paymentech's outstanding shares of
common stock, other than the shares owned by a subsidiary of BANK ONE. In the
merger, Paymentech's public stockholders (other than shareholders who validly
exercise appraisal rights in connection with the merger) would exchange all of
their shares in Paymentech for $25.50 in cash per share and would no longer
hold any equity in Paymentech or its related entities.
In connection with the merger agreement, First Data and BANK ONE have
separately agreed that following the merger they will combine Paymentech's
operations with Banc One Payment Services L.L.C., the existing merchant bank
alliance between First Data and BANK ONE.
In order to complete the merger, the merger agreement must be adopted by the
holders of a majority of Paymentech common stock, including at least two-thirds
of the shares not owned by either BANK ONE or its affiliates. The merger is
also subject to obtaining antitrust regulatory approval, as well as other
conditions. Stockholders who make a written demand for appraisal prior to the
stockholder vote at the special meeting, who do not vote in favor of adoption
of the merger agreement and who otherwise comply with the provisions of Section
262 of the General Corporation Law of the State of Delaware will be entitled,
if the merger is completed, to statutory appraisal of the "fair value" of their
shares of common stock.
You should be aware that six of Paymentech's eight directors are either
directors or executive officers of BANK ONE or an executive officer of
Paymentech. Your board of directors unanimously approved the merger agreement
and the merger. Merrill Lynch, financial advisor to Paymentech, rendered its
opinion that the $25.50 merger consideration is fair from a financial point of
view. Paymentech's board of directors unanimously recommends that you vote to
adopt the merger agreement.
This proxy statement provides you with detailed information concerning
Paymentech, First Data, BANK ONE and the merger. Please give all of the
information contained in the proxy statement your careful attention.
The date, time and place of the special meeting:
, , 1999
: .m., local time
Paymentech, Inc.
1601 Elm Street, 47th Floor
Dallas, Texas 75201
Please use this opportunity to take part in the affairs of Paymentech by
voting on the adoption of the merger agreement. Whether or not you plan to
attend the meeting, please complete, sign, date and return the accompanying
proxy in the enclosed self- addressed stamped envelope. Returning your proxy
does NOT deprive you of your right to attend the meeting and to vote your
shares in person. YOUR VOTE IS IMPORTANT.
On behalf of the board of directors, I thank you for your support and
appreciate your consideration of this matter.
PAMELA H. PATSLEY
President and Chief Executive Officer
This transaction has not been approved or disapproved by the Securities
and Exchange Commission or any state securities regulators. In addition,
neither the Securities and Exchange Commission nor state securities
regulators passed upon the fairness or merits of the transaction nor upon
the accuracy or adequacy of the information contained in this document.
Any representation to the contrary is unlawful.
This proxy statement is dated , 1999 and was first mailed to
stockholders on or about , 1999.
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[Logo of Paymentech]
PAYMENTECH, INC.
1601 Elm Street
Dallas, Texas 75201
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Notice is hereby given that a special meeting of stockholders of Paymentech,
Inc. will be held on , , 1999, at :00 .m., local time, at 1601 Elm
Street, 47th Floor, Dallas, Texas 75201, for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of March 22, 1999, among Paymentech, First Data Corporation
and FB Merging Corporation, a newly formed company which will be jointly owned
by First Data and BANK ONE, pursuant to which FB Merging will merge with and
into Paymentech and Paymentech will survive the merger. In the merger, holders
of outstanding shares of the common stock, par value $.01 per share, of
Paymentech (other than BANK ONE, First Data, FB Merging and their respective
wholly owned subsidiaries and holders of dissenting shares), will receive
$25.50 in cash for each share of Paymentech common stock held by them. Adoption
of the merger agreement will also constitute approval of the merger and the
other transactions contemplated by the merger agreement.
2. To transact such other business as may properly come before the special
meeting or any adjournment thereof.
These items of business are described in the attached proxy statement. Only
stockholders of record at the close of business on , 1999, the record
date, are entitled to notice of and to vote at the special meeting. You may
vote in person at the special meeting, even if you have returned a proxy.
By order of the Board of Directors
Pamela H. Patsley
President and Chief Executive
Officer
, 1999
Whether or not you plan to attend the meeting, please complete, sign,
date and return the accompanying proxy in the enclosed self-addressed
stamped envelope. Returning your proxy does NOT deprive you of your right to
attend the meeting and to vote your shares in person.
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TABLE OF CONTENTS
<TABLE>
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QUESTIONS AND ANSWERS ABOUT PAYMENTECH'S MERGER AND THE SPECIAL MEETING OF
STOCKHOLDERS............................................................. 1
SUMMARY................................................................... 3
Special Factors......................................................... 3
The Merger Agreement.................................................... 7
Litigation.............................................................. 9
Dissenters' Rights of Appraisal......................................... 9
Other Agreements Between First Data and BANK ONE........................ 10
THE PARTIES............................................................... 14
SPECIAL FACTORS........................................................... 16
Background of the merger................................................ 16
Recommendation of Paymentech's board of directors and fairness of the
merger................................................................. 21
Reasons for the merger.................................................. 25
Opinion of Paymentech's financial advisor............................... 26
Certain projected financial information................................. 32
Position of BANK ONE and First USA Financial regarding the merger....... 33
Position of First Data, FDC Offer and FB Merging regarding the merger... 34
Plans for Paymentech following the merger and certain effects of the
merger................................................................. 35
Conduct of Paymentech's business if the merger is not completed......... 36
Conflicts of interest and other interests of certain persons in the
merger and certain relationships....................................... 36
Accounting treatment.................................................... 37
Regulatory requirements and third party consents........................ 38
U.S. federal income tax consequences of the merger...................... 38
Fees and expenses....................................................... 39
INFORMATION CONCERNING THE SPECIAL MEETING................................ 40
Proxy statement......................................................... 40
Time, place and date.................................................... 40
Purpose of the special meeting.......................................... 40
Stockholder record date for the special meeting......................... 40
Vote of Paymentech stockholders required for adoption of the merger
agreement.............................................................. 40
Proxies................................................................. 41
LITIGATION................................................................ 42
THE MERGER AGREEMENT...................................................... 43
The merger.............................................................. 43
Contribution of cash and Paymentech common stock to FDC Offer........... 43
Conversion of securities................................................ 43
Exchange of securities.................................................. 44
Charter and by-laws; directors and officers............................. 44
Representations and warranties.......................................... 45
Covenants relating to the conduct of Paymentech's business.............. 45
No solicitation......................................................... 47
Third-party standstill agreements....................................... 48
Covenants regarding stockholder meeting................................. 48
Stock-based compensation................................................ 48
Indemnification......................................................... 49
Conditions precedent to the merger...................................... 49
Termination of the merger agreement..................................... 50
Costs and expenses; termination fee..................................... 51
</TABLE>
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THE STOCKHOLDER AGREEMENT................................................. 52
Agreement to vote....................................................... 52
Restrictions on transfer; proxies....................................... 52
No solicitation......................................................... 52
Actions taken prior to completion of the merger......................... 53
Actions taken after completion of the merger............................ 53
Termination of stockholder agreement.................................... 54
THE CONTRIBUTION AGREEMENT................................................ 55
OTHER AGREEMENTS BETWEEN FIRST DATA, BANK ONE AND/OR PAYMENTECH........... 57
Existing agreements between First Data and its affiliates and BANK ONE
and its affiliates..................................................... 57
Agreements between BANK ONE and Paymentech.............................. 57
DISSENTERS' RIGHTS OF APPRAISAL........................................... 61
PAYMENTECH, INC. SELECTED FINANCIAL DATA.................................. 64
MARKET FOR THE COMMON STOCK............................................... 65
Paymentech common stock market price and dividend information........... 65
Market price of Paymentech common stock................................. 65
SECURITIES OWNERSHIP...................................................... 66
CONTROLLING PERSONS, DIRECTORS AND EXECUTIVE OFFICERS OF PAYMENTECH, BANK
ONE, FIRST USA FINANCIAL, FIRST DATA, FDC OFFER AND FB MERGING........... 68
Background of named persons............................................. 68
Past contacts, transactions and negotiations............................ 78
Plans or proposals...................................................... 79
Recent transactions in Paymentech common stock.......................... 79
Contracts, arrangements or understandings concerning Paymentech's
securities............................................................. 79
INDEPENDENT ACCOUNTANTS................................................... 80
STOCKHOLDER PROPOSALS..................................................... 80
WHERE YOU CAN FIND MORE INFORMATION....................................... 81
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS......................... 83
OTHER BUSINESS............................................................ 83
</TABLE>
Annex A--Agreement and Plan of Merger
Annex B--Stockholder Agreement
Annex C--Contribution Agreement
Annex D--Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
Annex E--Section 262 of the Delaware General Corporation Law
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QUESTIONS AND ANSWERS ABOUT PAYMENTECH'S MERGER
AND THE SPECIAL MEETING OF STOCKHOLDERS
Q: What is the proposal that I will be voting on?
A: You are being asked to approve the merger agreement and the merger. The
merger agreement provides that Paymentech will merge with a newly formed
company which will be jointly owned by First Data and BANK ONE. As a result
of the merger, First Data will indirectly acquire an approximate 45%
interest in Paymentech, which represents the ownership currently held by
all of Paymentech's outstanding shares of common stock, other than the
shares owned by BANK ONE.
Q:What will I receive in the merger?
A: If the merger is completed, you will receive $25.50 in cash for each share
of Paymentech common stock that you own.
Q: What rights do I have if I oppose the merger?
A: You may dissent from the merger and seek appraisal of the fair value of
your shares by complying with all of the Delaware law procedures explained
on pages 61 to 63. If you are entitled to an appraisal, the Delaware Court
of Chancery will appraise the fair value of your shares by taking into
account all relevant factors, exclusive of any value arising from the
accomplishment or expectation of the merger.
Q: What will happen to Paymentech after the merger?
A: First Data and BANK ONE have separately agreed that following the merger
they will combine Paymentech's operations with Banc One Payment Services
L.L.C., the existing merchant bank alliance between First Data and BANK
ONE.
Q: Why is the board of directors recommending that I vote for the merger
agreement?
A: After considering the approval of the merger by its two independent
directors, as well as the opinion of its financial advisor, Merrill Lynch,
your board of directors unanimously believes that the terms of the merger
agreement are advisable and fair to stockholders not affiliated with BANK
ONE.
Q:What if the merger is not completed?
A: It is possible the merger will not be completed. That might happen if, for
example, Paymentech's stockholders do not adopt the merger agreement or if
timely regulatory approval is not received. Should that occur, none of BANK
ONE, First Data or any third party is under any obligation to make or
consider any alternative proposals regarding the purchase of the public
shares of Paymentech common stock.
Q:What do I need to do now?
A: Please mail your signed proxy card in the enclosed return envelope as soon
as possible, so that your shares will be represented at the special
meeting.
Q:Who may vote on the merger?
A: All stockholders of record as of the close of business on , 1999 may
vote. You are entitled to one vote per share of Paymentech common stock
that you owned on the record date. For the merger to occur, the holders of
a majority of the shares of Paymentech common stock must approve the merger
agreement and the merger, including at least two-thirds of the shares not
owned by either BANK ONE or its affiliates. BANK ONE, which owns
approximately 55% of the outstanding Paymentech common stock, has signed an
agreement with First Data to vote to approve the merger. Also, Paymentech
expects that its executive officers and directors will vote to approve the
merger.
Q:Should I send in my stock certificates now?
A: No. If the merger is completed, we will send you written instructions for
exchanging your share certificates.
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Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares.
Q:May I change my vote?
A: Yes. If you hold your shares in your own name, just send the Secretary of
Paymentech a written revocation notice or a later-dated, signed proxy card
before the special meeting or attend the special meeting and vote. If you
hold your shares in "street name," you should follow the directions provided
by your broker regarding how to change your vote.
Q:When and where is the special meeting?
A: The special meeting will be held at : .m. on , 1999 at 1601 Elm
Street, 47th Floor, in Dallas, Texas.
Q: When do you expect the merger to be completed?
A: We will complete the merger when all of the conditions to its completion are
satisfied or waived. The merger will become effective when we file a
certificate of merger with the State of Delaware. We are working toward
completing the merger as quickly as possible and hope to complete the merger
during the third calendar quarter of 1999, provided that all of the
conditions to the merger can be satisfied within this time period.
Q:What else will happen at the meeting?
A: We know of no other matters, other than as described in the "Notice of
Special Meeting," which are to come before the special meeting.
Q:Who can answer my questions?
A: If you have questions about the merger or need additional copies of this
proxy statement, please call Georgeson & Company, Inc., a professional
soliciting organization retained by Paymentech, at 1-800-223-2064. If you
have any questions about Paymentech's operations, please call (214) 849-
3750.
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SUMMARY
This summary highlights material information from this document and may not
contain all of the information that is important to you. You should carefully
read this entire document and the other documents we refer to for a more
complete understanding of the merger and other transactions contemplated by
Paymentech, First Data and BANK ONE. In particular, you should read the
documents attached to this proxy statement, including the merger agreement, the
stockholder agreement and the contribution agreement, which are attached as
Annexes A, B and C, respectively. In addition, we incorporate by reference
important business and financial information about Paymentech into this proxy
statement. You may obtain the information incorporated by reference into this
proxy statement without charge by following the instructions in the section
entitled "Where You Can Find More Information" on page 81 of this proxy
statement.
Special Factors
Purpose, background and effects of the merger and related transactions
The merger and related transactions will combine the resources of First
Data, Paymentech and BANK ONE, strengthening their efforts to offer customers a
broad array of competitive services and increased processing scale and
efficiency. The structure of the merger will enable First Data to acquire the
entire outstanding minority equity interest in Paymentech, with BANK ONE
retaining its majority equity interest. Upon completion of the merger,
Paymentech, as the surviving corporation, will become a privately held company
jointly owned indirectly by First Data and BANK ONE. Following the merger,
First Data and BANK ONE will cause Paymentech to contribute substantially all
of its assets and liabilities to Banc One Payment Services L.L.C., the existing
merchant bank alliance between First Data and BANK ONE. Ultimately, BANK ONE
will own approximately a 52.5% interest and First Data will own approximately a
47.5% interest in the BANK ONE/First Data alliance. First Data's acquisition of
the entire minority equity interest in Paymentech was a prerequisite for First
Data agreeing to the ultimate combination of Paymentech and the BANK ONE/First
Data alliance.
The proposed transactions will enable BANK ONE to consolidate Paymentech's
merchant acquiring and processing operations with the merchant acquiring
operations of the BANK ONE/First Data alliance, thereby streamlining and
strengthening BANK ONE's participation in the merchant services market and
creating an entity better able to compete in a consolidating market in which
scale and efficiency are increasingly important. The proposed transactions will
also enable First Data to strengthen its relationship with BANK ONE, one of the
two largest credit card issuers in the United States, and to have access to
Paymentech's seasoned management team.
If the merger is completed, Paymentech common stock would cease to be
publicly traded and holders of Paymentech common stock (other than BANK ONE,
First Data, FB Merging and their wholly owned subsidiaries and stockholders who
dissent from the merger and seek appraisal of their shares in accordance with
the Delaware law requirements explained in this document) would receive $25.50
per share in cash. As a result of the merger, Paymentech's public stockholders
will not face the risk of a decline in the value of Paymentech or the
Paymentech common stock. However, due to the merger, Paymentech's public
stockholders will not have the opportunity to participate in the future
earnings and growth of Paymentech or any increase in the value of the
Paymentech common stock and will not have any right to vote on corporate
matters. In addition, the merger will constitute a taxable transaction to
Paymentech's public stockholders who may otherwise have preferred holding their
Paymentech shares until some future time in order to defer the occurrence of a
taxable event.
Recommendation of Paymentech's board of directors
After considering that each of the two directors not affiliated with BANK
ONE or employed by Paymentech (other than as directors) indicated his intention
to vote for approval of the merger, as well as the opinion of Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Paymentech's board of directors has
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unanimously approved the merger agreement and the merger and recommends that
you vote to adopt the merger agreement and approve the merger. The board of
directors has unanimously determined that the merger is fair to Paymentech
stockholders not affiliated with BANK ONE and the terms and provisions of the
merger agreement (including the $25.50 per share purchase price) are advisable.
Factors considered by the board of directors
In reaching its decision to recommend adoption of the merger agreement and
approval of the merger, the board of directors considered a number of factors,
including the following:
. a comparison of the historical market prices of Paymentech common stock
to the $25.50 per share price offered by First Data, which represents a:
. 2.2% premium over the $24.94 closing price per share of Paymentech
common stock on March 19, 1999, which was the last trading day prior
to the date on which the merger was announced
. 29.1% premium over the $19.75 closing price per share of Paymentech
common stock on March 8, 1999, which was 10 trading days prior to the
date on which the merger was announced
. 29.1% premium over the $19.75 closing price per share of Paymentech
common stock on February 22, 1999, which was 20 trading days prior to
the date on which the merger was announced
. 28.7% premium over the $19.81 closing price per share of Paymentech
common stock on February 5, 1999, which was 30 trading days prior to
the date on which the merger was announced
. 82.1% premium over the $14.00 closing price per share of Paymentech
common stock on December 22, 1998, which was 60 trading days prior to
the date on which the merger was announced
. the financial presentations of Merrill Lynch and the opinion of Merrill
Lynch addressed to Paymentech's board of directors that, as of March 22,
1999 and based upon and subject to the factors set forth therein, the
$25.50 per share to be received by the holders of Paymentech common
stock (other than BANK ONE, First Data and their subsidiaries) in
connection with the merger was fair to those stockholders from a
financial point of view
. the belief of Paymentech's board of directors that available sale
alternatives and the price per outstanding share that might be offered
without a purchaser obtaining majority ownership of Paymentech were more
limited in light of BANK ONE's decision to retain its controlling
ownership interest in Paymentech; accordingly, the Paymentech board
recognized that the values included in the proposals received by
Paymentech from third parties in 1998 in relation to a purchase of all
of the outstanding Paymentech common stock, all of which were subject to
the parties reaching agreement on all of the terms of a transaction,
would not likely reflect what a third-party purchaser would be willing
to pay for only a minority stake in Paymentech, since a minority stake
would not enable a purchaser to control Paymentech's operations or
permit it comparable flexibility to combine Paymentech's operations with
its own similar operations
. the belief of Paymentech's board of directors, based upon the
negotiations that had occurred with First Data, that the merger
consideration represented the highest price that First Data would likely
be willing to pay at that time to acquire the publicly-held shares of
Paymentech common stock
. the merger agreement's requirement that the merger be approved by the
holders of at least two-thirds of the shares of Paymentech common stock
not owned by BANK ONE and its affiliates
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. the merger agreement's provision permitting the board of directors to
terminate the merger agreement in order to exercise the board's
fiduciary duties and to accept an alternative proposal more favorable to
Paymentech's stockholders, but subject to Paymentech's payment of a $10
million termination fee to First Data
. the factors described in the section of this proxy statement entitled
"Special Factors--Recommendation of Paymentech's board of directors and
fairness of the merger"
In addition to the foregoing factors, the board of directors considered the
following countervailing factors:
. Paymentech's public stockholders will not participate in the future
earnings and growth of Paymentech and will not have any right to vote on
corporate matters
. if Paymentech were to remain a publicly owned corporation and the price
of Paymentech common stock appreciated, stockholders might receive more
than the $25.50 per share price offered in the merger in a future sale
transaction
. the $25.50 per share price to be paid to Paymentech's stockholders is
less than the highest proposals received by Paymentech in 1998 from
third parties that had expressed interest in acquiring all of the
outstanding shares of Paymentech common stock, including shares owned by
BANK ONE and its subsidiaries
. the merger will constitute a taxable transaction to Paymentech's public
stockholders
In addition to the factors listed above, the six Paymentech directors who
are either executive officers or directors of BANK ONE or an executive officer
of Paymentech considered that Paymentech's two independent directors each
indicated his intention to vote for approval of the merger. The independent
directors each determined to approve the merger and recommend adoption of the
merger agreement and approval of the merger based upon the foregoing factors.
The independent directors did not, as a special committee, independently
evaluate the transaction or take any official action in respect of their
approval apart from their participation as members of Paymentech's board. In
addition, neither the Paymentech board nor the independent directors retained
outside advisors to negotiate solely on behalf of unaffiliated Paymentech
stockholders.
Merrill Lynch's fairness opinion
Merrill Lynch delivered to Paymentech's board of directors a written
opinion, dated March 22, 1999, that as of that date, based upon the assumptions
made, matters considered and limits of review described to the board of
directors and subsequently detailed in the written opinion, the $25.50 per
share to be received by Paymentech's stockholders (other than BANK ONE, First
Data and their subsidiaries) was fair from a financial point of view to those
stockholders. The full text of Merrill Lynch's written opinion dated as of the
date of this proxy statement, which sets forth the assumptions made, matters
considered, and qualifications and limitations on the review undertaken by
Merrill Lynch and which is substantially similar to Merrill Lynch's March 22,
1999 written opinion, is included as Annex D at the end of this proxy
statement. Please read the opinion carefully. Merrill Lynch has in the past
provided financial advisory and financing services to Paymentech, BANK ONE and
First Data and/or their affiliates and may continue to do so and has received,
and may receive, fees for the rendering of these services. Pursuant to the
terms of Merrill Lynch's engagement letter with Paymentech, Paymentech has
agreed to pay Merrill Lynch a fee of $3.9 million in connection with the
merger, all of which is contingent upon consummation of the merger.
Position of BANK ONE and First USA Financial regarding the merger
Senior executive officers of BANK ONE and First USA also serve as directors
of Paymentech and participated in the deliberations of the Paymentech board of
directors as described above. Based upon such
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deliberations, BANK ONE has adopted the analyses as presented to the Paymentech
board in support of BANK ONE's conclusions concerning the fairness of the
merger to the public stockholders of Paymentech, as expressed in the following
paragraph.
Based upon the conclusions of Paymentech's board of directors, the approval
of its two independent directors and the opinion and related analyses of
Merrill Lynch that, as of March 22, 1999 and based upon and subject to the
factors and assumptions set forth in the opinion, the $25.50 to be received by
Paymentech's public stockholders is fair to those stockholders from a financial
point a view, each of BANK ONE and First USA Financial, Inc., a wholly owned
subsidiary of BANK ONE which directly owns the BANK ONE equity interest in
Paymentech, has concluded that the merger is fair to Paymentech's public
stockholders. As disclosed in the section entitled "Special Factors--Conflicts
of interest and other interests of certain persons in the merger and certain
relationships," each of BANK ONE and First USA Financial has various interests
in the merger that differ from those of Paymentech's public stockholders.
Position of First Data, FDC Offer and FB Merging regarding the merger
Each of First Data, FDC Offer and FB Merging has reviewed the analyses of
the Paymentech board of directors to the extent set forth in this proxy
statement as to the fairness of the merger to the public stockholders of
Paymentech and has adopted these analyses in support of their separate
conclusions that the merger is fair to Paymentech's public stockholders. As
disclosed in the section entitled "Special Factors--Conflicts of interest and
other interests of certain persons in the merger and certain relationships,"
First Data has various interests in the merger that differ from those of
Paymentech's public stockholders.
Conflicts of interest and other interests of certain persons in the merger
In addition to the interests of BANK ONE, First USA Financial and First Data
described in this proxy statement, almost all of Paymentech's directors
(including John C. Tolleson (Chairman of the Board), Gene H. Bishop, Pamela H.
Patsley, Rupinder S. Sidhu and Richard W. Vague) and officers (including Pamela
H. Patsley (President and Chief Executive Officer), James W. Baumgartner
(President of Financial Services), Michael P. Duffy (Chief Operating Officer),
Kathryn Kessler (Chief Financial Officer) and Philip E. Taken (Chief
Administrative Officer, General Counsel and Secretary)) own shares of
Paymentech common stock and/or hold options to purchase the common stock and,
to that extent, their interest in the merger is the same as yours. In
accordance with the terms of the merger agreement, all options held by
Paymentech employees will be cashed out in the merger and all restrictions on
shares of stock held by Paymentech employees under Paymentech's restricted
stock plan will lapse at the effective time of the merger. You should note that
BANK ONE, First USA Financial and First Data and the directors and officers
named above have relationships or interests in the merger that are different
from your interests as a stockholder or that may present a conflict of
interest. In the case of various Paymentech officers and directors, these
interests include the cash-out of options to purchase Paymentech common stock,
the lapsing of restrictions on shares of Paymentech common stock granted under
Paymentech's restricted stock plan, the continuation of rights to
indemnification and liability insurance coverage for a limited time following
the merger and the forgiveness of a $1.95 million loan to Ms. Patsley. Also,
the current officers of Paymentech will hold management positions at the BANK
ONE/First Data alliance upon completion of the merger and the related
contribution of Paymentech's assets and liabilities to the alliance. For a more
detailed description of these interests, see pages 36 to 37 Paymentech's
independent directors were aware of these interests in determining to support
the merger to the board of directors and the board of directors subsequently
took those interests into account in declaring the merger agreement advisable
and fair to Paymentech's public stockholders and recommending that stockholders
adopt the merger agreement and approve the merger.
Accounting treatment of the merger
The merger will be accounted for under the "purchase" method of accounting
in accordance with generally accepted accounting principles. Therefore, the
aggregate consideration paid by First Data in
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connection with the merger will be allocated to First Data's proportionate
share of Paymentech's identifiable assets and liabilities based on their fair
market values, with any excess being treated as goodwill by First Data.
U.S. federal income tax consequences of the merger
The receipt of cash by Paymentech's public stockholders in exchange for
their shares of Paymentech common stock in the merger will be a taxable
transaction for U.S. federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign tax laws.
Paymentech stockholders must approve the merger
At the special meeting on , 1999, holders of a majority of the
outstanding shares of Paymentech common stock must approve the merger,
including at least two-thirds of the stockholders not affiliated with BANK ONE.
BANK ONE, which owns indirectly approximately 55% of the outstanding shares of
Paymentech common stock, has already agreed in the stockholder agreement to
vote to approve the merger. You are entitled to one vote per share of
Paymentech common stock that you owned on , 1999.
Regulatory approvals required to complete the merger
The merger is subject to antitrust laws. Under the Hart-Scott-Rodino Act of
1976, as amended, and the related rules of the Federal Trade Commission, we
cannot complete the merger until notifications have been given and certain
information has been furnished to the Federal Trade Commission and the
Antitrust Division of the United States Justice Department and the required
waiting period has either expired or been terminated by the Federal Trade
Commission or the Justice Department. The waiting period applicable to the
merger under the Hart-Scott-Rodino Act was terminated by the Federal Trade
Commission on May 13, 1999. The Department of Justice, Federal Trade Commission
or a government, state or private person may challenge the merger at any time
before its completion.
The Merger Agreement
The merger consideration
If the merger is completed, you will be entitled to receive $25.50 in cash
for each of your shares of Paymentech common stock.
Conditions to completion of the merger
The obligations of Paymentech and First Data to complete the merger are
subject to the prior satisfaction or waiver of various conditions. These
conditions include, among others, the following:
. Paymentech's stockholders must adopt the merger agreement and approve
the merger
. the applicable waiting periods under the antitrust laws must expire or
be terminated
. no injunction or order preventing the completion of the merger may be in
effect
. the respective representations and warranties of Paymentech and First
Data in the merger agreement must be true and correct in all material
respects
. Paymentech and First Data must comply with their respective material
agreements in the merger agreement in all material respects
. no material adverse change may occur in Paymentech's business
. neither BANK ONE nor First USA Financial, as applicable, shall have
terminated or repudiated the stockholder agreement or contribution
agreement with First Data or shall have breached its obligations under
either agreement
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. BANK ONE and First Data each shall have received confirmation from its
independent accountants that the merger and the contribution of
Paymentech's assets and liabilities to the BANK ONE/First Data alliance
will not adversely affect "pooling of interests" accounting treatment
for any publicly announced or completed transaction by BANK ONE or First
Data, respectively
. there shall not be any pending litigation by a governmental authority
which is reasonably likely to have a material adverse effect on
Paymentech or which seeks either to prohibit the merger and the other
transactions provided for in the merger agreement, the stockholder
agreement and the contribu-tion agreement or to compel Paymentech or
First Data to dispose of a material portion of their assets or
businesses.
Neither Paymentech nor First Data expect to waive any material condition to
the merger. Paymentech will require, before completing the merger, stockholder
approval of any waiver that Paymentech's board of directors has determined
would have a material adverse impact on its stockholders because it would
materially delay completion of the merger or result in stockholders receiving a
reduced amount of consideration.
Termination of the merger agreement
The merger agreement may be terminated under certain circumstances at any
time before the completion of the merger, as summarized below.
The merger agreement may be terminated by the mutual consent of Paymentech
and First Data.
In addition, the merger agreement may be terminated by either Paymentech or
First Data if:
. the conditions to completion of the merger would not be satisfied
because of a material breach of an agreement, representation or warranty
of the other in the merger agreement and that breach cannot be remedied
within 30 days of notice of the breach
. the merger is not completed prior to October 1, 1999
. if a governmental authority has issued a final and nonappealable order
prohibiting the merger or the other transactions provided for in the
merger agreement, stockholder agreement or contribution agreement.
If the merger agreement is terminated because the merger is not completed prior
to October 1, 1999 and any waiting period under the Hart-Scott-Rodino Act has
not expired or been terminated, then First Data has agreed to reimburse
Paymentech for up to $2 million of its out-of-pocket fees and expenses incurred
in connection with the merger agreement.
Paymentech may terminate the merger agreement if, prior to the approval of
the merger agreement by Paymentech's stockholders, its board of directors
determines that it is necessary to do so in order to comply with applicable
laws or its fiduciary duties to Paymentech's stockholders. The board of
directors may only make that determination if:
. it has received an alternative proposal relating to an acquisition
transaction of the nature specified in the merger agreement and
involving Paymentech and a party other than First Data
. the proposal is more favorable to Paymentech's stockholders compared to
the merger and is likely to be completed by October 1, 1999 and First
Data fails to match that proposal
. simultaneously with the termination of the merger agreement, Paymentech
enters into a definitive agreement relating to the alternative proposal
. Paymentech pays a $10 million termination fee to First Data
Furthermore, First Data may terminate the merger agreement and receive
payment of the $10 million termination fee from Paymentech, if Paymentech's
board of directors takes any of the following actions:
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. withdraws or modifies its approval and recommendation of the merger and
the merger agreement in a manner adverse to First Data
. approves or recommends any alternative proposal relating to an
acquisition transaction of the nature specified in the merger agreement
and involving Paymentech and a party other than First Data
No other negotiations involving Paymentech
Until the merger is completed or the merger agreement is terminated,
Paymentech has agreed not to solicit, initiate, encourage, make, implement,
recommend, participate in discussions or negotiate, directly or indirectly, any
proposal for an acquisition transaction of the nature specified in the merger
agreement and involving Paymentech and a party other than First Data. However,
Paymentech may provide confidential information about Paymentech's operations
to a third party making an unsolicited acquisition proposal if Paymentech's
board of directors determines that not providing this information would be
inconsistent with applicable laws or the board's fiduciary duties to
Paymentech's stockholders.
In addition, Paymentech may make the above determination and thereafter
discuss or negotiate a third party acquisition proposal if its board of
directors believes that:
. the proposal is more favorable to Paymentech's stockholders compared to
the merger
. if applicable, financing to complete the alternative acquisition
transaction is committed or highly likely to be obtained by the third
party making the proposal
. the proposal has a reasonable prospect of being completed prior to
October 1, 1999
. failure to engage in these discussions or negotiations would be
inconsistent with applicable laws or the board's fiduciary duties to
Paymentech's stockholders
Litigation
Subsequent to the announcement of the merger by Paymentech and First Data on
March 22, 1999, three putative class actions were filed in the Court of
Chancery for the State of Delaware. These lawsuits have subsequently been
consolidated into a single action which challenges the terms of the merger and
names as defendants Paymentech, Paymentech's directors, First Data and BANK
ONE. The lawsuit alleges that Paymentech's directors and BANK ONE, as a
controlling stockholder of Paymentech, aided by First Data, breached their
fiduciary duties to Paymentech's public stockholders. The action seeks to have
the merger enjoined or, if it is consummated, to have it rescinded and to
recover unspecified damages, fees and expenses.
Dissenters' Rights of Appraisal
Any stockholder who does not wish to accept the $25.50 per share in the
merger has the right under Delaware law to have the "fair value" of his or her
shares determined by the Delaware Chancery Court. This "right of appraisal" is
subject to a number of restrictions and technical requirements. Generally, in
order to exercise appraisal rights:
. you must not vote in favor of the merger
. you must make a written demand for appraisal in compliance with Delaware
law before the vote on the merger
Merely voting against the merger will not protect your right of appraisal.
Annex E to this proxy statement contains the Delaware statutory provisions
relating to your right of appraisal. Failure to follow all of the steps
required by these provisions will result in the loss of your right of
appraisal. The Delaware law requirements for exercising appraisal rights are
explained on pages 60 to 62 of this proxy statement.
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Other Agreements Between First Data and BANK ONE
The stockholder agreement
In connection with the merger agreement, First Data, BANK ONE, First USA
Financial, Inc., a wholly owned subsidiary of BANK ONE which directly owns the
BANK ONE equity interest in Paymentech, FDC Offer Corporation, the parent
company of FB Merging, and FB Merging have entered into a stockholder
agreement. Under this agreement, First USA Financial has agreed to the
following:
. not to transfer or encumber any of its shares of Paymentech common stock
. not to grant any proxies or enter into any voting agreements with
respect to its shares of Paymentech common stock
. not to solicit or participate in discussions or negotiations regarding a
third-party acquisition involving Paymentech or its subsidiaries
. to vote in favor of adopting the merger agreement and approval of the
merger
. to vote against: any action or agreement that would effectively impede
or prevent completion of the merger or cause Paymentech to breach the
merger agreement
. to vote against (unless requested by First Data) or as otherwise
provided in the stockholder agreement:
. any extraordinary corporate transaction involving Paymentech or its
subsidiaries, such as a merger or significant asset sale
. a change in Paymentech's management or a majority of its directors
. a change in Paymentech's present capitalization
. an amendment to the charter or by-laws of Paymentech or any of its
subsidiaries
. any other material change in Paymentech's business or corporate
structure or which may impede or prevent the merger and the other
transactions contemplated by the merger agreement, the stockholder
agreement and the contribution agreement
The stockholder agreement will terminate upon any of the following:
. the termination of either the merger agreement or the contribution
agreement
. the failure of BANK ONE to receive the written opinion of its outside
legal counsel that the contribution of its Paymentech common stock to
FDC Offer in exchange for an ownership interest in FDC Offer will
constitute an exchange of a type that is generally tax-free
. the completion of the contribution of Paymentech's assets and
liabilities to the BANK ONE/First Data alliance as provided for in the
contribution agreement.
The contribution agreement
First Data and BANK ONE have also entered into a contribution agreement.
Under this agreement, First Data and BANK ONE have agreed to cause Paymentech,
as the surviving corporation in the merger, to contribute substantially all of
its assets and liabilities and business to the BANK ONE/First Data alliance in
exchange for a membership interest in the alliance. The parties are presently
considering amending the contribution agreement to replace Paymentech's
contribution of assets and liabilities with an alternative structure. This
alternative structure would provide for the merger of substantially all of
Paymentech's operating subsidiaries into various newly-formed limited liability
company subsidiaries, with these new subsidiaries surviving the respective
mergers. Paymentech would then contribute all of its ownership in these
subsidiaries to the BANK ONE/First Data alliance in exchange for a membership
interest in the alliance.
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TRANSACTION DIAGRAMS
A. Current Structure [GRAPHIC] [The printed version of this proxy statement
contains a diagram showing that approximately 55% and 45% of the outstanding
Paymentech common stock is currently owned by First USA Financial (which is
wholly owned by BANK ONE) and public stockholders, respectively.]
B. Capitalization of FDC Offer Corporation [GRAPHIC] [The printed version of
this proxy statement contains a diagram showing that prior to the merger (1)
First USA Financial will contribute its shares of Paymentech common stock to FDC
Offer in exchange for approximately 55% of the common stock to FDC Offer in
exchange for approximately 55% of the common stock of FDC Offer and (2)
First Data will contribute to FDC Offer cash sufficient to pay the aggregate
merger consideration in exchange for approximately 45% of the common stock of
FDC Offer.]
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C. Merger Transactions [GRAPHIC] [The printed version of this proxy statement
contains a diagram showing that (1) immediately prior to completion of the
merger, First Data and First USA Financial will cause FDC Offer to contribute to
FB Merging all of the shares of Paymentech common stock that it receives from
First USA Financial and all of the cash it receives from First Data in exchange
for shares of capital stock of FB Merging; (2) FB Merging will merge into
Paymentech; and (3) each share of Paymentech common stock held by Paymentech's
public stockholders will be converted in the merger into the right to receive
$25.50 in cash, without interest.]
D. Post Merger Transactions [GRAPHIC] [The printed version of this proxy
statement contains a diagram detailing the contribution of Paymentech's business
to the BANK ONE/First Data alliance following completion of the merger. See "The
Contribution Agreement."]
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THE PARTIES
Paymentech, Inc.
1601 Elm Street
Dallas, Texas 75201
(214) 849-3750
Incorporated in Delaware in 1995, Paymentech engages in the credit card
industry primarily as a payment processor of credit and debit card transactions
on behalf of merchants, financial institutions and sales agents. Paymentech
also provides third-party credit and debit authorization services to financial
institutions, sales agents and Paymentech's direct merchants. According to
published industry sources, Paymentech is the third largest payment processor
of bankcard transactions in the United States. In addition, Paymentech markets
and issues commercial cards to businesses and other entities. Commercial cards
facilitate business-to-business payment procedures and reporting, replacing
direct payment methods.
First Data Corporation
5660 New Northside Drive
Atlanta, Georgia 30328
(770) 857-0001
Incorporated in Delaware in 1989, First Data operates in three principal
business segments providing high- quality, high-volume information processing
and related services to several market sectors. These sectors, which represent
approximately 90% and 80% of First Data's revenues in 1998 and 1997,
respectively, are payment instruments, card issuer services and merchant
processing services.
BANK ONE CORPORATION
One First National Plaza
Chicago, Illinois 60670
(312) 732-4000
BANK ONE is a multi-bank holding company organized in 1998 under the laws of
the State of Delaware to effect the merger, effective October 2, 1998, of First
Chicago NBD Corporation with BANC ONE CORPORATION.
Through its bank subsidiaries, BANK ONE provides domestic retail banking,
worldwide corporate and institutional banking, and trust and investment
management services. BANK ONE operates banking offices in Arizona, Colorado,
Florida, Illinois, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma,
Texas, Utah, West Virginia and Wisconsin. BANK ONE also owns nonbank
subsidiaries that engage in businesses related to banking and finance,
including credit card and merchant processing, consumer and education finance,
mortgage lending and servicing, insurance, venture capital, investment and
merchant banking, trust, brokerage, investment management, leasing, community
development and data processing.
First USA Financial, Inc.
Three Christina Centre
201 North Walnut
Wilmington, Delaware 19801
(302) 594-4100
Incorporated in Delaware in 1989, First USA Financial is an intermediate
bank holding company that has as subsidiaries First USA Bank, N.A. and
approximately a 55% equity interest in Paymentech. Through First USA Bank,
First USA Financial is one of the two largest issuers of credit cards in the
United States.
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FDC Offer Corporation
5660 New Northside Drive
Atlanta, Georgia 30328
(770) 857-7000
FDC Offer Corporation is a newly incorporated Delaware corporation organized
by First Data in connection with the merger. FDC Offer has not carried on any
activities to date and is currently wholly owned by First Data. Until
immediately prior to the merger and the related contribution of Paymentech
common stock by BANK ONE and cash by First Data to acquire the public shares of
Paymentech common stock in the merger, it is not expected that FDC Offer will
have any significant assets or liabilities or engage in activities other than
those incident to its formation and capitalization and the transactions
contemplated by the merger. Following consummation of the foregoing
contributions, FDC Offer will be owned 55% by First Data and 45% by BANK ONE.
FB Merging Corporation
5660 New Northside Drive
Atlanta, Georgia 30328
(770) 857-0001
FB Merging is a newly incorporated Delaware corporation organized by First
Data in connection with the merger. FB Merging has not carried on any
activities to date and is currently wholly owned by FDC Offer. Until
immediately prior to the merger and the related contribution by FDC Offer of
Paymentech common stock and cash to acquire the public shares of Paymentech
common stock in the merger, it is not expected that FB Merging will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the merger.
Relationships between First Data and BANK ONE and First USA Financial
First Data and its affiliates provide various merchant processing services
to Paymentech and various credit card and processing services to, and has
certain other contractual relationships with, BANK ONE and its subsidiaries. In
addition, First Data and BANK ONE each also owns 50% of their existing
alliance, BankOne Payment Services L.L.C. See "Other Agreements between First
Data, BANK ONE and/or Paymentech--Existing agreements between First Data and
its affiliates and BANK ONE and its affiliates."
Except for their respective ownership interests in the BANK ONE/First Data
alliance, First Data does not currently own any material number of shares of
BANK ONE, First USA Financial or any of their affiliates, and BANK ONE and
First USA Financial do not currently own any material number of shares of First
Data or any of its affiliates. However, immediately prior to the merger, First
USA Financial will contribute to FDC Offer all of the Paymentech common stock
it owns in exchange for shares of common stock of FDC Offer, and First Data and
First USA Financial will cause FDC Offer to contribute to FB Merging all of the
shares of Paymentech common stock that it receives from First USA Financial for
shares of capital stock of FB Merging. See "The Stockholder Agreement--Actions
taken prior to completion of the merger."
First Data currently does not have any officers or directors who also serve
as officers or directors of either BANK ONE or First USA Financial or any of
their affiliates, other than the BANK ONE/First Data alliance. However, First
Data, BANK ONE, First USA Financial and FDC Offer have agreed in the
stockholder agreement that immediately after completion of the merger and until
the contribution of substantially all of Paymentech's assets and liabilities to
the BANK ONE/First Data alliance, FDC Offer will elect a nine-member board of
directors for Paymentech, five of whom will be designated by BANK ONE and four
of whom will be designated by First Data. After the contribution of
Paymentech's assets and liabilities to the BANK ONE/First Data alliance, the
stockholder agreement provides that the Paymentech's board of directors will be
reduced to four members, with two members designated by each of BANK ONE and
First Data. See "The Stockholder Agreement--Actions taken after completion of
the merger."
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SPECIAL FACTORS
Background of the merger
On January 20, 1997, BANK ONE announced its agreement to acquire by merger
First USA Inc., which at the time owned 57% of the outstanding Paymentech
common stock. In response to this proposed merger and the existence of the BANK
ONE/First Data alliance which raised questions regarding BANK ONE's long-term
plans with respect to Paymentech, Paymentech's board of directors approved the
engagement of Merrill Lynch as financial advisor to Paymentech, in order to
analyze various strategic options available to Paymentech in a manner
consistent with the "pooling" accounting treatment of the proposed BANK
ONE/First USA merger.
Throughout February, March and early April 1997, Paymentech, with the
assistance of Merrill Lynch, engaged in discussions and exploratory due
diligence with BANK ONE regarding a possible transaction in which BANK ONE
would have terminated the BANK ONE/First Data alliance and thereafter
Paymentech would have purchased Banc One POS Services Corporation, BANK ONE's
merchant processing business. However, on April 10, 1997, Paymentech publicly
announced that Paymentech and BANK ONE would not pursue this combination
(because the parties failed to agree on a price and other key terms), that BANK
ONE intended to allow Paymentech to pursue greater operating independence and
that BANK ONE expected to reduce its ownership in Paymentech following
completion of the BANK ONE/First USA merger, provided that this ownership
reduction could be accomplished so as to preserve the pooling accounting
treatment of that merger.
Having mutually agreed to do so, on August 13, 1997, William P. Boardman,
Senior Executive Vice President of BANK ONE, and Richard J. Lehmann, the then
President of BANK ONE, met with Henry C. Duques, Chairman and Chief Executive
Officer of First Data, Walter Hoff, Executive Vice President of First Data, Lee
Adrean, Executive Vice President and Chief Financial Officer of First Data, and
Roger Peirce, Group President of Electronic Funds Services of First Data (who
terminated his employment with First Data in 1998). At the meeting, the parties
discussed First Data's possible acquisition of the public shares of Paymentech
common stock, as well as combining Paymentech with the existing BANK ONE/First
Data alliance. On August 22, 1997, Mr. Boardman, Pamela Patsley, President and
Chief Executive Officer of Paymentech, along with a representative from Merrill
Lynch, and Messrs. Hoff and Adrean of First Data met to discuss the financial
implications of combining Paymentech and the BANK ONE/First Data alliance.
On September 4, 1997, BANK ONE and First Data executed a confidentiality
agreement, and representatives of First Data conducted due diligence sessions
at Paymentech's offices in Dallas on September 13 and 14, 1997. On September 15
and 17, 1997, Mr. Hoff raised with Ms. Patsley and Mr. Boardman the possibility
of First Data making a loan to Paymentech to enable Paymentech to acquire all
of the shares of Paymentech common stock held by the public stockholders.
Following the proposed acquisition, upon the request of First Data, Paymentech
would cause the contribution of Paymentech's assets to the BANK ONE/First Data
alliance in exchange for the assumption by the BANK ONE/First Data alliance of
the Paymentech loan and an increased equity interest in the alliance, with a
possibility for further reductions in BANK ONE's equity interest in the
alliance. These discussions included a proposed range of cash payments of
$28.00 to $30.00 (which represented premiums of 11.4% to 19.4% to Paymentech's
$25.13 market price on September 13, 1997) for each of the outstanding public
shares of Paymentech common stock, depending upon the other material terms of
the transaction. In addition, First Data's proposal was conditioned on First
Data having a right to cause Paymentech to repay its loan from First Data if
the contribution of Paymentech's assets to the BANK ONE/First Data alliance was
not completed within six months following First Data's request. As a result of
First Data's and BANK ONE's failure to agree on various key terms for the
proposed transaction, and the concern expressed by First Data with respect to
Paymentech's September 24, 1997 announcement that it intended to restate and
revise downward its previously announced results for the fourth fiscal quarter
of 1997, BANK ONE, Paymentech and First Data terminated these discussions in
September 1997.
In January 1998, Paymentech's board of directors authorized the company's
senior management and Merrill Lynch to begin discussions with third parties
regarding a sale of all of the outstanding Paymentech
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common stock, including BANK ONE's shares. At this meeting, BANK ONE's
representatives on the Paymentech board confirmed that BANK ONE was prepared to
consider third-party proposals to acquire the public shares of Paymentech
common stock and the shares owned by BANK ONE, provided that a transaction
could be accomplished in a manner consistent with BANK ONE's pooling accounting
restrictions.
Paymentech entered into confidentiality agreements and furnished information
to several parties interested in acquiring Paymentech throughout March and
April 1998. During this time, Paymentech's management and representatives of
Merrill Lynch held various meetings with interested parties regarding
Paymentech's operations and the terms for a possible transaction. In addition,
during this time, representatives of BANK ONE and First Data held separate
discussions regarding a possible transaction involving Paymentech, but such
discussions were not pursued further at that time as the parties remained
unable to agree on the key terms for a proposed transaction.
During May 1998, Paymentech received preliminary proposals from three
companies engaged in the merchant processing industry regarding the purchase of
all of the outstanding Paymentech common stock, including BANK ONE's shares, at
prices ranging from $22.00 to $26.00 per share in cash.
Paymentech's senior management, with the assistance of Merrill Lynch and
Paymentech's legal counsel, continued discussions regarding a potential
business combination with two of the interested parties, having been unable to
obtain sufficient information relating to the level of interest of the third
company.
Between June 18, 1998 and June 22, 1998, Paymentech received proposals from
these two interested companies to purchase all of the outstanding shares of
Paymentech common stock, including BANK ONE's shares, for per share prices of
$24.50 and $25.50, which were subsequently increased to $25.50 and $26.00,
respectively, and which represented premiums of 33.7% and 36.4%, respectively,
to Paymentech's $19.03 market price at such time. While Paymentech, Merrill
Lynch and Paymentech's legal counsel evaluated these proposals, which were
subject to negotiation of definitive transaction documents and satisfaction of
certain conditions, BANK ONE and its independent accountants also reviewed
these proposals and the other proposed terms for the transaction in light of
BANK ONE's pooling accounting restrictions.
On June 22, 1998, Paymentech's board of directors authorized Paymentech's
senior management, financial advisors and legal counsel to continue further
negotiations with the company offering to acquire Paymentech for $26.00 per
share.
On June 23, 1998, having been notified by Merrill Lynch that Paymentech
would be continuing negotiations with another bidder, the company that offered
to acquire Paymentech for $25.50 per share sent a letter to Paymentech
indicating that it was revising its proposed purchase price to $26.50 per
share, subject to this bidder's receipt of third-party financing and the
satisfaction of a number of conditions, including certain types of third-party
legal proceedings challenging the proposed transaction or certain types of
third-party or governmental legal proceedings adversely affecting the bidder's
financing of the proposed transaction not having been instituted, the absence
of any threatened or actual material adverse changes in Paymentech's business,
the absence of certain adverse changes in the United States financial markets,
the absence of a war or material armed hostilities or other international or
national calamity directly or indirectly involving the United States and no
third party having acquired more than 10% of Paymentech's common stock.
Paymentech's board of directors believed that these additional conditions
significantly increased the risk that the proposed transaction would not be
completed. Therefore, the board determined not to pursue further discussions
regarding this revised proposal but rather to continue negotiations with its
selected bidder who had not proposed any of these additional conditions and who
had indicated its ability to pay the proposed purchase price without the need
to obtain third-party financing or to subject completion of the transaction to
the risk that a third party might challenge the transaction or that Paymentech
might experience an adverse change in its business.
In connection with its exploration of a possible sale of BANK ONE's interest
in Paymentech, BANK ONE made clear that it would be necessary that the proposed
sale not raise concerns with respect to the pooling
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treatment of BANK ONE's prior merger transactions that had been accounted for
under the pooling-of-interests accounting method. Sales of assets by a party to
a pooling transaction can, under certain circumstances, raise issues under the
pooling rules and BANK ONE and its accountants carefully reviewed the proposed
transactions under those rules and determined that there was a substantial risk
that they could not be accomplished without jeopardizing the pooling treatment
of previously announced BANK ONE transactions. Beginning in late June 1998 and
extending through July and August 1998, BANK ONE and one of the selected
purchasers discussed possible alternative transaction structures in an effort
to ensure that any proposed sale would satisfy BANK ONE's pooling-of-interest
accounting requirements. Such proposals involved payments for the public shares
of Paymentech common stock in the range of $23.00 to $25.00 per share in cash
(which represented premiums of approximately 20.1% to 31.1% to Paymentech's
$19.03 market price on June 22, 1998).
At a meeting of Paymentech's board of directors on August 26, 1998, BANK
ONE's representatives on the Paymentech board indicated that BANK ONE had
completed its review of the proposed transaction, as well as its assessment of
the strategic value of its ownership interest in Paymentech and the business
prospects of Paymentech, including its focus on certain potentially higher
growth segments of the processing market, such as the Internet. Based on this
review, BANK ONE decided not to sell its interest in Paymentech and,
accordingly, determined that a sale transaction involving the BANK ONE shares
should not be pursued further. BANK ONE confirmed this position on August 28,
1998 in a filing with the SEC which stated that BANK ONE had concluded at such
time not to decrease its ownership interest in Paymentech. BANK ONE's
determination at this time was based on strategic considerations relating to
the benefits of maintaining a controlling interest in Paymentech in light of
BANK ONE's recognition that there was a greater strategic fit between the
business strategies being pursued by Paymentech and those of BANK ONE and First
USA than had previously been considered and was arrived at independently of
concerns about the effect of a potential sale of its interest in Paymentech on
the pooling accounting for BANK ONE's mergers described above. Because BANK ONE
will retain a substantial interest in Paymentech's business through its
interest in the BANK ONE/First Data alliance, it will be treated differently
from the public stockholders of Paymentech. See "--Position of BANK ONE and
First USA Financial regarding the merger." BANK ONE's decision was not based on
its view as to the adequacy of the prices being offered as measured against the
value of Paymentech as a going concern in such third party sales transactions.
In light of BANK ONE's determination not to sell its interest in Paymentech
based on strategic considerations as opposed to its view of the adequacy of the
consideration obtainable from third parties, Paymentech's board recognized that
the transactions it had been discussing with potential third party purchasers
could not be consummated and, accordingly, determined to terminate those
discussions.
During the Fall of 1998, BANK ONE and First Data commenced discussions with
respect to a possible transaction involving Paymentech and the BANK ONE/First
Data alliance. Key participants in one or more of these discussions included
Mr. Boardman, Mr. Lehmann and Richard W. Vague (Executive Vice President and
Head of Credit Card of BANK ONE and a member of Paymentech's board of
directors) of BANK ONE; Ms. Patsley, Michael P. Duffy (Chief Operating
Officer), Kathryn Kessler (Chief Financial Officer) and Philip E. Taken (Chief
Administrative Officer, General Counsel and Secretary) of Paymentech; and
Messrs. Duques, Charles T. Fote (President and Chief Operating Officer), Mr.
Adrean and David J. Treinen (Senior Vice President of Planning and Development)
of First Data. Because BANK ONE's decision not to sell its interest in
Paymentech was based on strategic considerations and not on the adequacy of the
prices being offered, Paymentech's board of directors decided not to renew
discussions with the two companies that had offered $26.50 and $26.00 per share
for all outstanding Paymentech common stock in June 1998. On October 22, 1998,
Paymentech and First Data confirmed the confidentiality agreement they had
entered into on September 4, 1997. In addition, BANK ONE, with the assistance
of Paymentech, and First Data exchanged due diligence information during this
period. Discussions between BANK ONE and First Data continued throughout
December with respect to a possible acquisition by First Data of the public
shares of Paymentech common stock and a combination of Paymentech and the BANK
ONE/First Data alliance, subject to BANK ONE and First Data reaching agreement
on the terms of the combination of Paymentech and the BANK ONE/First Data
alliance.
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On January 12, 1999, BANK ONE and First Data filed the necessary
applications with the Department of Justice under the Hart-Scott-Rodino Act in
order to commence the regulatory review process in anticipation of a potential
transaction generally along the lines then being discussed, which, although not
finalized, was anticipated to include an acquisition by First Data that would
trigger Hart-Scott-Rodino Act filing requirements. This filing did not include
a price or value for Paymentech, which the parties had not yet discussed. BANK
ONE and First Data continued their negotiations regarding the acquisition of
the public shares of Paymentech common stock and the subsequent combination of
Paymentech through January and the beginning of February. First Data
subsequently withdrew its Hart-Scott-Rodino Act application on February 4, 1999
and indicated to the Department of Justice that it would refile the application
if and when significant outstanding issues between BANK ONE and First Data were
resolved and First Data was prepared to make a proposal to Paymentech's board
of directors.
On January 8, 1999, Paymentech and First Data Merchant Services Corporation,
a wholly owned subsidiary of First Data, signed a letter of intent, indicating
their intention to enter into an agreement under which Paymentech would
outsource to First Data Merchant Services various processing functions for its
general merchant acquiring business.
At a February 10, 1999 meeting, First Data's board of directors received the
presentation of First Data's management concerning the status of discussions
with Paymentech and BANK ONE, as well as the general terms of the proposed
acquisition of the public shares of Paymentech common stock and contribution of
Paymentech's business to the BANK ONE/First Data alliance. The First Data board
authorized the company's management to proceed with a transaction.
Intermittently throughout February and early March 1999 representatives of
BANK ONE and First Data (including those who participated in the Fall 1998
discussions) discussed the terms of a possible offer by First Data for the
public shares of Paymentech and the subsequent combination of Paymentech and
the BANK ONE/First Data alliance. On March 12 and March 15, 1999, First Data
and BANK ONE refiled the Hart-Scott-Rodino applications with the Department of
Justice. Legal counsel for Paymentech and First Data began compiling additional
documents for the antitrust review process and Paymentech confidentially
notified selected customers in anticipation of inquiries that the Department of
Justice had indicated it intended to make. BANK ONE indicated that any
transaction between the two companies which involved Paymentech would be
predicated upon Paymentech's two independent directors approving the
transaction. In addition, BANK ONE indicated that representatives of
Paymentech, and not of BANK ONE, would need to negotiate the price to be paid
by First Data for the public shares of Paymentech common stock and this price
would need to be satisfactory to Paymentech's two independent directors.
On March 18, 1999, Mr. Fote sent a letter to Ms. Patsley at Paymentech
outlining First Data's proposal for acquiring the outstanding public shares of
Paymentech common stock for $24.00 per share in cash and included proposed
forms of transaction agreements to be entered into by Paymentech, First Data
and/or BANK ONE.
On March 20, 1999, representatives of the managements of Paymentech, BANK
ONE and First Data, (including Ms. Patsley, Mr. Taken, Philip Weaver, Executive
Vice President of First USA Financial, and Mr. Fote) along with their
respective legal counsel, discussed the terms and conditions of the proposed
forms of the transaction agreements.
Later on March 20, 1999, Paymentech's board of directors met and considered
First Data's proposal and authorized Gene H. Bishop and Rupinder S. Sidhu, the
two directors not affiliated with BANK ONE nor employed by Paymentech (except
as directors), to work with Paymentech's management, financial advisors and
legal counsel to seek a higher purchase price for First Data's purchase of the
outstanding public shares of Paymentech common stock and to finalize the other
terms of the definitive transaction agreements. This action was taken, in part,
because the other directors--who were either affiliated with BANK ONE or
employed by Paymentech--indicated they would not approve the proposed
transaction unless the independent directors both indicated their intention to
approve it. Neither the Paymentech board nor the independent directors retained
outside advisors to negotiate
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solely on behalf of unaffiliated Paymentech stockholders. At this meeting,
Merrill Lynch reviewed the financial terms of the proposed transaction and
discussed the results of its review of Paymentech's business. In addition,
Paymentech's legal counsel reviewed the terms and conditions of the proposed
transaction agreements and relevant aspects of applicable law regarding the
fiduciary duties of the Paymentech board in connection with the merger and the
stockholder approval requirements applicable to the merger. Following the
meeting, the two independent directors discussed with Paymentech's management,
Paymentech's legal counsel and Merrill Lynch the desire to obtain from First
Data the highest possible price for the public shares of Paymentech common
stock and the requirement that the final price represent a premium to current
trading prices, as well as other important issues relating to the proposed
transaction with First Data.
On March 21, 1999, representatives of the managements of Paymentech, BANK
ONE and First Data, along with their respective legal counsel, discussed the
terms and conditions of the proposed forms of the transaction agreements.
At a meeting in the evening of March 21, 1999, Paymentech's management
provided the board of directors with an update as to the status of the ongoing
negotiations with First Data and Paymentech's legal counsel updated the board
on the status of the various transaction documents. In addition, the board was
provided written summaries of the proposed merger agreement and stockholder
agreement.
Later on March 21, 1999, the Paymentech and First Data management teams and
their respective legal counsel and financial advisors continued to discuss
various issues relating to the proposed merger, including the desire of
Paymentech's management to propose a higher purchase price. After several
attempts by Paymentech to have First Data increase its offer to at least
$26.00, Mr. Fote orally increased First Data's initial offer of $24.00 per
share of Paymentech common stock to $25.50 (which represented a premium of
approximately 2.2% to the $24.94 market price of Paymentech common stock on
March 19, 1998) and also agreed that First Data would pay up to $2 million of
the expenses incurred by Paymentech in connection with the merger if the merger
is not completed by October 1, 1999 and the Hart-Scott-Rodino Act waiting
period has not expired or been terminated. First Data rejected Paymentech's
further attempts to obtain an additional purchase price increase. Separately,
the BANK ONE and First Data management teams, along with their respective legal
counsel, continued to discuss the terms of the proposed stockholder agreement,
contribution agreement and other related agreements to be entered into by them
in connection with the merger agreement.
On the morning of March 22, 1999, Paymentech's board of directors reviewed
the terms of the proposed transaction with First Data and considered the
opinion of Merrill Lynch, as of such date and based upon and subject to the
factors and assumptions set forth therein, that the $25.50 per share purchase
price to be paid to the holders of Paymentech common stock (other than BANK
ONE, First Data and their subsidiaries and the holders of dissenting shares)
was fair to those stockholders from a financial point of view. In addition,
Paymentech's legal counsel reviewed the principal terms and conditions of the
proposed merger agreement and the stockholder agreement and relevant aspects of
applicable law regarding the fiduciary duties of the Paymentech board of
directors in connection with the merger. The two independent directors
indicated to the other Paymentech directors that they would vote to approve the
proposed transaction. After considering Merrill Lynch's opinion, the legal
presentation and the independent directors' intention to vote for approval of
the proposed transaction, the board of directors, including its two independent
members, determined that the merger agreement is advisable and the terms of the
merger are fair to Paymentech's stockholders not affiliated with BANK ONE.
Accordingly, the board of directors approved the merger agreement and the
stockholder agreement and authorized Paymentech's management to finalize with
First Data the outstanding issues under the merger agreement.
In light of the board of directors' approval of the merger and in
anticipation of the pending finalization of definitive transaction agreements
with First Data, Paymentech requested that the New York Stock Exchange not
permit the Paymentech common stock to commence trading until the merger was
publicly announced.
Later on March 22, 1999, following completion of final negotiations among
Paymentech, BANK ONE and First Data, the parties publicly announced the
transaction.
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Recommendation of Paymentech's board of directors and fairness of the merger
At a special meeting on March 22, 1999, after considering the intention of
the two directors not affiliated with BANK ONE or employed by Paymentech (other
than as directors) to vote for approval of the merger, Merrill Lynch's opinion
and the other factors described below, Paymentech's board of directors
determined that the merger agreement is advisable and the merger is fair to
Paymentech stockholders not affiliated with BANK ONE. Accordingly, the board of
directors unanimously approved the merger agreement and now recommends that
Paymentech's stockholders adopt the merger agreement and approve the merger and
the other transactions contemplated by the merger agreement.
Factors considered by the board of directors. In determining to approve the
merger agreement and recommend that stockholders adopt it, the board of
directors considered the following factors:
. Merrill Lynch opinion. The board of directors considered the financial
presentations of Merrill Lynch and Merrill Lynch's oral opinion
delivered at the March 22, 1999 meeting of the board of directors (which
was subsequently confirmed in writing) to the effect that, as of the
date of its opinion and subject to the factors and assumptions set forth
therein, the $25.50 to be received by the holders of shares of
Paymentech common stock (other than BANK ONE, First Data and their
subsidiaries and the holders of dissenting shares) in connection with
the merger was fair from a financial point of view to those holders. The
full text of Merrill Lynch's written opinion dated as of the date of
this proxy statement, which sets forth the assumptions made, matters
considered and limits of review undertaken by Merrill Lynch and which is
substantially similar to Merrill Lynch's March 22, 1999 written opinion,
is attached as Annex D to this proxy statement. Stockholders are urged
to, and should, read Merrill Lynch's opinion carefully. The board of
directors did not take any specific action to adopt Merrill Lynch's
fairness opinion. However, Merrill Lynch's opinion was one of the
factors considered by the board in making its determination to approve
the merger agreement and recommend that stockholders adopt the merger
agreement.
. Merger consideration. Based upon the outcome of the negotiations with
First Data, the board of directors believed that the merger
consideration represented the highest price that First Data would likely
be willing to pay at this time to acquire the publicly-held shares of
Paymentech common stock, without also acquiring BANK ONE's shares. In
recognition of BANK ONE's determination not to sell its interest in
Paymentech and that First Data was the only company which met the two-
fold criteria of (i) not being a banking competitor of BANK ONE and (ii)
having the experience and desire to pursue a strategic alliance approach
to the merchant acquiring and processing business, an alliance with
First Data represented the most attractive transaction under the
circumstances. The Paymentech board recognized that the proposals
referenced under "--Prior contemplated transactions," the highest of
which indicated values in excess of the merger price but were all
subject to the parties reaching agreement on all terms of a transaction,
would not likely reflect what a third-party purchaser would be willing
to pay for only a minority stake in Paymentech, since a minority stake
would not enable a purchaser to control Paymentech's operations or
permit it comparable flexibility to combine Paymentech's operations with
its own similar operations.
. Market price and premium. The board of directors considered the
historical market prices of the Paymentech common stock to the $25.50
per share price offered by First Data, which represents a:
. 2.2% premium over the $24.94 closing price per share of Paymentech
common stock on March 19, 1999, which was the last trading day prior
to the date on which the merger was announced
. 29.1% premium over the $19.75 closing price per share of Paymentech
common stock on March 8, 1999, which was 10 trading days prior to
the date on which the merger was announced
. 29.1% premium over the $19.75 closing price per share of Paymentech
common stock on February 22, 1999, which was 20 trading days prior
to the date on which the merger was announced
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. 28.7% premium over the $19.81 closing price per share of Paymentech
common stock on February 5, 1999, which was 30 trading days prior to
the date on which the merger was announced
. 82.1% premium over the $14.00 closing price per share of Paymentech
common stock on December 22, 1998, which was 60 trading days prior
to the date on which the merger was announced
. Terms of the merger agreement. The board of directors also considered
the terms of the merger agreement, including:
. the "neutralized voting" provision requiring that the merger be
approved by the holders of at least two-thirds of the outstanding
shares of Paymentech common stock not owned by either BANK ONE or
its affiliates
. the ability of the board of directors, in the exercise of its
fiduciary duties, to cause Paymentech to furnish confidential
information about its operations to third parties making alternative
acquisition proposals
. the ability of the board of directors, in the exercise of its
fiduciary duties, to terminate the merger agreement in order to
permit Paymentech to enter into an alternative business combination
transaction which the board determines to be more favorable to
Paymentech's stockholders compared to the merger, subject to
Paymentech's payment of a $10 million termination fee to First Data
. the ability of Paymentech to obtain from First Data reimbursement
for up to $2 million of fees and expenses which Paymentech incurs in
connection with the merger, if the merger is not completed prior to
October 1, 1999 and the waiting period under the Hart-Scott-Rodino
Act has not expired or terminated
. Possible decline in market price of Paymentech common stock. The board
of directors also considered the possibility that if a merger
transaction with First Data was not negotiated and Paymentech remained
as a publicly owned corporation, it is possible that because of
potentially lower than expected projected earnings for Paymentech or a
decline in the market price of Paymentech common stock or the stock
market in general, the price that Paymentech stockholders might receive
in a future sale transaction might be less than the $25.50 per share
price offered in the merger by First Data.
. Availability of dissenters' rights. The board of directors also
considered the fact that dissenters' rights of appraisal will be
available to stockholders under Delaware law.
. Approval of Paymentech's independent directors. In addition to the
factors listed above, the six Paymentech directors who are either
executive officers or directors of BANK ONE or an executive officer of
Paymentech considered the intention of Paymentech's two independent
directors to vote for approval of the merger. The independent directors
each determined to vote for approval of the merger and recommend
adoption of the merger agreement and approval of the merger based upon
the foregoing factors. The independent directors did not, as a special
committee, independently evaluate the transaction or take any official
action in respect of their approval apart from their participation as
members of Paymentech's board.
The Paymentech board believes that the factors regarding "market price and
premium" and "financial analysis" support its determination that the
consideration to be received by Paymentech's public stockholders in connection
with the merger is fair to those stockholders, as such factors each indicate
that the $25.50 merger price compares favorably with recent trading prices of
the Paymentech common stock, with certain financial and operating statistics of
companies comparable to Paymentech, with recent precedent merger and
acquisition transactions and with the derived value of Paymentech as a going
concern. The Paymentech board believes that Merrill Lynch's opinions as to the
fairness of the $25.50 merger price, because they represent third-party
opinions as to the fairness of the $25.50 merger price from a financial point
of view, support its determination that the consideration to be received by
Paymentech's public stockholders is fair. In light of the foregoing and
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the Paymentech board of directors' conclusion that $25.50 was the highest price
that First Data was willing to pay, the Paymentech board believes that the
factors regarding "merger consideration" and "possible decline in market price
of Paymentech common stock" support its fairness determination, as the public
stockholders' risk in respect of their Paymentech shares to possible market
declines will be eliminated upon consummation of the merger by payment of the
$25.50 merger price.
The Paymentech board believes that the factor regarding "terms of the merger
agreement" supports its determination as to the procedural fairness of the
merger, as the minority stockholders can decide for themselves whether the
merger should be approved and completed and the board, subject to the terms of
the merger agreement (including the payment of a termination fee), continues to
have the opportunity to consider and pursue a more favorable business
combination transaction than the merger if presented. In addition, even if two-
thirds minority shareholder approval is obtained, the Paymentech board believes
that the factor regarding "availability of dissenters' rights" supports its
determination as to the procedural and financial fairness of the merger, as
those minority shareholders who do not approve the merger have the opportunity
to exercise dissenters rights and seek appraisal of the "fair value" of their
Paymentech shares in accordance with Delaware law.
The Paymentech board believes that the factor regarding "approval of
Paymentech's independent directors" supports its determination as to the
procedural fairness of the merger, as the independent directors were authorized
to work with Paymentech's management, financial advisors and legal counsel to
seek the highest possible price and to finalize the terms of the merger
agreement and Paymentech's other directors indicated they would not approve the
merger unless the independent directors also approved it.
In addition to the foregoing factors, the board of directors also considered
the following neutral factors:
. Prior contemplated transactions. The board of directors also considered
the results of the sales process conducted in 1998, whereby Paymentech
retained Merrill Lynch to solicit third-party bids to acquire all of the
outstanding shares of Paymentech common stock, including shares owned by
BANK ONE and its subsidiaries. In that sales process, Paymentech
received proposals to purchase all of the outstanding shares of
Paymentech common stock ranging from $22.00 to $26.50 per share (which
represented premiums of 15.4% to 39.0% to the $19.03 market price of the
Paymentech common stock on June 22, 1998, the day on which Paymentech's
board of directors considered these proposals). Subsequently, after
completing a review of a proposed transaction, as well as its assessment
of the strategic value of its ownership interest in Paymentech and the
business prospects of Paymentech (including its focus on certain
potentially higher growth segments of the processing market, such as the
Internet), BANK ONE decided not to sell its interest in Paymentech, and
accordingly, determined that a sale transaction involving the BANK ONE
shares should not be pursued further.
. Cross conditions between transaction agreements. The board of directors
also took note that the completion of the merger was subject to the
stockholder agreement and the contribution agreement not being
terminated. The stockholder agreement may be terminated, among other
events, if BANK ONE fails to receive the written opinion of Wachtell,
Lipton, Rosen & Katz to the effect that the contribution by First USA
Financial of its Paymentech common stock to FDC Offer and the receipt of
an ownership interest in FDC Offer by First USA Financial will
constitute an exchange of a type that is generally tax-free. The
contribution agreement may be terminated, among other events, if the
merger is not consummated or the contribution of substantially all of
the assets and liabilities of Paymentech to the BANK ONE/First Data
alliance and other transactions contemplated by the contribution
agreement do not occur by October 1, 1999.
The Paymentech board believes that the factor regarding "prior contemplated
transactions" is a neutral consideration, as the referenced proposals all
contemplated the acquisition of all of Paymentech and, in light of BANK ONE's
determination not to pursue a sale of its interest in Paymentech, that type of
transaction was no longer possible. Accordingly, while the board believes that
the $25.50 merger price compares favorably to the
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prior proposals (since it represents more than 96% of the highest offer
previously made for a purchase of all Paymentech stock), the board recognized
that the prior proposals likely reflected a higher value to be paid in an
acquisition of a majority stake in Paymentech that would not be contained in a
proposal to purchase a minority stake, since a minority stake would not enable
a purchaser to control Paymentech or permit it comparable flexibility to
combine Paymentech's operations with its own similar operations. In addition,
the board recognized that the prior proposals were subject to the parties
reaching agreement on all of the terms of a transaction, as well as the
negotiation and execution of definitive transaction agreements. The Paymentech
board believes that the factor regarding "cross conditions between transaction
agreements" is a neutral consideration, as the Paymentech board believes that
the conditions under those other agreements will be susceptible to satisfaction
in conjunction with the satisfaction of the conditions to the merger and that
the conditions under those other agreements were required by BANK ONE and First
Data as a condition to their willingness to pursue the merger.
In addition to the foregoing factors, the board of directors also considered
the following countervailing factors:
. No future participation in Paymentech. The board of directors considered
the fact that after the completion of the merger, Paymentech's public
shareholders will not participate in the future earnings and growth of
Paymentech and will not have any right to vote on corporate matters.
However, as described above, the Paymentech board believes that the
$25.50 per share merger price is fair to Paymentech's public
stockholders, and, upon receipt of the merger price, the public
stockholders' risk in respect of their Paymentech shares to possible
market declines due to the risks and uncertainties associated with
Paymentech's future prospects and general market conditions will be
eliminated.
. Possible increase in market price of Paymentech common stock. The board
of directors also considered the possibility that if a merger
transaction with First Data was not completed, Paymentech were to remain
a publicly owned corporation and the price of Paymentech common stock
appreciated, stockholders might possibly receive in a future sale
transaction more than the $25.50 per share price offered in the merger
by First Data. However, the Paymentech board recognized that there is no
guarantee that the market price of Paymentech common stock would
increase in the future or any future sale transaction would be
consummated.
. Higher indications of interest. The board of directors considered that
the $25.50 per share price to be paid to Paymentech's stockholders is
less than the highest proposals received by Paymentech in 1998 from
third parties that had expressed interest in acquiring all of the
outstanding shares of Paymentech common stock, including shares owned by
BANK ONE and its subsidiaries. While the Paymentech board believes that
$25.50 merger price compares favorably to the prior proposals (since it
represents more than 96% of the highest offer previously made for a
purchase of all Paymentech stock), the Paymentech board recognized that
the prior proposals likely reflected a higher value to be paid in an
acquisition of a majority stake in Paymentech that would not be
contained in a proposal to purchase a minority stake, since a minority
stake would not enable a purchaser to control Paymentech or permit it
comparable flexibility to combine Paymentech's operations with its own
similar operations. In addition, the board recognized that the prior
proposals were subject to the parties reaching agreement on all of the
terms of a transaction, as well as the negotiation and execution of
definitive transaction agreements.
. Taxable transaction. The merger will constitute a taxable transaction to
Paymentech's public stockholders who may otherwise have preferred
holding their Paymentech common stock until some future time in order to
defer the occurrence of a taxable event. However, as described above,
the Paymentech board believes that the $25.50 per share merger is fair
to Paymentech's public stockholders.
. Interests of various parties in the merger. Paymentech's directors were
aware that BANK ONE, First Data and some of Paymentech's directors and
officers have relationships and interests in the merger that differ from
the interests of Paymentech's public stockholders. The two independent
directors also considered these various interests in connection with
their determination to vote for
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approval of the merger. For a summary of these interests, see the
section below entitled "Conflicts of interest and other interests of
certain persons in the merger and certain relationships."
In the board of directors' view, these countervailing factors were not
sufficient, either individually or collectively, to outweigh the benefits of
the proposed merger to Paymentech's public stockholders.
In view of the wide variety of factors considered in connection with its
evaluation of the merger and the merger agreement, the board of directors did
not find it practicable to, and did not attempt to, quantify, rank or otherwise
assign relative weights to the specific factors it considered in reaching its
determinations, although the board of directors recognized that Merrill Lynch's
presentation and opinions comprised the only financial analysis provided to it
in connection with its consideration of the merger. In addition, individual
directors may have given different weights to different factors.
Paymentech's board of directors did not request that Merrill Lynch undertake
a net book value or liquidation value analysis of Paymentech in connection with
its consideration of the merger. The Paymentech board did not believe that such
an analysis was relevant to the valuation of a sale of an interest in
Paymentech because cash flow is the standard measure of valuation in the
transaction processing industry. As described under "--Opinion of Paymentech's
financial advisor--Discounted cash flow analysis," as part of its financial
analysis of the merger, Merrill Lynch analyzed the value of Paymentech as a
going concern based upon management's estimates of Paymentech's financial
performance for the periods 1999 to 2004. This analysis implied a range of
values per share of Paymentech common stock of $20.71 to $27.08.
Reasons for the merger
The parties believe that, by combining the resources of First Data,
Paymentech and BANK ONE, the merger will strengthen their efforts to offer
customers a broad array of competitive services and increased processing scale
and efficiency. The proposed transactions will enable the consolidation of
Paymentech's merchant acquiring and processing operations with the merchant
acquiring operations of the BANK ONE/First Data alliance, streamlining and
strengthening BANK ONE's participation in the merchant services market and
creating an entity better able to compete in a consolidating market in which
scale and efficiency are increasingly important. The proposed transactions will
also enable First Data to strengthen its relationship with BANK ONE, one of the
two largest credit card issuers in the United States, and have access to
Paymentech's seasoned management team. For reasons discussed in "--Background
of the Merger" and "Recommendation of Paymentech's board of directors and
fairness of the merger," Paymentech's board of directors believes that the
proposed transaction represents the most attractive way of accomplishing these
objectives under the circumstances.
The structure of the merger will enable First Data to acquire the entire
outstanding minority equity interest in Paymentech, with BANK ONE retaining its
majority equity interest. Upon completion of the merger, Paymentech, as the
surviving corporation, will become a privately held company jointly owned
indirectly by First Data and BANK ONE. Following the merger, First Data and
BANK ONE will cause Paymentech to contribute substantially all of its assets
and liabilities to Banc One Payment Services L.L.C., the existing merchant bank
alliance between First Data and BANK ONE. Ultimately, BANK ONE will own
approximately a 52.5% interest and First Data will own approximately a 47.5%
interest in the BANK ONE/First Data alliance. The parties selected this
particular structure for the merger because First Data was only willing to
agree to combine Paymentech's assets with the BANK ONE/First Data alliance if
it received the significant equity interest in the future combined entity which
it could obtain through purchasing all of the outstanding public shares of
Paymentech common stock.
If the merger is completed, Paymentech common stock will cease to be
publicly traded and holders of Paymentech common stock (other than BANK ONE,
First Data, FB Merging and their wholly owned subsidiaries and stockholders who
dissent from the merger and seek appraisal of their shares in accordance with
the Delaware law requirements explained in this document) will receive $25.50
per share in cash. As a result of the merger, Paymentech public stockholders
will not face the risk of a decline in the value of Paymentech common stock.
However, due to the merger, Paymentech's public stockholders will not have the
opportunity to participate in the future earnings and growth of Paymentech or
any increase in the value of the Paymentech
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common stock and will not have any right to vote on corporate matters. In
addition, the merger will constitute a taxable transaction to Paymentech's
public shareholders who may otherwise have preferred holding their Paymentech
shares until some future time in order to defer the occurrence of a taxable
event.
Opinion of Paymentech's financial advisor
Paymentech retained Merrill Lynch to act as its exclusive financial advisor
in connection with a possible business combination. On March 22, 1999, Merrill
Lynch rendered to the board of directors of Paymentech its oral opinion (which
was subsequently reconfirmed in writing) that, as of that date and based upon
and subject to the factors and assumptions set forth therein, the $25.50 per
share to be received by the holders of Paymentech common stock, other than BANK
ONE, First Data and their affiliates, in the merger was fair from a financial
point of view to those stockholders. Merrill Lynch subsequently delivered to
the Paymentech board a written opinion dated as of the date of this proxy
statement confirming its March 22, 1999 opinion.
The full text of Merrill Lynch's written opinion dated as of the date of
this proxy statement, which sets forth the assumptions made, matters
considered, and qualifications and limitations on the review undertaken by
Merrill Lynch, is attached as Annex D at the end of this proxy statement and is
incorporated herein by reference. The summary of the Merrill Lynch opinion set
forth in this proxy statement is qualified in its entirety by reference to the
full text of the Merrill Lynch opinion dated as of the date of this proxy
statement. Holders of Paymentech common stock are urged to read the opinion in
its entirety. The Merrill Lynch opinions were provided to the board of
directors of Paymentech for its information and are directed only to the
fairness from a financial point of view of the $25.50 per share to be received
by the holders of Paymentech common stock, other than BANK ONE, First Data and
their affiliates, in the merger, do not address the merits of the underlying
decision by Paymentech to engage in the merger and do not constitute a
recommendation to any Paymentech stockholder as to how that stockholder should
vote on the proposed merger.
While the description set forth below is a summary of the material analyses
underlying the Merrill Lynch opinions, it does not purport to be a complete
description of all of the analyses underlying the Merrill Lynch opinions. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis or summary description. In arriving at its opinions, Merrill
Lynch did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. While, as indicated below, there
were specific aspects of Merrill Lynch's analyses which imputed a value for
Paymentech common stock in excess of the $25.50 per share offered by First
Data, Merrill Lynch believes that its analyses must be considered as a whole
and that selecting portions of its analyses, without considering all analyses,
would create an incomplete view of the process underlying its opinions.
In performing its analyses, numerous assumptions were made with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Merrill
Lynch, Paymentech, BANK ONE or First Data. Any estimates contained in the
analyses performed by Merrill Lynch are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable
than suggested by those analyses. Additionally, estimates of the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which these businesses or securities might actually be sold.
Accordingly, these analyses and estimates are inherently subject to substantial
uncertainty. In addition, the Merrill Lynch opinion was among several factors
taken into consideration by the board of directors of Paymentech in making its
determination to approve the merger agreement and the merger. Consequently, the
Merrill Lynch analyses described below should not be viewed as determinative of
the decision of the board of directors of Paymentech or Paymentech's management
with respect to the fairness of the $25.50 per share to be received by the
holders of Paymentech common stock in the merger.
26
<PAGE>
In arriving at its opinion dated as of the date of this proxy statement
Merrill Lynch, among other things:
. reviewed certain publicly available business and financial information
relating to Paymentech which Merrill Lynch deemed to be relevant;
. reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
Paymentech, furnished to Merrill Lynch by Paymentech;
. conducted discussions with members of senior management and
representatives of Paymentech concerning the matters described above;
. reviewed the market prices and valuation multiples for shares of
Paymentech common stock and compared them with those of certain publicly
traded companies which Merrill Lynch deemed to be relevant;
. reviewed the results of operations of Paymentech and compared them with
those of certain publicly traded companies which Merrill Lynch deemed to
be relevant;
. compared the proposed financial terms of the Merger with the financial
terms of certain other transactions which Merrill Lynch deemed to be
relevant;
. participated in certain discussions and negotiations among
representatives of Paymentech, First Data and their financial and legal
advisors;
. reviewed the merger agreement; and
. reviewed selected other financial studies and analyses and took into
account various other matters as Merrill Lynch deemed necessary,
including Merrill Lynch's assessment of general economic, market and
monetary conditions.
In performing its analyses, Merrill Lynch considered, among other things,
certain standard factors and information, including (i) the history of trading
prices and volume for Paymentech common stock and the relationship between
movements in Paymentech's common stock price and movements in the S&P 500 and
movements in the prices of other companies involved in the transaction
processing industry; (ii) the trading activity at varying price levels in
Paymentech's common stock from the date of Paymentech's initial public
offering on March 22, 1996 and follow-on offering on November 8, 1996; and
(iii) past proposals to purchase full control of Paymentech's outstanding
shares of common stock. While the review of this information did not, and was
not intended to, result in valuations of Paymentech's common stock similar to
the detailed analyses described below, this information was considered by
Merrill Lynch in connection with rendering its opinions.
In preparing its opinions, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available, and Merrill Lynch did not assume any responsibility for
independently verifying that information or undertake an independent
evaluation or appraisal of any of the assets or liabilities of Paymentech and
was not furnished with any such evaluation or appraisal. In addition, Merrill
Lynch did not assume any obligation to conduct any physical inspection of the
properties or facilities of Paymentech. With respect to the financial forecast
information furnished to or discussed with Merrill Lynch by Paymentech,
Merrill Lynch assumed that it had been reasonably prepared and reflected the
best currently available estimates and judgment of Paymentech's management as
to the expected future financial performance of Paymentech.
The Merrill Lynch opinion is necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Merrill Lynch as of, the date of the opinion.
For the purpose of rendering the Merrill Lynch opinion, Merrill Lynch assumed,
in all respects material to its analysis, that the representations and
warranties of each party in the merger agreement and all related documents and
instruments contained therein are true and correct, that each party to the
merger agreement and all the related documents and instruments will perform
all of the covenants and agreements required to be performed by that party
therein and that all conditions to the consummation of the merger will be
satisfied without waiver thereof.
27
<PAGE>
Merrill Lynch has in the past provided financial advisory and financing
services to Paymentech, BANK ONE and First Data and/or their affiliates and may
continue to do so and has received, and may receive, fees for the rendering of
these services. Specifically, Merrill Lynch acted as financial advisor to BANK
ONE in connection with its 1998 merger with First Chicago NBD. In addition, in
the ordinary course of Merrill Lynch's business, Merrill Lynch may actively
trade the Paymentech common stock, as well as securities of BANK ONE and First
Data for its own account and for the accounts of its customers and, accordingly,
may at any time hold a long or short position in these securities.
Set forth below is a summary of the material analyses presented by Merrill
Lynch to Paymentech's board of directors on March 20, 1999, after taking into
account certain updates and clarifications (as indicated to Paymentech's
directors on March 22, 1999), in connection with the Merrill Lynch opinions.
Transaction overview. The $25.50 per share of Paymentech common stock
offered by First Data represented a premium to the market price of Paymentech
common stock one, ten, thirty and sixty trading days prior to the announcement
of the merger of 2.2%, 29.1%, 28.7% and 82.1%. The aggregate purchase price,
which is calculated by multiplying the $25.50 per share of Paymentech common
stock by 37.16 million fully diluted shares of Paymentech common stock
outstanding (using the treasury stock method at the price offered) represented
a multiple of net income for the last twelve months (LTM) ended December 31,
1998 of 43.2x, a multiple of 1999 calendar year estimated earnings (as
published by First Call Consensus, an industry service provider of global
earnings information based on an average of earnings estimates published by
various investment banking firms) per share (EPS) of 33.1x and a multiple of
LTM cash flow of 18.6x. Additionally, the multiples of aggregate transaction
value (defined as the aggregate purchase price plus total debt and book value
of preferred stock minus free cash (cash not owed to merchants in the normal
course of business)) of Paymentech to LTM revenue, LTM earnings before interest
and taxes (EBIT) and LTM earnings before interest, taxes and depreciation and
amortization (EBITDA) were 4.3x, 21.9x and 13.3x, respectively.
Peer group comparison. Using publicly available information and estimates of
future financial results published by First Call, and taken from research
reports, Merrill Lynch compared certain financial and other operating
information and ratios related to Paymentech with that of other comparable
companies in the transaction processing industry. For purposes of its analysis,
Merrill Lynch identified the following six companies as comparable companies:
. Concord EFS, Inc. (after giving effect to its merger with Electronic
Payment Systems, Inc.);
. First Data Corporation;
. National Data Corporation;
. National Processing, Inc.;
. NOVA Corporation (after giving effect to its merger with PMT Services,
Inc.); and
. Total Systems Services, Inc.
Merrill Lynch further analyzed these companies based on a variety of operating
and financial criteria, including, among other things, industry focus
(including a focus on credit card processing), growth, size and profitability
and ownership characteristics to determine a group of core comparable companies
most comparable to Paymentech for valuation purposes. Merrill Lynch determined
that the core comparable companies included:
. Concord EFS, Inc.;
. First Data Corporation;
. National Data Corporation; and
. NOVA Corporation.
28
<PAGE>
Core comparable company statistics. In comparing Paymentech to the core
comparable companies, Merrill Lynch calculated certain financial and operating
statistics. Merrill Lynch's calculations resulted in the following relevant
ranges for the core comparable companies as of March 19, 1999 (based on closing
prices one day prior to the announcement of the merger) and for Paymentech at
March 8, 1999 and March 19, 1999:
<TABLE>
<CAPTION>
Multiple of Fully
Diluted Core Comparable
Market Value to Companies Paymentech at
----------------- -------------------- ----------------------------
Range Median March 8, 1999 March 19, 1999
------------- ------ ------------- --------------
<S> <C> <C> <C> <C>
LTM Net Income.............. 21.0x - 44.1x 28.1x 32.4x 40.9x
Estimated Calendar Year 1999
Net Income................. 17.1 - 31.2 21.8 25.6 32.4
Estimated Calendar Year 2000
Net Income................. 13.0 - 23.0 17.7 21.9 27.7
LTM Cash Flow............... 10.4 - 25.5 15.3 14.4 18.2
LTM EBITDA.................. 7.0 - 21.7 12.9 9.8 12.4
LTM Revenues................ 1.7 - 3.6 2.7 3.2 4.0
</TABLE>
In addition, Merrill Lynch calculated a range of five year growth rates, as
reported by First Call, of 13.0% to 30.0%, with a median estimated five year
growth rate of 25.0% (as compared to Paymentech at 17.0% at March 19, 1999 and
March 8, 1999). Based on this information, Merrill Lynch calculated a range of
multiples derived from a fraction, the numerator of which is a multiple of each
core comparable company's fully diluted market value to estimated calendar year
1999 net income and the denominator of which is the First Call five-year growth
rate, of .66x to 1.8x with a median multiple of .95x (as compared to Paymentech
at 1.9x at March 19, 1999 and 1.5x at March 8, 1999).
Imputed value based on comparable company analysis. Merrill Lynch compared
certain information related to Paymentech with the core comparable companies to
determine an implied value of Paymentech's common stock. This information
included, among other things, fully diluted market capitalization as a multiple
of LTM revenues, fully diluted market capitalization to LTM net income, fully
diluted market capitalization to LTM cash flow and fully diluted market
capitalization to estimated calendar year 1999 net income. The multiples of
fully diluted market capitalization to the median core comparable companies'
LTM revenues, LTM net income, LTM cash flow and estimated calendar year 1999
net income implied a value per share of Paymentech common stock of $17.95,
$16.61, $21.02 and $16.79 respectively (as compared to the $25.50 offered by
First Data). Merrill Lynch observed that the market price of Paymentech common
stock was $24.94 on March 19, 1999 and $19.75 on March 8, 1999.
Imputed value based on selected precedent acquisition transactions. Merrill
Lynch reviewed the publicly available financial terms of 19 precedent
acquisition transactions in related technology services over an observation
period beginning January 1997 and extending through March 19, 1999. Merrill
Lynch narrowed the list of precedent acquisition transactions based on a
variety of criteria, including, among other things, specific industry focus
(including a focus on transaction processing), deal size and ownership
characteristics and determined that the following five core precedent
acquisition transactions were most comparable to the proposed transaction
between Paymentech and First Data for valuation purposes:
. USCS International/DST Systems, Inc.;
. BA Merchant Services, Inc./BankAmerica;
. Electronic Payment Services, Inc./Concord EFS, Inc.;
. SPS Transaction Services/Associates First Capital Corporation; and
. PMT Services Inc./NOVA Corporation.
29
<PAGE>
For the core precedent acquisition transactions, Merrill Lynch calculated a
range of multiples of transaction value as follows:
. transaction value to LTM revenue of 2.8x to 5.4x with a median multiple
of 3.2x (as compared to 4.3x based on the $25.50 offered by First Data);
and
. transaction value to LTM EBITDA of 11.5x to 19.4x with a median multiple
of 12.8x (as compared to 13.3x based on the $25.50 offered by First
Data).
Merrill Lynch calculated a range of multiples of purchase price as follows:
. purchase price to LTM earnings of 21.4x to 48.9x with a median multiple
of 37.1x (as compared to 43.2x based on the $25.50 offered by First
Data); and
. purchase price to LTM cash flow of 15.5x to 28.5x with a median multiple
of 17.9x (as compared to 18.6x based on the $25.50 offered by First
Data).
Merrill Lynch also calculated the premiums paid to the average market price
thirty days prior to the announcement of each of the core precedent acquisition
transactions. The premiums ranged from 7.0% to 56.9% with a median premium of
37.4%. The multiple of transaction value to the median of the precedent
acquisition transactions' LTM revenue, the multiples of purchase price to the
LTM earnings and LTM cash flow and the premiums paid to the 30-day average
price prior to announcement imply a value per share of Paymentech common stock
of $21.05, $21.92, $24.59 and $27.74, respectively (as compared to the $25.50
offered by First Data).
30
<PAGE>
Imputed value based on selected minority shareholder transactions. Merrill
Lynch analyzed premiums paid in the following 33 subsidiary transactions from
January 1996 through March 1999 where a single majority shareholder owned from
51% up to 89% of the target subsidiary shares being acquired in a variety of
industries:
<TABLE>
<CAPTION>
Target Acquiror
------ --------
<S> <C>
Citizens Corp (Hanover Ins Co) Allmerica Financial Corp
J&L Specialty Steel Inc Usinor SA
Tele-Commun Intl (Tele-Commun) Liberty Media (Tele-Commun)
Mycogen Corp (Dow AgroSciences) Dow AgroSciences (Dow Chemical)
Intl Specialty Prods ISP Holdings Inc
BET Holdings Inc Investor Group
IP Timberlands Ltd IP Forest Resources Co
XLConnect Solutions Inc Xerox Corp.
BT Office Products Intl Inc Buhrmann NV
NACT Telecommunications (GST) World Access Inc
Rayonier Timberlands LP Rayonier Inc
Guaranty National Corp Orion Capital Corp
Rhone-Poulenc Rorer Inc Rhone-Poulenc SA
Weelabrator Technologies Inc Waste Management Inc
Faulding Inc (FH Faulding & Co) FH Faulding & Co Ltd
Acordia Inc (Anthem Inc) Anthem Inc.
Chaparral Steel Co (Texas Ind) Texas Industries Inc
Fina Inc Petrofina SA
NHP Inc (Apartment Investment) Apartment Investment & Mgmt Co
Contour Medical (Retirement) Sun Healthcare Group Inc
Calgene Inc Monsanto Co Monsanto Co
Mafco Consolidated Grp (Mafco) Mafco Holdings Inc.
Zurich Reinsurance Centre Zurich Versicherungs GmbH
Allmerica Property & Casualty Allmerica Financial Corp
Central Tractor Farm & Country JW Childs Equity Partners LP
WCI Steel Inc (Renco Group Inc) Renco Group Inc
Crocker Realty Trust Inc Highwoods Properties Inc
Bankers Life Holding (Conseco) Conseco Inc.
North Carolina Railroad Co North Carolina
Roto-Rooter Inc (Chemed Corp) Chemed Corp
Golden Poultry Co Inc Gold Kist Inc
SyStemix Inc (Novartis AG) Novartis AG
Great American Mgmt & Invt Inc Equity Holdings, Chicago, IL
</TABLE>
This analysis compared the median premiums paid one week and four weeks
preceding the public announcement of each subsidiary transaction. Merrill Lynch
observed that BANK ONE owned approximately 55% of the outstanding shares of
Paymentech common stock on March 19, 1999. Merrill Lynch calculated the median
premiums paid one week and four weeks prior to the date of announcement for the
subsidiary transactions to be 23.1% and 26.8%, respectively. Merrill Lynch
applied these premiums to the Paymentech stock price one week and four weeks
prior to the announcement of the merger which resulted in an implied value per
share of Paymentech common stock of $28.31 and $25.04, respectively (as
compared to the $25.50 offered by First Data).
Discounted cash flow analysis. Merrill Lynch performed a discounted cash
flow analysis (i.e., an analysis of the present value of projected unlevered
free cash flows for the periods and using the discount rates indicated) of
Paymentech based upon 1999-2004 forecasts prepared by Paymentech's management.
Utilizing these forecasts, Merrill Lynch computed the present value of the free
cash flows for the five calendar years
31
<PAGE>
1999-2003 by applying a range of discount rates of 13.0% to 15.0% per year
calculated by analyzing the weighted average cost of capital for the comparable
companies in the transaction processing industry. Merrill Lynch also computed
the present value of the terminal value of Paymentech at the end of calendar
year 2003 by applying a range of net income multiples of 15.0 to 19.0 times
estimated 2004 net income and applying to these terminal values a range of
discount rates of 13.0% to 15.0% per year. The range of terminal net income
multiples was determined by analyzing the current and historic projected net
income multiples of Paymentech and the core comparable companies and factoring
in the expected growth prospects of Paymentech at the end of calendar year
2003. The discounted cash flow analysis implied a range of values per share of
Paymentech common stock, on a fully diluted basis, of $20.71 to $27.08 (as
compared to the $25.50 offered by First Data).
In connection with its opinion dated the date of this proxy statement,
Merrill Lynch performed procedures to update, as necessary, certain of the
analyses described above and reviewed the assumptions on which such analyses
described above were based and the factors considered in connection therewith.
Merrill Lynch did not perform any analyses in addition to those described in
updating its March, 22, 1999 opinion.
None of Paymentech, BANK ONE or First Data has indicated any intention of
making any material amendments to the merger agreement. If there are any
material amendments to the merger agreement in the future, Paymentech will make
a decision whether to request a revised fairness opinion from Merrill Lynch
based on the facts and circumstances at that time and the nature of the
specific amendment.
As described above, Merrill Lynch's opinions and its presentation to the
Paymentech board of directors were one of many factors taken into consideration
by the Paymentech board of directors in making its determination to recommend
the merger agreement and the transactions contemplated thereby. Consequently,
the analyses described above should not be viewed as determinative of the
opinion of the Paymentech board of directors or Paymentech's management with
respect to the value of Paymentech or whether the Paymentech board of directors
would have been willing to recommend a merger at a different level of
consideration.
Paymentech retained Merrill Lynch to act as its financial advisor in
connection with the merger. There were no limitations imposed on the scope of
Merrill Lynch's investigations by Paymentech or any of its affiliates. Merrill
Lynch was selected by Paymentech based on Merrill Lynch's qualifications,
expertise and reputation, as well as Merrill Lynch's familiarity with
Paymentech. Merrill Lynch is an internationally recognized investment banking
and advisory firm. Merrill Lynch, as part of its investment banking business,
is continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes.
Pursuant to an engagement letter dated March 19, 1999, Paymentech engaged
Merrill Lynch to provide financial advisory services to it in connection with
the merger, including, among other things, rendering the Merrill Lynch
opinions. Pursuant to the terms of the engagement letter, Paymentech agreed to
pay Merrill Lynch a fee of $3.9 million upon the consummation of the merger or
any other merger transaction with First
Data. In addition, Paymentech has agreed to reimburse Merrill Lynch for its
out-of-pocket expenses, including attorney's fees, incurred in connection with
its engagement, and to indemnify Merrill Lynch and its affiliates and their
respective directors, officers, employees agents and controlling persons
against customary losses, claims, damages, liabilities and expenses arising out
of or in conjunction with its rendering of services under its engagement.
Additionally, Merrill Lynch and its affiliates have received the following
compensation from Paymentech and its affiliates since January 1, 1997 in
connection with financial advisory and financing services, approximately
$11,379,000 from BANK ONE, $23,265,000 from First USA and $653,000 from
Paymentech.
Certain projected financial information
Paymentech does not, as a matter of course, make public forecasts or
projections as to future revenues or results of operations. However, in order
to aid the analysis of the proposed merger by Paymentech's board of directors
and Merrill Lynch's assessment of the fairness, from a financial point of view,
of the merger
32
<PAGE>
consideration, Paymentech furnished to representatives of Merrill Lynch certain
information about Paymentech and its financial performance which is not
publicly available. This information included the projections set forth below:
<TABLE>
<CAPTION>
Projected Calendar Year
--------------------------------------------
1999 2000 2001 2002 2003
-------- -------- -------- -------- --------
(amounts in thousands)
<S> <C> <C> <C> <C> <C>
Revenues........................... $277,683 $310,921 $348,149 $389,843 $436,541
EBITDA(1).......................... 96,575 111,171 127,826 146,817 168,458
EBIT(2)............................ 60,254 73,398 88,542 105,961 125,968
Net income......................... 28,625 36,171 45,083 55,577 67,340
</TABLE>
- --------
(1) Earnings before interest, taxes, depreciation and amortization.
(2) Earnings before interest and taxes.
While presented with numerical specificity, the projections are based upon
numerous estimates and assumptions including, without limitation, the
following: (i) a completed conversion of Paymentech's retail portfolio to the
First Data platform by June 30, 2000; (ii) 12% annual growth in revenues, net
of declinations in pricing and per item revenues, which declinations have been
a consistent trend in the industry and at Paymentech; (iii) an approximate
9.2%-9.4% annual increase in expenses; and (iv) gradual margin improvement due
to the excess of revenue growth over expense growth. The projections are
inherently subject to significant business, economic, industry and competitive
uncertainties and contingencies, all of which are difficult to predict and many
of which are beyond Paymentech's control. Certain assumptions on which the
projections were based related to the achievement of strategic goals,
objectives and targets over the applicable periods that are more aggressive
than recent historical results. There can be no assurance that the projected
results would be realized or that actual results would not be significantly
higher or lower than those predicted. While the projections were prepared in
good faith, no assurance can be made regarding future events. Therefore, the
projections cannot be considered a reliable predictor of future operating
results, and this information should not be relied upon as such. Additionally,
the financial projections do not reflect revised prospects for Paymentech,
changes in general business and economic conditions, or any other transaction
or event that has occurred or may occur and that was not anticipated at the
time the information was prepared. The projections were not prepared with a
view toward public disclosure or complying with either the published guidelines
of the Securities and Exchange Commission regarding projections or forecasts or
the American Institute of Certified Public Accountants' Guide for Prospective
Financial Statements. The projections do not purport to present operations in
accordance with generally accepted accounting principles, and Paymentech's
independent auditors have not examined, compiled or performed any procedures
regarding these projections. Holders of Paymentech common stock are cautioned
not to place undue reliance on the projections.
Position of BANK ONE and First USA Financial regarding the merger
Senior executive officers of BANK ONE and First USA also serve as directors
of Paymentech and participated in the deliberations of the Paymentech board of
directors as described above. Based upon such deliberations, BANK ONE has
adopted the analyses as presented to the Paymentech board in support of BANK
ONE's conclusions concerning the fairness of the merger to the public
stockholders of Paymentech, as expressed in the following paragraph.
Based upon the conclusions of Paymentech's board of directors, the approval
of its two independent directors and the opinion and related analyses of
Merrill Lynch that, as of March 22, 1999 and based upon and subject to the
factors and assumptions set forth in the opinion, the $25.50 to be received by
Paymentech's public stockholders is fair to those stockholders from a financial
point of view, each of BANK ONE and First USA Financial have concluded that the
merger is fair to Paymentech's public stockholders. As disclosed in the section
entitled "Special Factors--Conflicts of interest and other interests of certain
persons in the merger and certain relationships," both BANK ONE and First USA
Financial have various interests in the merger that differ from those of
Paymentech's public stockholders.
33
<PAGE>
BANK ONE will be treated differently from the public stockholders of
Paymentech because it will retain a significant equity interest in the BANK
ONE/First Data alliance (to which the assets of Paymentech will be contributed).
As discussed under "--Background of the Merger," BANK ONE's determination to
maintain a continuing equity interest in Paymentech's business was based on its
assessment that there are strategic benefits to BANK ONE in maintaining such a
continuing interest. While BANK ONE has determined, based upon the factors
described above, that the $25.50 in cash to be received by Paymentech's public
stockholders is fair to such stockholders, BANK ONE has also previously
determined that, based on its evaluation of the strategic value of Paymentech's
businesses to BANK ONE, it is not interested in selling its interest in
Paymentech. As described under "--Background to the Merger," BANK ONE terminated
discussions with third parties relating to a possible sale of BANK ONE's
interest in Paymentech during which such third parties had indicated interest in
acquiring all of the Paymentech common stock at prices in the range of $22.00 to
$26.50 per share in cash.
Position of First Data, FDC Offer and FB Merging regarding the merger
Each of First Data, FDC Offer and FB Merging has reviewed the analyses of
the Paymentech Board of Directors to the extent set forth in this proxy
statement as to the fairness of the merger to the public stockholders of
Paymentech and has adopted these analyses in support of their conclusions
concerning the fairness of the merger to the public stockholders of Paymentech,
as expressed in the following paragraph.
Based upon the analyses and conclusions of Paymentech's board of directors
and the votes for approval of the merger by its two independent directors, each
of First Data, FDC Offer and FB Merging has concluded that the merger is fair
to Paymentech's public stockholders. As disclosed in the section entitled
"Conflicts of interest and other interests of certain persons in the merger and
certain relationships," First Data has various interests in the merger that
differ from those of Paymentech's public stockholders.
First Data currently has a 50% interest in the BANK ONE/First Data Alliance.
First Data will be treated differently from the public stockholders of
Paymentech because it will retain a significant equity interest in the BANK
ONE/First Data alliance (to which the assets of Paymentech will be
contributed). First Data is in favor of combining the business of Paymentech
with the BANK ONE/First Data alliance at this time for the following reasons:
. the BANK ONE/First Data alliance would be able to offer customers a
broader array of competitive services and increased processing scale and
efficiency
. the BANK ONE/First Data alliance would have access to Paymentech's
seasoned management team
. First Data would strengthen its relationship with BANK ONE, one of the
two largest credit card issuers in the United States.
However, First Data believes the proposed transaction does entail various
considerations that may be considered detrimental to First Data for the
following reasons:
. First Data believes it is paying a high premium to purchase all of the
shares of common stock owned by Paymentech's public stockholders
. Somewhat unusual for a transaction of this size, First Data will have
diminished input into management decisions with respect to, and will
have diminished management representation in, the BANK ONE/First Data
alliance as a result of the transactions
. the business of the BANK ONE/First Data alliance will be susceptible to
the risks associated with Paymentech's merchant acquiring and processing
business as a result of the contribution of Paymentech's assets and will
take on the risk of the future growth of not only its business, but
also Paymentech's.
34
<PAGE>
Plans for Paymentech following the merger and certain effects of the merger
Upon completion of the merger, Paymentech, as the surviving corporation,
will become a wholly owned subsidiary of FDC Offer, which at that time will be
jointly owned by First Data and BANK ONE. In accordance with the terms and
conditions of the contribution agreement, after the merger has been completed
and several other conditions set forth in the contribution agreement are met,
First Data and BANK ONE will cause Paymentech to contribute substantially all
of its assets and liabilities, except for the capital stock of First USA
Financial Services, Inc. and MessageMedia, Inc. (formerly known as First
Virtual Holdings, Inc.) and any related liabilities, to the BANK ONE/First Data
alliance in exchange for a membership interest in the alliance. It is unclear
whether or not the business of MessageMedia would be a permissible activity for
the BANK ONE/First Data alliance to engage in under federal banking
regulations. The parties agreed not to contribute MessageMedia to the BANK
ONE/First Data alliance in order to avoid the potential for further regulatory
delay. As part of the discussions leading to the proposed transaction, First
Data insisted that First USA Financial Services, a card issuing business, not
be contributed to the BANK ONE/First Data alliance in order that First Data
would remain in material compliance with its contractual obligations with third
parties prohibiting First Data from owning such a company. Accordingly, under
the contribution agreement, BANK ONE and First Data have agreed to effect a
spin-off, sale or divestiture of First USA Financial Services to BANK ONE prior
to Paymentech's contribution of its assets to the BANK ONE/First Data alliance.
See "The Contribution Agreement." Paymentech would receive a 50% interest in
the alliance in exchange for the contribution of its assets. BANK ONE's and
First Data's interests in the alliance, other than through their joint
ownership of FDC Offer, would each be reduced from 50% to 25%.
In addition, upon completion of the merger, Paymentech's stockholders (other
than BANK ONE and its subsidiaries) will no longer have any interest in, and
will not be stockholders of, Paymentech or the BANK ONE/First Data alliance.
Therefore, these public stockholders will not benefit from any future earnings
or growth of Paymentech or the BANK ONE/First Data alliance or benefit from any
increases in Paymentech's or the alliance's value. They will also no longer
bear the risk of any decreases in Paymentech's value. Instead, upon completion
of the merger, each of these stockholders will have the right to receive $25.50
in cash for each of their shares of Paymentech common stock. This cash merger
consideration will not be paid in exchange for shares of Paymentech common
stock which are:
. held in the treasury of Paymentech or any of its wholly owned
subsidiaries
. owned by First Data, BANK ONE or FB Merging or any of their respective
wholly owned subsidiaries
. held by dissenting stockholders who seek appraisal of the fair value of
their shares and comply with all of the Delaware law procedures
explained on pages 60 to 62.
Paymentech common stock is currently registered under the Securities
Exchange Act of 1934, as amended. As a result of the merger, this stock will be
delisted from the New York Stock Exchange and its registration under the
Exchange Act will be terminated. Also, Paymentech will no longer need to comply
with the proxy rules or periodic reporting requirements under the federal
securities laws or to file information with the Securities and Exchange
Commission (SEC). Paymentech's officers, directors and large beneficial owners
will be relieved of the reporting requirements and restrictions on insider
trading under the Exchange Act.
The directors of FB Merging and the officers of Paymentech immediately prior
to completion of the merger will be the directors and officers, respectively,
of Paymentech, as the surviving corporation, immediately following completion
of the merger. Furthermore, First Data, BANK ONE, First USA Financial and FDC
Offer have agreed in the stockholder agreement that after completion of the
merger but prior to the contribution of substantially all of Paymentech's
assets and liabilities to the BANK ONE/First Data alliance, FDC Offer will
elect a nine-member board of directors for the surviving corporation, five of
whom will be designated by BANK ONE and four of whom will be designated by
First Data. After the contribution of Paymentech's assets and liabilities to
the BANK ONE/First Data alliance, as provided for in the contribution
agreement, the stockholder agreement provides that the surviving corporation's
board of directors will be reduced to four members, with two members designated
by each of BANK ONE and First Data.
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Paymentech's certificate of incorporation will be amended as presented in
Exhibit C to the merger agreement and will be the certificate of incorporation
of Paymentech immediately after completion of the merger. The by-laws of FB
Merging, as in effect immediately prior to completion of the merger, will be
the by-laws of Paymentech immediately after completion of the merger.
Conduct of Paymentech's business if the merger is not completed
If the merger is not completed, Paymentech's board of directors expects that
Paymentech's current management will continue to operate the company's business
substantially as presently operated. Paymentech will continue to consider, from
time to time, all available options with respect to the future of its business
and operations.
Conflicts of interest and other interests of certain persons in the merger and
certain relationships
In considering the recommendation of Paymentech's board of directors with
respect to the merger, stockholders should be aware that BANK ONE, First Data
and various members of the board of directors and Paymentech's management have
interests that may present them with actual, potential or the appearance of
potential conflicts of interest in connection with the merger. The board of
directors, including its independent directors, was aware of these potential or
actual conflicts of interest and considered them along with other matters
described in detail in the section of this proxy statement entitled "Special
Factors--Recommendation of Paymentech's board of directors and fairness of the
merger."
BANK ONE and First Data ownership. Upon completion of the merger, each
outstanding share of Paymentech common stock will be converted into the right
to receive $25.50 in cash. This cash merger consideration will not be paid in
exchange for shares of Paymentech common stock which are:
. held in the treasury of Paymentech or any of its wholly owned
subsidiaries
. owned by First Data, BANK ONE or FB Merging or any of their respective
wholly owned subsidiaries, other than shares held in a fiduciary,
collateral, custodial or similar capacity
. held by dissenting stockholders who seek appraisal of the fair value of
their shares and comply with all of the Delaware law procedures
explained on pages 60 to 62
BANK ONE currently owns indirectly, through First USA Financial, approximately
55% of the outstanding shares of Paymentech common stock. Following completion
of the merger and the contribution of most of Paymentech's assets to the BANK
ONE/First Data alliance, BANK ONE will own approximately a 52.5% equity
interest in the alliance and First Data will own approximately a 47.5% equity
interest in the alliance. Five of Paymentech's directors who approved the
merger agreement are executive officers and/or directors of BANK ONE and one of
Paymentech's directors is Paymentech's President and Chief Executive Officer.
Directors and executive officers of the BANK ONE/First Data alliance
following the merger. The merger agreement provides that the current directors
of FB Merging will be the directors of the surviving corporation. Two officers
of First Data, Richard Aiello and David J. Treinen, currently serve as the only
directors of FB Merging. However, First Data, BANK ONE, First USA Financial and
FDC Offer have agreed in the stockholder agreement that after completion of the
merger but prior to the contribution of substantially all of Paymentech's
assets and liabilities to the Bank One/First Data alliance, FDC Offer will
elect a nine-member board of directors for the surviving corporation, five of
whom will be designated by BANK ONE and four of whom will be designated by
First Data. After the contribution of Paymentech's assets and liabilities to
the BANK ONE/First Data alliance, as provided for in the contribution
agreement, the stockholder agreement provides that the surviving corporation's
board of directors will be reduced to four members, with two members designated
by each of BANK ONE and First Data.
The merger agreement also provides that the current officers of Paymentech
will be the officers of the surviving corporation. Upon the contribution of
most of Paymentech's assets and liabilities to the BANK ONE/First Data
alliance, First Data and BANK ONE expect that Pamela H. Patsley, currently
Paymentech's president and chief executive officer, will lead the combined
operations and other members of Paymentech's management will hold management
positions at the BANK ONE/First Data alliance.
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<PAGE>
Equity interests of Paymentech's executive officers and directors.
Paymentech's executive officers and directors currently own an aggregate of
1,350,561 shares of Paymentech common stock, representing less than 4% of the
total outstanding shares. In addition, Paymentech's executive officers and
directors own options to purchase an aggregate of 1,326,400 shares of Paymentech
common stock at strike prices ranging from $14.56 to $39.50. Each of these
options will be cancelled in the merger in exchange for an amount of cash equal
to the positive difference between $25.50 and the applicable share strike price.
Upon the cash-out of all options at the effective time of the merger, Paymentech
expects that the following directors and executive officers will receive the
following cash payments for their options:
<TABLE>
<S> <C>
Gene H. Bishop................................................ $ 75,788
Pamela H. Patsley............................................. $3,181,875
Rupinder Sidhu................................................ $ 75,788
John C. Tolleson.............................................. $ 45,938
Richard W. Vague.............................................. $ 298,500
James W. Baumgartner.......................................... $ 790,000
Michael P. Duffy.............................................. $1,083,625
Kathyrn J. Kessler............................................ $ 550,113
Philip E. Taken............................................... $ 849,700
</TABLE>
In addition, Paymentech's executive officers and directors currently own an
aggregate of 99,955 restricted shares of Paymentech common stock under
Paymentech's restricted stock plan. At the effective time of the merger, all
restrictions on the restricted stock will lapse and these unrestricted shares
of Paymentech common stock will be converted in the merger into the right to
receive the $25.50 per share cash merger consideration. The following table
sets forth those executive officers and directors of Paymentech holding shares
of restricted stock and the amounts of cash they will receive in exchange for
these shares in the merger:
<TABLE>
<S> <C>
Pamela H. Patsley............................................... $988,125
James W. Baumgartner............................................ $485,903
Michael P. Duffy................................................ $473,153
Kathryn J. Kessler.............................................. $136,833
Philip E. Taken................................................. $464,840
</TABLE>
Indemnification and insurance. The merger agreement provides that the
surviving corporation will, following completion of the merger, indemnify all
past and present officers and directors of Paymentech to the same extent and in
the same manner as these persons are indemnified by Paymentech under Delaware
law and Paymentech's charter and by-laws. This indemnification covers any acts
or omissions of these officers and directors occurring prior to the effective
time of the merger. The merger agreement also provides that for six years
following completion of the merger, the surviving corporation will provide
directors' and officers' liability insurance coverage to Paymentech's current
officers and directors substantially similar to Paymentech's existing policy.
However, the surviving corporation will not be required to pay an annual
premium for the directors' and officers' insurance in excess of 150% of the
last annual premium paid prior to the date of the merger agreement but in that
case will purchase as much coverage as possible for that amount.
Other. In March 1996, Ms. Patsley received a full recourse loan in the
amount of $1,953,000 from First USA Financial in order to acquire shares of
Paymentech common stock through the exercise of options granted under
Paymentech's 1996 Stock Option Plan. The outstanding balance of this loan as of
March 31, 1999, including accrued interest, was $2,293,564. Under the terms of
the promissory note for this loan, as a result of the merger, the unpaid
balance of the loan will be forgiven by First USA Financial.
Accounting treatment
The merger will be accounted for under the "purchase" method of accounting
in accordance with generally accepted accounting principles. Therefore, the
aggregate consideration paid by First Data in connection with the merger will
be allocated to First Data's proportionate share of Paymentech's identifiable
assets and liabilities based on their fair market values, with any excess being
treated as goodwill by First Data.
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<PAGE>
Regulatory requirements and third party consents
In connection with the merger, First Data and BANK ONE are required to file
documents under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. Paymentech must file the certificate of merger with the Secretary of
State of the State of Delaware.
Under the Hart-Scott-Rodino Act and the related rules of the Federal Trade
Commission, certain acquisition transactions may not be completed unless
selected information has been furnished to the Antitrust Division of the
Department of Justice and the FTC and prescribed waiting period requirements
have been satisfied. One condition to completion of the merger is the
expiration or termination of all applicable Hart-Scott-Rodino Act waiting
periods. The waiting period applicable to the merger under the Hart-Scott-
Rodino Act was terminated by the FTC on May 13, 1999.
At any time during or after this process, the antitrust agencies may seek to
enjoin or unwind the merger by filing suit in federal district court.
Except as discussed above, Paymentech does not believe that any material
third party consents will be required in connection with the merger.
U.S. federal income tax consequences of the merger
The receipt of cash for shares of Paymentech common stock pursuant to the
merger will be a taxable transaction for U.S. federal income tax purposes and
may also be a taxable transaction under applicable state, local or foreign tax
laws. The tax consequences of this receipt pursuant to the merger may vary
depending upon, among other things, the particular circumstances of the
stockholder. In general, a stockholder who receives cash for shares pursuant to
the merger will recognize gain or loss for U.S. federal income tax purposes
equal to the difference between the amount of cash received in exchange for the
shares sold and that stockholder's adjusted tax basis in the shares.
Provided that the shares constitute capital assets in the hands of the
stockholder, the gain or loss will be capital gain or loss and will be long-
term capital gain or loss if the holding period for the shares exceeds one
year. Gain or loss will be calculated separately for each block of shares
(i.e., shares acquired at the same time and price) sold pursuant to the merger.
For individual taxpayers, capital losses are generally deductible only to the
extent of capital gains for the year plus ordinary income of up to $3,000.
Corporate taxpayers may generally deduct capital losses only to the extent of
their capital gains.
A stockholder may be subject to backup withholding at a rate of 31% unless
the stockholder provides a correct taxpayer identification number and certifies
that the stockholder is not subject to backup withholding, or unless an
exemption applies. Backup withholding is not an additional tax; any amounts so
withheld may be credited against the U.S. federal income tax liability of the
stockholder subject to the withholding.
The U.S. federal income tax discussion set forth above is included for
general information only and is based upon present law. Stockholders are urged
to consult their tax advisors with respect to the specific tax consequences of
the merger to them, including the application and effect of the alternative
minimum tax, and state, local and foreign tax laws. In addition, the discussion
set forth above may not apply to particular categories of stockholders,
including, for example, stockholders who, for U.S. federal income tax purposes,
are non-resident alien individuals, foreign corporations, foreign partnerships
or foreign trusts or estates, stockholders who are life insurance companies,
tax-exempt organizations, financial institutions, and stockholders who acquired
shares pursuant to the exercise of employee stock options or otherwise as
compensation.
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Fees and expenses
Whether or not the merger is completed and except as stated in this section,
all fees and expenses incurred in connection with the merger will be paid by
the party incurring the fees and expenses.
If the merger agreement is terminated because the merger is not completed
prior to October 1, 1999 and any waiting period under the Hart-Scott-Rodino Act
has not expired or terminated, then First Data has agreed to reimburse
Paymentech for up to $2 million of its documented out-of-pocket fees and
expenses incurred in connection with the merger agreement.
Furthermore, Paymentech has agreed to pay First Data a $10 million
termination fee if First Data terminates the merger agreement because
Paymentech's board of directors takes any of the following actions:
. withdraws or modifies its approval or recommendation of the merger or
the merger agreement in a manner which is adverse to First Data
. approves or recommends any alternative proposal relating to an
acquisition transaction of the nature specified in the merger agreement
and involving Paymentech and a party other than First Data
Paymentech has also agreed to pay First Data a $10 million termination fee if
Paymentech terminates the merger agreement in order to enter into an agreement
for an alternative transaction that Paymentech's board of directors believes is
more favorable to Paymentech's stockholders than the merger.
The following are estimates of the fees and expenses which Paymentech, First
Data and BANK ONE expect to incur in connection with the merger:
<TABLE>
<CAPTION>
Paymentech First Data BANK ONE
---------- ---------- --------
<S> <C> <C> <C>
Financial Advisor Fees....................... $4,050,000(1) $ (2) $ --
SEC Filing Fees.............................. 86,073 -- --
Legal Fees and Expenses...................... 2,200,000 1,000,000 100,000
Accounting Fees.............................. 30,000 25,000 25,000
Printing and Mailing Expenses................ 145,000 -- --
Exchange Agent Fees.......................... 20,000 -- --
Solicitation Fees............................ 15,000 -- --
</TABLE>
- --------
(1) This figure consist only of estimated fees and expenses payable to Merrill
Lynch, which are described in detail in the section of this proxy statement
entitled "Special Factors--Opinion of Paymentech's financial advisor."
(2) Morgan Stanley & Co. Incorporated is providing certain financial advisory
services to First Data in connection with the merger. First Data has agreed
to pay Morgan Stanley reasonable and customary compensation for such
services. In addition, First Data has agreed to reimburse Morgan Stanley
for its out-of-pocket expenses related to its engagement, including the
reasonable fees and expenses of its counsel, and has agreed to indemnify
Morgan Stanley against certain liabilities and expenses.
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<PAGE>
INFORMATION CONCERNING THE SPECIAL MEETING
Proxy statement
This proxy statement is being furnished to you in connection with the
solicitation of proxies by Paymentech's board of directors in connection with
the proposed merger.
This proxy statement is first being furnished to stockholders of Paymentech
on or about , 1999.
Time, place and date
The special meeting of stockholders of Paymentech is scheduled to be held
as follows:
, , 1999
: .m., local time
Paymentech, Inc.
1601 Elm Street, [47th Floor]
Dallas, Texas 75201
Purpose of the special meeting
The special meeting is being held so that stockholders of Paymentech may
consider and vote upon a proposal to adopt the merger agreement and to
transact any other business that properly comes before the special meeting or
any adjournment. Adoption of the merger agreement will also constitute
approval of the merger and the other transactions contemplated by the merger
agreement.
If the stockholders of Paymentech adopt the merger agreement, FB Merging
will merge with and into Paymentech and Paymentech will survive the merger.
You will receive $25.50 in cash for each share of Paymentech common stock that
you own. This cash merger consideration will not be paid in exchange for
shares of Paymentech common stock which are:
. held in the treasury of Paymentech or any of its wholly owned
subsidiaries
. owned by First Data, BANK ONE or FB Merging or any of their respective
wholly owned subsidiaries
. held by dissenting stockholders who seek appraisal of the fair value of
their shares and comply with all of the Delaware law procedures
explained on pages 60 to 62.
Stockholder record date for the special meeting
Paymentech's board of directors has fixed the close of business on ,
1999, as the record date for determination of Paymentech stockholders entitled
to notice of and entitled to vote at the special meeting. On the record date,
there were shares of Paymentech common stock outstanding, held by
approximately holders of record.
Vote of Paymentech stockholders required for adoption of the merger agreement
A majority of the voting power of the outstanding shares of Paymentech
common stock entitled to vote at the special meeting must be represented,
either in person or by proxy, to constitute a quorum at the special meeting.
Broker non-votes and shares as to which a stockholder abstains will be
included in determining whether there is a quorum at the special meeting.
The holders of a majority of the outstanding shares of Paymentech common
stock must approve the merger, including at least two-thirds of the shares not
beneficially owned by either BANK ONE or its affiliates. You are entitled to
one vote for each share of Paymentech common stock owned on the record date on
each proposal to be presented to stockholders at the special meeting. BANK
ONE, which owns indirectly approximately 55% of the outstanding shares of
Paymentech common stock, has already agreed in the
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<PAGE>
stockholder agreement to vote to approve the merger. In addition, Paymentech
expects that its executive officers and directors, who beneficially own
approximately 3% of the outstanding shares of Paymentech common stock, will
vote to approve the merger. Their vote will count towards the two-thirds vote
requirement.
Proxies
All shares of Paymentech common stock represented by properly executed
proxies received before or at the special meeting will, unless the proxies are
revoked, be voted in accordance with the instructions indicated thereon. If no
instructions are indicated on a properly executed proxy, the shares will be
voted FOR adoption of the merger agreement. You are urged to mark the box on
the proxy to indicate how to vote your shares.
If a properly executed proxy is returned and the stockholder has abstained
from voting on adoption of the merger agreement, the Paymentech common stock
represented by the proxy will be considered present at the special meeting for
purposes of determining a quorum and for purposes of calculating the vote, but
will not be considered to have been voted in favor of adoption of the merger
agreement. Similarly, if an executed proxy is returned by a broker holding
shares of Paymentech common stock in street name which indicates that the
broker does not have discretionary authority to vote on adoption of the merger
agreement, the shares will be considered present at the meeting for purposes of
determining the presence of a quorum and calculating the vote, but will not be
considered to have been voted in favor of adoption of the merger agreement.
Your broker will vote your shares only if you provide instructions on how to
vote by following the information provided to you by your broker.
Because adoption of the merger agreement and approval of the merger require
the affirmative vote of the holders of a majority of the outstanding shares of
Paymentech common stock, including at least two-thirds of the stockholders not
affiliated with BANK ONE, as of the record date, abstentions, failures to vote
and broker non-votes will have the same effect as a vote against adoption of
the merger agreement and approval of the merger.
Paymentech does not expect that any matter other than adoption of the merger
agreement will be brought before the special meeting. If, however, other
matters are properly presented, the persons named as proxies will vote in
accordance with their judgment with respect to those matters, unless authority
to do so is withheld in the proxy.
You may revoke your proxy at any time before it is voted by:
. sending a written revocation notice to the Secretary of Paymentech at
1601 Elm Street, 9th Floor, Dallas, Texas, 75201
. granting a subsequent proxy
. appearing in person and voting at the special meeting. Attendance at the
special meeting will not in and of itself constitute revocation of a
proxy
If you own your shares of Paymentech common stock in "street name," you
should follow your broker's instructions concerning how to change your vote.
Paymentech will incur the expenses incurred in connection with the printing
and mailing of this proxy statement. Paymentech has retained Georgeson & Co.,
Inc. at an estimated cost of $15,000 plus reimbursement of expenses, to assist
in the solicitation of proxies. Paymentech and Georgeson will also request
banks, brokers and other intermediaries holding shares beneficially owned by
others to send this proxy to and obtain proxies from the beneficial owners and
will reimburse the holders for their reasonable expenses in so doing.
You should not send in any stock certificates with your proxies. A
transmittal form with instructions for the surrender of stock certificates for
Paymentech common stock will be mailed to you as soon as practicable after
completion of the merger.
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LITIGATION
After the announcement of the merger by Paymentech and First Data on March
22, 1999, three putative class action lawsuits relating to the merger were
filed in the Court of Chancery for the State of Delaware. These lawsuits have
been consolidated into a single action captioned: In Re Paymentech, Inc.
Shareholders Litigation, C.A. No. 17044-NC.
The lawsuit was filed by individuals claiming to be stockholders of
Paymentech, purportedly on behalf of all Paymentech's stockholders (except BANK
ONE and its subsidiaries) against Paymentech, Paymentech's directors, BANK ONE,
and First Data. The plaintiffs in the lawsuit allege, among other things, that
the $25.50 per share price offered by First Data is inadequate, and that
Paymentech's directors, as well as BANK ONE as an allegedly controlling
stockholder, aided by First Data, breached their fiduciary duties to
Paymentech's minority stockholders in connection with the merger agreement.
This lawsuit seeks to have the merger enjoined or, if the merger is completed,
to have it rescinded and to recover unspecified damages, fees and expenses. The
plaintiffs have indicated an intent to file a consolidated amended complaint.
Paymentech, BANK ONE and First Data intend to vigorously oppose this lawsuit.
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THE MERGER AGREEMENT
The following is a brief summary of material provisions of the merger
agreement, which is attached as Annex A to this proxy statement. We urge
stockholders to read Annex A in its entirety.
The merger. The merger agreement provides that, at the effective time of the
merger, FB Merging will be merged into Paymentech, Paymentech will continue as
the surviving corporation and the separate existence of FB Merging will cease.
Pursuant to the provisions of the merger agreement, the merger will become
effective when a certificate of merger executed in accordance with Delaware law
is filed with the Secretary of State of the State of Delaware, or at another
time as FB Merging and Paymentech agree and specify in the certificate of
merger.
Contribution of cash and Paymentech common stock to FDC Offer. Immediately
prior to completion of the merger, the following transfers will occur:
(a) First Data will contribute to FDC Offer sufficient cash to pay the
aggregate merger consideration and, at the same time, First USA
Financial will contribute to FDC Offer all of its shares of Paymentech
common stock (other than shares held in a fiduciary, collateral,
custodial or similar capacity), in each case in exchange for shares of
common stock of FDC Offer; and
(b) First Data and First USA Financial will then cause FDC Offer to
contribute to FB Merging all of the shares of Paymentech common stock
that it receives from First USA Financial and all of the cash it
receives from First Data in exchange for shares of capital stock of FB
Merging.
Conversion of securities. As of the effective time of the merger, without
any further action on the part of FB Merging, Paymentech or the holders of any
securities of FB Merging or Paymentech:
(a) Each issued and outstanding share of common stock of FB Merging will be
converted into one share of common stock of the surviving corporation;
(b) All shares of Paymentech common stock held in the treasury of
Paymentech or by any wholly owned subsidiary of Paymentech and any
shares owned by First Data, BANK ONE or FB Merging or by any wholly
owned subsidiary of First Data or BANK ONE (other than shares held in a
fiduciary, collateral, custodial or similar capacity) shall be canceled
and no capital stock of First Data or other consideration will be
delivered for the shares; and
(c) Each other share of Paymentech common stock issued and outstanding
prior to the effective time of the merger (other than shares as to
which dissenters' rights of appraisal have been perfected) will be
converted into the right to receive from the surviving corporation
$25.50 in cash, without interest. These shares of Paymentech common
stock will no longer be outstanding and will automatically be canceled
and retired and each holder of a certificate representing any of these
shares shall cease to have any rights except the right to receive the
merger consideration, less any applicable withholding taxes, upon
surrender of the stock certificate that formerly evidenced the shares
of Paymentech common stock.
As a result of the actions described above, at the effective time of the
merger, Paymentech will become a wholly owned subsidiary of FDC Offer, which
itself at that time will be owned approximately 55% by BANK ONE and
approximately 45% by First Data.
Paymentech stockholders who do not vote in favor of the merger or consent
thereto in writing and who have demanded properly in writing appraisal for
their shares of Paymentech common stock in accordance with Delaware law and who
otherwise comply with all of the provisions of Delaware law regarding statutory
appraisal rights, have the right to seek a determination of the fair value of
their shares of Paymentech common stock and cash payment for those shares in
lieu of the merger consideration to which they would otherwise be entitled.
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<PAGE>
Shares of Paymentech common stock that are issued and outstanding
immediately prior to the effective time of the merger and that are held by
stockholders who have not voted the shares in favor of the merger and who have
complied with the requirements of Section 262 of the Delaware General
Corporation Law will represent only the right to receive payment for the shares
as provided under Section 262, and shall not be converted into the merger
consideration, unless the holder fails to perfect or effectively withdraws or
loses the stockholder's right to receive payment for the shares under Section
262. If the holder fails to perfect, effectively withdraws or loses this right,
the stockholder's shares of common stock thereupon will be deemed, as of the
effective time of the merger, to be converted into the merger consideration.
See the section entitled "Dissenters' Rights of Appraisal" in this proxy
statement for further information.
Exchange of securities. As soon as reasonably practicable after the merger,
the paying agent will mail a letter of transmittal to each holder of record of
Paymentech common stock immediately prior to the effective time of the merger
for use in forwarding the holder's Paymentech common stock certificates for
surrender and exchange for the merger consideration to which the stockholder
has become entitled. After receipt of the letter of transmittal, each holder of
certificates that represented Paymentech common stock prior to the merger
should surrender the certificates together with the signed letter of
transmittal duly executed, and any other required documents as set forth in the
letter of transmittal to the paying agent, and each holder will receive in
exchange the merger consideration to which that holder is entitled. The letter
of transmittal will be accompanied by instructions specifying other details of
the exchange. Thereafter, the stockholder will be entitled to receive an amount
of cash equal to the product of the number of shares of Paymentech common stock
formerly represented by that stockholder's certificate(s) and $25.50. No
interest will be paid on the cash payable upon surrender of any certificate(s).
First Data or the paying agent will be entitled to deduct and withhold from the
merger consideration those amounts as First Data or the paying agent is
required to deduct and withhold from the merger consideration as may be
required by any applicable tax laws.
After the effective time of the merger, each certificate formerly
representing Paymentech common stock, until surrendered and exchanged, will be
deemed for all purposes to evidence the right to receive only the merger
consideration for the shares of common stock represented.
After the merger, there will be no transfers of shares of Paymentech common
stock on the stock transfer books of Paymentech. If, after the completion of
the merger, certificates that previously represented shares of Paymentech
common stock are presented for transfer, they will be canceled and exchanged
for the merger consideration under the terms of the merger agreement.
No transfer taxes will be payable in connection with any payment for shares
of Paymentech common stock, except that if the check for this payment is to be
delivered to a person other than the person in whose name the certificates
surrendered are registered, the person requesting delivery of the check must,
prior to the delivery thereof, either (a) pay to the paying agent any resulting
transfer taxes or other taxes or (b) establish to the satisfaction of the
paying agent that the tax has been paid or is not applicable.
Notwithstanding any of the above provisions, none of the paying agent, FDC
Offer nor any party to the merger agreement will be liable to any holder of
stock certificates for any amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
Charter and by-laws; directors and officers. The merger agreement also
provides that the certificate of incorporation of the surviving corporation
will, at the effective time of the merger, be amended to read in its entirety
as set forth in exhibit C to the merger agreement. At the effective time of the
merger, the by-laws of the surviving corporation will be the by-laws of FB
Merging as in effect immediately prior to the effective time. In addition, the
merger agreement provides that the directors of FB Merging at the effective
time of the merger will be the directors of the surviving corporation and that
the officers of Paymentech at the effective time of the merger will be the
officers of the surviving corporation. However, First Data, BANK ONE, First USA
Financial and FDC Offer have agreed in the stockholder agreement that after
completion of the merger but prior to the contribution of substantially all of
Paymentech's assets and liabilities to the BANK ONE/First
44
<PAGE>
Data alliance, FDC Offer will elect a nine-member board of directors for the
surviving corporation, five of whom will be designated by BANK ONE and four of
whom will be designated by First Data. After the contribution of Paymentech's
assets and liabilities to the BANK ONE/First Data alliance, as provided for in
the contribution agreement, the stockholder agreement provides that the
surviving corporation's board of directors will be reduced to four members,
with two members designated by each of BANK ONE and First Data.
Representations and warranties. The merger agreement contains various
representations and warranties by First Data, FB Merging and/or Paymentech
relating to, among other things:
(a) the organization and similar corporate matters of First Data,
Paymentech and certain of their subsidiaries;
(b) the capital structure of Paymentech;
(c) the authorization, execution, delivery, performance and enforceability
of the merger agreement, the stockholder agreement, the contribution
agreement and related matters;
(d) required consents and approvals or conflicts under certificates of
incorporation, by-laws or agreements, or violations of law, subject to
certain materiality qualifications;
(e) the accuracy of information supplied by Paymentech and First Data in
connection with this proxy statement and various other filings required
under the Exchange Act;
(f) First Data's ability to pay the aggregate merger consideration;
(g) the accuracy of filings made by Paymentech with the SEC under the
Securities Act of 1933, as amended, and the Exchange Act, including
financial statements included in the documents filed by Paymentech
under these acts;
(h) the absence of certain events with respect to Paymentech since June 30,
1998;
(i) permits and compliance with laws with respect to Paymentech;
(j) tax matters of Paymentech;
(k) actions and proceedings of Paymentech;
(l) selected employee agreements, benefit plans, employees and employment
practices of Paymentech;
(m) liabilities and services of Paymentech;
(n) labor matters of Paymentech;
(o) intellectual property, software matters and year 2000 compliance of
Paymentech;
(p) title to assets of Paymentech;
(q) required stockholder votes with respect to Paymentech;
(r) environmental matters with respect to Paymentech;
(s) customers and merchant contracts with respect to Paymentech;
(t) insurance with respect to Paymentech;
(u) transactions with affiliates with respect to Paymentech;
(v) brokers; and
(w) state takeover statutes with respect to Paymentech.
Covenants relating to the conduct of Paymentech's business. Paymentech has
also agreed, among other things, that through the effective time of the merger
and except as otherwise expressly contemplated or permitted by the merger
agreement or except as otherwise agreed by First Data, that Paymentech and its
subsidiaries will, in all material respects, carry on its business in the
ordinary course of its business as currently conducted and, will not:
(a) declare, set aside or pay any dividends on, or make any other
distributions in respect of, its or its subsidiaries' capital stock, or
otherwise make any payments or other distributions, subject to certain
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exceptions, or split, combine or reclassify any of it or its
subsidiaries' capital stock or purchase, redeem or otherwise acquire any
shares of it or its subsidiaries' capital stock or any other securities
or any rights, warrants or options to acquire any shares of capital
stock or other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its or its subsidiaries' capital stock, any other voting
securities or equity equivalent or any securities convertible into, or
any rights, warrants or options (including options under the Paymentech
stock option plan) to acquire any such shares, voting securities,
equity equivalent or convertible securities, subject to certain
exceptions;
(c) amend its charter or by-laws or any other similar organizational
documents;
(d) engage in material acquisitions;
(e) except as provided in the contribution agreement, sell, lease, encumber
or otherwise dispose of any of its assets, other than sales of
inventory that are in the ordinary course of business consistent with
past practice and sales of assets having an aggregate fair market value
of up to $10 million;
(f) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to,
or other investments in, any other person, other than in the ordinary
course of business consistent with past practice and, in the case of
indebtedness and guarantees, in an amount not to exceed $50 million in
the aggregate in excess of the amounts outstanding on the date the
merger agreement was signed;
(g) alter it or its subsidiaries' corporate structure or ownership, subject
to certain exceptions;
(h) increase compensation or grant severance or termination pay to any of
it or its subsidiaries' directors, officers or employees or amend in
any material respect any severance plan, agreement or arrangement or
enter into or amend any of it or its subsidiaries' plans or certain
other employee arrangements or agreements, subject to certain
exceptions;
(i) knowingly violate or knowingly fail to perform, in any material
respect, any obligation or duty imposed upon it or its subsidiaries by
any applicable federal, state or local law, rule, regulation, guideline
or ordinance;
(j) 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
generally accepted accounting principles);
(k) prepare or file any tax return inconsistent with past practice or, on
any such tax return, take any position, make any election, or adopt any
method that is inconsistent with positions taken, elections made or
methods used in preparing or filing similar tax returns in prior
periods;
(l) settle or compromise any federal, state, local or foreign income tax
dispute in excess of $10 million or settle or compromise any claims or
litigation where the consideration paid by Paymentech and its
subsidiaries, in the aggregate, has a fair market value in excess of $6
million or there are potential criminal liabilities;
(m) enter into, amend or terminate any material agreement or contract to
which it is a party, or waive, release or resign any material rights or
claims under any material agreement or contract, or purchase any real
property, or make or agree to make any new capital expenditure or
expenditures (other than the purchase of real property) which in the
aggregate are in excess of 15% higher than expenditures contemplated by
Paymentech's capital budget for fiscal 1999 or fiscal 2000;
(n) pay, discharge or satisfy any claims, liabilities or obligations in
excess of $6 million, subject to certain exceptions;
(o) except as required by applicable law or by order of a governmental
entity, do any other act which would cause any representation or
warranty of Paymentech in the merger agreement to be or become untrue;
and
(p)authorize or agree to do any of the above.
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In addition, First Data agreed that it will not, and will cause its
subsidiaries not to, consummate or agree to consummate a transaction that might
delay the merger or which relates to the merchant acquiring business and would
require filings to be made under the Hart-Scott-Rodino Act.
No solicitation. In the merger agreement, Paymentech agreed that it would
not, and would not permit any of its subsidiaries to, nor would it authorize or
permit any of its representatives such as an officer, director, financial
advisor, attorney or other advisor or representative of, Paymentech or any of
its subsidiaries, to, directly or indirectly:
(a) solicit, initiate or encourage any inquiries or the making or
implementation of any takeover proposal;
(b) make or implement or participate in the making or implementation of any
takeover proposal;
(c) approve or recommend (except with respect to a superior proposal where
Paymentech is entitled to discuss or negotiate in accordance with the
merger agreement), or enter into any agreement with respect to any
takeover proposal; or
(d) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to Paymentech or any of its
subsidiaries in connection with, or take any other action that may
reasonably be expected to lead to any takeover proposal;
provided, however, that prior to the merger, if Paymentech receives an
unsolicited request for non-public information from a party who proposes a
written bona fide takeover proposal and if the board of directors reasonably
determines in good faith that the failure to provide the information requested
would be inconsistent with the board's fiduciary duties to Paymentech and its
stockholders or otherwise breach or violate applicable law (based on the advice
of outside legal counsel to Paymentech to that effect, which advice shall
specifically take into account the stockholder agreement), then, Paymentech and
its representatives may, in response to an unsolicited request, and subject to
compliance with the merger agreement, furnish information with respect to
Paymentech and its subsidiaries to the person making the takeover proposal
pursuant to a confidentiality agreement, and participate in discussions or
negotiations with that person, if the proposal constitutes a superior proposal.
For purposes of the merger agreement, "takeover proposal" means (1) any
written proposal or offer for a tender offer, recapitalization, merger,
consolidation or other business combination involving Paymentech or any of its
subsidiaries or any proposal or offer to acquire in any manner an equity
interest in any voting securities of, or a substantial portion of the assets of
Paymentech or any of its subsidiaries, other than the transactions contemplated
by the merger agreement, the stockholder agreement and the contribution
agreement or (2) any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially delay
the merger or which could reasonably be expected to dilute or adversely affect
materially the benefits to First Data of the transactions contemplated by the
merger agreement, the stockholder agreement and the contribution agreement.
For purposes of the merger agreement, "superior proposal" means a bona fide
takeover proposal made by a third party on terms which the board of directors
reasonably determines in good faith to be more favorable to the stockholders
than the merger (based on a written opinion, with only customary exceptions,
from a nationally recognized investment banking firm serving as financial
advisor to Paymentech) that the value of the consideration provided for in the
proposal exceeds the merger consideration and for which financing, to the
extent required, is then committed or which the board of directors reasonably
determines in good faith (based on a banker's opinion) is highly likely to be
obtained by that third party. In making its determination whether a takeover
proposal constitutes a superior proposal, the board of directors shall take
into account whether the takeover proposal has a reasonable prospect of being
consummated prior to October 1, 1999. Notwithstanding the foregoing, unless the
merger agreement shall have been terminated pursuant to the terms thereof,
nothing shall prevent First Data, in its discretion, from consummating the
merger.
The merger agreement provides further that Paymentech must advise First Data
and BANK ONE orally and in writing of any takeover proposal or any inquiry with
respect to or which could lead to any takeover
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proposal received by any officer or director of Paymentech or, to the knowledge
of Paymentech, any other representative of Paymentech, and the identity of the
person making any such takeover proposal or inquiry, no later than 24 hours
following receipt of the takeover proposal or inquiry. If Paymentech intends to
furnish any person with any information with respect to any takeover proposal
in accordance with the merger agreement, Paymentech is required to advise First
Data and BANK ONE orally and in writing of that intention not less than 24
hours in advance of providing the information and shall promptly provide to
First Data and BANK ONE any information concerning Paymentech, its
subsidiaries, business, properties or assets furnished to any third party and
which has not previously been provided to First Data and BANK ONE.
Third-party standstill agreements. During the period from the date of the
merger agreement through the effective time of the merger, Paymentech has
agreed not to terminate, amend, modify or waive any provision of any standstill
agreement to which Paymentech or any of its subsidiaries is a party. During
this period, Paymentech has also agreed to enforce, to the fullest extent
permitted under applicable law, the provisions of any standstill agreements,
including, but not limited to, obtaining injunctions to prevent any breaches of
those agreements and to enforce specifically the terms and provisions of those
agreements.
Covenants regarding stockholder meeting. In the merger agreement,
Paymentech, among other things, has agreed to convene and hold a meeting of its
stockholders as soon as practicable for the purpose of adopting the merger
agreement and approving the merger. In addition, Paymentech has agreed that its
board of directors, subject to its fiduciary duties, will recommend to its
stockholders the adoption of the merger agreement and will not withdraw or
modify its recommendation except to the extent it is permitted to do so in
accordance with the provisions of the merger agreement. In the merger
agreement, Paymentech agreed to file this proxy statement with the SEC. The
merger agreement will be submitted to the stockholders whether or not the board
of directors determines at any time that the merger agreement is no longer
advisable and recommends that the stockholders reject it.
Stock-based compensation. Prior to the merger, the Paymentech board of
directors (or, if appropriate, any committee thereof) will:
(a) cause each option to purchase shares of Paymentech common stock that
was outstanding as of the date of the merger agreement to vest and to
be exercisable immediately prior to the consummation of the merger;
(b) cause all restrictions applicable to any restricted stock award granted
prior to the date of the merger agreement and outstanding upon
consummation of the merger to lapse immediately prior to the merger;
and
(c) cause each option to purchase shares of Paymentech common stock that is
outstanding upon the consummation of the merger to be exercisable only
for the merger consideration for each share of Paymentech common stock
issuable upon exercise thereof immediately prior to the merger.
Paymentech will offer each holder of an option to purchase common stock, in
exchange for the cancellation of the option, the right to receive from
Paymentech an amount equal to (A) the product of (i) the number of shares of
common stock subject to the option and (ii) the excess, if any, of the merger
consideration over the exercise price per share for the purchase of shares of
common stock subject to the option, minus (B) all applicable federal, state and
local taxes required to be withheld in respect of the payment. The amounts
payable for canceling the options will be paid as soon as reasonably
practicable following the merger.
Under the merger agreement, Paymentech will take all actions necessary to
ensure the following: the offering period applicable to the options outstanding
under Paymentech stock purchase plan is shortened so as to have an exercise
date that occurs before the merger; no new offering period, other than the
offering period that commenced on April 1, 1999, shall commence after the date
of the merger agreement; and no holder of an option to purchase shares of
common stock under the Paymentech stock purchase plan is permitted to increase
his or her rate of payroll deduction under Paymentech stock purchase plan from
and after the date of the merger agreement.
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Paymentech has also agreed to take all actions necessary to provide that,
prior to the merger, each of Paymentech's stock option and stock purchase plans
and any similar plan or agreement of Paymentech will be terminated, 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 Paymentech or
any of its subsidiaries will be terminated, and no holder of an option to
purchase shares of Paymentech common stock will have any right to receive any
shares of capital stock of Paymentech or, if applicable, the surviving
corporation, upon exercise of any stock option.
Indemnification. The merger agreement provides that from and after the
merger, First Data will cause the surviving corporation to indemnify and hold
harmless all past and present officers and directors of Paymentech and of its
subsidiaries to the same extent and in the same manner these persons are
indemnified, as of the date of the merger agreement, by Paymentech under
Delaware law, Paymentech's charter or by-laws for acts or omissions occurring
at or prior to the merger.
Also under the merger agreement, First Data will cause the surviving
corporation to provide, for an aggregate period of not less than six years from
the merger, Paymentech's current directors and officers an insurance and
indemnification policy that provides coverage for events occurring prior to the
merger that is substantially similar to Paymentech's existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage. However, the surviving corporation will not be required to pay an
annual premium for the directors' and officers' insurance in excess of 150% of
the last annual premium paid prior to the date of the merger agreement but in
that case will purchase as much coverage as possible for that amount.
Conditions precedent to the merger. The respective obligations of each party
to effect the merger are subject to the satisfaction or waiver by each party
prior to the merger of the following conditions, among others:
(a) Stockholder approval--adoption of the merger agreement and approval of
the merger by the holders of a majority of the outstanding shares of
Paymentech common stock, which majority shall, unless otherwise agreed
by Paymentech, First Data and BANK ONE, include not less than 66 2/3%
of the outstanding shares of common stock not owned by BANK ONE, First
Data or their respective affiliated persons or associates, including
without limitation FDC Offer and FB Merging;
(b) No order--no court or other governmental entity having jurisdiction
over Paymentech or First Data or any of their respective subsidiaries
shall have enacted, issued, promulgated, enforced or entered any law,
rule, regulation, executive order, decree, injunction or other order
which is then in effect and has the effect of making illegal the merger
or any of the other transactions contemplated by the merger agreement,
the stockholder agreement or the contribution agreement;
(c) Hart-Scott-Rodino Act and regulatory approvals--any waiting period (and
any extension thereof) under the HSR Act applicable to the merger shall
have expired or been terminated and, subject to certain materiality
qualifications, any other governmental or regulatory notices or
approvals required with respect to the transactions contemplated by the
merger agreement shall have been either filed or received; and
(d) Representations and warranties; performance of obligations--the
representations and warranties of the other party set forth in the
merger agreement that are qualified as to materiality shall be true and
correct and the representations and warranties that are not so
qualified shall be true and correct in all material respects, and the
other party shall have performed in all material respects each material
covenant required to be performed by it under the merger agreement.
In addition, the obligations of First Data and FB Merging to effect the
merger are subject to the satisfaction or waiver by First Data and FB Merging
of the following conditions:
(a) Absence of material adverse change--there shall not have occurred any
material adverse change with respect to Paymentech;
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(b) Absence of pending litigation--there shall not be pending by any
governmental entity any suit, action or proceeding (1) seeking to
restrain or prohibit the merger or the performance of any of the other
transactions contemplated by the merger agreement, the stockholder
agreement or the contribution agreement or seeking to obtain from
Paymentech or First Data any damages that would have a material adverse
effect on Paymentech or First Data, (2) seeking to compel Paymentech or
First Data or any of their affiliates to dispose of or hold separate
any material portion of the business or assets of Paymentech and its
subsidiaries, taken as a whole, or First Data and its subsidiaries,
taken as a whole, as a result of the merger or any of the other
transactions contemplated by the merger agreement, the stockholder
agreement or the contribution agreement or (3) which otherwise is
reasonably likely to have a material adverse effect on Paymentech,
other than those suits, actions or proceedings which, in the reasonable
opinion of both counsel to First Data and to Paymentech, are unlikely
to result in an adverse judgment;
(c) Stockholder agreement and contribution agreement--neither BANK ONE nor
First USA Financial shall have terminated the stockholder agreement or
the contribution agreement and neither BANK ONE nor First USA Financial
shall be in material breach thereof or indicated its intention not to
perform its obligations thereunder; and
(d) Accounting matters--Each of BANK ONE and First Data shall have received
an accounting opinion from its independent accountants that the
transactions contemplated by the merger agreement, the contribution
agreement and the operating agreement will not have adversely affected
"pooling of interests" accounting treatment for any then publicly
announced or completed transaction by BANK ONE or any affiliate or FDC
or any affiliate, as applicable, assuming any changes to the BANK
ONE/First Data alliance operating agreement that would be reasonably
acceptable to BANK ONE or First Data.
Termination of the merger agreement. The merger agreement provides that it
may be terminated at any time prior to the merger, whether before or after the
approval of the terms of the merger agreement by the stockholders of
Paymentech:
(a) by mutual written consent of First Data and Paymentech;
(b) by either First Data or Paymentech if the merger shall not have been
consummated prior to October 1, 1999 or any governmental entity shall
have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the merger
or other transactions contemplated by the merger agreement, the
stockholder agreement or the contribution agreement and the order,
decree or ruling or other action shall have become final and non-
appealable;
(c) by First Data or Paymentech in the event of a breach by the other (or
FB Merging, in the case of First Data) of any representation, warranty,
covenant or other agreement which would reasonably be expected to give
rise to the failure of the conditions precedent to the merger with
respect to the representations, warranties and covenants of Paymentech
and First Data which cannot be or has not been cured within 30 days
after giving written notice of the breach;
(d) by First Data if the board of directors of Paymentech or any committee
of that board shall have withdrawn or modified in a manner adverse to
First Data its approval or recommendation of the merger or the merger
agreement or approved or recommended any takeover proposal or has
resolved to take any of the foregoing actions;
(e) by Paymentech prior to receipt of the approval of the stockholders if a
takeover proposal constitutes a superior proposal and the board of
directors reasonably determines in good faith that the failure to
terminate the merger agreement and accept the superior proposal would
be inconsistent with the board's fiduciary duties to Paymentech and its
stockholders or otherwise breach or violate applicable law (based on
outside legal advice); provided, however, that Paymentech cannot
terminate the merger agreement pursuant to this right to terminate
unless it has complied with all of the nonsolicitation provisions
contained in the merger agreement, simultaneously with that termination
Paymentech has paid First Data a termination fee of $10 million and
simultaneously with the termination Paymentech
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enters into a definitive agreement to effect the superior proposal; and
provided, further, Paymentech may not terminate the merger agreement
under this right to terminate until 120 hours have elapsed following
delivery to First Data and BANK ONE of a written notice of the
determination by the board of directors and during the 120 hours First
Data has not informed Paymentech that it is willing to substantially
match the terms and conditions of the superior proposal.
In the event of a termination of the merger agreement by either Paymentech
or First Data, the merger agreement shall become void (except for certain
specified provisions, including those pertaining to costs and expenses, the
payment of certain fees and except for certain confidentiality obligations of
the parties) and there shall be no liability on the part of First Data, FB
Merging or Paymentech or their respective officers or directors, other than
for liability for any willful breach of a representation or warranty contained
in the merger agreement or the material breach of any covenant contained in
the merger agreement.
Costs and expenses; termination fee. Except as otherwise provided in the
merger agreement, all costs and expenses incurred in connection with the
merger agreement and the transactions contemplated thereby shall be paid by
the party incurring those costs and expenses, whether or not the merger is
consummated.
The merger agreement provides that Paymentech shall pay in same day funds
to First Data $10 million under the circumstances and terms set forth below:
(a) if First Data terminates the merger agreement because the board of
directors of Paymentech or any committee thereof shall have withdrawn
or modified in a manner adverse to First Data its approval or
recommendation of the merger or the merger agreement or approved or
recommended any takeover proposal or has resolved to take any of the
foregoing actions, Paymentech shall pay the $10 million upon demand;
and
(b) if Paymentech terminates the merger agreement because prior to the
receipt of stockholder approval Paymentech receives a superior proposal
and enters into a definitive agreement to effect that superior
proposal, Paymentech shall pay the $10 million simultaneously with the
termination.
In addition, if the merger agreement is terminated because the merger is
not completed prior to October 1, 1999 and any waiting period under the Hart-
Scott-Rodino Act has not expired or been terminated, then First Data has
agreed to reimburse Paymentech for up to $2 million of its out-of-pocket fees
and expenses incurred in connection with the merger agreement.
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THE STOCKHOLDER AGREEMENT
The stockholder agreement was entered into simultaneously with the merger
agreement. Set forth below is a brief summary of material provisions of the
stockholder agreement, which is attached as Annex B to this proxy statement. We
urge stockholders to read Annex B in its entirety.
Agreement to vote. Pursuant to the stockholder agreement, First USA
Financial has agreed to vote its shares as common stock as follows:
(a) in favor of adoption of the merger agreement and the approval of the
merger, all other transactions contemplated thereby and any actions
required in furtherance thereof;
(b) against any action or agreement that is intended, or could reasonably
be expected, to impede, interfere with, or prevent the merger or result
in a breach in any respect of any covenant, representation or warranty
or any other obligation or agreement of Paymentech or any of its
subsidiaries under the merger agreement or the stockholder agreement;
and
(c) except as specifically requested in writing in advance by First Data or
as permitted by the terms of the merger agreement, against the
following actions (other than the merger and the transactions
contemplated by or required to implement the merger agreement, the
stockholder agreement and the contribution agreement) involving
Paymentech or any of its subsidiaries or affiliates: (1) any
extraordinary corporate transaction; (2) a sale, lease, transfer or
disposition of any assets outside the ordinary course of business or
any assets which in the aggregate are material taken as a whole, or a
reorganization, recapitalization, dissolution or liquidation; (3) any
change in the management or in a majority of the persons who constitute
the board of directors; any change in the present capitalization or any
charter or by-law amendments; any other material change in its
subsidiaries' structure or business; or any other action that, in the
case of each of the matters referred to in this clause (3) is intended,
or could reasonably be expected, to impede, interfere with, delay,
postpone or materially adversely affect the merger or the transactions
contemplated by the stockholder agreement, the contribution agreement
and the merger agreement.
Restrictions on transfer; proxies. Also pursuant to the stockholder
agreement, First USA Financial has agreed not to:
(a) tender its shares of Paymentech common stock in any tender offer for
the common stock;
(b) except as contemplated by the stockholder agreement, the contribution
agreement or the merger agreement, otherwise offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement with respect to or
consent to the offer for sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of any or all of its Paymentech common
stock or any interest therein;
(c) grant any proxies or powers of attorney, deposit any of its Paymentech
common stock into a voting trust or enter into a voting agreement with
respect to any of its Paymentech common stock; or
(d) take any action that would make any representation or warranty of First
USA Financial contained in the stockholder agreement that is qualified
by materiality untrue or incorrect in any respect or any representation
or warranty of First USA Financial in the stockholder agreement that is
not so qualified untrue or correct in any material respect or have the
effect of preventing or disabling First USA Financial from performing
First USA Financial's obligations under the stockholder agreement.
No solicitation. With some exceptions, BANK ONE agreed that it and its
affiliates would immediately cease any existing discussions or negotiations
with any parties regarding any acquisition of all or any material portion of
Paymentech's assets or Paymentech's equity. Pursuant to the stockholder
agreement, each of BANK ONE and First USA Financial has agreed not, nor shall
they authorize or permit any of their affiliates or any director, officer,
employee, financial advisor, attorney or other advisor or representative to,
directly or indirectly: (a) solicit, initiate or encourage any inquiries or the
making or implementation of any takeover proposal; (b) make or implement or
participate in the making or implementation of any takeover proposal (other
than an agreement conditioned upon the concurrent exercise by Paymentech,
provided that concurrently
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with the effectiveness of that agreement, Paymentech exercises its right to
terminate the merger agreement as a result of the superior proposal); (c) enter
into any agreement with respect to or approve or recommend any takeover
proposal; (d) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to Paymentech or any of its
subsidiaries in connection with, or take any other action that may reasonably
be expected to lead to any takeover proposal. Notwithstanding the foregoing, no
affiliate of BANK ONE or First USA Financial will be prohibited (1) from
providing shareholder or proxy services in the ordinary course of business of
the affiliate or (2) to the extent the affiliate is acting in a fiduciary
capacity, from taking actions directed by one or more of the beneficiaries or
other legal representatives involved in the fiduciary relationship or as is
otherwise required by reason of the fiduciary relationship.
In addition, under the stockholder agreement, if at any time BANK ONE or any
of its affiliates (other than Paymentech and its subsidiaries) is approached
(without any joint or related approach to Paymentech or any of its
subsidiaries) by any person concerning its participation in a transaction
involving any of the assets, businesses or securities of Paymentech or any
subsidiary thereof (other than with respect to the excluded assets), BANK ONE
will promptly inform First Data of the nature of the contact and the parties
thereto and provide a copy of any such written proposal and a summary of any
oral proposal (including the material terms and conditions of the proposal) to
First Data immediately after receipt thereof. Notwithstanding the foregoing, no
affiliate of BANK ONE is required to provide any notification referred to in
the preceding sentence if the affiliate's participation in the transaction is
limited to the provision of shareholder or proxy services in the ordinary
course of business of the affiliate or if the affiliate is acting in a
fiduciary capacity and this participation in the transaction is directed by one
or more of the beneficiaries or other legal representatives involved in the
fiduciary relationship or as is otherwise required by reason of the fiduciary
relationship.
Actions taken prior to completion of the merger. The stockholder agreement
provides that the following transfers will take place immediately prior to the
effective time:
(a) First Data will contribute to FDC Offer sufficient cash to pay the
aggregate merger consideration and, at the same time, First USA
Financial will contribute to FDC Offer all of the common stock it owns
of Paymentech (other than shares of common stock held in a fiduciary,
collateral, custodial or similar capacity), in each case in exchange
for shares of common stock of FDC Offer; and
(b) First Data and First USA Financial will then cause FDC Offer to
contribute to FB Merging all of the shares of Paymentech common stock
that it receives from First USA Financial and all of the cash it
receives from First Data in exchange for shares of capital stock of FB
Merging.
However, the obligation of First USA Financial to contribute its shares of
common stock to FDC Offer is subject to the receipt by First USA Financial of a
written opinion of Wachtell, Lipton, Rosen & Katz that this contribution and
receipt of ownership interests in FDC Offer by First USA Financial will
constitute an exchange of a type that is generally tax-free.
The total number of shares of common stock of FDC Offer to be issued to
First Data and First USA Financial in exchange for their respective
contributions to FDC Offer will be in an amount to be agreed upon between First
USA Financial and First Data and will be allocated in the following
percentages: (a) to First USA Financial, the percentage obtained by dividing
(1) the total number of shares of Paymentech common stock which are contributed
by First USA Financial to FDC Offer by (2) the total number of shares of
Paymentech common stock outstanding immediately prior to the merger; and (b) to
First Data, the percentage obtained by subtracting First USA Financial's
percentage from 100%. BANK ONE and First Data agree to cause FB Merging to
cause all shares of the Paymentech common stock owned by it to be voted in
approval of the merger.
Actions taken after completion of the merger. Each of the parties to the
stockholder agreement has also agreed to the following:
(a) The parties will take all steps reasonably necessary to cause the
consummation of the transactions contemplated by the contribution
agreement.
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(b) The parties will cause the surviving corporation to comply with the
covenants of First Data in the merger agreement regarding
indemnification and directors and officers insurance.
(c) FDC, BANK ONE and First USA Financial shall take actions necessary to
cause the board of directors of the surviving corporation, immediately
after the merger and until the closing of the transactions contemplated
by the contribution agreement occurs, to consist of nine members, five
of whom will be designated by BANK ONE and four of whom will be
designated by First Data. After the closing of the transactions
contemplated by the contribution agreement, BANK ONE and First USA
Financial shall take actions necessary to cause the board of directors
of the surviving corporation to consist of four members, two of whom
will be designated by BANK ONE and two of whom will be designated by
First Data.
(d) Following any payment by the surviving corporation in respect of
dissenting shares (excluding any dissenting shares held by stockholders
who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of these shares), First
Data shall pay to the surviving corporation, as a capital contribution
(but without the issuance of any additional shares of capital stock),
an amount, in respect of each dissenting share, equal to the amount
paid by the surviving corporation in respect of the dissenting share;
provided, however, that at the time as the aggregate amount paid to the
surviving corporation is equal to the sum of (1) the product obtained
by multiplying the number of dissenting shares in respect of which
payment is made multiplied by the merger consideration and (2) $2
million, then any payments thereafter made by First Data shall be
limited to an amount per share equal to the merger consideration.
Following any payment by the surviving corporation in respect of
dissenting shares that are held by stockholders who shall have failed
to perfect or who effectively shall have withdrawn or lost their rights
to appraisal of these shares but as to which shares of common stock a
contribution of cash to FDC Offer by First Data was not made pursuant
to the merger agreement, First Data shall pay to the surviving
corporation, as a capital contribution (but without the issuance of any
additional shares of capital stock), an amount, in respect of each of
these shares, equal to the merger consideration.
(e) The surviving corporation shall bear the financial responsibility for
amounts required to be paid in respect of the Paymentech stock options
pursuant to the merger agreement.
Termination of stockholder agreement. The stockholder agreement terminates upon
the earliest of:
(a) the written consent of the parties thereto;
(b) the termination of the merger agreement in accordance with its terms;
(c) failure to receive the written opinion of Wachtell, Lipton, Rosen &
Katz to the effect that the contribution by First USA Financial of
common stock to FDC Offer and the receipt of an ownership interest in
FDC Offer by First USA Financial will constitute an exchange of a type
that is generally tax-free;
(d) the consummation of the transactions contemplated by the contribution
agreement; and
(e) the termination of the contribution agreement.
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THE CONTRIBUTION AGREEMENT
The contribution agreement was entered into simultaneously with the merger
agreement. The following is a brief summary of material provisions of the
contribution agreement, which is attached to this proxy statement as Annex C.
We urge stockholders to read Annex C in its entirety.
Under the contribution agreement, BANK ONE and First Data have agreed that,
prior to the completion of the contribution of Paymentech's assets and
liabilities to the BANK ONE/First Data alliance, they will cause the spin-off,
sale or other disposition of the capital stock of two subsidiaries of
Paymentech, First USA Financial Services and MessageMedia (although, at the
election of BANK ONE, First USA Financial Services' assets and liabilities
rather than its capital stock may be affected) to BANK ONE. These dispositions
will take place in exchange for consideration to be agreed upon, in the case of
First USA Financial Services, and for consideration realized in open market
sales, in the case of MessageMedia. BANK ONE and First Data anticipate amending
the contribution agreement prior to completion of the merger in order to delete
the provision requiring the spin off, sale or disposition of the capital stock
of MessageMedia by Paymentech. The parties anticipate that Paymentech will
retain the capital stock of MessageMedia following the merger and this stock
will not be contributed to the BANK ONE/First Data alliance. In accordance with
the terms and conditions of the contribution agreement, after the merger has
been consummated and certain other conditions set forth in the contribution
agreement are met, First Data and BANK ONE will cause Paymentech to contribute
all of its assets and liabilities, except for the capital stock of First USA
Financial Services and MessageMedia and any liabilities related thereto, to the
BANK ONE/First Data alliance in exchange for a membership interest in the
alliance.
BANK ONE and First Data further have agreed to keep the subsidiaries of
Paymentech in existence, or if the parties mutually agree, to merge or
otherwise combine one or more of these subsidiaries into or with one or more
other of these subsidiaries prior to the contribution of Paymentech's assets
and liabilities to the BANK ONE/First Data alliance and thereafter cause the
assets, liabilities and business of each surviving subsidiary to be contributed
(directly or indirectly) to the BANK ONE/First Data alliance in exchange for a
membership interest in the alliance. The parties are presently considering
amending the contribution agreement to replace Paymentech's contribution of
assets and liabilities with an alternative structure. This alternative
structure would provide for the merger of substantially all of Paymentech's
operating subsidiaries into various newly-formed limited liability company
subsidiaries, with these new subsidiaries surviving the respective mergers.
Paymentech would then contribute all of its ownership in these subsidiaries to
the BANK ONE/First Data alliance in exchange for a membership interest in the
alliance.
Under either of the structures referenced above, Paymentech would have a 50%
interest in the BANK ONE/First Data alliance, First Data, through First Data
Merchant Services, would have a 25% interest in the alliance, and BANK ONE,
through Banc One POS Services, would have a 25% interest in the BANK ONE/First
Data alliance. Paymentech would then be a wholly owned subsidiary of FDC Offer,
which in turn, would be jointly owned by First Data and First USA Financial.
Consequently, First Data would indirectly have approximately a 47.5% interest
in the BANK ONE/First Data alliance and BANK ONE would indirectly have
approximately a 52.5% interest in the alliance.
Upon the completion of the contribution of substantially all of Paymentech's
business to the BANK ONE/First Data alliance, BANK ONE and First Data have
agreed to amend and restate the alliance operating agreement and to revise the
alliance processing agreement. The alliance operating agreement will be amended
and restated in order to, among other things, make Paymentech and possibly some
of its subsidiaries a member of the BANK ONE/First Data alliance. The revised
processing agreement will take into consideration the additional capabilities
that the BANK ONE/First Data alliance will have upon the contribution of
substantially all of Paymentech's business to the alliance.
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Under the terms of the amended and restated alliance operating agreement,
BANK ONE will be obligated, subject to certain limitations, to contribute
merchant portfolios it acquires or otherwise owns to the BANK ONE/First Data
alliance and First Data Merchant Services would cause a proportional matching
contribution to be made by Unified Merchant Services, a Georgia general
partnership indirectly owned by First Data Merchant Services. In addition,
First Data Merchant Services, Unified Merchant Services and Banc One POS
Services Corporation have entered into a revenue sharing agreement, dated as of
March 22, 1999 and effective as of April 1, 1999, according to which First Data
Merchant Services and Banc One POS share the economic benefit of the Unified
Merchant Services portfolio.
In connection with the contribution agreement, First Data Merchant Services
granted Banc One POS Services the option, exercisable in the event that the
contribution agreement is terminated, to terminate the BANK ONE/First Data
alliance. In the event the alliance is terminated, the alliance would make a
distribution of $31.5 million to First Data Merchant Services and the remaining
assets of the alliance would be distributed between Banc One POS Services and
First Data Merchant Services. Following termination, the merchant agreements
distributed to Banc One POS Services would continue to be processed by First
Data Merchant Services.
The contribution agreement may be terminated by the mutual consent of BANK
ONE and First Data or by either BANK ONE or First Data if (1) the merger
agreement is terminated, (2) the merger does not occur on or before October 1,
1999 or (3) the contribution of substantially all of the business of Paymentech
to the BANK ONE/First Data alliance and the other transactions contemplated by
the contribution agreement does not occur on or prior to October 1, 1999.
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OTHER AGREEMENTS BETWEEN FIRST DATA, BANK ONE AND/OR PAYMENTECH
Existing agreements between First Data and its affiliates and BANK ONE and its
affiliates
First Data Merchant Services Corporation, a Florida corporation and wholly
owned subsidiary of First Data, First Data Resources Inc., a Delaware
corporation and wholly owned subsidiary of First Data, and Banc One POS
Services Corporation, an Ohio corporation and wholly owned subsidiary of BANK
ONE, entered into an Alliance Agreement, dated June 15, 1995, as amended on
January 10, 1996. Under the alliance agreement, the parties agreed to form the
BANK ONE/First Data alliance to provide payment processing and related services
to Banc One POS as well as certain merchants and other customers. First Data
Merchant Services, Banc One POS and Banc One Payment Services, L.L.C., (a
Delaware limited liability company which is the BANK ONE/First Data alliance)
entered into a Limited Liability Company Agreement, dated January 10, 1996, as
amended on December 31, 1996, which serves as the operating agreement governing
the operations of the BANK ONE/First Data alliance. First Data, through First
Data Merchant Services, currently has a 50% interest in the BANK ONE/First Data
alliance and BANK ONE, through Banc One POS, currently has a 50% interest in
the alliance. The BANK ONE/First Data alliance is a competitor of Paymentech.
Under the terms of the alliance operating agreement, BANK ONE currently refers
all prospective merchant customers from BANK ONE's branch network to the BANK
ONE/First Data alliance.
Under a Purchase Agreement dated as of April 1, 1999 and effective as of
December 1, 1998 among First Data Merchant Services, the BANK ONE/First Data
alliance, Banc One POS Services and BANK ONE's bank subsidiaries, American
National Bank & Trust Company of Chicago, The First National Bank of Chicago,
NBD Bank, N.A. (Indianapolis) and NBD Bank (Detroit), these banks recently
transferred substantial portions of their respective portfolios of merchant
transaction card processing contracts to the BANK ONE/First Data alliance.
First Data, First Data Resources, Banc One POS and the BANK ONE/First Data
alliance are also parties to a Processing Agreement, dated January 10, 1996,
pursuant to which First Data acts as the sole and exclusive provider of
financial transaction processing and other related services to, for and on
behalf of the BANK ONE/First Data alliance and its affiliates involved in its
business. The original term of this alliance processing agreement is 10 years,
subject to earlier termination in various circumstances. After the original
term, upon the approval of the management committee of the BANK ONE/First Data
alliance, the alliance processing agreement will be renewed for consecutive
periods of one year each.
Simultaneously with the execution of the merger agreement, First Data
Merchant Services and Paymentech entered into an agreement whereby Paymentech
will outsource to First Data Merchant Services certain processing functions for
Paymentech's general merchant acquiring business. If the merger is completed,
then upon the contribution of Paymentech's assets and liabilities to the BANK
ONE/First Data alliance, this processing agreement will be replaced by the
amended and restated alliance processing agreement discussed above under the
section entitled "The Contribution Agreement."
First Data Resources, Inc. and First USA Bank, on behalf of themselves and
their affiliates, are also parties to a restated service agreement, dated as of
June 20, 1997, under which First Data Resources serves as the exclusive
provider for certain processing, authorization, security, embossing and other
services in connection with First USA Bank's transaction card processing for
the credit card business. The term of this agreement is scheduled to terminate
on June 30, 2004.
First Data Resources, and various subsidiaries of BANK ONE have also entered
into agreements to provide additional processing services.
Agreements between BANK ONE and Paymentech
Registration Rights Agreement. BANK ONE, as successor to First USA, is a
party to a registration rights agreement with Paymentech. Under this agreement,
BANK ONE has the right to require Paymentech to use its
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best efforts to register under the Securities Act of 1933, as amended, and the
securities or blue sky laws of any jurisdiction designated by BANK ONE, all or
a portion of the issued and outstanding shares of Paymentech common stock held
by BANK ONE for sale in accordance with BANK ONE's intended method of
disposition. Those demand rights would be subject to the condition that
Paymentech would not be required to effect more than four demand registrations.
BANK ONE also has the right to participate, or "piggy-back," in selected equity
offerings initiated by Paymentech, subject to reduction of the size of the
offering on the advice of the managing underwriter. Paymentech and BANK ONE
will share equally all expenses relating to the performance of, or compliance
with, demand registration requests under the registration rights agreement.
Paymentech will pay all expenses relating to the performance of, or compliance
with, "piggy-back" registrations under the registration rights agreement.
However, in either case, BANK ONE will be responsible for underwriters'
discounts and selling commissions with respect to the registrable shares of
Paymentech common stock being sold and the fees and expenses of its counsel in
connection with their registration.
The registration rights agreement also provides that during any period in
which BANK ONE owns at least 20% of the voting power of the outstanding capital
stock of Paymentech or in which BANK ONE is required to account for its
investment in Paymentech under the equity method of accounting, Paymentech will
provide BANK ONE with selected financial and other information.
Under the terms of the contribution agreement, BANK ONE has agreed to
terminate the registration rights agreement prior to the completion of the
contribution of Paymentech's assets and liabilities to the BANK ONE/First Data
alliance.
Services and Facilities. Paymentech and First USA Financial are parties to
two subleases, under which First USA Financial provides Paymentech with office
space. Under an intercompany services agreement with Paymentech, First USA
Financial and one of its subsidiaries allow Paymentech to participate in
insurance coverage made available by First USA Financial.
Under the terms of the contribution agreement, First USA Financial will
continue to provide the office space and insurance coverage availability to
Paymentech following the merger.
License to use the First USA name. The intercompany agreement provides for
First USA Financial's grant to Paymentech of a license to use the name "First
USA" and selected trademarks in connection with Paymentech's business. The
intercompany agreement provides that Paymentech will not, without First USA
Financial's prior written consent, take any action with respect to:
. any litigation or proceeding involving the First USA trademarks
. any new use of the First USA trademarks or changes in the purpose for
which the trademarks are used
. any change in Paymentech's names, logos and other identifications which
reasonably could be expected to affect the First USA trademarks
. if required by First USA Financial, any advertising campaigns or
strategies which use the First USA trademarks or refer to First USA
First USA Financial has the right to revoke the license to use the First USA
trademarks under various circumstances if there is a change in control or sale
of Paymentech, such as the merger.
The intercompany agreement provides that Paymentech will indemnify First USA
Financial, its subsidiaries and each of their respective officers, directors,
employees and agents against losses from third-party claims based on, arising
out of or resulting from (1) the use of the First USA trademarks, other than
claims relating to First USA Financial's rights in the First USA trademarks,
and (2) any other acts or omissions arising out of performance of the
intercompany agreement.
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The intercompany agreement provides that First USA Financial will indemnify
Paymentech, its subsidiaries and each of their respective officers, directors,
employees and agents against losses from third-party claims based on, arising
out of or resulting from (1) any third-party claims relating to First USA
Financial's rights in the First USA trademarks, and (2) any other acts or
omissions arising out of the performance of the intercompany agreement.
Under the terms of the contribution agreement, the provisions of the
intercompany agreement will continue in effect for at least one year after the
merger.
Tax sharing agreement. Paymentech has entered into a tax sharing agreement
with First USA Financial, which governs tax-related matters affecting taxable
periods ending prior to and subsequent to Paymentech's initial public offering
in March 1996, including the preparation and filing of tax returns, payment of
taxes and indemnification for tax liabilities. In general, under the tax
sharing agreement, Paymentech is responsible for filing tax returns and paying
taxes of Paymentech. The tax sharing agreement provides that First USA
Financial will retain control of audits affecting its consolidated, combined or
unitary returns which include Paymentech and its subsidiaries. Paymentech is
allowed to participate in, but not control, any audits with respect to matters
for which it may be required to indemnify First USA Financial under the tax
sharing agreement.
Under the terms of the contribution agreement, BANK ONE has agreed to
terminate the tax-sharing agreement prior to the completion of the contribution
of Paymentech's assets and liabilities to the BANK ONE/First Data alliance, to
the extent BANK ONE and First Data agree that portions of the tax sharing
agreement should be terminated.
Other agreements between Paymentech and BANK ONE. Paymentech entered into a
credit agreement with BANK ONE, dated as of February 18, 1999, under which BANK
ONE has made available to Paymentech a $150 million unsecured credit facility.
The current principle balance of this debt is $84 million, and interest is
paid, at Paymentech's option, at either (1) the Eurodollar rate plus .35% or
(2) the then applicable "base rate" as announced by The First National Bank of
Chicago from time to time.
In addition, Paymentech is a party to agreements with BANK ONE under which
BANK ONE and its affiliates provide automated clearing house and wire transfer
services to Paymentech and receive approximately $1.1 million annual
compensation for these services.
Until First USA's merger with BANK ONE in June 1997, First USA provided
various administrative services to Paymentech. Prior to Paymentech's 1998
fiscal year, Paymentech's consolidated statements of income included an
allocation to Paymentech of the cost incurred by First USA or one of its
subsidiaries for these services. In conjunction with First USA's merger with
BANK ONE, Paymentech assumed these administrative services.
As of March 31, 1999, Paymentech had $2.9 million invested in First USA Bank
certificates of deposit. These certificates of deposit earn interest at a
market rate and had initial maturities of less than 90 days.
In May 1996, First USA acquired from Paymentech a warrant to acquire shares
of convertible preferred stock of MessageMedia, at that time a private company.
Paymentech retained a five-year call option which allowed Paymentech at any
time to repurchase that warrant upon payment to First USA of its investment in
the warrant plus a fixed return. This transaction was structured in order to
provide First USA with an economic interest in the success of MessageMedia. In
December 1996, following the initial public offering of the common stock of
MessageMedia and the commencement of trading of that stock, First USA and
Paymentech agreed to a termination of the call option at its estimated fair
value so that First USA would have full rights to its MessageMedia warrant.
This transaction resulted in Paymentech recognizing a $3.5 million pre-tax
gain. In addition, Ms. Patsley is a member of the board of directors of
MessageMedia.
Also, Paymentech realized a $5 million pre-tax gain in March 1997 related to
the termination of an agreement that First USA would not compete with
Paymentech for business card customers.
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In June 1997, First USA merged with and into BANK ONE. This transaction
caused Paymentech to record a one-time merger expense of $12.5 million, which
included the costs associated with the accelerated vesting of First USA
restricted stock grants and forgiveness of stock loans provided by First USA to
certain key Paymentech employees. Certain key employees of Paymentech
participated in First USA's 1994 Restricted Stock Plan which allowed the
granting of First USA restricted stock to eligible employees. First USA
restricted stock was transferred to the recipient without payment to Paymentech
or First USA, and was subject to certain restrictions and risk of forfeiture.
These restrictions lapsed upon the merger of First USA and BANK ONE, generating
an expense related to Paymentech employees of $6.6 million. In addition, in
March 1996, First USA made loans to certain key employees of Paymentech to
exercise 30-day stock options for Paymentech common stock at the initial public
offering price. The terms of these loans called for the outstanding principal
and accrued interest to be forgiven upon a change of control of either First
USA or Paymentech. These loans were forgiven upon the merger of First USA with
and into BANK ONE, resulting in an expense related to Paymentech employees of
$5.9 million. Paymentech did not expend any cash relative to either expense;
rather the total $12.5 million was treated as a capital contribution from First
USA to Paymentech.
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DISSENTERS' RIGHTS OF APPRAISAL
Under Section 262 of the Delaware General Corporation Law, any holder of
Paymentech common stock who does not wish to accept the merger consideration
may dissent from the merger and elect to have the fair value of the
stockholder's shares of Paymentech common stock (exclusive of any element of
value arising from the accomplishment or expectation of the merger) judicially
determined and paid to the stockholder in cash, together with a fair rate of
interest, if any, provided that the stockholder complies with the provisions of
Section 262 of the Delaware General Corporation Law. The following discussion
is not a complete statement of the law pertaining to appraisal rights under
Delaware law, and is qualified in its entirety by the full text of Section 262,
which is provided in its entirety as Annex E to this proxy statement. All
references in Section 262 and in this summary to a "stockholder" are to the
record holder of the shares of common stock as to which appraisal rights are
asserted. A person having a beneficial interest in shares of common stock held
of record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow properly the steps summarized
below and in timely manner to perfect appraisal rights.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, as in the case of the special meeting, the
corporation, not less than 20 days prior to the meeting, must notify each of
its stockholders entitled to appraisal rights that the appraisal rights are
available and include in the notice a copy of Section 262. This proxy statement
shall constitute the notice to the holders of common stock and the applicable
Delaware law provisions are attached to this proxy statement as Annex E. Any
stockholder who wishes to exercise appraisal rights or who wishes to preserve
the right to do so should review carefully the following discussion and Annex E
to this proxy statement because failure to comply with the procedures specified
in Section 262 timely and properly will result in the loss of appraisal rights.
Moreover, because of the complexity of the procedures for exercising the right
to seek appraisal of the common stock, Paymentech believes that stockholders
who consider exercising these rights should seek the advice of counsel.
Any holder of common stock wishing to exercise the right to dissent from the
merger and demand appraisal under Section 262 must satisfy each of the
following conditions:
(a) The stockholder must deliver to Paymentech a written demand for
appraisal of the stockholder's shares before the vote on the merger
agreement at the special meeting, which demand will be sufficient if it
reasonably informs Paymentech of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of the
holder's shares;
(b) The stockholder must not vote its shares of common stock in favor of
the merger agreement. Because a proxy which does not contain voting
instructions will, unless revoked, be voted in favor of the merger
agreement, a stockholder who votes by proxy and who wishes to exercise
appraisal rights must vote against the merger agreement or abstain from
voting on the merger agreement; and
(c) The stockholder must continuously hold the shares from the date of
making the demand through the effective time. Accordingly, a
stockholder who is the record holder of shares of common stock on the
date the written demand for appraisal is made but who thereafter
transfers the shares prior to the effective time will lose any right to
appraisal in respect of that stockholder's shares.
Neither voting (in person or by proxy) against, abstaining from voting on or
failing to vote on the proposal to approve and adopt the merger agreement will
constitute a written demand for appraisal within the meaning of Section 262.
The written demand for appraisal must be in addition to and separate from any
such proxy or vote.
Only a holder of record of shares of common stock issued and outstanding
immediately prior to the effective time is entitled to assert appraisal rights
for the shares of common stock registered in that holder's name. A demand for
appraisal should be executed by or on behalf of the stockholder of record,
fully and correctly, as that stockholder's name appears on the stock
certificates, should specify the stockholder's name and mailing address, the
number of shares of common stock owned and that the stockholder intends thereby
to demand appraisal of the stockholder's common stock. If the shares are owned
of record in a fiduciary capacity,
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such as by a trustee, guardian or custodian, execution of the demand should be
made in that capacity, and if the shares are owned of record by more than one
person as in a joint tenancy or tenancy in common, the demand should be
executed by or on behalf of all owners. An authorized agent, including one or
more joint owners, may execute a demand for appraisal on behalf of a
stockholder; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the agent is acting
as agent for the owner or owners. A record holder such as a broker who holds
shares as nominee for several beneficial owners may exercise appraisal rights
with respect to the shares held for one or more beneficial owners while not
exercising these rights with respect to the shares held for one or more
beneficial owners; in that case, the written demand should set forth the number
of shares as to which appraisal is sought, and where no number of shares is
expressly mentioned the demand will be presumed to cover all shares held in the
name of the record owner. Stockholders who hold their shares in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by a nominee.
A stockholder who elects to exercise appraisal rights under Section 262
should mail or deliver a written demand to: Paymentech, Inc., 1600 Elm Street,
9th Floor, Dallas, Texas 75201, Attention: Philip E. Taken, Secretary.
Within ten days after the effective time, the surviving corporation must
send a notice as to the effectiveness of the merger to each former stockholder
of Paymentech who has made a written demand for appraisal in accordance with
Section 262 and who has not voted in favor of the merger agreement. Within 120
days after the effective time, but not thereafter, either the surviving
corporation or any dissenting stockholder who has complied with the
requirements of Section 262 may file a petition in the Delaware Chancery Court
demanding a determination of the value of the shares of common shares held by
all dissenting stockholders. Paymentech is under no obligation to and has no
present intent to file a petition for appraisal, and stockholders seeking to
exercise appraisal rights should not assume that the surviving corporation will
file such a petition or that the surviving corporation will initiate any
negotiations with respect to the fair value of such shares. Accordingly,
stockholders who desire to have their shares appraised should initiate any
petitions necessary for the perfection of their appraisal rights within the
time periods and in the manner prescribed in Section 262. Inasmuch as
Paymentech has no obligation to file such a petition, the failure of a
stockholder to do so within the period specified could nullify that
stockholder's previous written demand for appraisal. In any event, at any time
within 60 days after the effective time (or at any time thereafter with the
written consent of Paymentech), any stockholder who has demanded appraisal has
the right to withdraw the demand and to accept payment of the merger
consideration.
Under the merger agreement, Paymentech has agreed to give First Data prompt
notice of any demands for appraisal received by it, withdrawals of these
demands, and any other instruments served in accordance with Delaware law and
received by Paymentech and relating thereto. First Data shall direct all
negotiations and proceedings with respect to demands for appraisal under
Delaware law. Paymentech shall not, except with the prior written consent of
First Data, make any payment with respect to any demands for appraisal, or
offer to settle, or settle, any such demands.
Within 120 days after the effective time, any stockholder who has complied
with the provisions of Section 262 to that point in time will be entitled to
receive from the surviving corporation, upon written request, a statement
setting forth the aggregate number of shares not voted in favor of the merger
agreement and with respect to which demands for appraisal have been received
and the aggregate number of holders of these shares. The surviving corporation
must mail the statement to the stockholder within 10 days of receipt of the
request or within 10 days after expiration of the period for delivery of
demands for appraisals under Section 262, whichever is later.
A stockholder timely filing a petition for appraisal with the Court of
Chancery must deliver a copy to the surviving corporation, which will then be
obligated within 20 days to provide the Delaware Court of Chancery with a duly
verified list containing the names and addresses of all stockholders who have
demanded appraisal
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of their shares. After notice to these stockholders, the Delaware Court of
Chancery is empowered to conduct a hearing on the petition to determine which
stockholders are entitled to appraisal rights. The Delaware Court of Chancery
may require stockholders who have demanded an appraisal for their shares and
who hold stock represented by certificates to submit their certificates to the
Register in Chancery for notation thereon of the pendency of the appraisal
proceedings, and if any stockholder fails to comply with the requirement, the
Delaware Court of Chancery may dismiss the proceedings as to that stockholder.
After determining the stockholders entitled to an appraisal, the Delaware
Court of Chancery will appraise the "fair value" of their shares, exclusive of
any element of value arising from the accomplishment or expectation of the
merger, together with a fair rate of interest, if any, to be paid upon the
amount determined to be the fair value. The costs of the action may be
determined by the Delaware Chancery Court and taxed upon the parties as the
Delaware Chancery Court deems equitable. Upon application of a dissenting
stockholder, the Delaware Chancery Court may also order that all or a portion
of the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all of
the shares entitled to appraisal. Stockholders considering seeking appraisal
should be aware that the fair value of their shares as determined under Section
262 could be more than, the same as or less than the merger consideration they
would receive under the merger agreement if they did not seek appraisal of
their shares. Stockholders should also be aware that investment banking
opinions are not opinions as to fair value under Section 262.
In determining fair value and, if applicable, a fair rate of interest, the
Delaware Chancery Court is to take into account all relevant factors. In
Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods that are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered, and that "fair price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court stated that, in making this determination of fair value,
the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts that could be
ascertained as of the date of the merger that throw any light on future
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court
stated that "elements of future value, including the nature of the enterprise,
that are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." Section 262 provides that fair
value is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger."
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the effective time, be entitled to vote the shares
subject to the demand for any purpose or be entitled to the payment of
dividends or other distributions on those shares (except dividends or other
distributions payable to holders of record of shares as of a record date prior
to the effective time).
Any stockholder may withdraw its demand for appraisal and accept the merger
consideration by delivering to the surviving corporation a written withdrawal
of the stockholder's demand for appraisal, except that (1) any such attempt to
withdraw made more than 60 days after the effective time will require written
approval of the surviving corporation and (2) no appraisal proceeding in the
Delaware Chancery Court shall be dismissed as to any stockholder without the
approval of the Delaware Chancery Court, and such approval may be conditioned
upon such terms as the Delaware Chancery Court deems just. If the surviving
corporation does not approve a stockholder's request to withdraw a demand for
appraisal when such approval is required or if the Delaware Chancery Court does
not approve the dismissal of an appraisal proceeding, the stockholder would be
entitled to receive only the appraised value determined in any such appraisal
proceeding, which value could be lower than the value of the merger
consideration.
Failure to comply strictly with all of the procedures set forth in Section
262 will result in the loss of a stockholder's statutory appraisal rights.
Consequently, any stockholder wishing to exercise appraisal rights is urged to
consult legal counsel before attempting to exercise such rights.
63
<PAGE>
PAYMENTECH, INC. SELECTED FINANCIAL DATA
The selected financial information included in the table below for each of
the five years in the period ended June 30, 1998 has been derived from and is
qualified in its entirety by the audited financial statements of Paymentech,
including those incorporated into this proxy statement by reference to
Paymentech's Annual Report on Form 10-K, as amended, for the fiscal year ended
June 30, 1998, available as described below under "Where You Can Find More
Information." The selected financial data presented below for the nine months
ended March 31, 1998 and 1999 and as of March 31, 1998 and 1999 has been
derived from, and should be read in conjunction with, the unaudited interim
financial statements of Paymentech included in its Quarterly Report on Form 10-
Q for the nine months ended March 31, 1999, incorporated into this proxy
statement by reference. In the opinion of Paymentech, such unaudited interim
financial statements have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations for the interim periods.
<TABLE>
<CAPTION>
Nine Months Ended
March 31
(unaudited) Fiscal Year Ended June 30
----------------- ------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenue........... $190,495 $165,907 $221,486 $202,390 $125,811 $88,527 $64,379
Net income.............. 18,512 15,171 20,188 3,726 14,252 7,920 6,351
Net income per share--
diluted................ 0.51 0.43 0.56 0.11 0.54 0.32 0.26
Ratio of earnings to
fixed charges (1)...... 6.1:1 5.2:1 5.2:1 3.3:1 N/A N/A N/A
Total assets............ 927,404 651,707 649,383 631,000 290,221 84,038 37,805
Notes payable to banks
(current liabilities).. 84,005 -- 55,049 -- -- -- --
Notes payable to banks
and other borrowings
(non-current
liabilities)........... -- 55,058 -- 75,140 690 4,000 --
Stockholders' equity.... 429,855 391,847 399,072 359,415 231,064 47,232 14,728
Book value per share
(2).................... 11.82 10.89 11.08 N/A N/A N/A N/A
</TABLE>
- --------
(1) For purposes of the ratio of earnings to fixed charges, earnings represents
income before income taxes from continuing operations plus fixed charges.
Fixed charges consist of interest costs and the interest portion of
operating rents, which is estimated by management to approximate one-third
of aggregate operating rents.
(2) Book value per share is calculated based upon the number of shares of
common stock outstanding at period end.
64
<PAGE>
MARKET FOR THE COMMON STOCK
Paymentech common stock market price and dividend information
Paymentech common stock is traded on the New York Stock Exchange under the
symbol "PTI". The following tables show the per share high and low sales prices
reported in the consolidated transaction reporting system for transactions in
the common stock for the fiscal year periods indicated. No cash dividends have
been paid by Paymentech on its common stock since its initial public offering
on March 27, 1996.
Market price of Paymentech common stock
<TABLE>
<CAPTION>
High Low
---- ----
<S> <C> <C>
Fiscal Year 1998
- ----------------
First Quarter.............................................. $32 3/8 $15 7/8
Second Quarter............................................. 20 1/2 11 13/16
Third Quarter.............................................. 20 5/8 12 7/8
Fourth Quarter............................................. 21 1/2 16
Fiscal Year 1999
- ----------------
First Quarter.............................................. $21 1/2 $11 1/8
Second Quarter............................................. 18 15/16 10 15/16
Third Quarter.............................................. 25 1/2 17 1/4
Fourth Quarter (through , 1999).........................
</TABLE>
On March 19, 1999, the last full trading day prior to the day on which the
execution of the merger agreement was publicly announced, the high and low
sales prices for Paymentech common stock on the New York Stock Exchange were
$25.50 and $24.50, respectively.
On , 1999, the last practicable trading day prior to the date of this
proxy statement, the closing price for the Paymentech common stock on the New
York Stock Exchange was $ .
The market price for Paymentech common stock is subject to fluctuation and
stockholders are urged to obtain current market quotations. No assurance can be
given as to the future price of, or market for, Paymentech common stock.
65
<PAGE>
SECURITIES OWNERSHIP
Paymentech. The following table sets forth selected information believed by
Paymentech to be accurate based on information provided to it concerning the
beneficial ownership of Paymentech common stock by each stockholder who is
known by Paymentech to own beneficially in excess of 5% of the outstanding
Paymentech common stock as of the latest practicable date, and by each
director, Paymentech's chief executive officer, each of Paymentech's other four
most highly compensated executive officers and all executive officers and
directors as a group, as of March 31, 1999. Except as otherwise indicated, all
persons listed below have (i) sole voting power and investment power with
respect to their shares, except to the extent that authority is shared by
spouses under applicable law, and (ii) record and beneficial ownership with
respect to their shares. The shares and percentages set forth below include
shares of Paymentech common stock which were outstanding or issuable within 60
days upon the exercise of options outstanding as of March 31, 1999.
<TABLE>
<CAPTION>
Paymentech Common Stock
----------------------------
Number of Percentage
Name of Beneficial Owner Shares of Shares
------------------------ --------------- ------------
<S> <C> <C>
First USA Financial, Inc.(a)................ 19,979,081 55%
Dimensional Fund Advisors Inc.(b)........... 1,861,000 5%
Gene H. Bishop(c)(d)........................ 32,500 *
William P. Boardman(a)(c)................... -- *
Richard W. Vague(a)(c)(d)................... 250,000 *
John B. McCoy(a)(c)......................... -- *
Pamela H. Patsley(c)(d)..................... 390,025 *
Rupinder S. Sidhu(c)(d)(e).................. 202,500 *
John C. Tolleson(a)(c)(d)................... 210,000 *
Ronald G. Steinhart(a)(c)................... -- *
James W. Baumgartner(d)..................... 117,923 *
Michael P. Duffy(d)......................... 124,795 *
Philip E. Taken(d).......................... 68,972 *
Kathryn J. Kessler(d)....................... 23,846 *
All executive officers and directors as a
group (12 persons)(d)(e)................... 1,420,561 3%
</TABLE>
- --------
* Less than 1.0%.
(a) First USA Financial is a wholly owned subsidiary of BANK ONE. According to
Amendment No. 1 to a Schedule 13G filed with the SEC, each of BANK ONE and
First USA Financial has shared voting and dispositive power with respect to
the shares indicated. The address of First USA Financial is Three Christina
Centre, 201 North Walnut, Wilmington, Delaware 19801, and the address of
BANK ONE is One First National Plaza, Chicago, Illinois 60670. Mr. McCoy is
President and Chief Executive Officer of BANK ONE, Messrs. Boardman and
Steinhart are executive officers of BANK ONE, Mr. Vague is an executive
officer of BANK ONE and President of First USA Financial and Mr. Tolleson
is a director of BANK ONE. Each could therefore be deemed to control the
shares indirectly owned by BANK ONE through First USA Financial. Each of
Messrs. McCoy, Boardman, Steinhart, Tolleson and Vague disclaims beneficial
ownership of those BANK ONE/First USA Financial shares.
(b) Based on a Schedule 13G filed with the SEC. The Schedule 13G reported that
Dimensional Fund Advisors, Inc. has sole voting and dispositive power with
respect to 1,861,000 shares. The Schedule 13G states that all of these
shares are owned by advisory clients of Dimensional Fund Advisors, Inc.
which disclaims beneficial ownership of all of these shares.
(c) Gene H. Bishop, William P. Boardman, John B. McCoy, Pamela H. Patsley,
Rupinder S. Sidhu, Ronald Steinhart, John C. Tolleson and Richard W. Vague
are directors of Paymentech.
(d) The shares include shares subject to options exercisable within 60 days of
March 31, 1999, as follows: Mr. Bishop, 12,500 shares; Mr. Baumgartner,
73,000 shares; Mr. Duffy, 81,000 shares; Ms. Kessler, 18,280 shares; Ms.
Patsley, 196,800 shares; Mr. Sidhu, 12,500 shares; Mr. Taken, 38,000
shares; Mr. Tolleson, 10,000 shares; Mr. Vague, 50,000 shares; and all
executive officers and directors as a group, 492,080 shares. The respective
addresses for Messrs. Baumgartner, Boardman, Bishop, Duffy, McCoy, Sidhu,
Steinhart, Taken, Tolleson and Vague and for Ms. Kessler and Ms. Patsley
are set forth in the section entitled "Controlling persons, directors and
executive officers of Paymentech, BANK ONE, First USA Financial, First
Data, FDC Offer and FB Merging" on page 67 of this proxy statement.
(e) The shares include 70,000 shares held by a limited partnership, for which
Mr. Sidhu is the President of the general partner, a limited liability
company. Mr. Sidhu disclaims beneficial ownership of those shares.
66
<PAGE>
BANK ONE and First USA Financial. None of BANK ONE, any pension, profit-
sharing or similar plan of BANK ONE, or any associate or majority-owned
subsidiary of BANK ONE, beneficially owns any shares of Paymentech common
stock, other than (1) shares held by mutual funds or collective funds held
under a 401K plan maintained by BANK ONE or one of its affiliates; (2) 3,979
shares held in a grantor trust established to fund non-qualified deferred
compensation liabilities of First USA Financial and (3) shares held by First
USA Financial, the information for which is provided below and in this section
under the subheading "Paymentech." No director, executive officer or
controlling person of BANK ONE beneficially owns any shares of Paymentech
common stock other than Messrs. Tolleson and Vague, the information for whom is
provided in this section under the subheading "Paymentech." Other than as
described in this proxy statement, no controlling person of First USA Financial
beneficially owns any shares of Paymentech common stock. The following
describes the ownership of Paymentech shares by directors and executive
officers of First USA Financial, Messrs. Vague, George P. Hubley, Jr. and
Clinton W. Walker. The information regarding Mr. Vague's ownership is provided
in this section under the subheading "Paymentech." As of April 2, 1999, Mr.
Hubley owned 13,500 shares and had options to purchase 15,000 shares; and Mr.
Walker owned 1,000 shares.
First Data. None of First Data, any pension, profit-sharing or similar plan
of First Data or any associate or majority-owned subsidiary of First Data
beneficially owns any shares of Paymentech common stock, other than (1) shares
held by mutual funds or collective funds in pension plans maintained for First
Data and its affiliates or (2) 1,000 shares held in a settlor trust for the
First Data Corporation Retirement Plan. No current director, executive officer
or controlling person of First Data beneficially owns any shares of Paymentech
common stock.
FDC Offer. None of FDC Offer, any pension, profit-sharing or similar plan of
FDC Offer or any associate or majority-owned subsidiary of FDC Offer
beneficially owns any shares of Paymentech common stock. No current director,
executive officer or controlling person of FDC Offer beneficially owns any
shares of Paymentech common stock.
FB Merging. None of FB Merging, any pension, profit-sharing or similar plan
of FB Merging or any associate or majority-owned subsidiary of FB Merging
beneficially owns any shares of Paymentech common stock. No current director,
executive officer or controlling person of FB Merging beneficially owns any
shares of Paymentech common stock.
67
<PAGE>
CONTROLLING PERSONS, DIRECTORS AND EXECUTIVE OFFICERS OF
PAYMENTECH, BANK ONE, FIRST USA FINANCIAL, FIRST DATA,
FDC OFFER AND FB MERGING
Background of named persons
Paymentech, BANK ONE, First USA Financial, First Data, FDC Offer and FB
Merging have jointly filed a Rule 13e-3 Transaction Statement with the SEC with
respect to the merger. The principal executive offices of Paymentech, BANK ONE,
First Data, FDC Offer and FB Merging are set forth in this proxy statement
under the section entitled "The Parties."
Information concerning each controlling person, director and executive
officer of Paymentech, BANK ONE, First USA Financial, First Data, FDC Offer and
FB Merging, including that person's (1) name, (2) business address, (3) present
principal occupation or employment, and (4) material occupation, positions,
offices and employments during the past five years, if that person is an
individual, and the name and address of the organizations in which that
individual conducted the material occupations, positions, offices and
employments is set forth as follows:
1. Paymentech, Inc.
Each such person is a citizen of the United States of America. Unless
otherwise indicated below, the business address of each director and executive
officer is 1601 Elm Street, 9th Floor, Dallas, Texas 75201.
(a) Directors of Paymentech
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Gene H. Bishop....... Mr. Bishop served as Chairman and Chief Executive
Officer of Life Partners Group, Inc. from November 1991
until October 1994. Mr. Bishop is also a director of
Southwest Airlines Co., Liberte Investors and Drew
Industries, Inc. He became a director of Paymentech in
1995.
William P. Boardman.. Mr. Boardman has been Senior Executive Vice President
of BANK ONE since December 15, 1998 and Head of
Acquisitions of BANK ONE since October 2, 1998.
Previously, Mr. Boardman has served as Senior Executive
Vice President of BANC ONE CORPORATION, having joined
BANC ONE in 1984. Mr. Boardman is also a director of
Checkfree Corporation, Visa USA, Inc. and Visa
International, Inc. He became a director of Paymentech
in 1997. His business address is c/o BANK ONE
CORPORATION, One First National Plaza, Chicago,
Illinois 60670.
John B. McCoy........ Mr. McCoy has been a Director, President and Chief
Executive Officer of BANK ONE since October 2, 1998.
Previously, Mr. McCoy served as Chairman and Chief
Executive Officer of BANC ONE CORPORATION from January
1987 until 1998, and as President of BANC ONE from 1983
to 1987. Mr. McCoy is also a director of Cardinal
Health, Inc., Ameritech Corporation, Federal Home Loan
Mortgage Corporation. Mr. McCoy became a director of
Paymentech in 1997. His business address is c/o BANK
ONE CORPORATION, One First National Plaza, Chicago,
Illinois 60670.
Pamela H. Patsley.... Ms. Patsley has been President, Chief Executive Officer
of Paymentech since December 1995. She has also served
as President and Chief Executive Officer of Paymentech
Merchant Services, Inc., Paymentech's transaction
processing subsidiary, since December 1991 and as
Chairman of the Board of First USA Financial Services,
Inc., Paymentech's commercial card subsidiary, since
August 1994. Ms. Patsley also served as Executive Vice
President and Secretary of First USA from July 1989
until June 1997, and as Chief Financial Officer from
January 1987 to April 1994. Ms. Patsley is also a
director of Message Media, Inc., Adolph Coors Company
and Coors Brewing Company. She became a director of
Paymentech in 1995.
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Rupinder S. Sidhu.... Mr. Sidhu has been President of Merion Capital
Management LLC, a private investment company, since
1994. From 1993 to 1994, Mr. Sidhu was a Partner of
Stonington Partners, Inc. (formerly known as First
Capital Partners, Inc.), a private investment firm. Mr.
Sidhu has been a member of the board of directors of
Merrill Lynch Capital Partners, Inc., a private
investment firm affiliated with Merrill Lynch & Co.,
since 1987. He is also a director of CMI Industries,
Inc. Mr. Sidhu became a director of Paymentech in 1995.
Ronald G. Steinhart.. Mr. Steinhart has been an Executive Vice President of
BANK ONE since December 15, 1998 and Head of BANK ONE's
Commercial Bank--Real Estate and Private Banking since
October 2, 1998. Previously, he was Chairman and Chief
Executive Officer of the Commercial Banking Group of
BANC ONE since December 1996, and was appointed
Chairman and Chief Executive Officer of BANK ONE,
Texas, N.A. in January 1995. From November 1992 through
December 1994, Mr. Steinhart served as President and
Chief Operating Officer of BANK ONE, Texas, N.A. Mr.
Steinhart also serves as Trustee of Prentiss Properties
Trust. He became a director of Paymentech in 1997. His
business address is c/o BANK ONE CORPORATION, One First
National Plaza, Chicago, Illinois 60670.
John C. Tolleson..... Mr. Tolleson served as Chairman of the Board of
Paymentech from December 1995 until October 1998. Mr.
Tolleson also served as Chairman of the Board and Chief
Executive Officer of First USA, Inc. from August 1989
until June 1997, and of First USA's predecessor since
its formation in May 1985. Mr. Tolleson currently
serves as a director on several boards, including BANK
ONE, VIAD Corporation, Haggar Corp. and Capstead
Mortgage Corporation. Mr. Tolleson is Chief Executive
Officer of The Tolleson Group, a private investment
firm, and a General Partner in Arena Capital Partners,
LLC, a private equity fund. He serves on the Dallas
County Advisory Board of The Salvation Army and also
serves on the executive board of the Cox School of
Business at Southern Methodist University. In addition,
he is a member of the board of directors of the Willis
M. Tate Distinguished Lecture Series at Southern
Methodist University. Mr. Tolleson became a director of
Paymentech in 1995. His business address is c/o First
USA, 1601 Elm Street, 47th Floor, Dallas, Texas 75201.
Richard W. Vague..... Mr. Vague has been Executive Vice President of BANK ONE
since December 15, 1998 and Head of Credit Card of BANK
ONE since October 2, 1998. Mr. Vague has served as
Chairman of the board of directors of Paymentech since
October 1998. Mr. Vague has been President of First USA
or its predecessor since June 1990 and a director of
First USA since August 1989. Mr. Vague has also been
Chairman of the Board and Chief Executive Officer of
First USA Bank since October 1995 and was a director
from May 1985 through October 1995. Mr. Vague serves as
a director of Visa USA, Inc. and was co-founder of the
predecessor of First USA with Mr. Tolleson. Mr. Vague
is also a director of Physician Support Systems, Inc.
Previously, he was a director of Paymentech from 1995
through June 1997. His business address is 201 N.
Walnut Street, Wilmington, Delaware 19801.
(b) Executive Officers of Paymentech
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
James W. Baumgart- Mr. Baumgartner has been President and a director of
ner................. Financial Services since June 1996. From 1992 to June
1996, Mr. Baumgartner was Senior Vice President and
General Manager of the commercial card business and
merchant bankcard business at First Bank System, Inc.
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Michael P. Duffy..... Mr. Duffy has served as Chief Operating Officer since
July 1997, and served as Group Executive of Direct
Marketing Operations from December 1995 through July
1997. From August 1992 to December 1995, Mr. Duffy
served as Vice President of Litle & Company, a leading
credit card processor for the direct marketing industry
which was acquired by Paymentech in 1995. Mr. Duffy
serves on the board of NXT Corporation and is a member
of Visa USA, Inc. Card Operations Advisors Group.
Kathryn Kessler...... Ms. Kessler has served as Chief Financial Officer of
Paymentech since October 1998, was Chief Accounting
Officer of Paymentech from September 1997 through
October 1998 and served as Senior Director of Finance
from July 1996 through September 1997. From 1994 to
1996, Ms. Kessler served as Manager of Planning and
Analysis for BANK ONE. Ms. Kessler also served as Chief
Accountant for BANK ONE, Texas from 1989 to 1994.
Pamela H. Patsley.... See Section 1(a) above.
Philip E. Taken...... Mr. Taken has served as Chief Administrative Officer,
General Counsel and Secretary of Paymentech since July
1997, and was Senior Vice President, General Counsel
and Assistant Secretary of Paymentech from December
1995 through June 1997. Mr. Taken also served as Senior
Vice President, General Counsel and Assistant Secretary
of First USA, Inc. from 1993 through 1997.
</TABLE>
2. BANK ONE CORPORATION
BANK ONE was formed as a result of the merger, effective October 2, 1998, of
First Chicago NBD and BANC ONE CORPORATION with and into BANK ONE. First
Chicago NBD was formed as a result of the merger, effective December 1, 1995,
of First Chicago Corporation with and into NBD Bancorp, Inc. Except for Mr.
Buschmann who is a citizen of Germany, each such person is a citizen of the
United States of America. Unless otherwise indicated below, the business
address of each director and executive officer is One First National Plaza,
Chicago, Illinois 60670.
(a) Directors of BANK ONE
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
John H. Bryan........ Mr. Bryan is Chairman and Chief Executive Officer of
Sara Lee Corporation, a global packaged food and
consumer products company, and has held that position
since 1976. In addition to Sara Lee Corporation, Mr.
Bryan is a director of BP Amoco p.l.c. and General
Motors Corporation. Mr. Bryan became a director of
First Chicago in 1982. His business address is c/o Sara
Lee Corporation, Three First National Plaza, Chicago,
Illinois 60602.
Siegfried Buschmann.. Mr. Buschmann is Chairman and Chief Executive Officer
of The Budd Company, a producer of automotive parts and
assemblies and a subsidiary of Thyssen AG, and has held
that position since 1989. He also serves as President
of Thyssen Holding Corporation and as Chief Executive
Officer of Thyssen Budd Automotive GmbH. He is a
director of both The Budd Company and Thyssen Holding
Corporation. Mr. Buschmann became a director of NBD in
1991. His business address is c/o The Budd Company,
3155 West Big Beaver Road, Troy, Michigan 48007.
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
James S. Crown....... Mr. Crown is a General Partner of Henry Crown and
Company (Not Incorporated), a diversified investment
company, a position he has held since 1985. In
addition, Mr. Crown is a director of General Dynamics
Corporation and Sara Lee Corporation. Mr. Crown became
a director of First Chicago in 1991. His business
address is c/o Henry Crown & Company, 222 North LaSalle
Street, Chicago, Illinois 60601.
Bennett Dorrance..... Mr. Dorrance is a private investor and Chairman and
Managing Director of DMB Associates, Inc., a real
estate investment and development company. Mr. Dorrance
has been with DMB Associates since 1986. Mr. Dorrance
is a director of Campbell Soup Company, Inc. and UDC
Homes, Inc. He became a director of BANC ONE in 1996.
His business address is c/o DMB Associates, Inc., 4201
North 24th Street, Suite 120, Phoenix, Arizona 85016.
Dr. Maureen A. Dr. Fay is President of the University of Detroit
Fay, O.P. Mercy. She has held that position since 1990, and was
President of its predecessor, Mercy College of Detroit,
from 1983 through 1990. She is a director of Kelly
Services, Inc. Dr. Fay became a director of NBD in
1985. Her business address is c/o University of Detroit
Mercy, 4001 West McNichols, Detroit, Michigan 48221.
John R. Hall......... Mr. Hall is the retired Chairman and Chief Executive
Officer of Ashland, Inc., an oil refiner, manufacturer
and distributor of chemicals. Mr. Hall served as
Chairman of Ashland, Inc. from 1981 to 1997 and as
Chief Executive Officer from 1981 to 1996. Mr. Hall
serves as a director of Arch Coal, Inc., CSX
Corporation, Humana, Inc., Reynolds Metals Company,
UCAR International, Inc. and United States Enrichment
Corporation. He became a director of BANC ONE in 1987.
His business address is P.O. Box 391, Ashland, Kentucky
41114.
Verne G. Istock...... Mr. Istock has been a director and Chairman of the
Board of BANK ONE since October 2, 1998. Previously,
Mr. Istock was Chairman of First Chicago NBD from 1996
to 1998 and served as President and Chief Executive
Officer from 1995 to 1998. Mr. Istock served as
Chairman and Chief Executive Officer of NBD from 1994
until December 1995. Mr. Istock is also a director of
Kelly Services, Inc. and Masco Corporation. He became a
director of NBD in 1985.
Laban P. Jackson, Mr. Jackson has been Chairman and Chief Executive
Jr.................. Officer of Clear Creek Properties, Inc., a real estate
development company, since 1989. Prior to that time, he
served as Chairman and Chief Executive Officer,
International Spike, Inc. He became a director of BANC
ONE in 1993. His business address is 2365 Harrodsburg
Road, Suite B230, Lexington, Kentucky 40504.
John W. Kessler...... Mr. Kessler has been Chairman of The New Albany
Company, a real estate development firm, since 1988. He
also serves as Chairman of Marsh & McLennan Real Estate
Advisors, Inc. and John W. Kessler Company. Mr Kessler
is a director of Abercrombie & Fitch Co. He served as a
director of BANC ONE from 1986 to 1992 and rejoined the
Board in 1995. His business address is c/o The New
Albany Company, 5906 E. Dublin-Granville Road, New
Albany, Ohio 43054.
Richard J. Lehmann... Mr. Lehmann has been Vice Chairman of the Board since
October 2, 1998. Previously, Mr. Lehmann served as
President of BANC ONE from 1995 and chief operating
officer from 1996 to 1998. Mr Lehmann was Chairman and
Chief Executive Officer of Banc One Arizona Corporation
and Bank One, Arizona, N.A. from 1991 to 1995. Mr.
Lehmann serves as a director of Moore Corporation
Limited. He became a director of BANC ONE in 1995.
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Richard A. Mr. Manoogian is Chairman and Chief Executive Officer
Manoogian........... of Masco Corporation, a diversified manufacturer, a
position he has held since 1985. In addition, Mr.
Manoogian serves as the Chairman and a director of
MascoTech, Inc. He became a director of NBD in 1978.
His business address is c/o Masco Corporation, 21001
Van Born Road, Taylor, Michigan 48180.
William T. McCormick, Mr. McCormick is Chairman and Chief Executive Officer
Jr.................. of CMS Energy Corporation, a diversified energy
company, a position he has held since 1988. He is also
Chairman of its principal subsidiary, Consumers Energy.
In addition to CMS Energy Corporation and Consumers
Energy, Mr. McCormick is a director of Rockwell
International Corporation and Schlumberger Limited. He
became a director of NBD in 1985. His business address
is c/o CMS Energy Corporation, 330 Town Center Drive,
Dearborn, Michigan 48126.
John B. McCoy........ See Section 1(a) above.
Thomas E. Reilly, Mr. Reilly is Chairman and Chief Executive Officer of
Jr.................. Reilly Industries, Inc., a diversified chemical
manufacturing company. He has held that position since
1990, and prior to that time held other executive
positions within the company. In addition to Reilly
Industries, Inc., Mr. Reilly is a director of Herff
Jones, Inc. and Lilly Industries, Inc. He became a
director of First Chicago NBD in 1995. His business
address is c/o Reilly Industries, Inc., 300 North
Meridian Street, Indianapolis, Indiana 46204.
John W. Rogers, Mr. Rogers is President and founder of Ariel Capital
Jr. ................ Management, Inc., an institutional money management
firm. He has held that position since 1983. Mr. Rogers
is a director of Aon Corporation, Burrell
Communications Group, Inc. and GATX Corporation. He
became a director of First Chicago NBD in 1998. His
business address is c/o Ariel Capital Management, Inc.,
307 North Michigan Avenue, Chicago, Illinois 60601.
Thekla R. Shackel- Ms. Shackelford is an education consultant. Ms.
ford................ Shackelford founded School Selection Consulting, an
admissions service for independent secondary schools
and colleges in 1978. Ms. Shackelford serves as a
director of Fiserv Inc. and Wendy's International, Inc.
She became a director of BANC ONE in 1993. Her business
address is 6020 Havens Road, Gahanna, Ohio 43230.
Alex Shumate......... Mr. Shumate has been the Office Managing Partner of
Squire, Sanders & Dempsey L.L.P., a law firm, since
1991. Mr. Shumate serves as a director of Intimate
Brands, Inc. and Wm. Wrigley Jr. Company. He became a
director of BANC ONE in 1993. His business address is
c/o Squire, Sanders & Dempsey, 41 South High Street,
Suite 1300, Columbus, Ohio 43215.
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Frederick P. Mr. Stratton has been Chairman and Chief Executive Officer of
Stratton, Jr........ Briggs & Stratton Corporation, a manufacturer of air cooled
gasoline engines for outdoor power equipment, since 1986. Mr.
Stratton serves as a director of Midwest Express Holdings,
Inc., Weyco Group, Inc., Wisconsin Electric Power Company and
Wisconsin Energy Corporation. He became a director of BANC ONE
in 1988. His business address is c/o Briggs & Stratton
Corporation, 12301 West Wirth Street, Wauwatosa, Wisconsin
53222.
John C. Tolleson..... See Section 1(a) above.
David J. Vitale...... Mr. Vitale has been Vice Chairman of the Board since October 2,
1998. He served as Vice Chairman of First Chicago NBD from 1995
to 1998, was Vice Chairman of First Chicago from 1993 to 1995
and served as the President of The First National Bank of
Chicago from 1995 to 1998. Mr. Vitale became a director of
First Chicago in 1992.
Robert D. Walter..... Mr. Walter has been Chairman and Chief Executive Officer of
Cardinal Health, Inc., a pharmaceutical service provider, since
1971. Mr. Walter is director of CBS Corporation, Infinity
Broadcasting Corporation and Karrington Health, Inc. He became
a director of BANC ONE in 1987. His business address is c/o
Cardinal Health, Inc., 5555 Glendon Court, Dublin, Ohio 43016.
</TABLE>
(b) Executive Officers of BANK ONE
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Marvin W. Adams...... Mr. Adams has been Executive Vice President since December 15,
1998 and Chief Technology Officer since October 2, 1998. Mr.
Adams joined BANC ONE in 1994, serving as President of
Financial Card Services until 1996. Following a brief period as
Chief Information Officer of Frontier Communications
Corporation, Mr. Adams returned to BANC ONE as Chief Technology
Officer in 1997.
William P. Boardman.. See Section 1(a) above.
Sherman I. Goldberg.. Mr. Goldberg has been Executive Vice President since December
15, 1998, and General Counsel and Secretary since October 2,
1998. From 1995 to 1998, he served as Executive Vice President,
Secretary and General Counsel of First Chicago NBD. Mr.
Goldberg served as Executive Vice President of First Chicago
from 1990 to 1995 and as Secretary and General Counsel from
1988 to 1995.
Verne G. Istock...... See Section 2(a) above.
W. G. Jurgensen...... Mr. Jurgensen has been Executive Vice President since December
15, 1998 and Head of Commercial Bank Products since October 2,
1998. From 1995 to 1998, Mr. Jurgensen was an Executive Vice
President of First Chicago NBD and served as Executive Vice
President of First Chicago from 1991 to 1995.
David J. Kundert..... Mr. Kundert has been Executive Vice President since December
15, 1998 and Head of Investment Management since October 2,
1998. He has been Chairman and Chief Executive Officer of Banc
One Investment Management Group of BANC ONE since 1995 and
President and Chief Executive Officer of Banc One Investment
Advisors Corporation since 1992. His business address is 1111
Polaris Parkway, Columbus, Ohio 43240.
Richard J. Lehmann... See Section 2(a) above.
John B. McCoy........ See Section 1(a) above.
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Timothy P. Moen...... Mr. Moen has been Executive Vice President since December 15, 1998
and Head of Human Resources since October 2, 1998. From 1995 to
1998, he was an Executive Vice President of First Chicago NBD. Mr.
Moen served as Senior Vice President and Executive Assistant to the
Chairman of First Chicago from 1994 to 1995.
Susan S. Moody....... Ms. Moody has been Executive Vice President since December 15, 1998
and Head of Commercial Bank Relationships since October 2, 1998.
From 1995 to 1998, she was an Executive Vice President of First
Chicago NBD. In 1995, she was elected an Executive Vice President of
NBD where she had been a Senior Vice President since 1994.
Robert A. O'Neill, Mr. O'Neill has been Executive Vice President since January 19, 1999
Jr.................. and General Auditor since October 2, 1998. Previously, he was a
Senior Vice President and Chief Auditor of BANC ONE, having joined
BANC ONE in 1987 as Vice President and Chief Auditor.
Robert A. Rosholt.... Mr. Rosholt has been Executive Vice President since December 15,
1998 and Chief Financial Officer since October 2, 1998. From 1995
until 1998 he served as Executive Vice President and Chief Financial
Officer of First Chicago NBD. Mr. Rosholt served as Chief Financial
Officer of First Chicago from 1993 to 1995 and as Executive Vice
President from 1994 to 1995.
Ronald G. Steinhart.. See Section 1(a) above.
Kenneth Stevens...... Mr. Stevens has been Executive Vice President since December 15,
1998 and Head of Retail since October 2, 1998. From 1996 to 1998 Mr.
Stevens was Chairman and Chief Executive Officer of the Retail Group
of BANC ONE. Prior to joining BANC ONE, Mr. Stevens served as
President and Chief Operating Officer (1994-1996) and Executive Vice
President (1993-1994) of Taco Bell Corporation. His business address
is 1111 Polaris Parkway, Columbus, Ohio 43240.
Geoffrey L. String- Mr. Stringer has been an Executive Vice President since May 19,
er.................. 1999. Prior to becoming an Executive Vice President, Mr. Stringer
served as Senior Vice President and Head of Corporate Investments
for BANK ONE. From 1995 to 1998, Mr. Stringer was Senior Vice
President and Head of Corporate Investments for First Chicago NBD
and prior thereto served as Senior Vice President of First Chicago.
Richard W. Vague..... See Section 1(a) above.
David J. Vitale...... See Section 2(a) above.
Richard R. Wade...... Mr. Wade has been Executive Vice President since December 15, 1998
and Head of Risk Management since October 2, 1998. From 1995 until
1996, he was a Senior Vice President of The First National Bank of
Chicago. Previously, from 1990 to 1995, he was a First Vice
President of NBD Bank (Michigan) serving as head of various
divisions, including a corporate banking group and capital markets.
Donald A. Winkler.... Mr. Winkler has been Executive Vice President since December 15,
1998 and Head of Finance One since October 2, 1998. He had been
Chairman and Chief Executive Officer of Finance One Group of BANC
ONE since 1993. His business address is 100 East Broad Street,
Columbus, Ohio 43215.
</TABLE>
74
<PAGE>
3. First USA Financial, Inc.
Each such person is a citizen of the United States of America. Unless
otherwise indicated below, the business address of each director and executive
officer is Three Christina Centre, 201 North Walnut Street, Wilmington,
Delaware 19801.
(a) Directors of First USA Financial
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Richard W. Vague..... See Section 1(a) above.
</TABLE>
(b) Executive Officers of First USA Financial
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Richard W. Vague..... See Section 1(a) above.
George P. Hubley, Mr. Hubley is Executive Vice President and Chief Financial
Jr. ................ Officer of First USA Bank and has been a senior financial
officer for First USA Financial since 1986.
Clinton W. Walker.... Mr. Walker has served as General Counsel for First USA Bank
since March 1996. From 1994 to 1996, Mr. Walker was an attorney
at Citicorp.
</TABLE>
4. First Data Corporation
Each of the directors and executive officers of First Data is a citizen of
the United States of America.
(a) Directors of First Data
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Ben Burdetsky........ Mr. Burdetsky has been the Professor Emeritus of the School of
Business and Public Management of the George Washington
University since 1995 and director of the Burdetsky Labor-
Management Institute at the University. Dr. Burdetsky was a
member of the full-time faculty from January 1977 to 1994. Dr.
Burdetsky is a director of National Capital Preferred Provider
Organization. He has been a director of First Data since April
1992. Mr. Burdetsky's business address is 4619 Dittmar Road,
Arlington, Virginia 22207.
Henry C. Duques...... Mr. Duques has been Chairman and Chief Executive Officer of
First Data from April 1989 to the present. He is a director of
theglobe.com and Unisys Corporation. Mr. Duques' business
address is First Data Corporation, One Mack Centre Drive,
Paramus, New Jersey 07652.
Courtney F. Jones.... Mr. Jones has been Managing Director in charge of the New World
Banking group of Bankers Trust since . He has been a
director of RSP Manufacturing Corporation since March 1998,
Outsourcing Solutions, Inc. since April 1998, and Medical
Manager Corporation since April 1997. Mr. Jones has been a
director of First Data since April 1992. His business address
is Bankers Trust, 130 Liberty Street, New York, New York 10006.
Robert J. Levenson... Mr. Levenson has been Executive Vice President of First Data
from 1993 to present. Mr. Levenson is a director of Emisphere
Technologies, Inc., Superior Telecom, Inc. and Vestcom
International, Inc. He has been a director of First Data since
April 1992. Mr. Levenson's business address is First Data, One
Mack Centre Drive, Paramus, New Jersey 07652.
</TABLE>
75
<PAGE>
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
James D. Robinson Mr. Robinson has been Chairman and Chief Executive Officer of RRE
III................. Investors, LLC a private information technology venture investment
firm, and Chairman of Violy Byorum & Partners Holdings, LLC. Mr.
Robinson is Senior Advisor to Salomon Smith Barney, Inc. He is a
director of Bristol-Myers Squibb Company, The Coca-Cola Company,
Cambridge Technology Partners, and Concur Technologies Inc. He is a
limited partner in and advisor to International Equity Partners and
serves on the board of directors of InfiCorp Holdings, Inc. and
Ibero American Media Partners, both private companies. Mr. Robinson
is a member of the Business Council and the Council on Foreign
Relations. He is Honorary Co-Chairman of Memorial Sloan-Kettering
Cancer Center; an Honorary Trustee of the Brookings Institution and
Chairman Emeritus of the World Travel and Tourism Council. Mr.
Robinson has been a director of First Data since April 1992. His
business address is RRE Investors, LLC, 126 E. 56th Street, 26th
Floor, New York, New York 10022.
Charles T. Russell... Mr. Russell is currently retired. Mr. Russell was formerly
President and Chief Executive Officer of Visa International from
1984 to January 1994. Mr. Russell joined Visa in 1971. He serves on
the Board of Visitors at the University of Pittsburgh's Joseph M.
Katz School of Business. Mr. Russell also is a director of
CyberCash, Inc., and InfiStar Corporation, which provides
management services to credit card issuers. He has been a director
of First Data since May 1994. Mr. Russell's business address is 812
Lamont Avenue, Novato, California 94945.
Bernard L. Schwartz.. Mr. Schwartz is Chairman and Chief Executive Officer of Loral Space
& Communications Ltd. He served as Chairman and Chief Executive
Officer of Loral Corporation from 1972 to 1996. Mr. Schwartz is the
Chairman and Chief Executive Officer of Globalstar
Telecommunications Limited. He also serves as Chairman and Chief
Executive Officer of K&F Industries Inc. and Chairman of Space
Systems/Loral. Mr. Schwartz is a director of Reliance Group
Holdings, Inc., a trustee of Mount Sinai-New York University
Medical Center, and a trustee of Thirteen/WNET. He has been a
director of First Data since April 1992. Mr. Schwartz's business
address is Loral Space & Communications, Ltd., 600 Third Avenue,
36th Floor, New York, New York 10016.
Joan E. Spero........ Ms. Spero has been President of the Doris Duke Charitable
Foundation since 1997. Ms. Spero was Undersecretary of State for
Economic, Business and Agricultural Affairs from 1993 to 1997. Ms.
Spero is a member of the Board of Trustees of the Brookings
Institution, Wisconsin Alumni Research Foundation, and Columbia
University. She serves as a director/Trustee of certain Scudder
Kemper Funds. Ms. Spero has been a director of First Data since
March 1998. Her business address is Doris Duke Charitable
Foundation, 650 Fifth Avenue, 19th Floor, New York, New York 10019.
Garen K. Staglin..... Mr. Staglin has been Chairman of the board of directors of Safelite
Glass Corporation since August 1991. Mr. Staglin also served as the
Chief Executive Officer of Safelite Glass Corporation from August
1991 until April 1997. He serves as a director of Quick Response
Services, Inc., CyberCash, Inc. and Specialized Bicycle Corp. Mr.
Staglin also serves on the Advisory Council of the Stanford
Graduate School of Business. He has been a director of First Data
since April 1992. Mr. Staglin's business address is P.O. Box 680,
Rutherford, California 94573.
</TABLE>
76
<PAGE>
(b) Executive Officers of First Data
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Eula L. Adams........ Mr. Adams was promoted to Executive Vice President of First
Data in September 1998. He joined First Data in 1991 and has
led operations in numerous business units including Western
Union, Teleservices and First Data Merchant Services. Prior to
joining First Data, Mr. Adams was a partner with Deloitte &
Touche. Mr. Adam's business address is First Data, 6200 South
Quebec Street, Englewood, Colorado 80111.
Lee Adrean........... Mr. Adrean joined First Data in May 1995 as Executive Vice
President and Chief Financial Officer. Mr. Adrean was President
of Providian Agency Group from 1993 to the time he joined First
Data. From 1991 to 1993 he was Senior Vice President and Chief
Financial Officer of Providian Corporation and from 1990 to
1991 he was Senior Vice President, Corporate Development and
Strategic Planning at Providian Corporation. Mr. Adrean's
business address is First Data, 5660 New Northside Drive, Suite
1400, Atlanta, Georgia 30328.
David P. Bailis...... Mr. Bailis has been an Executive Vice President of First Data
since September 1996. From July 1992 until March 1998 he served
as General Counsel of First Data. He joined First Data in June
1989 and advised the Health Systems Group and First Data
Resources business units on legal matters prior to his
promotion to General Counsel. From January 1988, until joining
First Data, Mr. Bailis was a partner at the law firm of Peper,
Martin, Jensen, Maichel and Hetlage in St. Louis, Missouri. Mr.
Bailis' business address is First Data, 10825 Farnam Drive,
Omaha, Nebraska 68154.
Henry C. Duques...... See Section 4(a) above.
Charles T. Fote...... Mr. Fote has been President and Chief Operating Officer of
First Data since September 1998. He served as Executive Vice
President of First Data from its initial public offering in
April 1992 until September 1998. He was a director of First
Data from the time of its formation in April 1989 as a
subsidiary of American Express Company until its initial public
offering. Mr. Fote also served as President of Integrated
Payment Systems ("IPS") from December 1989 through December
1991. From 1985 until 1989, he was Executive Vice President of
the Payment Products division of TRS, the predecessor of IPS.
Mr. Fote's business address is First Data, 6200 South Quebec
Street, Englewood Colorado 80111.
Michael T. Whealy.... Mr. Whealy was promoted in March 1998 to Executive Vice
President and General Counsel of First Data and to Chief
Administrative Officer in September 1998. He joined First Data
in April 1991 as Counsel of the WATS Marketing and Teleservices
business units. Mr. Whealy served as General Counsel of First
Data Resources Inc. from April 1992 until his promotion to
General Counsel of Card Services Group in 1994. Mr. Whealy's
business address is First Data, 5660 New Northside Drive, Suite
1400, Atlanta, Georgia 30328.
</TABLE>
77
<PAGE>
5. FDC Offer Corporation
Each such person is a citizen of the United States of America.
(a) Directors of FDC Offer
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Richard Aiello....... Mr. Aiello joined Card Establishment Services, Inc. ("CES") in
1992. First Data acquired CES in March 1995. CES was
subsequently merged into First Data Merchant Services and, from
April 1997 to the present, Mr. Aiello has served as Senior Vice
President of First Data Merchant Services. Mr Aiello has been a
Director and Secretary of FB Merging since its incorporation.
Mr. Aiello's business address is First Data Merchant Services,
265 Broad Hollow Road, Melville, NY 11747.
David J. Treinen..... Mr. Treinen joined First Data in 1988 and from November 1994 to
the present has served as Senior Vice President of Planning and
Development. Mr. Treinen has been a Director and President of
FB Merging since its incorporation. Mr. Treinen's business
address is First Data, 11718 Nicholas Street, Omaha, NE 68154.
</TABLE>
(b) Executive Officers of FDC Offer
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Richard Aiello....... See Section 5(a) above.
David J. Treinen..... See Section 5(a) above.
</TABLE>
6. FB Merging Corporation
Each of the directors and executive officers of FB Merging is a citizen of
the United States of America.
(a) Directors of FB Merging
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Richard Aiello....... See Section 5(a) above.
David J. Treinen..... See Section 5(a) above.
</TABLE>
(b) Executive Officers of FB Merging
<TABLE>
<CAPTION>
Name Business Address and Principal Occupation
---- -----------------------------------------
<C> <S>
Richard Aiello....... See Section 5(a) above.
David J. Treinen..... See Section 5(a) above.
</TABLE>
During the past five years neither Paymentech, BANK ONE, First USA
Financial, First Data, FDC Offer, FB Merging nor any named person has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of that
proceeding was or is subject to a judgment, decree or final order enjoining
further violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violations of those laws.
All information in this proxy statement concerning the named persons and
any referenced affiliates and associates is to the best knowledge of
Paymentech.
Past contacts, transactions and negotiations
Except as generally described in this proxy statement, since July 1, 1996,
none of BANK ONE, First USA Financial, First Data, FDC Offer, FB Merging or
any named person has had any contacts, negotiations or transactions with
Paymentech concerning the acquisition, acquisition of securities,
consolidation, election of directors, merger, tender offer or sale or other
transfer of a material amount of assets.
78
<PAGE>
Plans or proposals
Except as generally described in this proxy statement, none of Paymentech,
BANK ONE, First USA Financial, First Data, FDC Offer, FB Merging or any named
person has any plan or proposal concerning any extraordinary corporate
transaction involving Paymentech, any sale or transfer of a material amount of
Paymentech's assets, any change in Paymentech's board of directors or
management, any material change in Paymentech's present dividend rate or
present policy on indebtedness or capitalization, or any other change in
Paymentech's corporate structure or business.
Recent transactions in Paymentech common stock
None of Paymentech, BANK ONE, First USA Financial, First Data, FDC Offer, FB
Merging, any pension, profit sharing or similar plan of Paymentech, BANK ONE,
First USA Financial, First Data, FDC Offer or FB Merging, any named person, or
any associate or majority owned subsidiary of Paymentech, BANK ONE, First USA
Financial, First Data, FDC Offer or FB Merging has engaged in any transaction
involving shares of Paymentech common stock during the past 60 days. In
addition, the table does not include information regarding ordinary course
transactions in Paymentech common stock by subsidiaries of BANK ONE related to
their activities as a fiduciary, custodian, investment advisor, investment
manager or broker-dealer.
Contracts, arrangements or understandings concerning Paymentech's securities
Except as described in this proxy statement, none of Paymentech, BANK ONE,
First USA Financial, First Data, FDC Offer, FB Merging or any named person has
any arrangement, contract, relationship or understanding with any person with
respect to any security of Paymentech, including any arrangement, contract,
relationship or understanding concerning the transfer or the voting of any
security of Paymentech, any joint venture, any loan or option arrangement, any
put or call, any guarantee of a loan, any guarantee against loss, or any giving
or withholding of any authorization, consent or proxy.
79
<PAGE>
INDEPENDENT ACCOUNTANTS
The firm of Ernst & Young LLP has served as Paymentech's independent
auditors since 1996. The consolidated financial statements of Paymentech for
the fiscal year ended June 30, 1998, incorporated by reference to Paymentech's
Annual Report on Form 10-K, as amended, have been audited by Ernst & Young, as
stated in their report appearing in the Form 10-K. Paymentech expects that
representatives of Ernst & Young will be present at the special meeting and
will both respond to appropriate questions from Paymentech stockholders and
make a statement, if they so desire.
STOCKHOLDER PROPOSALS
If the merger is consummated, there will be no public stockholders of
Paymentech and no public participation in any future meetings of stockholders
of Paymentech. However, if the merger is not consummated, Paymentech's public
stockholders will continue to be entitled to attend and participate in
Paymentech's stockholders' meetings, and in accordance with Rule 14a-8 under
the Exchange Act, any stockholder may present proposals for consideration at
the next annual meeting of the stockholders of Paymentech.
Proposals received from stockholders are given careful consideration by
Paymentech and are eligible for consideration for inclusion in the proxy
statement for the 1999 annual meeting of the stockholders if they are received
by Paymentech on or before May 28, 1999. You should send any proposal to the
attention of the Secretary, Paymentech, Inc., 1601 Elm Street, 9th Floor,
Dallas, Texas 75201. In order for proposals submitted by stockholders not
submitted in accordance with Rule 14a-8 to be timely within the meaning of Rule
14a-4(c) under the Exchange Act, the proposal must be submitted so that it is
received no later than August 11, 1999, and in order for a proposal to be
timely under Paymentech's by-laws, it must be received on or prior to August 2,
1999, but no earlier than July 2, 1999.
80
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
The SEC allows Paymentech to "incorporate by reference" information into
this proxy statement, which means that it can disclose important information
by referring you to another document filed separately with the SEC. The
following documents are incorporated by reference in this proxy statement and
are deemed to be a part of this proxy statement, except for any information
superseded by information contained directly in this proxy statement:
<TABLE>
<CAPTION>
Paymentech SEC Filings (File No. 1-
14224) Period
- ----------------------------------- ------
<S> <C>
Annual Report on Form 10-K........... Year ended June 30, 1998 (as amended by
the 10-K/A filed on December 16, 1998)
Quarterly Reports on Form 10-Q....... Quarters ended September 30, 1998,
December 31, 1998 (as amended by the 10-
Q/A filed April 14, 1999) and March 31,
1999
Current Reports on Form 8-K.......... Dated August 28, 1998, October 29, 1998,
December 28, 1998, February 17, 1999,
March 23, 1999 and April 15, 1999
</TABLE>
We incorporate by reference additional documents that Paymentech may file
with the SEC after the date of this proxy statement and before the special
meeting. These include periodic reports, such as Annual Reports on Form 10- K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as
proxy statements. The information contained in any of those documents will be
considered a part of this proxy statement from the date the document is filed
and will supplement or amend the information contained in this proxy
statement.
Paymentech undertakes to provide by first class mail, without charge and
within one business day of receipt of any request, to any person to whom a
copy of this proxy statement has been delivered, a copy of any or all
documents referred to above which have been incorporated by reference in this
proxy statement, other than exhibits to those documents (unless the exhibits
are specifically incorporated by reference into those documents). Please
direct requests for copies of documents to:
Investor Relations Department
Paymentech, Inc.
1601 Elm Street, 9th Floor
Dallas, Texas 75201
Tel: (214) 849-3753
Paymentech is currently subject to the information requirements of the
Exchange Act and accordingly, Paymentech files periodic reports, proxy
statements and other information with the SEC relating to its business,
financial and other matters. You may obtain copies of these documents, as well
as the Schedule 13E-3 discussed in the next section of this proxy statement,
at prescribed rates, at the public reference facilities maintained by the SEC
at:
Room 1024 500 West Madison Street 7 World Trade Center
450 Fifth Street, N.W. Suite 1400 Suite 1300
Judiciary Plaza Chicago, Illinois 60661 New York, New York 10048
Washington, D.C. 20549
For further information concerning the SEC's public reference rooms, you
may call the SEC at 1-800-SEC-0330. You may also access some of this
information on the World Wide Web through the SEC's Internet address at
"http://www.sec.gov." The Paymentech common stock is listed on the New York
Stock Exchange, and materials may also be inspected at its offices, 86 Trinity
Place, New York, New York 10006.
81
<PAGE>
Because the merger is a "going private" transaction, Paymentech, First Data,
BANK ONE, First USA Financial, FDC Offer and FB Merging have filed a Schedule
13E-3 under the Exchange Act with respect to the merger. The Schedule 13E-3 and
this proxy statement contain additional information about Paymentech, First
Data, BANK ONE, First USA Financial, FDC Offer and FB Merging. A copy of the
written report presented by Merrill Lynch to Paymentech's board of directors,
including Merrill Lynch's opinion as to the fairness of the cash consideration
to be paid in the merger, has been filed as an exhibit to the Schedule 13E-3.
Copies of the Schedule 13E-3 are available for inspection and copying at the
principal executive offices of Paymentech, First Data, BANK ONE, First USA
Financial, FDC Offer and FB Merging during regular business hours by any
interested stockholder of Paymentech, or a representative who has been so
designated in writing. You may also obtain the Schedule 13E-3 by mail by
submitting a request to any of the following:
To Paymentech:
Investor Relations Department
Paymentech, Inc.
1601 Elm Street, 9th Floor
Dallas, Texas 75201
Tel: (214) 849-3753
To First Data, FDC Offer or FB Merging:
Investor Relations
First Data Corporation
5660 New Northside Drive
Atlanta, Georgia 30328
Fax-on-Demand Line at:
1-800-798-3659 or
Tel: (770) 857-7188
To BANK ONE or First USA Financial:
Investor Relations
BANK ONE CORPORATION
One First National Plaza
Chicago, Illinois 60670
Tel: (312) 732-4812
82
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under the captions "Summary" and "Special Factors--
Opinion of Paymentech's financial advisor" and elsewhere in this proxy
statement as well as in certain of the documents incorporated herein by
reference constitute forward-looking statements which involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance and achievements of Paymentech, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following factors, as well as those factors discussed
elsewhere in this proxy statement and in Paymentech's filings with the SEC:
. intense and increasing competition in the industry, including
competition from issuers of commercial cards, as well as other merchant
processors, that are offering rates which are at or below rates charged
by Paymentech;
. industry consolidation which enables competitors to have access to
significant capital, management, marketing and technological resources
that are equal to or greater than those of Paymentech;
. Paymentech's ability to identify and consummate acquisitions of merchant
portfolios, operating businesses and payment processing assets upon
satisfactory terms;
. Paymentech's ability to achieve a smooth and timely integration of newly
acquired assets and operating businesses and to achieve anticipated
synergies;
. increased chargeback and other losses due to Paymentech's contingent
liability for such losses through its merchants;
. the impact of a lack of growth or decline in the number and scope of
card-based payment transactions, on a worldwide basis, and a lack of
growth or a decline in the types of industries and merchants that accept
card-based transactions as a method of payment;
. seasonal fluctuations in Paymentech's revenues typically associated with
traditional peaks in consumer spending; and
. the effects of, and changes in, monetary and fiscal policies, laws and
regulations, other activities of governments, agencies and similar
organizations, and social and economic conditions, such as inflation,
and changes in taxation of Paymentech's earnings.
Statements incorporated herein by reference may not claim the protection of
the Private Securities Litigation Reform Act of 1995, irrespective of whether
the documents in which they are contained otherwise claim the protection of the
Private Securities Litigation Reform Act of 1995.
OTHER BUSINESS
The board of directors does not know of any other matters to be presented
for action at the special meeting other than as set forth in this proxy
statement. If any other business should properly come before the meeting, the
persons named in the accompanying form of proxy intend to vote thereon in
accordance with their best judgment unless they are directed by a proxy to do
otherwise.
83
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
FIRST DATA CORPORATION
FB MERGING CORPORATION
AND
PAYMENTECH, INC.
Dated as of March 22, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
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ARTICLE I
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THE MERGER................................................................. A-2
Section 1.1 Contributions of Cash and Shares to Holdco.................... A-2
Section 1.2 The Merger.................................................... A-2
Section 1.3 Effective Time................................................ A-2
Section 1.4 Effects of the Merger......................................... A-2
Section 1.5 Charter and By-laws; Directors and Officers................... A-2
Section 1.6 Conversion of Securities...................................... A-3
Section 1.7 Exchange of Certificates...................................... A-3
Section 1.8 Further Assurances............................................ A-5
Section 1.9 Closing....................................................... A-5
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.................... A-5
Section 2.1 Organization.................................................. A-5
Section 2.2 Authority..................................................... A-5
Section 2.3 Consents and Approvals; No Violations......................... A-6
Section 2.4 Information Supplied.......................................... A-7
Section 2.5 Financing..................................................... A-7
Section 2.6 Ownership of the Company's Capital Stock...................... A-7
Section 2.7 Brokers....................................................... A-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................. A-7
Section 3.1 Organization, Standing and Power.............................. A-7
Section 3.2 Subsidiaries.................................................. A-8
Section 3.3 Capital Structure............................................. A-8
Section 3.4 Authority..................................................... A-8
Section 3.5 Consents and Approvals; No Violation.......................... A-9
Section 3.6 SEC Documents and Other Reports............................... A-10
Section 3.7 Information Supplied.......................................... A-10
Section 3.8 Absence of Certain Changes or Events.......................... A-10
Section 3.9 Permits and Compliance........................................ A-11
Section 3.10 Tax Matters................................................... A-11
Section 3.11 Actions and Proceedings....................................... A-12
Section 3.12 Certain Agreements............................................ A-12
Section 3.13 ERISA......................................................... A-13
Section 3.14 Liabilities; Services......................................... A-14
Section 3.15 Labor Matters................................................. A-14
Section 3.16 Intellectual Property; Software; Year 2000.................... A-15
Section 3.17 Title to and Sufficiency of Assets............................ A-15
Section 3.18 Required Vote of Company Stockholders......................... A-15
Section 3.19 Environmental Matters......................................... A-16
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Section 3.20 Customers and Employees..................................... A-16
Section 3.21 Insurance................................................... A-16
Section 3.22 Transactions with Affiliates................................ A-17
Section 3.23 Brokers..................................................... A-17
Section 3.24 State Takeover Statute...................................... A-17
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS................................ A-17
Section 4.1 Conduct of Business Pending the Merger...................... A-17
Section 4.2 No Solicitation............................................. A-20
Section 4.3 Third Party Standstill Agreements........................... A-21
ARTICLE V
ADDITIONAL AGREEMENTS.................................................... A-21
Section 5.1 Stockholder Meeting......................................... A-21
Section 5.2 Access to Information....................................... A-22
Section 5.3 Costs and Expenses; Termination Fee......................... A-22
Section 5.4 Stock Options............................................... A-22
Section 5.5 Reasonable Best Efforts..................................... A-23
Section 5.6 Public Announcements........................................ A-24
Section 5.7 State Takeover Laws......................................... A-24
Section 5.8 Indemnification; Directors and Officers Insurance........... A-24
Section 5.9 Notification of Certain Matters............................. A-25
Section 5.10 Certain Litigation.......................................... A-25
Section 5.11 Revolving Credit Agreement.................................. A-25
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER....................................... A-25
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.. A-25
Section 6.2 Additional Conditions to Obligations of Parent and Merger
Sub..................................................................... A-26
Section 6.3 Additional Conditions to Obligation of the Company.......... A-26
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER........................................ A-27
Section 7.1 Termination................................................. A-27
Section 7.2 Effect of Termination....................................... A-28
Section 7.3 Amendment................................................... A-28
Section 7.4 Extension; Waiver........................................... A-28
ARTICLE VIII
GENERAL PROVISIONS....................................................... A-28
Section 8.1 Non-Survival of Representations, Warranties and Agreements.. A-28
Section 8.2 Notices..................................................... A-28
Section 8.3 Interpretation; Definitions................................. A-29
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Section 8.4 Counterparts.................................................. A-32
Section 8.5 Entire Agreement; No Third-Party Beneficiaries................ A-32
Section 8.6 Governing Law................................................. A-32
Section 8.7 Assignment.................................................... A-32
Section 8.8 Severability.................................................. A-32
Section 8.9 Enforcement of this Agreement................................. A-32
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EXHIBITS
Exhibit A Stockholder Agreement
Exhibit B Contribution Agreement
Exhibit C Amendments to Certificate of Incorporation of the Company
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 22, 1999 (this "Agreement"),
among First Data Corporation, a Delaware corporation ("Parent"), FB Merging
Corporation, a Delaware corporation ("Merger Sub") and a wholly-owned
subsidiary of FDC Offer Corporation, which in turn is a Delaware corporation
("Holdco") and a wholly-owned subsidiary of Parent, and Paymentech, Inc., a
Delaware corporation (the "Company") (Merger Sub and the Company being
hereinafter collectively referred to as the "Constituent Corporations").
WITNESSETH:
WHEREAS, BANK ONE CORPORATION, a Delaware corporation ("Bank One"), through
its wholly-owned subsidiary First USA Financial, Inc., a Delaware corporation
("First USA"), owns an aggregate of 19,979,081 shares of Common Stock, par
value $.01 per share, of the Company (the "Company Common Stock"; shares of
Company Common Stock being hereinafter referred to as the "Shares");
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved and declared advisable this Agreement and the
transactions contemplated hereby, including the merger of Merger Sub into the
Company (the "Merger"), upon the terms and subject to the conditions set forth
herein, whereby each issued and outstanding Share not owned directly or
indirectly by Parent, Bank One, the Company or any of their Subsidiaries
(including, without limitation, Merger Sub) (other than such Shares held by
Parent, Bank One, the Company or any of their Subsidiaries in a fiduciary,
collateral, custodial or similar capacity which will be converted) will be
converted into the right to receive from the Surviving Corporation (as
hereinafter defined) in cash, without interest $25.50 per Share (the "Merger
Consideration") and the respective Boards of Directors of Merger Sub and the
Company have approved and declared advisable this Agreement;
WHEREAS, in order to induce Parent and Merger Sub to enter into this
Agreement, concurrently herewith Parent, Holdco, Merger Sub, Bank One and First
USA are entering into a Stockholder Agreement dated as of the date hereof (the
"Stockholder Agreement") in the form of the attached Exhibit A whereby, among
other things, First USA has agreed to contribute to Holdco the Shares it owns
in exchange for shares of capital stock of Holdco and to vote in favor of the
adoption of this Agreement;
WHEREAS, pursuant to the Stockholder Agreement, Parent has agreed to
contribute to Holdco sufficient cash to pay the aggregate Merger Consideration
in accordance with Section 1.6 in exchange for shares of capital stock of
Holdco, and each of Parent and First USA has agreed to cause Holdco to
contribute to Merger Sub all of the Shares it receives from First USA and all
of the cash it receives from Parent pursuant to the Stockholder Agreement; and
WHEREAS, Parent has entered into a Contribution Agreement dated as of the
date hereof (the "Contribution Agreement") with Bank One in the form of the
attached Exhibit B which provides, among other things, that following the
Merger Parent and Bank One, through Holdco, will cause substantially all of the
assets and liabilities and business of the Company, as the Surviving
Corporation (as hereinafter defined), to be contributed to Bank One Payment
Services, L.L.C., a Delaware limited liability company and an alliance between
wholly-owned subsidiaries of Parent and Bank One (the "Alliance"), in exchange
for the issuance to the Surviving Corporation of a membership interest in the
Alliance.
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NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Contributions of Cash and Shares to Holdco. Pursuant to the
Stockholder Agreement, immediately prior to the transfers referred to in the
last sentence of this Section 1.1, Parent will contribute to Holdco cash in the
amount necessary for the payment of the aggregate Merger Consideration pursuant
to Section 1.6, and simultaneously therewith First USA will contribute to
Holdco all of the Shares it owns (other than such Shares held in a fiduciary,
collateral, custodial or similar capacity), in each case in exchange for shares
of common stock of Holdco. At that time each of Parent, Bank One and First USA
will execute that certain stockholder agreement relating to the governance of
Holdco and the Company. Immediately following such transfers and immediately
prior to the Effective Time each of Parent and First USA will cause Holdco to
contribute to Merger Sub all of the Shares it receives from First USA and all
of the cash it receives from Parent in exchange for shares of capital stock of
Merger Sub (in an amount to be agreed upon between Parent and First USA).
Section 1.2 The Merger. Upon the terms and subject to the conditions hereof,
and in accordance with the General Corporation Law of the State of Delaware, as
amended (the "DGCL"), Merger Sub shall be merged into the Company at the
Effective Time (as hereinafter defined). Following the Merger, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as
the surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Merger Sub and the Company in
accordance with the DGCL. Notwithstanding anything to the contrary herein, at
the joint election of Parent and Bank One, any direct or indirect jointly-owned
Subsidiary (as hereinafter defined) of Parent and Bank One may be substituted
for Merger Sub as a constituent corporation in the Merger. In such event, the
parties agree to execute an appropriate amendment to this Agreement, in form
and substance reasonably satisfactory to Parent, Bank One and the Company, in
order to reflect such substitution; provided, however, that no such
substitution shall (i) alter or change the amount or kind of consideration to
be received by the holders of Shares in the Merger or (ii) materially delay
receipt of any approval referred to in this Agreement or the consummation of
the transactions contemplated hereby.
Section 1.3 Effective Time. The Merger shall become effective when a
certificate of merger (the "Certificate of Merger"), executed in accordance
with the relevant provisions of the DGCL, is filed with the Secretary of State
of the State of Delaware, or at such other time as Merger Sub and the Company
shall agree and as specified in the Certificate of Merger. When used in this
Agreement, the term "Effective Time" shall mean the later of the date and time
at which the Certificate of Merger is duly filed with the Secretary of State of
the State of Delaware or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made prior to or on
the date of the Closing (as hereinafter defined).
Section 1.4 Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the DGCL.
Section 1.5 Charter and By-laws; Directors and Officers. (a) At the
Effective Time, the Certificate of Incorporation of the Company, as amended
(the "Company Charter"), as further amended to read in its entirety as
indicated on the attached Exhibit C, shall be the Certificate of Incorporation
of the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law. At the Effective Time, the By-laws of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the By-laws of
the Surviving Corporation until thereafter changed or amended as provided
therein or by the Company Charter.
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(b) The directors of Merger Sub at the Effective Time of the Merger shall be
the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be. The officers of the Company at the Effective
Time of the Merger shall be the officers of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
Section 1.6 Conversion of Securities. As of the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holders of any securities of the Constituent Corporations:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
common stock of Merger Sub shall be converted into one validly issued,
fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Treasury Shares, Parent Owned Shares, Bank One Shares. All Shares
that are held in the treasury of the Company or by any wholly-owned
Subsidiary of the Company and any Shares owned by Parent, Bank One or
Merger Sub or by any wholly-owned Subsidiary of Parent or Bank One (other
than such Shares held in a fiduciary, collateral, custodial or similar
capacity) shall be canceled and no capital stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Each Share issued and outstanding immediately
prior to the Effective Time (other than shares to be canceled in accordance
with Section 1.6(b) and other than Dissenting Shares (as hereinafter
defined)) shall be converted into the right to receive from the Surviving
Corporation the Merger Consideration. All such Shares, when so converted,
shall no longer be outstanding and shall automatically be canceled and
retired 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, less any applicable withholding taxes, upon
surrender of the Certificate (as hereinafter defined) that formerly
evidenced such Shares in the manner provided in Section 1.7.
(d) Shares of Dissenting Stockholders. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding Shares held by a
person (a "Dissenting Stockholder") who has not voted in favor of the
Merger or consented thereto in writing and who shall have demanded properly
in writing appraisal for such Shares in accordance with Section 262 of the
DGCL and otherwise complies with all of the provisions of the DGCL
concerning the right of holders of Shares to require appraisal of their
Shares ("Dissenting Shares") shall not be converted into or represent the
right to receive the Merger Consideration, unless such stockholder fails to
perfect or withdraws or loses its right to appraisal. Such stockholders
shall be entitled to receive payment of the appraised value of such Shares
held by them in accordance with the provisions of such Section 262, except
that all Dissenting Shares held by stockholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such Shares under such Section 262 shall thereupon be deemed
to have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration, without any
interest or dividends thereon, upon surrender of the Certificate or
Certificates that formerly evidenced such Shares in the manner provided in
Section 1.7. The Company shall give Parent and Bank One (i) prompt notice
of any demands for payment received by the Company, withdrawals of such
demands and any other instruments served 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 any such demand for appraisal
under the DGCL. The Company shall not, without the prior written consent of
Parent and Bank One, voluntarily make any payment with respect to, or
settle, offer to settle or otherwise negotiate, any such demands.
Section 1.7 Exchange of Certificates. (a) Paying Agent. Prior to the
Effective Time, Parent shall designate First Chicago Trust Company of New York
(or such other person or persons as shall be reasonably acceptable to Parent,
Bank One and the Company) to act as paying agent in the Merger (the "Paying
Agent"), and at the Effective Time, Merger Sub shall make available to the
Paying Agent cash in the amount necessary
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for the payment of the Merger Consideration upon surrender of certificates
representing Shares as part of the Merger pursuant to this Section 1.7. Any and
all interest earned on funds made available to the Paying Agent pursuant to
this Agreement shall be paid over to Parent.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
represented Shares (the "Certificates"), (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
Paying Agent and shall be in a form and have such other provisions as Parent
may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the amount of cash into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 1.6, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Shares that is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 1.7, each Certificate (other than Certificates
representing Dissenting Shares) shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the amount of
cash, without interest, into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 1.6. No interest will
be paid or will accrue on the cash payable upon the surrender of any
Certificate. Parent or the Paying Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
such amounts as Parent or the Paying Agent is required to deduct and withhold
with respect to the making of such payment under the Code (as hereinafter
defined) or under any provisions of state, local or foreign tax law. To the
extent that amounts are so withheld by Parent or the Paying Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the person in respect of which such deduction or withholding was
made by the Parent or the Paying Agent and any such amounts deducted or
withheld shall be promptly and timely paid by Parent or the Paying Agent to the
appropriate taxing authority.
(c) No Further Ownership Rights in Shares. All cash paid upon the surrender
of Certificates in accordance with the terms of this Article I shall be deemed
to have been paid in full satisfaction of all rights pertaining to the Shares
theretofore represented by such Certificates. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Paying Agent for any reason, they shall be
canceled and exchanged as provided in this Article I.
(d) Termination of Payment Fund. Any portion of the funds made available to
the Paying Agent to pay the Merger Consideration which remains undistributed to
the holders of Shares for six months after the Effective Time shall be
delivered to Parent, upon demand, and any holders of Shares who have not
theretofore complied with this Article I and the instructions set forth in the
letter of transmittal mailed to such holders after the Effective Time shall
thereafter look only to Parent for payment of the Merger Consideration to which
they are entitled, without interest or dividends.
(e) No Liability. None of Parent, Holdco, Merger Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash 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 I
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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.
(f) Lost, Stolen or Destroyed Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent or the Paying Agent, the posting by such person of a bond,
in such reasonable amount as Parent or the Paying Agent may direct as indemnity
against any claim that may be made against them with respect to such
Certificate, the Paying Agent will pay in exchange for such lost, stolen or
destroyed Certificate the amount of cash to which the holders thereof are
entitled pursuant to Section 1.6.
Section 1.8 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.
Section 1.9 Closing. The closing of the Merger (the "Closing") and all
actions specified in this Agreement to occur at the Closing shall take place at
the offices of Sidley & Austin, One First National Plaza, Chicago, Illinois
60603, at 10:00 a.m., local time, no later than the second business day
following the day on which the last of the conditions set forth in Article VI
shall have been fulfilled or waived (if permissible) or at such other time and
place as Parent and the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
Section 2.1 Organization. Each of Parent, Holdco and Merger Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as now being conducted except
where the failure to be so organized, existing or in good standing or to have
such power or authority would not, individually or in the aggregate, have a
Material Adverse Effect on Parent.
Section 2.2 Authority. On or prior to the date of this Agreement, the Boards
of Directors of Parent and Merger Sub have declared the Merger advisable and
the Board of Directors of Merger Sub has approved this Agreement in accordance
with the DGCL. Each of Parent and Merger Sub has all requisite power and
authority to execute and deliver this Agreement, the Stockholder Agreement and
the Contribution Agreement, and each of Parent and Merger Sub has all requisite
corporate power and authority to consummate the transactions contemplated
hereby and thereby, as applicable. The execution, delivery and performance by
Parent and Merger Sub of this Agreement, the Stockholder Agreement and the
Contribution Agreement, as applicable, and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action (including Board action) on the part of Parent and Merger Sub
and no other corporate proceedings on the part of Parent or Merger Sub or their
respective Boards of Directors are necessary to authorize and approve this
Agreement (or the Stockholder Agreement or Contribution Agreement, as
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applicable) or to consummate the transactions contemplated hereby and thereby,
as applicable, other than, in the case of this Agreement, the filing of the
Certificate of Merger as required by the DGCL. Each of the Agreement, the
Stockholder Agreement and the Contribution Agreement has been duly executed and
delivered by Parent, Holdco and Merger Sub, as applicable, and (assuming the
valid authorization, execution and delivery of this Agreement by the Company,
the valid authorization, execution and delivery of the Stockholder Agreement by
Bank One and First USA, the valid authorization, execution and delivery of the
Contribution Agreement by Bank One and the validity and binding effect hereof
and thereof on the Company and Bank One and First USA, as applicable) this
Agreement, the Stockholder Agreement and the Contribution Agreement constitute
the valid and binding obligation of each of Parent, Holdco and Merger Sub that
is a party thereto, enforceable against them in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to the enforcement of
creditors' rights generally, and by general equitable principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
Section 2.3 Consents and Approvals; No Violations. Assuming that all
consents, approvals, authorizations and other actions described in this Section
2.3 have been obtained and all filings and obligations described in this
Section 2.3 have been made, the execution and delivery of this Agreement, the
Stockholder Agreement and the Contribution Agreement do not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give to
others a right of termination, cancellation or acceleration of any obligation
or result in the loss of a material benefit under, or result in the creation of
any Lien (as hereinafter defined) upon any of the properties or assets of
Parent or any of its Subsidiaries under, any provision of (i) the Certificate
of Incorporation or the By-Laws of Parent, each as amended to date, (ii) any
provision of the comparable charter or organization documents of any of
Parent's Subsidiaries, (iii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to Parent or any of its Subsidiaries or (iv)
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clauses (iii) or (iv), any
such violations, defaults, rights or Liens that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent, materially
impair the ability of Parent, Holdco or Merger Sub to perform their respective
obligations hereunder or under the Stockholder Agreement or prevent or
materially delay the consummation of any of the transactions contemplated
hereby or thereby. No filing or registration with, or authorization, consent or
approval of, any domestic (federal and state), foreign or supranational court,
commission, governmental body, regulatory agency, authority or tribunal (each,
a "Governmental Entity"), Card Association or other Person is required by or
with respect to Parent or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the Stockholder Agreement by
Parent, Holdco or Merger Sub or is necessary for the consummation of the Merger
and the other transactions contemplated by this Agreement or the Stockholder
Agreement, except (i) in connection, or in compliance, with the provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the Exchange Act, (ii) 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 or any of its
Subsidiaries is qualified to do business, (iii) such filings and consents as
may be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by
the Merger or by the transactions contemplated by this Agreement, the
Stockholder Agreement or the Contribution Agreement, (iv) such filings,
authorizations, orders and approvals as may be required by state takeover laws
(the "State Takeover Approvals"), (v) applicable requirements, if any, of state
securities or "blue sky" laws ("Blue Sky Laws"), (vi) as may be required under
foreign laws, (vii) such filings, authorizations and approvals under the Change
in Bank Control Act, (viii) such filings, authorizations and approvals under
Sections 7-1-701 through 7-1-716 and 7-8-3 through 7-8-20 of the Utah code
(collectively, the "Utah Statute"), (ix) such filings, authorizations and
approvals under Section 4 of the Bank Holding Company Act, and (x) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on
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Parent, materially impair the ability of Parent, Holdco or Merger Sub to
perform its obligations hereunder or under the Stockholder Agreement or the
Contribution Agreement or prevent or materially delay the consummation of any
of the transactions contemplated hereby or thereby.
Section 2.4 Information Supplied. None of the information supplied or to be
supplied by Parent, Holdco, or Merger Sub specifically for inclusion or
incorporation by reference in (i) a Rule 13e-3 Transaction Statement pursuant
to Rule 13e-3 (the "Schedule 13e-3") under the Securities Exchange Act of 1934,
as amended (together with the rules and regulations promulgated thereunder, the
"Exchange Act"), or (ii) the proxy statement (together with any amendments or
supplements thereto, the "Proxy Statement") relating to the adoption of this
Agreement and approval of the Merger by the holders of a majority of the
outstanding Shares, which majority shall, unless otherwise agreed by the
Company, Parent and Bank One, include not less than 66 2/3% of the outstanding
Shares not owned directly or indirectly by Bank One, Parent or their respective
Affiliated Persons or associates including, without limitation, Holdco and
Merger Sub (the "Company Stockholder Approval"), will (a) in the case of the
Schedule 13e-3, at the time the Schedule 13e-3 is filed with the Securities and
Exchange Commission ("SEC") or (b) in the case of the Proxy Statement, at the
time the Proxy Statement is first mailed to the Company's stockholders or at
the time of the Stockholder Meeting (as hereinafter defined), 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.
Section 2.5 Financing. Parent has sufficient funds available for it to pay
the aggregate Merger Consideration.
Section 2.6 Ownership of the Company's Capital Stock. Except for Shares held
in a fiduciary or similar capacity, as of the date hereof, none of Parent,
Holdco, Merger Sub or any Subsidiary of Parent (i) beneficially owns (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, or (ii)
is a party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, shares of the capital
stock of the Company.
Section 2.7 Brokers. No broker, investment banker, financial advisor or
other person, other than Morgan Stanley Dean Witter & Co., the fees and
expenses of which will be paid by Parent, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent, Holdco or Merger Sub.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
Section 3.1 Organization, Standing and Power. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to carry on its business as now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power or authority would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The Company and each
of its Subsidiaries are duly qualified to do business, and are in good
standing, in each jurisdiction where the character of their properties owned or
held under lease or the nature of their activities makes such qualification
necessary, except where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on the Company or
materially delay the consummation of the Merger.
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Section 3.2 Subsidiaries. Section 3.2 of the letter dated the date hereof
and delivered on the date hereof by the Company to Parent, which relates to
this Agreement and is designated therein as the Company Letter (the "Company
Letter") lists each Subsidiary of the Company. All of the outstanding shares of
capital stock of each such Subsidiary that is a corporation have been validly
issued and are fully paid and nonassessable. Except as set forth in Section 3.2
of the Company Letter, all of the outstanding shares of capital stock of each
Subsidiary of the Company are owned by the Company, by another Subsidiary of
the Company or by the Company and another Subsidiary of the Company, free and
clear of any and all mortgages, liens, encumbrances, charges, claims,
restrictions, pledges, security interest or impositions (collectively, "Liens")
and free and clear of all options, rights of first refusal, agreements or
limitations on voting rights of any nature whatsoever. Except as set forth in
Section 3.2 of the Company Letter and except for the capital stock of its
Subsidiaries, the Company does not own, directly or indirectly, any capital
stock or other ownership interest in any corporation, partnership, joint
venture, limited liability company or other entity which is material to the
business or financial position of the Company.
Section 3.3 Capital Structure. The authorized capital stock of the Company
consists of 200,000,000 Shares and 10,000,000 shares of Preferred Stock, par
value $.01 per share ("Company Preferred Stock"). At the close of business on
January 30, 1999:
(i) 36,360,377 Shares were issued and outstanding, all of which were
validly issued, fully paid and nonassessable and free of preemptive rights;
(ii) No shares of Company Preferred Stock were issued and outstanding;
(iii) No Shares were held in the treasury of the Company or by
Subsidiaries of the Company;
(iv) 6,500,000 Shares were reserved for issuance in the aggregate upon
the exercise of outstanding stock options issued under the Company's 1996
Amended and Restated Stock Option Plan, (the "Company Stock Option Plan");
(v) 400,000 Shares were reserved for issuance in the aggregate pursuant
to the Company's Employee Stock Purchase Plan (the "Company Stock Purchase
Plan"); and
(vi) 500,000 Shares were reserved for issuance in the aggregate pursuant
to the Company's 1996 Restricted Stock Plan (the "Company Restricted Stock
Plan").
Section 3.3 of the Company Letter contains a correct and complete list as of
the date of this Agreement of each outstanding option to purchase shares of
Company Common Stock issued under the 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. Except for the Company Stock Options, the
Company Stock Option Plan, the Company Stock Purchase Plan and the Company
Restricted Stock Plan, there are no options, warrants, calls, rights or
agreements to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of the Company or any of its Subsidiaries or obligating
the Company or any of its Subsidiaries to grant, extend or enter into any such
option, warrant, call, right or agreement. Except as set forth in Section 3.3
of the Company Letter, there are no outstanding contractual obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of Company Common Stock or any capital stock of or any equity
interests in any of the Company's Subsidiaries. The Company does not have any
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or convertible into or exercisable for securities
having the right to vote) with the stockholders of the Company on any matter.
Section 3.4 Authority. On or prior to the date of this Agreement, the Board
of Directors of the Company has unanimously approved and declared the Merger
Agreement advisable, approved this Agreement and the transactions contemplated
hereby, including the Merger, in accordance with the DGCL, resolved to
recommend the acceptance of the approval of this Agreement and the Merger by
the Company's stockholders
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and directed that this Agreement be submitted to the Company's stockholders for
approval. The Company has all requisite corporate power and authority to enter
into this Agreement and, subject to approval by the stockholders of the Company
of this Agreement and the Merger, to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the Merger and of the other
transactions contemplated hereby have been duly authorized by all necessary
corporate action (including Board action) on the part of the Company, and no
other corporate proceedings on the part of the Company or its Board of
Directors are necessary to authorize and approve this Agreement or to
consummate the transactions contemplated hereby, other than (x) approval and
adoption of this Agreement by the stockholders of the Company and (y) the
filing of the Certificate of Merger as required by the DGCL. This Agreement has
been duly executed and delivered by the Company and (assuming the valid
authorization, execution and delivery of this Agreement by Parent and Merger
Sub and the validity and binding effect of this Agreement on Parent and Merger
Sub) constitutes the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to the enforcement of creditors' rights generally, and by
general equitable principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
Section 3.5 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
3.5 have been obtained and all filings and obligations described in this
Section 3.5 have been made, the execution, delivery or performance of this
Agreement does not, and the consummation of the transactions contemplated
hereby and compliance with the provisions hereof will not, result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give to others a right of termination, cancellation or acceleration
of any obligation or result in the loss of a material benefit under, or result
in the creation of any Lien, upon any of the properties or assets of the
Company or any of its Subsidiaries under, any provision of (i) the Company
Charter or the By-laws of the Company, (ii) any provision of the comparable
charter or organization documents of any of the Company's Subsidiaries, (iii)
except as set forth in Section 3.5 of the Company Letter, any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license (including any of the
Company Merchant Contracts) applicable to the Company or any of its
Subsidiaries or (iv) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its Subsidiaries or any of
their respective properties or assets (including any of the Company Merchant
Contracts), other than, in the case of clauses (iii) or (iv), any such
violations, defaults, rights, or Liens that, individually or in the aggregate,
would not have a Material Adverse Effect on the Company, materially impair the
ability of the Company to perform its obligations hereunder or prevent or
materially delay the consummation of any of the transactions contemplated
hereby. No filing or registration with, or authorization, consent or approval
of, any Governmental Entity, Card Association or any other Person is required
by or with respect to the Company or any of its Subsidiaries in connection with
the execution and delivery of this Agreement by the Company or is necessary for
the consummation of the Merger, except (i) in connection, or in compliance,
with the provisions of the HSR Act and the Exchange Act, (ii) 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 or any of its Subsidiaries is qualified to do business, (iii) such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or by the transactions contemplated by this
Agreement, (iv) such filings, authorizations, orders and approvals as may be
required to obtain the State Takeover Approvals, (v) applicable requirements,
if any, of Blue Sky Laws or the New York Stock Exchange, (vi) as may be
required under foreign laws, (vii) such filings, authorizations and approvals
under the Change in Bank Control Act, (viii) such filings, authorizations and
approvals under the Utah Statute, (ix) such filings, authorizations and
approvals under Section 4 of the Bank Holding Company Act, and (x) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, materially impair the
ability of the Company to perform its obligations hereunder or prevent or
materially delay the consummation of any of the transactions contemplated
hereby.
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Section 3.6 SEC Documents and Other Reports. The Company has filed all
required documents (including proxy statements) with the SEC since June 29,
1997 (as such documents have been amended since the time of their filing and
prior to the date hereof, 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, at the respective times they were filed or, if
amended, as of the date of the last such amendment, none of the Company SEC
Documents, including the financial statements of the Company and the notes
thereto, contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements (including, in each case,
any notes thereto) of the Company included in the Company SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with United States GAAP (except, in the
case of the 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
therein or in the notes thereto) and fairly presented the consolidated
financial position of the Company and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein none of which were or will be material in amount
or effect). Except as disclosed in the Company SEC Documents or as required by
GAAP, the Company has not, since June 29, 1997, made any change in the
accounting practices or policies applied in the preparation of financial
statements.
Section 3.7 Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Proxy Statement or (ii) the Schedule 13e-3 will (a) in the
case of the Schedule 13e-3, at the time the Schedule 13e-3 is filed with the
SEC, or (b) in the case of the Proxy Statement, at the time the Proxy Statement
is first mailed to the Company's stockholders or at the time of the Stockholder
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. The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Merger Sub specifically for inclusion or incorporation by reference
therein.
Section 3.8 Absence of Certain Changes or Events. Except as disclosed in
the Company SEC Documents filed with the SEC prior to the date of this
Agreement or as set forth in Section 3.8 of the Company Letter, since June 30,
1998, the Company and its Subsidiaries have conducted their respective business
in all material respects only in the ordinary course and (A) the Company and
its Subsidiaries have not incurred any liability or obligation (indirect,
direct or contingent) that would result in a Material Adverse Effect on the
Company, or entered into any material oral or written agreement or other
transaction that is not in the ordinary course of business or that would result
in a Material Adverse Effect on the Company, (B) the Company and its
Subsidiaries have not sustained any loss or interference with their business or
properties from fire, flood, windstorm, accident or other calamity (whether or
not covered by insurance) that has had a Material Adverse Effect on the
Company, (C) there has been no change in the capital stock of the Company
except for the issuance of shares of the Company Common Stock pursuant to
Company Stock Options, the Company Stock Purchase Plan or the Company
Restricted Stock Plan and no dividend or distribution of any kind declared,
paid or made by the Company on any class of its stock, (D) there has not been
(v) any adoption of a new Company Plan (as hereinafter defined), (w) any
amendment to a Company Plan materially increasing benefits thereunder, (x) any
granting by the Company or any of its Subsidiaries to any executive officer or
other key employee of the Company or any of its Subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice or as was required under employment agreements in effect as of the
date of the most recent audited financial statements included in the Company
SEC Documents, (y) any granting by the Company or any of its Subsidiaries to
any such executive officer or other key employee of any increase in
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severance or termination agreements in effect as of the date of the most recent
audited financial statements included in the Company SEC Documents or (z) any
entry by the Company or any of its Subsidiaries into any employment, severance
or termination agreement with any such executive officer or other key employee,
(E) there has not been any material changes in the amount or terms of the
indebtedness of the Company and its Subsidiaries from that described in the
Company SEC Documents filed prior to the date hereof, (F) any revaluation by
the Company of any of material assets and (G) no Material Adverse Effect on the
Company has occurred.
Section 3.9 Permits and Compliance. Each of the Company and its Subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity or Card Association necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company or prevent or
materially delay the consummation of the Merger, and no suspension or
cancellation of any of the Company Permits is pending or, to the knowledge of
the Company, threatened, except where the suspension or cancellation of any of
the Company Permits would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or prevent or materially delay the
consummation of the Merger, and no suspension or cancellation of any of the
Company Permits is pending or, to the knowledge of the Company, threatened,
except where the suspension or cancellation of any of the Company Permits would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company or prevent or materially delay the consummation of the Merger. Neither
the Company nor any of its Subsidiaries nor, for purposes of clause (D), any of
the Company's or any of its Subsidiary's independent sales organizations, is in
violation of (A) its charter, by-laws or other organizational documents, (B)
any law, ordinance, administrative or governmental rule or regulation, (C) any
order, decree or judgment of any Governmental Entity having jurisdiction over
the Company or any of its Subsidiaries or (D) any applicable Card Association
rules, by-laws or regulations, except in the case of clauses (A), (B), (C) and
(D), for any violations that, individually or in the aggregate, would not have
a Material Adverse Effect on the Company or prevent or materially delay the
consummation of the Merger. Except as disclosed in the Company SEC Documents
filed prior to the date of this Agreement or in Section 3.9 of the Company
Letter, there are no contracts or agreements of the Company or its Subsidiaries
(including the Company Merchant Contracts) having terms or conditions which
would have a Material Adverse Effect on the Company or having covenants that
purport to bind any stockholder or any Affiliated Person (as hereinafter
defined) of any stockholder of the Company after the Effective Time. Except as
set forth in the Company SEC Documents filed prior to the date of this
Agreement or in Section 3.9 of the Company Letter, no event of default or event
that, but for the giving of notice or the lapse of time or both, would
constitute an event of default exists or, upon the consummation by the Company
of the transactions contemplated by this Agreement, will exist under any
indenture, mortgage, loan agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument for borrowed money
or any lease, contractual license or other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any
such Subsidiary is bound or to which any of the properties, assets or
operations of the Company or any such Subsidiary is subject, other than any
defaults that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
Section 3.10 Tax Matters. Except as set forth in Section 3.10 of the Company
Letter, (i) the Company and each of its Subsidiaries have timely filed all
federal, and all material state, local, foreign and provincial, Tax Returns (as
hereinafter defined) required to have been filed (giving effect to all
applicable extensions), and such Tax Returns are correct and complete, except
to the extent that any failure to so file or any failure to be correct and
complete would not, individually or in the aggregate, have a Material Adverse
Effect on the Company; (ii) all material Taxes (as hereinafter defined) shown
to be due on such Tax Returns and all material Taxes for which no return was
filed (x) have been timely paid or extensions for payment have been properly
obtained, (y) are being timely and properly contested or (z) have been reserved
for in the financial statements of the Company (in accordance with GAAP); (iii)
neither the Company nor any of its Subsidiaries has waived any statute of
limitations in respect of its Taxes; and (iv) all deficiencies asserted or
assessments made as a result of any examination of such Tax Returns by any
taxing authority have been paid in full. For purposes of
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this Agreement: (i) "Taxes" means any federal, state, local, foreign or
provincial income, gross receipts, property, sales, use, license, excise,
franchise, employment, payroll, withholding, alternative or added minimum, ad
valorem, value-added, transfer or excise tax, or other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or penalty imposed by any Governmental Entity, and
(ii) "Tax Return" means any return, report or similar statement (including the
attached schedules) required to be filed with respect to any Tax, including any
information return, claim for refund, amended return or declaration of
estimated Tax.
Section 3.11 Actions and Proceedings. Except as set forth in Section 3.11 of
the Company Letter, there are no outstanding orders, judgments, injunctions,
awards or decrees of any Governmental Entity against or involving the Company
or any of its Subsidiaries, 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 or any of its Subsidiaries with respect to
the Company or any of its Subsidiaries, any of the properties, assets or
business of the Company or any of its Subsidiaries or any Company Plan that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company, materially impair the ability of the Company to perform its
obligations hereunder or prevent or materially delay the consummation of the
Merger. Except as disclosed in the Company SEC Documents filed with the SEC
prior to the date hereof or in Section 3.11 of the Company Letter, there are no
actions, suits or claims or legal, administrative or arbitrative proceedings or
investigations (including claims for workers' compensation) pending or, to the
knowledge of the Company, threatened against or involving the Company or any of
its Subsidiaries or, to the Company's knowledge, any of its or their present or
former directors, officers, employees, consultants or agents with respect to
the Company or any of its Subsidiaries, or any of the properties, assets or
business of the Company or any of its Subsidiaries or any Company Plan that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company, materially impair the ability of the Company to perform its
obligations hereunder or prevent or materially delay the consummation of the
Merger. The Company's expenses, losses and liabilities in connection with,
including any adverse outcome of, that class action lawsuit filed in the United
States District Court for the Northern District of Texas against the Company by
certain stockholders of the Company, entitled Raffaele Branca, Carl C. Conrad
and Michael P. Fuchs v. Paymentech Inc. Pamela H. Patsley and David W.
Truetzel, will, to the best of the Company's knowledge, be covered by insurance
maintained by the Company other than for the applicable deductibles under the
Company's insurance policies (which deductibles do not exceed, in the
aggregate, $1,000,000). There are no actions, suits, labor disputes or other
litigation, legal or administrative proceedings or governmental investigations
pending or, to the knowledge of the Company, threatened against or affecting
the Company or any of its Subsidiaries or, to the Company's knowledge, any of
its or their present or former officers, directors, employees, consultants or
agents with respect to the Company or its Subsidiaries, or any of the
properties, assets or business of the Company or any of its Subsidiaries, in
each case relating to the transactions contemplated by this Agreement.
Section 3.12 Certain Agreements. Except as set forth in Section 3.12 of the
Company Letter, neither the Company nor any of its Subsidiaries is a party to
any oral or written agreement or plan, including any employment agreement,
severance agreement, stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan (collectively, the "Compensation
Agreements"), pension plan (as defined in Section 3(2) of ERISA) or welfare
plan (as defined in Section 3(1) of ERISA) any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. Except as set forth in Section
5.4, no holder of any option to purchase Shares, or Shares granted in
connection with the performance of services for the Company or its
Subsidiaries, is or will be entitled to receive cash from the Company or any of
its Subsidiaries in lieu of or in exchange for such option or shares as a
result of the transactions contemplated by this Agreement. Section 3.12 of the
Company Letter sets forth (i) for each officer, director or employee who is a
party to, or will receive benefits under, any Compensation Agreement as a
result of the transactions contemplated herein, the total amount that each such
person may receive, or is eligible to receive, assuming that the transactions
contemplated by this Agreement are consummated on the date hereof, and (ii) the
total
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amount of indebtedness for borrowed money owed to the Company or its
Subsidiaries from each officer, director or employee of the Company and its
Subsidiaries.
Section 3.13 ERISA. (a) As used herein, (i) "Company Plan" means a "pension
plan" (as defined in section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") (other than a Company Multiemployer Plan)), a
"welfare plan" (as defined in section 3(1) of ERISA), or any other written or
oral bonus, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, restricted stock,
stock appreciation right, holiday pay, vacation, severance, medical, dental,
vision, disability, death benefit, sick leave, fringe benefit, personnel
policy, insurance or other plan, arrangement or understanding, in each case
established or maintained by the Company or any of its Subsidiaries or ERISA
Affiliates or as to which the Company or any of its Subsidiaries or ERISA
Affiliates has contributed or otherwise may have any liability, (ii) "Company
Multiemployer Plan" means a "multiemployer plan" (as defined in section
4001(a)(3) of ERISA) to which the Company or any of its Subsidiaries or ERISA
Affiliates is or has been obligated to contribute or otherwise may have any
liability, and (iii) "ERISA Affiliate" means any trade or business (whether or
not incorporated) which would be considered a single employer with the Company
pursuant to section 414(b), (c), (m) or (o) of the Code and the regulations
promulgated under those sections or pursuant to section 4001(b) of ERISA and
the regulations promulgated thereunder.
(b) Each material Company Plan is listed in Section 3.13(b) of the Company
Letter. With respect to each Company Plan listed therein, the Company has made
available to Parent a true and correct copy of (i) the three most recent annual
reports (Form 5500) filed with the IRS if applicable, (ii) each such Company
Plan that has been reduced to writing and all amendments thereto, (iii) each
trust agreement, insurance contract or administration agreement relating to
each such Company Plan, (iv) a written summary of each unwritten Company Plan,
(v) the most recent summary plan description or other written explanation of
each Company Plan provided to participants, (vi) the most recent determination
letter and request therefore, if any, issued by the IRS with respect to any
Company Plan intended to be qualified under section 401(a) of the Code, (vii)
any request for a determination currently pending before the IRS and (viii) all
material correspondence with the IRS, the Department of Labor, the SEC or
Pension Benefit Guaranty Corporation relating to any potential investigation or
outstanding controversy. Except as would not have a Material Adverse Effect on
the Company, each Company Plan complies in all respects with the ERISA, the
Code and all other applicable statutes and governmental rules and regulations.
Except for Company Plans listed in Section 3.13(b) of the Company Letter,
neither the Company nor any ERISA Affiliate currently maintains, contributes to
or has any liability or, at any time during the past six years has maintained
or contributed to any pension plan which is subject to section 412 of the Code
or section 302 of ERISA or Title IV of ERISA. Except for Company Multiemployer
Plans listed in Section 3.13(b) of the Company Letter, neither the Company nor
any ERISA Affiliate currently maintains, contributes to or has any liability
or, at any time during the past six years has maintained or contributed to any
Company Multiemployer Plan.
(c) Except as listed in Section 3.13(c) of the Company Letter, with respect
to the Company Plans, no event has occurred and, to the knowledge of the
Company, there exists no condition or set of circumstances in connection with
which the Company or any Subsidiary of the Company or ERISA Affiliate or
Company Plan fiduciary could reasonably be expected to be subject to any
liability under the terms of such Company Plans, ERISA, the Code or any other
applicable law which would have a Material Adverse Effect on the Company. All
Company Plans that are intended to be qualified under section 401(a) of the
Code have been determined by the IRS to be so qualified, or a timely
application for such determination is now pending and the Company is not aware
of any reason why any such Company Plan is not so qualified in operation.
Except as disclosed in Section 3.13(c) of the Company Letter, neither the
Company nor any of its Subsidiaries or ERISA Affiliates has any liability or
obligation under any welfare plan to provide benefits after termination of
employment to any employee or dependent other than as required by section 4980B
of the Code. Neither the Company nor any Subsidiary of the Company nor any
ERISA Affiliate has any liability whether direct, indirect, contingent or
otherwise, under (i) Section 302 of ERISA or section 412 of the Code or (ii)
Title IV of ERISA.
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(d) Section 3.13(d) of the Company Letter contains a list of all (i)
severance and employment agreements with employees of the Company and each of
its Subsidiaries with respect to any employee whose annual rate of base salary
exceeds $100,000, and (ii) severance programs and policies of the Company and
each of its Subsidiaries with or relating to its employees and (iii) plans,
programs, agreements and other arrangements of the Company and each of its
Subsidiaries with or relating to its employees containing change of control or
similar provisions.
(e) Except as set forth in Section 3.13(e) of the Company Letter, neither
the Company nor any of its Subsidiaries is a party to any agreement, contract
or arrangement that could result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of section 280G
of the Code or that provides for payments that would be nondeductible under
section 162(m) of the Code.
(f) Except as set forth in Section 3.13(f) of the Company Letter, with
respect to each Company Plan not subject to United States law (a "Company
Foreign Benefit Plan"), except as would not have a Material Adverse Effect on
the Company, (i) the fair market value of the assets of each funded Company
Foreign Benefit Plan, the liability of each insurer for any Company Foreign
Benefit Plan funded through insurance or the reserve shown on the Company's
consolidated financial statements for any unfunded Company Foreign Benefit
Plan, together with any accrued contributions, is sufficient to procure or
provide for the benefit obligations, as of the Effective Time, with respect to
all current and former participants in such plan according to reasonable,
country specific actuarial assumptions and valuations and no transaction
contemplated by this Agreement shall cause such assets or insurance obligations
or book reserve to be less than such benefit obligations; and (ii) each Company
Foreign Benefit Plan required to be registered has been registered and has been
maintained in good standing with the appropriate regulatory authorities.
Section 3.14 Liabilities; Services. (a) Except (i) as fully reflected or
reserved against in the financial statements included in the Company SEC
Documents filed with the SEC prior to the date hereof, or disclosed in the
footnotes thereto, (ii) for liabilities incurred in the ordinary course of
business since December 31, 1998, or (iii) as set forth in Section 3.14(a) of
the Company Letter, neither the Company nor any of its Subsidiaries has any
liabilities (including Tax liabilities) or obligations of any nature, whether
accrued, absolute, contingent or otherwise required by generally accepted
accounting principles ("GAAP") to be set forth on a consolidated balance sheet
of the Company and its Subsidiaries or in the notes thereto, other than
liabilities or obligations that would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. As of the date hereof, the
indebtedness for borrowed money of the Company and its Subsidiaries does not
exceed $85 million.
(b) Except as set forth in Section 3.14(b) of the Company Letter, to the
knowledge of the Company, no product or service sold or delivered or service
rendered by the Company or any of its Subsidiaries is subject to any guaranty,
warranty or other indemnity.
Section 3.15 Labor Matters. Except as set forth in Section 3.15 of the
Company Letter, neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or labor contract with any union. Neither
the Company nor any of its Subsidiaries has engaged in any unfair labor
practice with respect to any persons employed by or otherwise performing
services primarily for the Company or any of its Subsidiaries (the "Company
Business Personnel"), and there is no unfair labor practice complaint or
grievance against the Company or any of its Subsidiaries by any person pursuant
to the National Labor Relations Act or any comparable state or foreign law
pending or threatened in writing with respect to the Company Business
Personnel, except where such unfair labor practice, complaint or grievance
would not have a Material Adverse Effect on the Company. There is no labor
strike, dispute, slowdown or stoppage pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
which may interfere with the respective business activities of the Company or
any of its Subsidiaries, except where such dispute, strike or work stoppage
would not have a Material Adverse Effect on the Company.
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Section 3.16 Intellectual Property; Software; Year 2000. (a) For purposes of
this Agreement, the following terms shall have the following meanings: (i)
"Computerized Assets" means all software, hardware, firmware, embedded systems
and other systems, components and/or services that are owned or leased by the
Company or any of its Subsidiaries and used in the conduct of its business;
(ii) "Intellectual Property Rights" means all patents, trademarks, trade names,
service marks, trade secrets, copyrights and other proprietary intellectual
property rights; and (iii) "Software" means computer software programs and
software systems, including, without limitation, all databases, compilations,
tool sets, compilers, higher level or "proprietary" languages, related
documentation and materials, whether in source code, object code or human
readable form.
(b) Except as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company, (i) the Company and its Subsidiaries have all
Intellectual Property Rights as are necessary in connection with the business
of the Company and its Subsidiaries, taken as a whole, (ii) neither the Company
nor any of its Subsidiaries is in breach of any agreement affecting the
Company's and/or its Subsidiaries' rights to use any of the licensed
Intellectual Property Rights or Software, and (iii) none of the owned
Intellectual Property Rights or Software infringes any Intellectual Property
Rights of any other Person.
(c) Except as would not have a Material Adverse Effect on the Company or
where a failure is attributable to the licensors or other third-party providers
of the Company or any of its Subsidiaries, all of the Company's and each of its
Subsidiary's Computerized Assets will be on or prior to January 1, 2000 capable
of providing and will provide uninterrupted millennium functionality to record,
store, process and present calendar dates falling on or after January 1, 2000
and date dependent data in such a manner and with such functionality as is
necessary for the operations of the Company and its Subsidiaries, and will not
cause an interruption in the ongoing operations or business of the Company or
any of its Subsidiaries on or after January 1, 2000.
Section 3.17 Title to and Sufficiency of Assets. (a) As of the date hereof,
the Company and its Subsidiaries own, and as of the Effective Time the Company
and its Subsidiaries 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 or in Section 3.17 of the Company
Letter 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 its Subsidiaries under
leases, include all tangible and intangible personal property, contracts and
rights necessary or required for the operation of the businesses of the Company
as presently conducted, except for such assets the failure to have would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
(b) Neither the Company nor any of its Subsidiaries owns any Real Estate.
All Real Estate assets held by the Company and its Subsidiaries under leases or
subleases are adequate for the operation of the businesses of the Company as
presently conducted, except for such assets the failure to have would not,
individually or in the aggregate, have a Material Adverse Effect. The leases
and subleases to all Real Estate occupied by the Company and its Subsidiaries
which are material to the operation of the businesses of the Company are in
full force and effect and no event has occurred which with the passage of time,
the giving of notice, or both, would constitute a default or event of default
by the Company or any of its Subsidiaries or, to the knowledge of the Company,
any other person who is a party signatory thereto, other than such defaults or
events of default which, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. For purposes of this Agreement, "Real
Estate" means, with respect to the Company or any of its Subsidiaries, as
applicable, all of the fee or leasehold ownership right, title and interest of
such person, in and to all real estate and improvements owned or leased by any
such person and which is used by any such person in connection with the
operation of its business.
Section 3.18 Required Vote of Company Stockholders. The Company Stockholder
Approval is required to adopt this Agreement and to consummate the Merger. No
other vote of the security holders of the Company is required by law, the
Company Charter or the By-laws of the Company or otherwise in order for the
Company to consummate the Merger and the transactions contemplated hereby.
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Section 3.19 Environmental Matters.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) petroleum and
petroleum products, by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls, and (B) 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; (ii) "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; and (iii) "Environmental Permit" means any permit, approval,
identification number, license or other authorization required under any
applicable Environmental Law.
(b) Except as disclosed in Section 3.19 of the Company Letter, the Company
and its Subsidiaries 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 in each case for the notices
set forth in Section 3.19 of the Company Letter or 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 circumstances that
are reasonably likely to prevent or interfere with such compliance in the
future. Except as disclosed in Section 3.19 of the Company Letter, 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
Company or its Subsidiaries in the conduct of their business that could form
the basis of any claim against the Company or its Subsidiaries under
Environmental Laws, except for such claims as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
Section 3.20 Customers and Employees. (a) Except as set forth in Section
3.20(a) of the Company Letter, neither the Company nor any of its Subsidiaries
has received any notice prior to the date of this Agreement that (i) any of the
top 25 customers of the Company and its Subsidiaries, as determined with
respect to the revenues generated in 1997 and 1998 from such customers (the
"Top 25 Customers"), intends to terminate or limit or alter its business
relationship with the Company or any of its Subsidiaries, or (ii) any key
employee intends to terminate or has terminated his or her employment with the
Company or any of its Subsidiaries.
(b) Except as set forth in Section 3.20(b) of the Company Letter, (i) each
contract between the Company and/or any of its Subsidiaries, on the one hand,
and any provider of goods and/or services that accepts Transaction Cards as a
payment vehicle which provider is one of the Top 25 Customers, on the other
hand (the "Company Merchant Contracts"), constitutes a valid and binding
obligation of the parties thereto and is in full force and effect, (ii) the
Company and/or its Subsidiary, as applicable, has fulfilled and performed in
all material respects its obligations under each of the Company Merchant
Contacts, (iii) the Company is not in, or alleged to be in, any material breach
or default under, nor is there or is there alleged to be any reasonable basis
for termination of, any of the Company Merchant Contracts and (iv) to the
knowledge of the Company, no other party to any of the Company Merchant
Contracts has materially breached or defaulted thereunder.
Section 3.21 Insurance. The Company and its Subsidiaries 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 as set forth in Section
3.21 of the Company Letter or that, individually or in the aggregate, would not
have a Material Adverse Effect on the Company. The Company and each of its
Subsidiaries have 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.
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Section 3.22 Transactions with Affiliates. (a) For purposes of this Section
3.22 and Section 3.9 hereof, the term "Affiliated Person" means (i) any direct
or indirect holder of 5% or more of the Company Common Stock, (ii) any director
or officer of the Company, any of its Subsidiaries or any Person described in
clause (i), (iii) any Person that directly or indirectly controls, is
controlled by, or is under common control with, any of the Company, any of its
Subsidiaries or any Person described in clause (i), or (iv) any member of the
immediate family or any of such persons.
(b) Except as set forth in Section 3.22 of the Company Letter or in the
Company SEC Reports filed with the SEC prior to the date hereof, since June 30,
1998, the Company and its Subsidiaries have not, in the ordinary course of
business or otherwise, (i) purchased, leased or otherwise acquired any material
property or assets or obtained any material services from, (ii) sold, leased or
otherwise disposed of any material property or assets or provided any material
services to (except with respect to remuneration for services rendered in the
ordinary course of business as director, officer or employee of the Company or
any of its Subsidiaries), (iii) entered into, renewed or modified in any manner
any contract with, or (iv) borrowed any money from, or made or forgiven any
loan or other advance (other than expenses or similar advances made in the
ordinary course of business) to, any Affiliated Person.
(c) Except as set forth in Section 3.22 of the Company Letter or in the
Company SEC Reports filed with the SEC prior to the date hereof, (i) the
contracts of the Company and its Subsidiaries do not include any material
obligation or commitment between the Company or any of its Subsidiaries and any
Affiliated Person, (ii) the assets of the Company or any of its Subsidiaries do
not include any receivable or other obligation or commitment from an Affiliated
Person to the Company or any of its Subsidiaries and (iii) the liabilities of
the Company and its Subsidiaries do not include any payable or other obligation
or commitment from the Company or any of its Subsidiaries to any Affiliated
Person.
(d) To the knowledge of the Company and except as set forth in Section 3.22
of the Company Letter or in the Company SEC Reports filed with the SEC prior to
the date hereof, no Affiliated Person of any of the Company or any of its
Subsidiaries is a party to any contract with any customer or supplier of the
Company or any of its Subsidiaries that affects in any material manner the
business, financial condition or results of operation of the Company or any of
its Subsidiaries.
Section 3.23 Brokers. No broker, investment banker or other person, other
than Merrill Lynch & Co. ("Merrill Lynch"), the fees and expenses of which will
be paid by the Company is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The maximum amount of such fees of Merrill Lynch has
been disclosed by the Company to Parent.
Section 3.24 State Takeover Statute. If the Merger is consummated as
provided in this Agreement following receipt of the Company Stockholder
Approval, Section 203 of the DGCL will be inapplicable to the Merger.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger. (a) Except as expressly
permitted by clauses (i) through (xvi) of this Section 4.1, during the period
from the date of this Agreement through the Effective Time, the Company shall,
and shall cause each of its Subsidiaries to, in all material respects, carry on
its business in the ordinary course of its business as currently conducted and,
to the extent consistent therewith, use commercially reasonable efforts to
preserve intact its current business organizations, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement or as set forth in the Company Letter (with
specific reference to the applicable
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subsection below), the Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of Parent (provided that
with respect to clauses (v), (vi), (viii), (xi), (xiii) and (xiv) below, such
consent shall not be unreasonably withheld or delayed):
(i) (A) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of the
Company's or any of its Subsidiaries' capital stock, or otherwise make any
payments or other distributions (whether in cash or property) to its
stockholders in their capacity as such, other than dividends, distributions
or other such payments by the Company's Subsidiaries in the ordinary course
of business consistent with past practice, (B) split, combine or reclassify
any of the Company's or any of its Subsidiaries' capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of the Company's or any of its Subsidiaries'
capital stock or (C) 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, other than in connection with cashless
exercises of Company Stock Options;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of the Company's or any of its Subsidiaries' capital stock, any
other voting securities or equity equivalent or any securities convertible
into, or any rights, warrants or options (including options under the
Company Stock Option Plan) to acquire any such shares, voting securities,
equity equivalent or convertible securities, other than (A) the issuance of
shares of Company Common Stock upon the exercise of Company Stock Options
outstanding on the date of this Agreement in accordance with their current
terms, (B) pursuant to the Company Stock Purchase Plan or (C) as set forth
in Section 4.1(ii) of the Company Letter;
(iii) amend the Company Charter or By-laws or other similar
organizational documents of any of the Company's Subsidiaries;
(iv) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, limited liability company,
partnership, association or other business organization or division
thereof, except for acquisitions in the ordinary course of business
consistent with past practice and involving aggregate consideration of up
to $25 million (if the Effective Time is on or prior to the 90th day
following the date hereof) or $50 million (if the Effective Time is
thereafter);
(v) except as provided in the Contribution Agreement, sell, lease,
encumber or otherwise dispose of, or agree to sell, lease, encumber or
otherwise dispose of, any of its assets, other than sales of inventory that
are in the ordinary course of business consistent with past practice and
sales of assets having an aggregate fair market value of up to $10 million;
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (A) in the ordinary
course of business consistent with past practice and, in the case of
indebtedness and guarantees, in an amount not to exceed $50 million in the
aggregate in excess of amounts outstanding on the date hereof and (B)
indebtedness, loans, advances, capital contributions and investments
between the Company and any of its Subsidiaries or between any of such
Subsidiaries, in each case in the ordinary course of business consistent
with past practice;
(vii) except as provided in Section 4.1(vii) of the Company Letter,
alter (through merger, liquidation, reorganization, restructuring or in any
other fashion) the corporate structure or ownership of the Company or any
of its Subsidiaries;
(viii) except as provided in Section 4.1(viii) of the Company Letter and
Section 5.4 hereof, increase the compensation payable or to become payable
to the Company's or any of its Subsidiaries' 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 any of its Subsidiaries, or establish, adopt, enter into,
or, except as may be required to comply with applicable law, amend in any
material respect or take action to enhance in any material respect or
accelerate any rights or benefits under,
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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 in the ordinary course of business or
where the aggregate annual expense to the Company and its Subsidiaries,
taken as a whole, associated with such actions is not in excess of $5
million;
(ix) knowingly violate or knowingly fail to perform, in any material
respect, any obligation or duty imposed upon the Company or any of its
Subsidiaries by any applicable federal, state or local law, rule,
regulation, guideline or ordinance;
(x) 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);
(xi) prepare or file any Tax Return inconsistent with past practice or,
on any such Tax Return, take any position, make any election, or adopt any
method that is inconsistent with positions taken, elections made or methods
used in preparing or filing similar Tax Returns in prior periods;
(xii) settle or compromise any federal, state, local or foreign income
tax dispute in excess of $10 million;
(xiii) settle or compromise any claims or litigation where (i) the
consideration paid by the Company and its Subsidiaries, in the aggregate,
has a fair market value in excess of $6 million or (ii) there are potential
criminal liabilities;
(xiv) other than in the ordinary course of business consistent with past
practice and other than the Processing Agreement, dated as of the date
hereof, between the Company and First Data Merchant Services Corporation,
enter into, amend or terminate any agreement or contract to which the
Company or any of its Subsidiaries is a party, (i) having a remaining term
in excess of 12 months or (ii) which involves or is expected to involve
future receipt or payment of $10 million 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 Estate, or make or agree to
make any new capital expenditure or expenditures (other than the purchase
of real property) which in the aggregate are in excess of 15% higher than
expenditures contemplated by the Company's capital budget for fiscal 1999
or fiscal 2000 as previously provided to Parent in writing;
(xv) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise) in
excess of $6 million, 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;
(xvi) except as required by applicable law or by order of a Governmental
Entity, do any other act which would cause any representation or warranty
of the Company in this Agreement to be or become untrue; or
(xvii) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
(b) Except as permitted herein, during the period from the date of this
Agreement through the Effective Time, Parent shall not, and shall cause each of
its Subsidiaries not to, consummate or enter into any agreement to consummate
any transaction which would reasonably be expected to delay or impede the
consummation of the Merger or which relates to the merchant acquiring business
and would require filings to be made under the HSR Act; provided, however, that
this Section 4.1(b) shall be inapplicable with respect to the exercise or
enforcement by Parent or any of its Subsidiaries of any of their current rights
(including, without limitation,
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options to acquire assets or perform services) or the performance by Parent or
any of its Subsidiaries of any current obligations (including, without
limitation, in connection with rights of third parties to require Parent or any
of its Subsidiaries to acquire assets or perform services).
Section 4.2 No Solicitation. (a) The Company shall, and shall cause its
Subsidiaries and its and their respective officers, directors, employees,
financial advisors, attorneys and other advisors and representatives
(collectively, "Company Representatives") to immediately cease any discussions
or negotiations with any Person that may be ongoing with respect to any
possibility or consideration of making a Takeover Proposal (as hereinafter
defined). The Company shall not, nor shall it permit any of its Subsidiaries
to, nor shall it authorize or permit any Company Representative to, directly or
indirectly, (i) solicit, initiate or encourage any inquiries or the making or
implementation of any Takeover Proposal, (ii) make or implement or participate
in the making or implementation of any Takeover Proposal, (iii) approve or
recommend (except with respect to a Superior Proposal in respect of which the
Company is entitled to discuss or negotiate in accordance with this Section
4.2), or enter into any agreement with respect to, any Takeover Proposal or
(iv) participate in any discussions or negotiations regarding, or furnish to
any Person any information with respect to the Company or any of its
Subsidiaries in connection with, or take any other action that may reasonably
be expected to lead to any Takeover Proposal; provided, however, that nothing
contained in this Section 4.2(a) shall prohibit the Company or its directors
from complying with Rules 14d-9 and 14e-2 promulgated under the Exchange Act
with regard to a tender or exchange offer; and provided, further, that prior to
the Effective Time, if (A) the Company receives a request for non-public
information that was not solicited in violation of this Section 4.2(a) from a
party who proposes a written bona fide Takeover Proposal and if the Board of
Directors of the Company determines in good faith that the failure to provide
the information requested would be inconsistent with such Board's fiduciary
duties to the Company and its stockholders or otherwise breach or violate
applicable law (based on the advice of outside legal counsel to the Company to
such effect, which advice shall specifically take into account the Stockholder
Agreement and all the terms thereof, including the obligations and agreements
therein of Bank One and First USA with respect to the Shares owned by First USA
and voting for the Merger and against any Takeover Proposal other than the
Merger (the "Legal Advice")), then the Company and the Company Representatives
may, in response to an unsolicited request therefor, and subject to compliance
with Section 4.2(b), furnish information with respect to the Company and its
Subsidiaries to the Person making such Takeover Proposal pursuant to a
customary confidentiality agreement (as determined by the Company's outside
legal counsel) on terms not in the aggregate materially more favorable to such
Person than the terms contained in the Confidentiality Agreement, and (B) (i) a
Takeover Proposal constitutes a Superior Proposal (as hereinafter defined), and
(ii) the Board of Directors of the Company reasonably determines in good faith
that the failure to provide the information requested or to engage in
discussions or negotiations would be inconsistent with such Board's fiduciary
duties to the Company and its stockholders or otherwise breach or violate
applicable law (based on Legal Advice), then to the extent such failure is
inconsistent with such Board's fiduciary duties (determined as aforesaid), the
Company and the Company Representatives may, in response to an unsolicited
request therefor, and subject to compliance with Section 4.2(b), participate in
discussions or negotiations with such Person. Without limiting the foregoing,
it is understood that any violation of the restrictions set forth in the
preceding sentence by any Company Representative, whether or not such person is
purporting to act on behalf of the Company or any of its Subsidiaries or
otherwise, shall be deemed to be a breach of this Section 4.2(a) by the
Company. For purposes of this Agreement, "Takeover Proposal" means (i) any
written proposal or offer for a tender offer, recapitalization, merger,
consolidation or other business combination involving the Company or any of its
Subsidiaries or any proposal or offer to acquire in any manner, directly or
indirectly, an equity interest in, any voting securities of, or a substantial
portion of the assets of the Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement, the Stockholder Agreement and the
Contribution Agreement or (ii) any other transaction the consummation of which
could reasonably be expected to impede, interfere with, prevent or materially
delay the Merger or which could reasonably be expected to dilute or adversely
affect materially the benefits to Parent of the transactions contemplated by
this Agreement, the Stockholder Agreement and the Contribution Agreement, and
"Superior Proposal" means a bona fide Takeover Proposal made by a third party
on terms which the Board of Directors of the Company reasonably determines in
good
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faith to be more favorable to the Company's stockholders than the Merger (based
on a written opinion, with only customary qualifications, from a nationally
recognized investment banking firm serving as financial advisor to the Company
(a "Banker Opinion") that the value of the consideration provided for in such
proposal exceeds the Merger Consideration) and for which financing, to the
extent required, is then committed or which the Board of Directors reasonably
determines in good faith (based on a Banker Opinion) is highly likely to be
obtained by such third party. In making its determination whether a Takeover
Proposal constitutes a Superior Proposal pursuant to the preceding sentence,
the Board of Directors shall take into account whether such Takeover Proposal
has a reasonable prospect of being consummated prior to October 1, 1999.
Notwithstanding the foregoing, unless this Agreement shall have been terminated
pursuant to the terms hereof, nothing shall prevent Parent, in its discretion,
from consummating the Merger.
(b) The Company shall advise Parent and Bank One orally and in writing of
(i) any Takeover Proposal or any inquiry with respect to or which could lead to
any Takeover Proposal received by any officer or director of the Company or, to
the knowledge of the Company, any other Company Representative and (ii) the
identity of the Person making any such Takeover Proposal or inquiry, no later
than 24 hours following receipt of such Takeover Proposal or inquiry. If the
Company intends to furnish any Person with any information with respect to any
Takeover Proposal in accordance with Section 4.2(a), the Company shall advise
Parent and Bank One orally and in writing of such intention not less than 24
hours in advance of providing such information and shall promptly provide to
Parent and Bank One any information concerning the Company, its Subsidiaries,
business, properties or assets furnished to any third party and which has not
previously been provided to Parent and Bank One.
Section 4.3 Third Party Standstill Agreements. 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 or any of its Subsidiaries is a party (other than, to the
extent mutually agreed between Parent and the Company, any such agreement
involving Parent). 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
Section 5.1 Stockholder Meeting. (a) As soon as practicable following the
execution of this Agreement, the Company will duly call, give notice of,
convene and hold a meeting of stockholders (the "Stockholder Meeting") for the
purpose of considering the adoption of this Agreement and the approval of the
Merger and at such meeting call for a vote and cause proxies to be voted in
respect of the adoption of this Agreement and the Company will, through its
Board of Directors, recommend to its stockholders the adoption of this
Agreement, and shall not withdraw or modify such recommendation (unless it has
been previously withdrawn pursuant to the terms of Section 4.2). This Agreement
shall be submitted to the Company's stockholders at the Stockholder Meeting
whether or not the Board of Directors determines at any time that this
Agreement is no longer advisable and recommends that the stockholders reject
it.
(b) As soon as practicable after the execution of this Agreement, the
Company shall prepare and file a preliminary Proxy Statement with the SEC and
shall use its reasonable best efforts to respond to any comments of the SEC or
its staff and to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments
to the satisfaction of the staff. The Company shall notify Parent and Bank One
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent and Bank One
with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the
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Proxy Statement or the Merger. If at any time prior to the Stockholder Meeting
there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company shall promptly prepare and mail
to its stockholders such an amendment or supplement. Parent and its counsel and
Bank One and its counsel shall be given a reasonable opportunity to review and
comment upon the Proxy Statement and any such correspondence prior to its
filing with the SEC or dissemination to the Company's Stockholders. The Company
shall not so file or disseminate any Proxy Statement, or any amendment or
supplement thereto, to which Parent or Bank One reasonably objects. Parent and
Bank One shall cooperate with the Company in the preparation of the Proxy
Statement or any amendment or supplement thereto.
Section 5.2 Access to Information. During the period from the date of this
Agreement through the Effective Time and subject to currently existing
contractual and legal restrictions applicable to the Company or any of its
Subsidiaries, the Company shall, and shall cause each of its Subsidiaries to,
afford to the accountants, counsel, financial advisors and other
representatives of Parent reasonable access to, and permit them to make such
inspections as they may reasonably require of, all of their respective
properties, books, contracts, commitments and records and, during such period,
the Company shall, and shall cause each of its Subsidiaries to (i) furnish
promptly to Parent a copy of each report, schedule, registration statement and
other document filed by it during such period pursuant to the requirements of
federal or state securities laws, (ii) furnish promptly to Parent all other
information concerning its business, properties and personnel as Parent may
reasonably request and (iii) promptly make available to Parent all personnel of
the Company and its Subsidiaries knowledgeable about matters relevant to such
inspections; provided, however, that the foregoing shall not require the
Company or any of its Subsidiaries to furnish or otherwise make available to
Parent or any of its Subsidiaries customer-specific data or competitively
sensitive information relating to areas of the company's business in which
Parent and/or any of its Subsidiaries competes against the Company. No
investigation pursuant to this Section 5.2 shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto. All information obtained by Parent pursuant
to this Section 5.2 shall be kept confidential in accordance with the Letter
Agreement, dated September 4, 1997 between Parent and the Company, as confirmed
in a letter dated October 22, 1998 from Parent to the Company (collectively,
the "Confidentiality Agreement").
Section 5.3 Costs and Expenses; Termination Fee. (a) Except as provided in
this Section 5.3, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including the Merger),
including the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses,
whether or not the Merger is consummated.
(b) The Company shall pay, or cause to be paid, in same day funds to Parent
$10 million (the "Termination Fee"), under the circumstances and at the times
set forth as follows:
(i) if Parent terminates this Agreement under Section 7.1(d) the Company
shall pay the Termination Fee upon demand; and
(ii) if the Company terminates this Agreement under Section 7.1(e), the
Company shall pay the Termination Fee simultaneously with such termination.
(c) If this Agreement is terminated pursuant to Section 7.1(b)(i) and at the
time of such termination the condition set forth in Section 6.1(c) shall not
have been fulfilled, then Parent shall reimburse the Company upon demand for
all documented out-of-pocket fees and expenses incurred or paid by or on behalf
of the Company in connection with this Agreement and the transactions
contemplated hereby, including all fees and expenses of its counsel, financial
advisor, accountant and other consultants and advisors; provided, however, that
Parent shall not be obligated to make payments pursuant to this Section 5.3(c)
in excess of $2 million in the aggregate.
Section 5.4 Stock Options. (a) Prior to the Effective Time, the Board of
Directors of the Company (or, if appropriate, any committee thereof) shall
adopt appropriate resolutions and take all other actions necessary or
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appropriate, if any, to (i) cause each Company Stock Option that is outstanding
as of the date hereof to vest and to be exercisable immediately prior to the
consummation of the Merger, (ii) cause all restrictions applicable to any
restricted stock award heretofore granted under the Company Restricted Stock
Plan or any other similar plan outstanding upon the consummation of the Merger
to lapse immediately prior to the Effective Time and (iii) cause each Company
Stock Option that is outstanding upon the consummation of the Merger to be
exercisable solely for the Merger Consideration for each Share issuable upon
exercise thereof immediately prior to the Effective Time. The Company shall
offer each holder of a Company Stock Option (an "Option Holder"), in exchange
for the cancellation thereof, the right to receive from the Company an amount
equal to (A) the product of (1) the number of shares of Company Common Stock
subject to such Company Stock Option and (2) the excess, if any, of the Merger
Consideration over the exercise price per share for the purchase of the Company
Common Stock subject to such Company Stock Option, minus (B) all applicable
federal, state and local Taxes required to be withheld in respect of such
payment. The amounts payable pursuant to the immediately preceding sentence of
this 5.4 shall be paid as soon as reasonably practicable following the
Effective Time. The surrender of an Option in exchange for the consideration
contemplated by the second sentence of this Section 5.4 shall be deemed a
release of any and all rights the Option Holder had or may have had in respect
thereof. The Company shall take all such steps as may be required to cause the
transactions contemplated by this Section 5.4 and any other dispositions of
Company equity securities (including derivative securities) in connection with
this Agreement by each individual who is a director or officer of the Company
to be exempt under Rule 16b-3 promulgated under the Exchange Act, such steps to
be taken in accordance with the No-Action Letter dated January 12, 1999, issued
by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP.
(b) The Company shall take all actions necessary to ensure that (i) the
Offering Period (as defined in the Company Stock Purchase Plan) applicable to
the options outstanding under the Company Stock Purchase Plan (each, a
"Purchase Plan Option") is shortened in accordance with Section 16 of the
Company Stock Purchase Plan so as to have an Exercise Date (as defined in the
Company Stock Purchase Plan) that occurs before the Effective Time; (ii) no new
Offering Period, other than the Offering Period scheduled to commence on April
1, 1999, shall commence on or after the date hereof, and (iii) no holder of a
Purchase Plan Option is permitted to increase his or her rate of payroll
deduction under the Company Stock Purchase Plan from and after the date hereof.
(c) The Company shall take all actions necessary to provide that, prior to
the Effective Time, (i) the Company Stock Option Plan, the Company Stock
Purchase Plan 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 any of its Subsidiaries shall be terminated,
and (iii) no Option Holder 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.
(d) The Company represents and warrants that it has the power and authority
under the terms of the Company Stock Purchase Plan and each of the Company
Stock Option Plan and the Company Restricted Stock Plan to comply with
subsections (a), (b) and (c) hereof without the consent of any Option Holder or
any other person.
Section 5.5 Reasonable Best Efforts. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use its
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 Merger and the other
transactions contemplated by this Agreement, including: (i) the obtaining of
all necessary actions or non-actions, waivers, consents and approvals from all
Governmental Entities and Card Associations and the making of all necessary
registrations and filings (including filings under the HSR Act, the Change in
Bank Control Act and the Utah Statute and other filings with Governmental
Entities) and the taking of all reasonable steps as may be necessary to obtain
an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity (including furnishing all information required under the
HSR Act, the Change in Bank
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Control Act and the Utah Statute and actions in connection with State Takeover
Approvals); (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 contemplated hereby and thereby, 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
contemplated by this Agreement. Each party will promptly consult with the other
with respect to, provide any necessary information with respect to and provide
the other (or its counsel) and Bank One (or its counsel) copies of, all filings
made by such party with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby. In addition, if at any time
prior to the Effective Time any event or circumstance relating to any of the
Company, Parent or Merger Sub or any of their respective Subsidiaries, or any
of their respective officers or directors, should be discovered by the Company,
Parent or Merger Sub, as the case may be, and which should be set forth in an
amendment or supplement to the Proxy Statement or the Schedule 13e-3, the
discovering party will promptly inform the other party of such event or
circumstance. No party to this Agreement shall consent to any voluntary delay
of the consummation of the Merger at the behest of any Governmental Entity
without the consent of the other parties to this Agreement, which consent shall
not be unreasonably withheld.
(b) Each party shall use all reasonable best efforts to not take any action,
or enter into any transaction, which would cause any of its representations or
warranties contained in this Agreement to be untrue or result in a breach of
any covenant made by it in this Agreement.
(c) Notwithstanding anything to the contrary contained in this Agreement, in
connection with any filing or submission required or action to be taken by
either Parent or the Company to effect the Merger and to consummate the other
transactions contemplated hereby, the Company shall not, without Parent's prior
written consent, commit to any divestiture transaction other than with respect
to the Excluded Assets (as defined in the Contribution Agreement), and neither
Parent nor any of its affiliates shall be required to divest or hold separate
or otherwise take or commit to take any action that limits its freedom of
action with respect to, or its ability to retain, the Company or any of the
businesses, product lines or assets of Parent or any of its Subsidiaries or
that would have a Material Adverse Effect on Parent.
Section 5.6 Public Announcements. Parent and the Company will not issue any
press release with respect to the transactions contemplated by this Agreement
or otherwise issue any written public statements with respect to such
transactions without prior consultation with the other party and Bank One,
except as may be required by applicable law or by obligations pursuant to any
listing agreement with any national securities exchange.
Section 5.7 State Takeover Laws. If any "fair price," "business combination"
or "control share acquisition" statute or other similar statute or regulation
is or may become applicable to the transactions contemplated hereby, in the
Stockholder Agreement or in the Contribution Agreement such that, without
further approval or action by Parent, the Company or their respective Boards of
Directors, such transactions cannot be consummated in accordance with the terms
hereof and thereof and such statute or regulations, then Parent and the Company
and their respective Boards of Directors shall use their reasonable efforts to
grant such approvals and take such actions as are necessary so that the
transactions contemplated hereby and thereby may be consummated as promptly as
practicable on the terms contemplated hereby and thereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby and thereby.
Section 5.8 Indemnification; Directors and Officers Insurance. (a) From and
after the Effective Time, Parent shall cause the Surviving Corporation to
indemnify and hold harmless all past and present officers and directors of the
Company and of its Subsidiaries (each an "Indemnified Party") to the same
extent and in the same manner such persons are indemnified as of the date of
this Agreement by the Company pursuant to the DGCL, the Company Charter or the
Company's By-laws for acts or omissions occurring at or prior to the Effective
Time. Parent also agrees to advance expenses as incurred to the fullest extent
permitted under the
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DGCL upon receipt from the applicable Indemnified Party to whom expenses are to
be advanced of an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification pursuant to this
Section 5.8(a).
(b) Parent shall cause the Surviving Corporation to provide, for an
aggregate period of not less than six years from the Effective Time, the
Company's current directors and officers an insurance and indemnification
policy that provides coverage for events occurring prior to the Effective Time
(the "D&O Insurance") that is substantially similar to the Company's existing
policy or, if substantially equivalent insurance coverage is unavailable, the
best available coverage; provided, however, that the Surviving Corporation
shall not be required to pay an annual premium for the D&O Insurance in excess
of 150% of the last annual premium paid prior to the date hereof but in such
case shall purchase as much coverage as possible for such amount.
(c) The provisions of this Section 5.8(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 5.9 Notification of Certain Matters. Parent shall use its reasonable
best efforts to give prompt notice to the Company and Bank One, and the Company
shall use its reasonable best efforts to give prompt notice to Parent and Bank
One, of: (i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which it is aware and which would be reasonably likely to
cause (x) any representation or warranty contained in this Agreement and made
by it to be untrue or inaccurate in any material respect or (y) any covenant,
condition or agreement contained in this Agreement and made by it not to be
complied with or satisfied in all material respects, (ii) any failure of Parent
or the Company, as the case may be, to comply in a timely manner with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder or (iii) any change or event which has had a Material Adverse
Effect on the Company; provided, however, that the delivery of any notice
pursuant to this Section 5.9 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 5.10 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, this
Agreement or the Stockholder Agreement without the prior written consent of
Parent, which consent may not be unreasonably withheld. In addition, the
Company shall not voluntarily cooperate with any third party that may hereafter
seek to restrain or prohibit or otherwise oppose the Merger and shall cooperate
with Parent and Merger Sub to resist any such effort to restrain or prohibit or
otherwise oppose the Merger.
Section 5.11 Revolving Credit Agreement. The Company agrees to use
reasonable efforts to obtain a waiver of the restrictions on dividends or other
distributions by the Company under its existing revolving credit agreement and
the consent to the transfer of such revolving credit agreement to the Alliance.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval shall have
been obtained.
(b) No Order. No court or other Governmental Entity having jurisdiction
over the Company or Parent, or any of their respective Subsidiaries, shall
have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of making illegal the Merger or any of the other transactions
contemplated by this Agreement, the Stockholder Agreement or the
Contribution Agreement.
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(c) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or been terminated.
(d) Regulatory Approvals. The parties shall have received the approval
of the Federal Deposit Insurance Corporation under the Change in Bank
Control Act and the approval of the Utah Department of Financial
Institutions under the Utah Statute, and any other governmental or
regulatory notices or approvals required with respect to the transactions
contemplated hereby shall have been either filed or received, except for
those the failure to have given or obtain would not have a Material Adverse
Effect on the Company.
Section 6.2. Additional Conditions to Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to effect the Merger shall be subject
to fulfillment of the following additional conditions, any of which, subject to
Section 7.4, may be waived exclusively by Parent:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement that are qualified as to
materiality shall be true and correct as of the date of the Closing and the
representations and warranties that are not so qualified shall be true and
correct in all material respects, in each case as though made on and as of
the date of the Closing (except to the extent any such representation or
warranty expressly speaks as of an earlier date); and Parent and Merger Sub
shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(b) Performance of Obligations. The Company shall have performed in all
material respects each material obligation and agreement and shall have
complied in all material respects with each material covenant required to
be performed and complied with by it under this Agreement at or prior to
the Effective Time; and Parent and Merger Sub shall have received a
certificate signed on behalf of the Company to such effect.
(c) Absence of Material Adverse Change. There shall not have occurred
any Material Adverse Change with respect to the Company.
(d) Absence of Pending Litigation. There shall not be pending by any
Governmental Entity any suit, action or proceeding (i) seeking to restrain
or prohibit the Merger or the performance of any of the other transactions
contemplated by this Agreement, the Stockholder Agreement or the
Contribution Agreement or seeking to obtain from the Company or Parent any
damages that would have a Material Adverse Effect on Parent or the Company,
(ii) seeking to compel the Company or Parent or any of their Affiliates to
dispose of or hold separate any material portion of the business or assets
of the Company and its Subsidiaries, taken as a whole, or Parent and its
Subsidiaries, taken as a whole, as a result of the Merger or any of the
other transactions contemplated by this Agreement, the Stockholder
Agreement or the Contribution Agreement or (iii) which otherwise is
reasonably likely to have a Material Adverse Effect on the Company, other
than such suits, actions or proceedings which, in the reasonable opinion of
both counsel to Parent and to the Company, are unlikely to result in an
adverse judgement.
(e) Stockholder Agreement and Contribution Agreement. Neither Bank One
nor First USA shall have terminated the Stockholder Agreement or the
Contribution Agreement (whether or not in accordance with the terms
thereof) and neither Bank One nor First USA shall be in material breach
thereof or shall have indicated its intention not to perform such party's
obligations thereunder.
(f) Accounting Matters Applicable to Bank One. The conditions set forth
in Section 5.9 of the Contribution Agreement shall have been fulfilled or
waived pursuant to the terms of the Contribution Agreement.
Section 6.3. Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger shall be subject to fulfillment
of the following additional conditions, any of which, subject to Section 7.4,
may be waived exclusively by the Company:
(a) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth in this Agreement that are qualified as
to materiality shall be true and correct as of the date of the
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Closing and the representations and warranties that are not so qualified
shall be true and correct in all material respects, in each case as though
made on and as of the date of the Closing (except to the extent any such
representation or warranty expressly speaks as of an earlier date); and the
Company shall have received certificates signed on behalf of each of Parent
and Merger Sub by an executive officer of each to such effect.
(b) Performance of Obligations. Parent and Merger Sub shall have
performed in all material respects each material obligation and agreement
and shall have complied in all material respects with each material
covenant required to be performed and complied with by either of them under
this Agreement at or prior to the Effective Time; and the Company shall
have received certificates signed on behalf of each of Parent and Merger
Sub to such effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of this Agreement by
the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated prior to October
1, 1999; provided, however, that the right to terminate this Agreement
pursuant to this Section 7.1(b)(i) shall not be available to any party
whose failure to perform any of its obligations under this Agreement
results in the failure of any such condition or if the failure of such
condition results from facts or circumstances that constitute a breach
of any representation or warranty under this Agreement by such party;
or
(ii) if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining
or otherwise prohibiting the Merger or the other transactions
contemplated by this Agreement, the Stockholder Agreement or the
Contribution Agreement and such order, decree or ruling or other action
shall have become final and nonappealable;
(c) by Parent or the Company in the event of a breach by the other (or
Merger Sub, in the case of Parent) of any representation, warranty,
covenant or other agreement contained in this Agreement which (i) would
reasonably be expected to give rise to the failure of a condition set forth
in Sections 6.2 (a) or (b) or 6.3 (a) or (b), as the case may be, and (ii)
cannot be or has not been cured within 30 days after the giving of written
notice of such breach to the Company;
(d) by Parent if (i) 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 Merger or this Agreement, or
approved or recommended any Takeover Proposal (whether or not in compliance
with Section 4.2) or (ii) the Board of Directors of the Company or any
committee thereof shall have resolved to take any of the foregoing actions;
or
(e) by the Company prior to receipt of the Company Stockholder Approval
if (i) a Takeover Proposal constitutes a Superior Proposal, and (ii) the
Board of Directors of the Company reasonably determines in good faith that
the failure to terminate this Agreement and accept such Superior Proposal
would be inconsistent with such Board's fiduciary duties to the Company and
its stockholders or otherwise breach or violate applicable law (based on
Legal Advice); provided, however, that this Agreement shall not terminate
pursuant to this Section 7.1(e) unless (i) the Company has complied with
all provisions of Section 4.2, including the notice provisions therein,
(ii) simultaneously with such termination the Company has complied with the
requirements of Section 5.3(b) relating to the payment (including the
timing of any payment) of the Termination Fee to the extent required by
Section 5.3(b) and (iii) simultaneously with
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such termination the Company enters into a definitive acquisition, merger
or similar agreement to effect such Superior Proposal; and provided,
further, that the Company may not terminate this Agreement pursuant to this
Section 7.1(e) unless and until 120 hours have elapsed following delivery
to Parent and Bank One of a written notice of such determination by the
Board of Directors of the Company and during such 120 hours Parent has not
informed the Company that it is willing to substantially match the terms
and conditions of such Superior Proposal.
The right of any party hereto to terminate this Agreement pursuant to this
Section 7.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Merger Sub or their respective officers or
directors (except for Section 2.5, 2.7, 3.23, the last sentence of Section 5.2,
Section 5.3, this Section 7.2 and Article VIII, all of which shall survive the
termination); provided, however, that nothing contained in this Section 7.2
shall relieve any party hereto from any liability for any willful breach of a
representation or warranty contained in this Agreement or the material breach
of any covenant contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties hereto,
at any time before or after Company Stockholder Approval (if required by law);
provided, that (i) if the Company Stockholder Approval shall have been
obtained, thereafter no amendment shall be made which by law requires further
approval by such stockholders without such further approval and (ii) no
amendment of this Agreement shall be made effective without the prior written
consent of Bank One which consent shall not be unreasonably withheld. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 7.4 Extension; Waiver. At any time prior to the Effective Time and
subject to in clause (ii) of Section 7.3, the parties hereto may to the extent
legally allowed (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall 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
shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations, Warranties and Agreements. None
of the representations, warranties and agreements (except those agreements
referred to in the immediately following sentence in the event of the Merger or
those agreements and matters referred to in Section 7.2 in the event of the
termination of this Agreement in accordance with Section 7.1) in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Effective Time or the termination of this Agreement pursuant to Section 7.1, as
the case may be. This Section 8.1 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective
Time of the Merger.
Section 8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when
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telecopied (with a confirmatory copy sent by overnight courier) 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 Merger Sub, to:
First Data Corporation
5660 New Northside Drive
Suite 1400
Atlanta, GA 30328
Attention: General Counsel
Facsimile No.: 770-857-0414
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Frederick C. Lowinger
Sherry S. Treston
Facsimile No.: 312-853-7036
(b) if to the Company, to:
Paymentech, Inc.
1601 Elm Street, 9th Floor
Dallas, Texas 75201
Attention: General Counsel
Facsimile No.: 214-849-2068
with a copy to:
Skadden, Arps, Slate, Meagher Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Randall H. Doud, Esq.
Eric J. Friedman, Esq.
Facsimile No.: 212-735-2000
(c) if to Bank One, to:
BANK ONE CORPORATION
One First National Plaza
Law Department
Mail Suite 0287
Chicago, Illinois 60670
Attention: Daniel P. Cooney, Esq.
Facsimile No.: 312-732-3596
Section 8.3 Interpretation; Definitions. (a) When a reference is made in
this Agreement to a Section, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents 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."
(b) As used in this Agreement, the following terms have the meanings
specified in this Section 8.3(b) and shall be equally applicable to both the
singular and plural forms:
"Bank Card Association" means Mastercard International, Inc., VISA U.S.A.,
Inc. or VISA International, Inc.
A-29
<PAGE>
"Bank Cards" means a credit card, charge card, debit card, stored value card
or similar instrument that is issued by a licensee of a Bank Card Association.
"Bank Holding Company Act" means the Bank Holding Company Act of 1956, as
amended.
"Card Associations" means (i) Bank Card Associations and (ii) Other Card
companies (e.g. Discover, JCB, American Express, debit card networks or links)
and any other card association or similar entity with whom the Company and/or
any of its Subsidiaries may have a contract for processing and/or facilitating
settlement of transaction media (including direct send contracts with Bank Card
issuing banks) generated by holders of cards or similar instruments issued by
licensees of such groups.
"Cards" means Bank Cards and all Other Cards.
"Change in Bank Control Act" means Section 18(c)(1)(A) of the Federal
Insurance Corporation Act.
"IRS" means the Internal Revenue Service.
"Material Adverse Change" or "Material Adverse Effect" means, when used with
respect to the Company or Parent, as the case may be, any change or effect that
is or would reasonably be expected (as far as can be foreseen at the time) to
be materially adverse to the business, results of operations, or condition
(financial or otherwise), of the Company and its Subsidiaries, taken as a
whole, or Parent and its Subsidiaries, taken as a whole; provided, however,
that the effects of changes that are generally applicable to the industries in
which the Company operates or to the United States economy generally, or which
result from the announcement of the transactions contemplated by this
Agreement, shall be excluded from such determination.
"Other Cards" shall include Discover, JCB, American Express, Diners Club,
Carte Blanche and any other Card or similar instrument which may be issued by a
debit card network or any other Card Association (or licensee thereof) other
than Mastercard or Visa.
"Subsidiary" means any corporation, partnership, limited liability company,
joint venture or other legal entity of which Parent, Bank One or the Company,
as the case may be (either alone or through or together with any other such
Subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation,
partnership, limited liability company, joint venture or other legal entity.
"Transaction Card" means a Card issued pursuant to a license from a Card
Association for which the Company and/or any of its Subsidiaries currently
provides service support.
(c) The following terms shall have the meanings set forth for such terms in
the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
"Affiliated Person".............................................. Section 3.22
"Agreement"...................................................... Preamble
"Alliance"....................................................... Recitals
"Bank One"....................................................... Recitals
"Banker Opinion"................................................. Section 4.2(a)
"Blue Sky Laws".................................................. Section 2.3
"Certificate of Merger".......................................... Section 1.3
"Certificates"................................................... Section 1.7(b)
"Closing"........................................................ Section 1.9
"Company"........................................................ Preamble
"Company Business Personnel"..................................... Section 3.15
"Company Charter"................................................ Section 1.5(a)
"Company Common Stock"........................................... Recitals
</TABLE>
A-30
<PAGE>
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
"Company Foreign Benefit Plan".................................. Section 3.13(f)
"Company Letter"................................................ Section 3.2
"Company Merchant Contracts".................................... Section 3.20(c)
"Company Multiemployer Plan".................................... Section 3.13(a)
"Company Permits"............................................... Section 3.9
"Company Plan".................................................. Section 3.13(a)
"Company Preferred Stock"....................................... Section 3.3
"Company Representatives"....................................... Section 4.2(a)
"Company Restricted Stock Plan"................................. Section 3.3
"Company SEC Documents"......................................... Section 3.6
"Company Stock Option Plan"..................................... Section 3.3
"Company Stock Options"......................................... Section 3.3
"Company Stock Purchase Plan"................................... Section 3.3
"Company Stockholder Approval".................................. Section 2.4
"Compensation Agreements"....................................... Section 3.12
"Computerized Assets"........................................... Section 3.16
"Confidentiality Agreement"..................................... Section 5.2
"Constituent Corporations"...................................... Preamble
"Contribution Agreement"........................................ Recitals
"D&O Insurance"................................................. Section 5.8(b)
"DGCL".......................................................... Section 1.2
"Dissenting Shares"............................................. Section 1.6(d)
"Dissenting Stockholder"........................................ Section 1.6(d)
"Effective Time"................................................ Section 1.3
"Environmental Law"............................................. Section 3.19(a)
"Environmental Permit".......................................... Section 3.19(a)
"ERISA"......................................................... Section 3.13(a)
"ERISA Affiliate"............................................... Section 3.13(a)
"Exchange Act".................................................. Section 2.4
"First USA"..................................................... Recitals
"GAAP".......................................................... Section 3.14(a)
"Governmental Entity"........................................... Section 2.3
"Hazardous Substances".......................................... Section 3.19(a)
"Holdco"........................................................ Preamble
"HSR Act"....................................................... Section 2.3
"Intellectual Property Rights".................................. Section 3.16
"Legal Advice".................................................. Section 4.2(a)
"Liens"......................................................... Section 3.2
"Merger"........................................................ Recitals
"Merger Consideration".......................................... Recitals
"Merger Sub".................................................... Preamble
"Option Holder"................................................. Section 5.4(a)
"Parent"........................................................ Preamble
"Paying Agent".................................................. Section 1.7(a)
"Proxy Statement"............................................... Section 2.4
"Purchase Plan Option".......................................... Section 5.4(b)
"Real Estate"................................................... Section 3.17(b)
"Schedule 13e-3"................................................ Section 2.4
"SEC"........................................................... Section 2.4
"Securities Act"................................................ Section 3.6
"Shares"........................................................ Recitals
</TABLE>
A-31
<PAGE>
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
"Software"...................................................... Section 3.16
"State Takeover Approvals"...................................... Section 2.3
"Stockholder Agreement"......................................... Recitals
"Stockholder Meeting"........................................... Section 5.1(a)
"Superior Proposal"............................................. Section 4.2(a)
"Surviving Corporation"......................................... Section 1.2
"Takeover Proposal"............................................. Section 4.2(a)
"Tax Return".................................................... Section 3.10
"Taxes"......................................................... Section 3.10
"Termination Fee"............................................... Section 5.3(b)
"Top 25 Customers".............................................. Section 3.20(a)
</TABLE>
Section 8.4 Counterparts. This Agreement may be executed in 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 8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
except as provided in the last sentence of Section 5.2, constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof. This
Agreement, except for the provisions of Sections 1.2 and 5.8 and except as
expressly set forth in Sections 1.5, 1.7(a), 2.4, 4.2(b), 5.1, 5.5, 5.6, 5.9,
7.3 and 8.5 with respect to Bank One, is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
Section 8.6 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 conflicts
of laws thereof. In addition, each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of any Federal or state court located in
the State of Delaware in the event any dispute arises out of this Agreement or
any of the transactions contemplated by this Agreement, (ii) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, (iii) waives any objection based
on forum non conveniens or any other objection to venue thereof, and (iv)
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 or state court sitting in the State of Delaware.
Section 8.7 Assignment. Subject to Section 1.2, neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and permitted assigns.
Section 8.8 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 terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific wording or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof, such remedy being
in addition to any other remedy to which any party is entitled at law or in
equity. Each party hereto waives any right to a trial by jury in connection
with any such action, suit or proceeding.
A-32
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
FIRST DATA CORPORATION
By: /s/ David J. Treinen
-------------------------------
Name: David J. Treinen
Title: Senior Vice President
FB MERGING CORPORATION
By: /s/ David J. Treinen
-------------------------------
Name: David J. Treinen
Title: Senior Vice President
PAYMENTECH, INC.
By: /s/ Pamela H. Patsley
-------------------------------
Name: Pamela H. Patsley
Title: President and Chief
Executive Officer
A-33
<PAGE>
Exhibit C
As of the Effective Time, the Company Charter shall be amended to read in
its entirety as follows:
First: The name of this corporation (hereinafter called the "Corporation")
is
Paymentech, Inc.
Second: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street,
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
Third: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
Fourth: The amount of the total authorized capital stock of this
Corporation is Ten Dollars ($10.00) divided into 1,000 shares, par value
$0.01 per share.
A-34
<PAGE>
ANNEX B
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is dated as of March 22, 1999,
among First Data Corporation, a Delaware corporation ("FDC"), FDC Offer
Corporation, a Delaware corporation and a direct wholly-owned subsidiary of FDC
("Holdco"), FB Merging Corporation, a Delaware corporation and a direct wholly-
owned subsidiary of Holdco ("Merger Sub"), BANK ONE CORPORATION, a Delaware
corporation ("Bank One"), and First USA Financial, Inc., a Delaware corporation
and wholly-owned subsidiary of Bank One ("First USA").
W I T N E S S E T H:
WHEREAS, concurrently herewith, FDC, Merger Sub and Paymentech, Inc., a
Delaware corporation (the "Company"), are entering into an Agreement and Plan
of Merger, a form of which is appended hereto as Exhibit A (as such agreement
may hereafter be amended from time to time, the "Merger Agreement"), pursuant
to which Merger Sub will be merged into the Company (the "Merger").
WHEREAS, the Merger Agreement contemplates that Merger Sub will be merged
into the Company, upon the terms and subject to the conditions set forth
therein, and pursuant to which each of the issued and outstanding shares, par
value $.01 per share, of common stock of the Company (the "Company Common
Stock") not owned directly or indirectly by Parent, Bank One, the Company or
any of their Subsidiaries (including, without limitation, Merger Sub) (other
than such shares held by Parent, Bank One, the Company or any of their
Subsidiaries in a fiduciary, collateral, custodial or similar capacity which
will be converted) will be converted into the right to receive the Merger
Consideration;
WHEREAS, First USA Beneficially Owns (as defined herein) 19,979,081 shares
of the Company Common Stock (all such shares so owned and which may hereafter
be acquired by First USA prior to the termination of this Agreement, whether by
means of purchase, dividend, distribution, split-up, recapitalization,
combination, exchange of shares or otherwise, being referred to herein as the
"First USA Shares");
WHEREAS, the Merger Agreement contemplates that First USA shall, in a tax-
free exchange pursuant to Section 351 of the Internal Revenue Code of 1986, as
amended (the "Code"), contribute the Company Common Stock owned by it to Holdco
and Holdco will make a capital contribution of such Company Common Stock to
Merger Sub;
WHEREAS, contemporaneously with the First USA contribution, FDC shall
contribute sufficient cash to pay the aggregate Merger Consideration to Holdco
and Holdco will make a capital contribution of such cash to Merger Sub;
WHEREAS, concurrently herewith, FDC and Bank One are entering into a
Contribution Agreement (the "Contribution Agreement"), which provides that
following the Merger, FDC and Bank One will, through Holdco, cause
substantially all of the assets and liabilities and business of the Company, as
the Surviving Corporation, to be contributed to Bank One Payment Services
L.L.C., a Delaware limited liability company and an alliance between wholly-
owned subsidiaries of FDC and Bank One (the "Alliance"), in exchange for a
membership interest in the Alliance;
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, FDC and Merger Sub have required that each of Bank One and First USA
agree, and each of Bank One and First USA has agreed, to enter into this
Agreement.
B-1
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements contained herein, the
parties hereby agree as follows:
1. Agreement to Vote: Restriction on Transfer. Proxies and Non-Interference.
(a) First USA hereby agrees that during the period commencing on the date
hereof and continuing until the termination of this Agreement in accordance
with its terms, at any meeting of the holders of the Company Common Stock,
however called, or in connection with any written consent of the holders of the
Company Common Stock, First USA shall vote (or cause to be voted) the First USA
Shares, (i) in favor of adoption of the Merger Agreement and the approval of
the Merger, all other transactions contemplated thereby, and any actions
required in furtherance thereof and hereof; (ii) against any action or
agreement that is intended, or could reasonably be expected, to impede,
interfere with, or prevent the Merger or result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement
of the Company or any of its subsidiaries under the Merger Agreement or this
Agreement; and (iii) except as specifically requested in writing in advance by
FDC or as permitted pursuant to the terms of the Merger Agreement, against the
following actions (other than the Merger and the transactions contemplated by
or required to implement the Merger Agreement, this Agreement and the
Contribution Agreement): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Company or
any of its subsidiaries or affiliates; (B) a sale, lease, transfer or
disposition by the Company or any of its subsidiaries of any assets outside the
ordinary course of business or any assets which in the aggregate are material
to the Company and its subsidiaries taken as a whole, or a reorganization,
recapitalization, dissolution or liquidation of the Company or any of its
subsidiaries or affiliates; (C)(1) any change in the management of the Company
or any of its subsidiaries or in a majority of the persons who constitute the
board of directors of the Company or any of its subsidiaries; (2) any change in
the present capitalization of the Company or any of its subsidiaries or any
amendment of the Company's charter or by-laws or the charter or by-laws of any
of its subsidiaries; (3) any other material change in the Company's or any of
its subsidiaries' corporate structure or business; or (4) any other action
that, in the case of each of the matters referred to in clauses (C)(1), (2) or
(3), is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone or materially adversely affect the Merger or the transactions
contemplated by this Agreement, the Contribution Agreement and the Merger
Agreement. Neither Bank One nor First USA shall enter into any agreement or
understanding with any Person (as defined herein) the effect of which would be
inconsistent with or violative of the provisions and agreements contained in
this Agreement.
(b) First USA shall not, directly or indirectly: (i) tender the First USA
Shares in any tender offer for the Company Common Stock; (ii) except as
contemplated by this Agreement, the Contribution Agreement or the Merger
Agreement, otherwise offer for sale, sell, transfer, tender, pledge, encumber,
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,
transfer, tender, pledge, encumbrance, assignment or other disposition of, any
or all of the First USA Shares or any interest therein; (iii) grant any proxies
or powers of attorney, deposit any First USA Shares into a voting trust or
enter into a voting agreement with respect to any First USA Shares; or (iv)
take any action that would make any representation or warranty of First USA
contained herein that is qualified by materiality untrue or incorrect in any
respect or any representation or warranty of First USA contained herein that is
not so qualified untrue or incorrect in any material respect or have the effect
of preventing or disabling First USA from performing First USA's obligations
under this Agreement.
(c) So long as this Agreement remains in effect, each instrument or
certificate evidencing or representing First USA Shares shall bear a legend
substantially to the following effect:
"The shares of Common Stock represented by this certificate are subject
to the transfer and other restrictions stated in a Stockholder Agreement
dated as of March 22, 1999, a copy of which is on file at the office of the
Assistant Secretary of BANK ONE CORPORATION."
(d) First USA agrees with, and covenants to, FDC that First USA shall not
request that the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the First USA
Shares, unless such transfer is made in compliance with this Agreement.
B-2
<PAGE>
2. Waiver of Appraisal and Dissenter's Rights. First USA hereby irrevocably
waives any rights of appraisal or rights to dissent from the Merger that it may
have.
3. Schedule 13e-3. FDC, Holdco, Merger Sub, Bank One and First USA shall, in
accordance with the rules and regulations of the SEC, file with the SEC a Rule
13e-3 Transaction Statement (such Rule 13e-3 Transaction Statement, as amended
from time to time, the "Rule 13e-3 Transaction Statement"), with respect to the
Merger Agreement and the Contribution Agreement, and such parties shall cause
to be disseminated the information contained therein to holders of the shares
of the Company Common Stock as and to the extent required by the applicable
rules and regulations of the SEC. Each of the parties hereto agrees promptly to
correct any information provided by it for use in the Rule 13e-3 Transaction
Statement if and to the extent that such information shall have become false or
misleading in any material respect, and such parties further agree to take all
steps necessary to cause the Rule 13e-3 Transaction Statement as so corrected
to be filed with the SEC and the information contained in such corrected filing
to be disseminated to holders of shares of the Company Common Stock, in each
case as and to the extent required by the applicable rules and regulations of
the SEC. FDC and its counsel shall be given reasonable opportunity to review
and comment on the Rule 13e-3 Transaction Statement prior to its filing with
the SEC or dissemination to the stockholders of the Company. Bank One and First
USA agree to provide FDC and its counsel any comments Bank One, First USA or
their counsel may receive from the SEC or its staff with respect to the Rule
13e-3 Transaction Statement promptly after the receipt of such comments and to
cooperate with FDC and its counsel in responding to any such comments. The
parties hereto jointly agree to cause the Rule 13e-3 Transaction Statement to
comply as to form in all material respects with the requirements of the
Exchange Act and to allow the Company to rely upon such agreement to do so.
4. No Solicitation. (a) Other than with respect to the Excluded Assets, Bank
One and its affiliates shall immediately cease existing discussions or
negotiations, if any, with any parties conducted heretofore with respect to any
acquisition of all or any material portion of the assets of, or any equity
interest in, the Company or any of its subsidiaries or any business combination
with the Company or any of its subsidiaries.
(b) Bank One and First USA shall not, nor shall they authorize or permit any
of their affiliates or any director, officer, employee, financial advisor,
attorney or other advisor or representative of any of the foregoing to,
directly or indirectly: (i) solicit, initiate or encourage any inquiries or the
making or implementation of any Takeover Proposal; (ii) make or implement or
participate in the making or implementation of any Takeover Proposal; (other
than an agreement conditioned upon the concurrent exercise by the Company,
provided that concurrently with the effectiveness of such agreement, the
Company exercises the termination right set forth in Section 7.1(e) of the
Merger Assignment) (iii) enter into any agreement with respect to or approve or
recommend any Takeover Proposal; or (iv) participate in any discussions or
negotiations regarding, or furnish to any Person any information with respect
to the Company or any of its Subsidiaries in connection with, or take any other
action that may reasonably be expected to lead to any Takeover Proposal.
Notwithstanding the foregoing, nothing in this Section 4(b) shall prohibit any
affiliate of Bank One or First USA (i) from providing shareholder or proxy
services in the ordinary course of business of such affiliate or (ii) to the
extent such affiliate is acting in a fiduciary capacity, from taking actions
directed by one or more of the beneficiaries or other legal representatives
involved in the fiduciary relationship or as is otherwise required by reason of
the fiduciary relationship. Any action taken by the Company or any member of
the Board of Directors of the Company in accordance with Section 4.2 of the
Merger Agreement shall be deemed not to violate this Section 4.
(c) If at any time Bank One or any of its affiliates (other than the Company
and its Subsidiaries) is approached (without any joint or related approach to
the Company or any of its Subsidiaries) by any Person concerning its
participation in a transaction involving any of the assets, businesses or
securities of the Company or any subsidiary thereof (other than with respect to
the Excluded Assets), Bank One will promptly inform FDC of the nature of such
contact and the parties thereto and provide a copy of any such written proposal
and a summary of any oral proposal (including the material terms and conditions
of such proposal) to FDC immediately after receipt thereof. Notwithstanding the
foregoing, nothing in this Section 4(c) shall require any
B-3
<PAGE>
affiliate of Bank One to provide any notification referred to in the preceding
sentence if (i) such affiliate's participation in such transaction is limited
to the provision of shareholder or proxy services in the ordinary course of
business of such affiliate or (ii) if such affiliate is acting in a fiduciary
capacity and such participation in such transaction is directed by one or more
of the beneficiaries or other legal representatives involved in the fiduciary
relationship or as is otherwise required by reason of the fiduciary
relationship.
5. Representations and Warranties by Bank One and First USA. Each of Bank
One and First USA hereby represents and warrants to FDC, Holdco and Merger Sub
as of the date hereof and as of the Closing as follows:
(a) Ownership of Shares. First USA is the record and Beneficial Owner of
the First USA Shares and the First USA Shares constitute all of the shares
of the Company Common Stock owned of record by First USA other than Shares
Beneficially Owned by First USA or Bank One in a fiduciary, custodial,
collateral or similar capacity. First USA owns the First USA Shares free
and clear of all liens, claims, charges, security interests, mortgages or
other encumbrances, and the First USA Shares are subject to no rights of
first refusal, put rights, other rights to purchase or encumber the First
USA Shares, or to any agreements other than this Agreement as to the
encumbrance or disposition of the First USA Shares. First USA has sole
voting power and sole power to issue instruction with respect to the
matters set forth in Section 1 hereof, sole power of disposition, sole
power of conversion, sole power to demand appraisal rights and sole power
to agree to all of the matters set forth in this Agreement, in each case
with respect to all of the First USA Shares, with no limitations,
qualifications or restrictions on such rights.
(b) Power; Binding Agreement. Each of Bank One and First USA is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to execute, deliver and perform all of its
obligations under this Agreement and to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance of
this Agreement by each of Bank One and First USA, and the consummation of
the transactions contemplated hereby, has been or will be duly authorized
by all necessary corporate action on the part of Bank One and First USA and
no other corporate proceedings on the part of Bank One or First USA or
their respective Board of Directors are or will be necessary to consummate
the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of Bank One and First USA and constitutes a valid and
binding agreement of each of Bank One and First USA, enforceable against
each of Bank One and First USA in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement
of creditors' rights generally, and except as the availability of equitable
remedies may be limited by the application of general principles of equity
(regardless of whether such equitable principles are applied in a
proceeding at law or in equity).
(c) No Conflicts. Except for filings, permits, authorizations, consents
and approvals as may be required under the HSR Act and the SEC with respect
to the Rule 13E-3 Transaction Statement, no filing with, and no permit,
authorization, consent or approval of, any state or federal public body or
authority is necessary for the execution of this Agreement by Bank One or
First USA and the consummation by Bank One and First USA of the
transactions agreed to in this Agreement and none of the execution or
delivery of this Agreement by Bank One and First USA, the consummation by
Bank One and First USA of the transactions agreed to in this Agreement or
compliance by Bank One and First USA with any of the provisions hereof
shall (i) conflict with, violate, result in a breach of, or constitute a
default under the charter or by-laws of Bank One or First USA, (ii)
conflict with (A) any Court Order to which Bank One or First USA is a party
or by which Bank One or First USA is bound or (B) any Requirements of Law
affecting Bank One or First USA, other than for any such conflicts,
violations, breaches or defaults that individually or in the aggregate
would not have a material adverse effect on Bank One, or (iii) conflict
with or violate in any material manner or result in any material breach of,
or constitute a material default under any material voting agreement,
shareholder agreement or voting trust or any material note, instrument,
agreement, mortgage, lease, license, franchise, permit or other
authorization, right, restriction
B-4
<PAGE>
or obligation to which Bank One or First USA is a party or by which Bank
One or First USA or, to the best of Bank One's or First USA's knowledge,
any of Bank One's or First USA's properties or assets may be bound. This
Agreement hereby supersedes all prior agreements to which Bank One or First
USA is a party with respect to Bank One's or First USA's Shares.
(d) No Finder's Fees. No broker, investment banker, financial adviser or
other Person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission from First USA or Bank One in connection
with the transactions contemplated by the Merger Agreement, this Agreement
or the Contribution Agreement based upon arrangements made by or on behalf
of Bank One or First USA.
6. Representations and Warranties by FDC, Holdco and Merger Sub.
(a) Power; Binding Agreement. Each of FDC, Holdco and Merger Sub is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to enter into and perform all of its obligations under this
Agreement. The execution, delivery and performance of this Agreement by each of
FDC, Holdco and Merger Sub, and the consummation of the transactions
contemplated hereby, has been duly authorized by all necessary corporate action
on the part of FDC, Holdco and Merger Sub. This Agreement has been duly and
validly executed and delivered by each of FDC, Holdco and Merger Sub and
constitutes a valid and binding agreement of each of FDC, Holdco and Merger
Sub, enforceable against each of FDC, Holdco and Merger Sub in accordance with
its terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity).
(b) No Conflicts. Except for filings, permits, authorizations, consents and
approvals as may be required under the HSR Act and with the SEC with respect to
the Rule 13e-3 Transaction Statement, no filing with, and no permit,
authorization, consent or approval of, any state or federal public body or
authority is necessary for the execution of this Agreement by FDC, Holdco or
Merger Sub and the consummation by FDC, Holdco and Merger Sub of the
transactions contemplated hereby and none of the execution or delivery of this
Agreement by FDC, Holdco or Merger Sub, the consummation by FDC, Holdco and
Merger Sub of the transactions contemplated hereby or compliance by FDC, Holdco
and Merger Sub with any of the provisions hereof shall (i) conflict with,
violate, result in a breach of, or constitute a default under the charter or
by-laws of FDC, Holdco or Merger Sub, (ii) conflict with (A) any Court Order to
which FDC, Holdco or Merger Sub is a party or by which FDC, Holdco or Merger
Sub is bound or (B) any Requirements of Law affecting FDC, Holdco or Merger
Sub, other than for any such conflicts, violations, breaches or defaults that
individually or in the aggregate would not have a material adverse effect on
FDC, or (iii) conflict with or violate in any material manner or result in any
material breach of, or constitute a material default under any material voting
agreement, shareholder agreement, voting trust, note, instrument, agreement,
mortgage, lease, license, franchise, permit or other authorization, right,
restriction or obligation to which FDC, Holdco or Merger Sub is a party or by
which FDC, Holdco or Merger Sub or, to the best of FDC's, Holdco's or Merger
Sub's knowledge, any of FDC's, Holdco's or Merger Sub's properties or assets
may be bound.
(c) No Finder's Fees. No broker, investment banker, financial adviser or
other Person, other than Morgan Stanley Dean Witter & Co., the fees and
expenses of which will be paid by FDC, is entitled to any broker's, finder's,
financial adviser's or other similar fee or commission in connection with the
transactions contemplated by the Merger Agreement based upon arrangements made
by or on behalf of FDC, Holdco or Merger Sub.
7. Further Assurances. From time to time, at FDC's request and without
further consideration, First USA agrees to execute and deliver such additional
documents and take such further lawful action as may be necessary or desirable
to consummate and make effective, and to cause the Company to consummate and
make effective the transactions provided for in this Agreement, it being
understood and agreed that First USA shall not be required hereunder to make
any payment (other than customary administrative and processing fees and
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reasonable legal expenses), commence litigation or agree to any material
agreements in connection with the foregoing.
8. Actions Taken Prior to Consummation of the Merger. (a) Each of the
parties hereto shall take, or cause to be taken, the actions when and as
contemplated by Section 1.1 of the Merger Agreement to be taken by such party;
provided, however that the obligation of First USA to contribute shares of
Company Common Stock owned by it to Holdco shall be subject to the receipt by
First USA of a written opinion of Wachtell, Lipton, Rosen & Katz to the effect
that such contribution and the receipt of ownership interests in Holdco by
First USA shall constitute a transaction qualifying under Section 351 of the
Code. The stockholder agreement relating to the governance of Holdco and the
Company described therein will be in the form attached hereto as Exhibit B. The
total number of shares of common stock to be issued to FDC and First USA in
exchange for their respective contributions to Holdco as contemplated by such
Section 1.1 will be in an amount to be agreed upon between First USA and FDC
and will be allocated in the following percentages: (A) to First USA, the
percentage (the "First USA Percentage") obtained by dividing (i) the total
number of shares of Company Common Stock which are contributed by First USA to
Holdco in accordance with Section 1.1 of the Merger Agreement and Section 8 of
this Agreement by (ii) the total number of shares of Company Common Stock
outstanding immediately prior to the Effective Time; and (B) to FDC, the
percentage obtained by subtracting the First USA percentage from 100%. The
parties hereto agree to cause Merger Sub to cause all shares of the Company
Common Stock owned by it to be voted in approval of the Merger.
(b) Bank One, as lender under that certain Credit Agreement, dated February
18, 1999, between Bank One and the Company, hereby grants all consents required
to be obtained by the Company pursuant to such Credit Agreement in connection
with the transactions contemplated by this Agreement, the Merger Agreement and
the Contribution Agreement.
9. Actions Taken After Consummation of the Merger.
(a) Each of the parties hereto will take all steps reasonably necessary to
cause the consummation of the transactions contemplated by the Contribution
Agreement.
(b) Each of the parties hereto agree to cause the Surviving Corporation to
comply with the covenants set forth in Section 5.8 of the Merger Agreement.
(c) FDC, Bank One and First USA shall take actions necessary to cause the
Board of Directors of the Surviving Corporation, immediately after the
Effective Time and until the closing of the transactions contemplated by the
Contribution Agreement occurs, to consist of nine members, five of whom will be
designated by Bank One and four of whom will be designated by FDC. After the
Closing (as defined in the Contribution Agreement) Bank One and First USA shall
take actions necessary to cause the Board of Directors of the Surviving
Corporation to consist of four members, two of whom will be designated by Bank
One and two of whom will be designated by FDC.
(d) Following any payment by the Surviving Corporation in respect of
Dissenting Shares pursuant to Section 262 of the DGCL (excluding any Dissenting
Shares held by stockholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their rights to appraisal of such Shares under
Section 262 of the DGCL), FDC shall pay to the Surviving Corporation, as a
capital contribution (but without the issuance of any additional shares of
capital stock), an amount, in respect of each such Dissenting Share, equal to
the amount paid by the Surviving Corporation in respect of such Dissenting
Share; provided, however, that at such time as the aggregate amount paid to the
Surviving Corporation pursuant to this sentence is equal to the sum of (i) the
product obtained by multiplying the number of Dissenting Shares in respect of
which payment is made multiplied by the Merger Consideration and (ii) $2
million, then any payments thereafter made by FDC pursuant to this sentence
shall be limited to an amount per Share equal to the Merger Consideration.
Following any payment by the Surviving Corporation in respect of Dissenting
Shares that are held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
Shares under Section 262 of the DGCL but as to which Shares a contribution of
cash to Holdco by Parent was
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<PAGE>
not made pursuant to Section 1.1 of the Merger Agreement, FDC shall pay to the
Surviving Corporation, as a capital contribution (but without the issuance of
any additional shares of capital stock), an amount, in respect of each such
Share, equal to the Merger Consideration.
(e) The parties acknowledge and agree that the Surviving Corporation shall
bear the financial responsibility for amounts required to be paid in respect of
the Company Stock Options pursuant to Section 5.4 of the Merger Agreement.
10. Termination. Except as otherwise provided herein, the covenants and
agreements contained herein shall terminate and have no further force or effect
upon the earliest of (i) the written consent of the parties hereto, (ii)
termination of the Merger Agreement in accordance with its terms (including,
without limitation, termination of the Merger Agreement by the Company pursuant
to Section 7.1(e) of the Merger Agreement), (iii) failure to receive the
opinion required under Section 8 hereof, (iv) the consummation of the
transactions contemplated by the Contribution Agreement, and (v) the
termination of the Contribution Agreement in accordance with its terms. No
termination of this Agreement shall relieve any party hereto from any liability
for any breach of this Agreement.
11. Miscellaneous.
(a) Certain Definitions. Capitalized terms used herein and not defined herein
shall have the respective meanings assigned to them in the Merger Agreement. As
used in this Agreement, the following capitalized terms shall have the
following meanings:
(i) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing, but excluding securities held in a fiduciary, custodial,
collateral or similar capacity. Without duplicative counting of the same
securities by the same holder, securities Beneficially Owned by a Person
shall include securities Beneficially Owned by all other Persons with whom
such Person would constitute a "group" as within the meanings of Section
13(d)(3) of the Exchange Act.
(ii) "Court Order" has the meaning assigned to it in the Contribution
Agreement.
(iii) "Excluded Assets" has the meaning assigned to it in the
Contribution Agreement.
(iv) "Person" means any general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business
trust, governmental agency, cooperative, association, individual or other
entity, and the heirs, executors, administrators, legal representatives,
successors and assigns of such Person as the context may require.
(v) "Requirements of Law" has the meaning assigned to it in the
Contribution Agreement.
(vi) "Subsidiary" or "subsidiaries" of FDC, Holdco, Merger Sub, Bank One,
First USA or any other Person means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other
legal entity of which FDC, Holdco, Merger Sub, Bank One, First USA or any
such other Person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, 50% or more of
the capital stock the holders of which are generally entitled to vote for
the election of the board of directors or other governing body of such
corporation or other legal entity.
(b) Entire Agreement. This Agreement, the Contribution Agreement and the
Merger Agreement constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
(c) Certain Events. Bank One and First USA agree that this Agreement, the
Contribution Agreement and the obligations hereunder shall attach to the First
USA Shares and shall be binding upon any Person or entity to
B-7
<PAGE>
which legal or beneficial ownership of the First USA Shares shall pass, whether
by operation of law or otherwise. Notwithstanding any transfer of the First USA
Shares, the transferor shall remain liable for the performance of all
obligations under this Agreement of the transferor.
(d) Assignment. This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other parties, provided that
FDC may assign, in its sole discretion, its rights and obligations hereunder to
any direct or indirect wholly-owned subsidiary of FDC, but no such assignment
shall relieve FDC of its obligations hereunder if such assignee does not
perform such obligations.
(e) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the relevant parties
hereto.
(f) Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly received if so given) by hand delivery, telegram, telex or telecopy,
or by mail (registered or certified mail, postage prepaid, return receipt
requested) or by any courier service, such as Federal Express, providing proof
of delivery. All communications hereunder shall be addressed to the respective
parties at the following addresses:
If to Bank One or First USA:
BANK ONE CORPORATION
One First National Plaza
Law Department
Mail Suite 0287
Chicago, Illinois 60670
Attention: Daniel P. Cooney
Facsimile No.: (312) 732-3596
with a copy to:
First USA Financial, Inc.
3 Christiana Centre
201 Walnut Street
10th Floor
Wilmington, Delaware 19801
Attention: Phillip L. Weaver
Facsimile No.: (302) 985-8433
If to FDC, Holdco or Merger Sub:
First Data Corporation
5660 New Northside Dr.
Suite 1400
Atlanta, GA 30328
Attention: General Counsel
Facsimile No.: (770) 857-0414
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: Frederick C. Lowinger
Sherry S. Treston
Facsimile No.: (312) 853-7036
B-8
<PAGE>
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.
(g) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such 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.
(h) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(i) Remedies Cumulative. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any thereof by any party
shall not preclude the simultaneous or later exercise of any other such right,
power or remedy by such party.
(j) No Waiver. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy or
to demand such compliance.
(k) No Third Party Beneficiaries. This Agreement, except as expressly set
forth in Section 3 with respect to the Company, is not intended to be for the
benefit of, and shall not be enforceable by, any Person who is not a party
hereto.
(l) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts and laws thereof.
(m) Descriptive Headings. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
(o) Expenses. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be for the account of the
party incurring such costs and expenses.
B-9
<PAGE>
IN WITNESS WHEREOF, FDC, Holdco, Merger Sub, Bank One and First USA have
caused this Agreement to be duly executed as of the day and year first above
written.
FIRST DATA CORPORATION
By /s/ David J. Treinen
-------------------------------
Name: David J. Treinen
Title: Senior Vice President
FDC OFFER CORPORATION
By /s/ David J. Treinen
-------------------------------
Name: David J. Treinen
Title: Senior Vice President
FB MERGING CORPORATION
By /s/ David J. Treinen
-------------------------------
Name: David J. Treinen
Title: Senior Vice President
BANK ONE CORPORATION
By /s/ Richard J. Lehmann
-------------------------------
Name: Richard J. Lehmann
Title: President and Chief
Operating Officer
FIRST USA FINANCIAL, INC.
By /s/ Phillip L. Weaver
-------------------------------
Name: Phillip L. Weaver
Title: Executive Vice President
Strategic Planning
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<PAGE>
ANNEX C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
dated as of March 22, 1999
BETWEEN
FIRST DATA CORPORATION
AND
BANK ONE CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
------- ----
ARTICLE I
DEFINITIONS
<C> <S> <C>
1.1. Definitions.................................................... C-1
1.2. Interpretation................................................. C-2
ARTICLE II
PRELIMINARY TRANSACTIONS
2.1. Divestiture of Excluded Assets................................. C-2
2.2. Subsidiaries of Alpha.......................................... C-2
ARTICLE III
CLOSING
3.1. Time and Place of Closing...................................... C-2
3.2. Execution and/or Amendment of Agreements....................... C-2
3.3. Contribution of Specified Assets and Liabilities............... C-3
3.4. Alpha Deliveries............................................... C-3
3.5. Alliance Deliveries............................................ C-3
3.6. Other Deliveries............................................... C-3
3.7. Consents to Assignment......................................... C-3
3.8. Closing Costs; Transfer Fees................................... C-4
ARTICLE IV
CONTRIBUTION OF ASSETS AND LIABILITIES OF ALPHA
4.1. Contribution Assets............................................ C-4
4.2. Excluded Assets................................................ C-5
4.3. Assumed Liabilities............................................ C-5
4.4. Excluded Liabilities........................................... C-5
ARTICLE V
CONDITIONS TO CLOSING
5.1. Illegality, Etc. .............................................. C-5
5.2. Litigation..................................................... C-5
5.3. Consents and Approvals......................................... C-6
5.4. Merger......................................................... C-6
5.5. Other Agreements............................................... C-6
5.6. Divestiture of Unrelated Assets................................ C-6
5.7. Resolutions, Certificates, Etc. ............................... C-6
5.8. Opinions of Counsel............................................ C-6
5.9. Accounting..................................................... C-7
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Representations and Warranties of Bank One and Bank One
6.1. Affiliates..................................................... C-7
6.2. Representations and Warranties of FDC and FDC Affiliates....... C-9
</TABLE>
C-i
<PAGE>
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
ARTICLE VII
SCHEDULES OF ALPHA ASSETS AND LIABILITIES................................. C-10
ARTICLE VIII
ADDITIONAL AGREEMENTS
<S> <C> <C>
8.1. Reasonable Access................................................ C-10
8.2. Accuracy of Representations and Warranties....................... C-10
8.3. Efforts to Consummate............................................ C-10
8.4. No Public Announcement........................................... C-11
8.5. Notices.......................................................... C-11
8.6 Notification of Certain Matters.................................. C-12
8.7. Card Association Approvals....................................... C-12
8.8. Related Party Transactions....................................... C-12
8.9. Operations Prior to Closing Date................................. C-12
8.10. Intercompany Agreements.......................................... C-12
8.11. Cooperation on Debt.............................................. C-12
8.12. Certain Fees..................................................... C-13
ARTICLE IX
EMPLOYEE MATTERS
9.1. Employment of Alpha Employees.................................... C-13
9.2. Maintenance of Employee Benefits Plans........................... C-13
9.3. Bonuses.......................................................... C-13
9.4. Vacation and Sick Leave.......................................... C-13
9.5. Workers' Compensation............................................ C-13
9.6. Employees of Alliance Members.................................... C-13
ARTICLE X
INDEMNIFICATION; PAYMENT OF CERTAIN COSTS
10.1. Indemnification by FDC........................................... C-14
10.2. Indemnification by Bank One...................................... C-14
10.3. Notice of Claims................................................. C-14
10.4. Third Person Claims.............................................. C-14
10.5. Limitation....................................................... C-15
ARTICLE XI
TERMINATION
11.1. Termination...................................................... C-15
11.2. Notice of Termination............................................ C-15
11.3. Effect of Termination............................................ C-15
</TABLE>
C-ii
<PAGE>
<TABLE>
<CAPTION>
Section Page
------- ----
ARTICLE XII
MISCELLANEOUS PROVISIONS
<C> <S> <C>
12.1. Counterparts..................................................... C-16
12.2. Entire Agreement................................................. C-16
12.3. Partial Invalidity............................................... C-16
12.4. Amendment........................................................ C-16
12.5. Governing Law.................................................... C-16
12.6. Waiver........................................................... C-16
12.7. Further Assurances............................................... C-16
12.8. Expenses......................................................... C-16
12.9. Survival of Obligations.......................................... C-17
12.10. Successors and Assigns........................................... C-17
12.11. Confidential Nature of Information............................... C-17
12.12. Informal Dispute Resolution...................................... C-17
12.13. Arbitration...................................................... C-18
12.14. Judicial Procedure............................................... C-19
12.15. Amendment of Alliance Agreement.................................. C-19
</TABLE>
ANNEXES
<TABLE>
<C> <S>
ANNEX I --Definitions
EXHIBITS
EXHIBIT A --Form of Operating Agreement
EXHIBIT B --Related Party Transactions
EXHIBIT C --List of Schedules
EXHIBIT D --Knowledge of Bank One
EXHIBIT E --Other Alliances
EXHIBIT F --Intentionally Omitted
EXHIBIT G --Form of Revised Processing Agreement--Additional Terms
</TABLE>
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<PAGE>
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT, dated as of March 22, 1999 (this "Agreement"),
between First Data Corporation, a Delaware corporation ("FDC"), and BANK ONE
CORPORATION, a Delaware corporation ("Bank One").
WITNESSETH:
WHEREAS, First Data Merchant Services Corporation, a Florida corporation
("FDMS") and wholly owned subsidiary of FDC (successor to Card Establishment
Services, Inc.), First Data Resources Inc., a Delaware corporation ("FDR") and
wholly owned subsidiary of FDC, and Banc One POS Services Corporation, an Ohio
corporation ("Banc One POS") and wholly owned subsidiary of Bank One, entered
into an Alliance Agreement dated June 15, 1995, as amended on January 10, 1996
(the "Alliance Agreement");
WHEREAS, FDMS, Banc One POS, and Banc One Payment Services L.L.C., a
Delaware limited liability company (the "Alliance") have entered into a Limited
Liability Company Agreement dated January 10, 1996, as amended on December 31,
1996 (the "Formation Agreement");
WHEREAS, Bank One, through its wholly-owned subsidiary, First USA Financial,
Inc., a Delaware corporation ("FUSA"), holds approximately 55% of the issued
and outstanding common stock of Paymentech, Inc., a Delaware corporation
("Alpha");
WHEREAS, FDC proposes to negotiate and enter into, or cause an Affiliate to
enter into, an agreement of merger (the "Merger Agreement") with Alpha pursuant
to which all the issued and outstanding common stock of Alpha not owned,
directly or indirectly, by Bank One will be acquired by such Affiliate (the
"Merger"), and FDC and Bank One propose to negotiate and enter into, or cause
an Affiliate to enter into a stockholders agreement (the "Stockholders
Agreement") governing certain actions of FDC, Bank One and/or certain of their
Affiliates relative to Alpha and certain Affiliates of Alpha;
WHEREAS, following the Merger, FDC and Bank One desire to cause the assets
and liabilities and business operations of Alpha to be contributed to the
Alliance in exchange for a Membership Interest, as defined in the Operating
Agreement (as defined herein), in the Alliance;
WHEREAS, upon the Closing, as hereinafter defined, FDC and Bank One shall
cause the members of the Alliance, including Alpha, to enter into an amended
and restated limited liability company agreement (the "Operating Agreement") in
the form attached hereto as Exhibit A;
WHEREAS, in recognition of the additional capabilities that the Alliance
will have upon the contribution to the Alliance of the assets and business of
Alpha, upon the Closing, FDC and Bank One shall cause the Alliance and FDMS to
execute an amended and restated processing agreement (the "Revised Processing
Agreement") in the form of the agreement dated as of March 22, 1999 between
FDMS and Paymentech Merchant Services, Inc., except for such changes necessary
to reflect the appropriate parties thereto and except as described on Exhibit G
attached hereto;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. In this Agreement, unless the context shall otherwise
require, the capitalized terms used herein shall have the respective meanings
specified or referred to in Annex I hereto, which is incorporated by reference
herein. Each agreement referred to in Annex I shall mean such agreement as
amended, supplemented and modified from time to time to the extent permitted by
the applicable provisions thereof and hereof.
C-1
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1.2. Interpretation. Each definition contained or referred to in this
Agreement includes the singular and the plural, and reference to the neuter
gender includes the masculine and feminine where appropriate. References to any
statute or regulation means such statute or regulations as amended at the time
and includes any successor legislation or regulations. The headings to the
Articles and Sections are for convenience of reference and shall not affect the
meaning or interpretation of this Agreement. Except as otherwise stated,
reference to Articles, Sections, Exhibits and Schedules means the Articles,
Sections, Exhibits and Schedules of this Agreement. The Exhibits and Schedules
are hereby incorporated by reference into and shall be deemed a part of this
Agreement.
ARTICLE II
PRELIMINARY TRANSACTIONS
2.1. Divestiture of Excluded Assets. Upon the terms and subject to the
conditions of this Agreement, Bank One and FDC shall cause the spin-off, sale
or other disposition of the capital stock or, at the election of Bank One, the
assets and liabilities of First USA Financial Services, Inc., a Utah industrial
loan company ("FUFSI"), and the capital stock of Message Media, Inc., a
Delaware corporation ("Message Media"). With respect to FUFSI, such spin-off,
sale or divestiture shall occur promptly following the consummation of the
Merger and in any event prior to the Closing Date unless such spin-off, sale or
other disposition shall have been previously effected with the consent of FDC.
With respect to Message Media, such spin-off, sale or divestiture shall occur
as soon as practical after the date hereof and in any event prior to the
Closing Date. Such spin-off, sale or other disposition of FUFSI shall be for a
net aggregate consideration to Alpha as shall be mutually agreed upon by FDC
and Bank One or, if FDC and Bank One are not able to agree, for such net
aggregate consideration as shall be determined pursuant to the Appraisal
Procedure. Such spin-off, sale or other disposition of Message Media shall be
for a net aggregate consideration to Alpha realized from the sale of such stock
in the open market.
2.2. Subsidiaries of Alpha. Upon the terms and subject to the conditions of
this Agreement, unless Bank One and FDC shall mutually agree to the contrary,
Bank One and FDC shall make appropriate mutually agreeable arrangements to
retain the Subsidiaries of Alpha in existence as Subsidiaries of Alpha after
the Closing or, if mutually agreed, to merge or otherwise combine one or more
such Subsidiaries into or with one or more other such Subsidiaries, and in each
case thereafter cause the assets, liabilities and business of each surviving
Subsidiary to be contributed (directly or indirectly) to the Alliance in
exchange for a Membership Interest, as defined in the Operating Agreement, in
the Alliance. References herein to Alpha shall, where appropriate, be deemed to
be references to Alpha and each surviving Subsidiary of Alpha.
ARTICLE III
CLOSING
3.1. Time and Place of Closing. Subject to the terms and conditions set
forth herein, the closing of the transactions contemplated hereby (the
"Closing") shall take place at 10:00 a.m. central time on the third Banking Day
following the satisfaction of the closing conditions specified in Article V or
such later date as may be agreed upon by the parties hereto after the
conditions set forth in Article V have been satisfied or waived,(the "Closing
Date"), at the offices of Sidley & Austin, Chicago, Illinois, or at such other
time and place as the parties hereto shall agree. All of the actions scheduled
in this Agreement for the Closing Date taken or occurring on the Closing Date
shall be deemed to occur simultaneously thereon.
3.2. Execution and/or Amendment of Agreements. Upon the terms and subject to
the conditions of this Agreement, on the Closing Date, Bank One and FDC,
respectively, shall cause each of the agreements listed in Section 5.5 to be
executed and delivered by the appropriate parties thereto.
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3.3. Contribution of Specified Assets and Liabilities. Upon the terms and
subject to the conditions of this Agreement, on the Closing Date, FDC and Bank
One, respectively, shall cause the Contributed Assets and the Assumed
Liabilities to be transferred to the Alliance as set forth in Article IV and
shall cause the Alliance to assume all such Assumed Liabilities.
3.4. Alpha Deliveries. Upon the terms and subject to the conditions of this
Agreement, on the Closing Date, Bank One and FDC, respectively, shall cause
Alpha to deliver to the Alliance all of the following:
(a) Certified copies of resolutions of the stockholders and the Board of
Directors of Alpha authorizing the transactions contemplated hereby;
(b) An instrument of assignment and assumption in form and substance
reasonably satisfactory to Bank One and FDC (the "Instrument of Assignment
and Assumption");
(c) Certificates of title or origin (or like documents) with respect to
any of the Contributed Assets for which a certificate of title or origin is
required in order to transfer title;
(d) Any consents, waivers or approvals obtained by Alpha with respect to
the Contributed Assets or the consummation of the transactions contemplated
by this Agreement; and
(e) Such other bills of sale, assignments and other instruments of
transfer or conveyance as either Bank One or FDC may reasonably request or
as may otherwise be necessary to evidence and effect the assignment,
transfer, conveyance and delivery of the Contributed Assets by Alpha to the
Alliance.
3.5. Alliance Deliveries. Upon the terms and subject to the conditions of
this Agreement, on the Closing Date, Bank One and FDC, respectively, shall
cause the Alliance to deliver to Alpha all of the following:
(a) The Instrument of Assignment and Assumption;
(b) Such other instruments as either Bank One or FDC may reasonably
request or as may be otherwise necessary to evidence or effect the
assumption by the Alliance of the Assumed Liabilities
In addition to the foregoing, on the Closing Date, Alpha will receive a
Membership Interest (as such term is defined in the Operating Agreement) in the
Alliance as described in Section 4.2 of the Operating Agreement. Bank One and
FDC agree that Alpha will be acquiring its Membership Interest for its own
account for investment and with no present intention of distributing or
reselling such Membership Interest or any part thereof. Alpha will be fully
informed as to the applicable limitations upon any distribution or resale of
the Membership Interest, which will not be registered pursuant to the
Securities Act. Bank One and FDC will cause Alpha to agree not to distribute or
resell all or any portion of the Membership Interest if such distribution or
resale would constitute a violation of the Securities Act by either Alpha or
the Alliance.
3.6. Other Deliveries. Upon the terms and subject to the conditions of this
Agreement, on the Closing Date, Bank One and FDC shall cause their respective
Affiliates to deliver to the other party such additional documents and
instruments, including certified copies of corporate charters or comparable
documents, by-laws, resolutions or other items, as either party may reasonably
request.
3.7. Consents to Assignment. Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
contract or agreement, or any claim or right or any benefit arising thereunder
or resulting therefrom, if an attempted assignment thereof, without the consent
of a third party thereto, would constitute a breach thereof or would in any way
adversely affect the rights of the Alliance thereunder. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
affect the rights thereunder so that the Alliance would not receive all such
rights, Bank One and FDC will cause Alpha and the Alliance to cooperate, in all
reasonable respects, to obtain such consent as soon as practicable and, until
such consent is obtained, to provide to the Alliance the benefits under any of
the foregoing to which such consent relates (with the Alliance responsible for
all the liabilities and obligations thereunder). In particular, in the event
that any such consent is not obtained prior to the Closing Date, then
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Bank One and FDC will cause Alpha and the Alliance to enter into such
arrangements (including subleasing or subcontracting if permitted) to provide
to all parties the economic and operational equivalent of obtaining such
consents and assigning such contract or agreement, including the enforcement
for the benefit of the Alliance of all claims or rights arising thereunder, and
the performance by the Alliance of the obligations thereunder.
3.8. Closing Costs; Transfer Fees. The cost of any surveys, title reports or
title searches, and the recording or filing of all applicable conveyancing
instruments incurred by reason of the transfer of Contributed Assets to the
Alliance will be paid by Alpha upon the Closing.
ARTICLE IV
CONTRIBUTION OF ASSETS AND LIABILITIES OF ALPHA
4.1. Contribution Assets. On the Closing Date and upon the terms and subject
to the conditions of this Agreement including Section 3.7, FDC and Bank One
shall cause Alpha, and each surviving Subsidiary under Section 2.2, to (and on
or prior to the Closing Date FDC and Bank One shall cause Alpha, and each
surviving Subsidiary under Section 2.2, on its own behalf, to agree in writing
with the Alliance upon such terms and subject to such conditions, to) assign,
transfer, convey and deliver unto the Alliance, on a going concern basis, all
of the business and operations of Alpha, and each such Subsidiary, and all of
the assets and properties of Alpha, and each such Subsidiary, of every kind and
description, wherever located, real, personal and mixed, tangible and
intangible (other than Excluded Assets) as the same shall exist on the Closing
Date (the "Contributed Assets"), including, without limitation, all right,
title and interest of Alpha, and each such Subsidiary, under, to and in:
(a) cash and cash equivalents;
(b) assets reflected on the balance sheet of Alpha, and each such
Subsidiary, as of December 31, 1998, except for those assets disposed of
subsequent to such date;
(c) Personal Property;
(d) Accounts Receivable and Inventory;
(e) any Owned Real Property;
(f) Leased Real Property and leasehold improvements;
(g) Capital Stock of Subsidiaries of Alpha, if mutually agreed by Bank
One and FDC;
(h) any Investments;
(i) Contracts including without limitation Merchant Agreements;
(j) goodwill together with all customer lists, processes, manuals, know
how and other proprietary information;
(k) owned Intellectual Property and Software, and the contracts,
licenses, sublicenses, assignments, indemnities and other agreements with
third parties related thereto;
(l) licensed Intellectual Property and Software, and the contracts,
licenses, sublicenses, assignments, indemnities and other agreements with
third parties related thereto;
(m) telephone, telex, telephone facsimile numbers and other directory
listings, web sites and Internet domain names;
(n) any rights, claims or causes of action against third Persons;
(o) any Governmental Permits;
(p) Insurance Policies;
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(q) books, files, reports, records, correspondence, documents and other
material including, without limitation, supplier lists and customer files,
payroll and personnel records and financial, sales and purchasing records;
and
(r) all other assets owned by Alpha on the Closing Date except for the
Excluded Assets.
4.2. Excluded Assets. Notwithstanding the provisions of Section 4.1, the
Contributed Assets shall not include the capital stock of FUFSI or the capital
stock of Message Media (herein referred to as the "Excluded Assets").
4.3. Assumed Liabilities. On the Closing Date and upon the terms and subject
to the conditions of this Agreement, FDC and Bank One shall cause the Alliance
to (and on or prior to the Closing Date FDC and Bank One shall cause Alpha, and
each surviving Subsidiary under Section 2.2, on its own behalf, to enter into
an agreement with the Alliance causing the Alliance, upon such terms and
subject to such conditions, to) assume and be obligated to pay, perform and
otherwise discharge all liabilities and obligations of Alpha, and each such
Subsidiary, direct or indirect, known or unknown, absolute or contingent (other
than the Excluded Liabilities) (the "Assumed Liabilities"), including, without
limitation:
(a) accounts payable and other accrued liabilities and obligations that
are reflected on the balance sheet of Alpha, and each such Subsidiary, as
of December 31, 1998 and similar liabilities and obligations incurred
subsequent to such date;
(b) all liabilities in respect of any pending or threatened action,
suit, or proceeding against Alpha or any such Subsidiary;
(c) Chargebacks and credit losses;
(d) liabilities in respect of Taxes;
(e) contingent liabilities; and
(f) liabilities and obligations under the Contracts.
4.4. Excluded Liabilities. Notwithstanding the provisions of Section 4.3,
the Alliance shall not assume or be obligated to pay, perform or otherwise
discharge liabilities or obligations of Alpha or any such Subsidiary in respect
of the Excluded Assets (all such liabilities and obligations not being assumed
by the Alliance being herein referred to as the "Excluded Liabilities").
ARTICLE V
CONDITIONS TO CLOSING
The obligations of the parties hereto to consummate the transactions
contemplated by this Agreement to occur at the Closing shall be subject to the
satisfaction, or waiver by the appropriate party or parties, on or prior to the
Closing Date of the following conditions precedent (except that the obligation
of any party shall not be subject to such party's own performance or
compliance):
5.1. Illegality, Etc. No change shall have occurred as of the Closing Date
in applicable Requirements of Laws that in the reasonable opinion of any party
would make it illegal for it to participate in any of the transactions
contemplated to occur at the Closing.
5.2. Litigation. No action, proceeding or investigation shall have been
instituted, nor shall action before any court or Governmental Body be
threatened, which in the opinion of counsel for FDC or Bank One is not
frivolous, nor shall any order, judgment or decree have been issued or proposed
to be issued by any court or Governmental Body, at the time of the Closing Date
to modify, set aside, invalidate, restrain, enjoin or prevent the consummation
of this Agreement, the Operating Agreement, the Revenue Sharing Agreement, the
Revised Processing Agreement or the transactions contemplated herein or
therein.
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5.3. Consents and Approvals. (a) All actions, approvals, consents, waivers,
exemptions, variances, franchises, orders, permits, authorizations, rights and
licenses (other than any thereof that are routine in nature and that cannot be
obtained, or that are not normally applied for, prior to the time they are
required and that FDC or Bank One, as the case may be, does not have any reason
to believe any difficulty will be encountered in obtaining) required to be
taken, given or obtained, as the case may be, by or from any Governmental Body,
that are necessary in connection with the consummation of the transactions
contemplated by this Agreement, the Operating Agreement, the Revenue Sharing
Agreement and the Revised Processing Agreement shall have been duly taken,
given or obtained, as the case may be, and shall be in full force and effect on
the Closing Date.
(b) Notwithstanding the foregoing, the waiting period under the HSR Act, if
applicable, shall have expired or been terminated.
5.4. Merger. The Merger shall have been consummated.
5.5. Other Agreements. The following agreements shall have been duly
authorized, executed and delivered by the respective party or parties thereto,
or shall have been received by a party hereto, shall each be satisfactory in
form and substance to each such party and shall be in full force and effect,
and executed counterparts shall have been delivered to each such party and its
respective counsel:
(a) this Agreement;
(b) the Operating Agreement;
(c) the Revised Processing Agreement;
(d) the Revenue Sharing Agreement; and
(e) a guaranty of Bank One, N.A., Columbus, Ohio and a guaranty of FDC
in form and substance mutually agreeable to Bank One and FDC, it being
understood that such guaranties will cover only the obligations of the
members under the Operating Agreement and that the enforcement of such
guaranties shall not require as a pre-condition obtaining a judgment
against the primary obligor.
5.6. Divestiture of Unrelated Assets. The transactions contemplated by
Section 2.1 hereof shall have occurred.
5.7. Resolutions, Certificates, Etc. Each party hereto shall have received,
in form and substance reasonably satisfactory to it,
(a) a copy of resolutions of the Board of Directors of each party (other
than FDC and Bank One) to any of the agreements referred to in Section 5.5,
certified as of the Closing Date by the Secretary or an Assistant Secretary
thereof, duly authorizing the execution, delivery and performance by such
party, respectively, of each such agreement to which it is a party,
together with an incumbency certificate as to the person or persons
authorized to execute and deliver such documents on its behalf; and
(b) such other documents and evidence with respect to FDC or Bank One
and each other party to any of the agreements referred to in Section 5.5 as
FDC or Bank One or their respective counsel may reasonably request in order
to consummate the transactions contemplated hereby, the taking of all
corporate proceedings in connection therewith and compliance with the
conditions herein.
5.8. Opinions of Counsel. The following opinions of legal counsel, dated the
Closing Date, shall have been delivered:
(a) Opinion of Counsel for FDC. Opinion from Michael T. Whealy, general
counsel of FDC, addressed to Bank One in form and substance reasonably
satisfactory to Bank One.
(b) Opinion of Counsel for Bank One. Opinion from Sherman I. Goldberg,
General Counsel for Bank One, addressed to FDC in form and substance
reasonably satisfactory to FDC.
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5.9. Accounting. (a) On or prior to the Closing Date, Bank One shall request
a formal written opinion of Arthur Andersen LLP to the effect that the
transactions contemplated by this Agreement, the Operating Agreement and the
Merger Agreement (and identified in such opinion) will not adversely affect
"pooling of interests" accounting treatment for any then publicly announced or
completed transaction by Bank One or any Affiliate assuming any changes to the
Operating Agreement that would be reasonably acceptable to Bank One. In the
event that Arthur Andersen LLP will not issue the formal written opinion
described in the preceding sentence, Bank One will request Arthur Andersen LLP
provide to Bank One and FDC the basis for its inability to deliver such
opinion, such basis to be given orally or in writing in reasonable detail. If
Bank One fails to receive a written opinion as described in the first sentence
of this Section 5.9(a), Bank One shall not be obligated to close the
transaction contemplated by this Agreement, it being understood that the
condition set forth in such first sentence shall be subsequently deemed
satisfied if Bank One shall receive a subsequent formal written opinion of
Arthur Andersen LLP in form and substance satisfactory to Bank One that the
transactions contemplated by this Agreement, the Operating Agreement and the
Merger Agreement will not adversely affect "pooling of interests" accounting
treatment for any then publicly announced or completed transaction by Bank One
or any Affiliate.
(b) On or prior to the Closing Date, FDC shall request a formal written
opinion of Ernst & Young LLP to the effect that the transactions contemplated
by this Agreement, the Operating Agreement and the Merger Agreement (and
identified in such opinion) will not adversely affect "pooling of interests"
accounting treatment for any then publicly announced or completed transaction
by FDC or any Affiliate assuming any changes to the Operating Agreement that
would be reasonably acceptable to FDC. In the event that Ernst & Young LLP will
not issue the formal written opinion described in the preceding sentence, FDC
will request Ernst & Young LLP provide to Bank One and FDC the basis for its
inability to deliver such opinion, such basis to be given orally or in writing
in reasonable detail. If FDC fails to receive a written opinion as described in
the first sentence of this Section 5.9(b), FDC shall not be obligated to close
the transaction contemplated by this Agreement, it being understood that the
condition set forth in such first sentence shall be subsequently deemed
satisfied if FDC shall receive a subsequent formal written opinion of Ernst &
Young LLP in form and substance satisfactory to FDC that the transactions
contemplated by this Agreement, the Operating Agreement and the Merger
Agreement will not adversely affect "pooling of interests" accounting treatment
for any then publicly announced or completed transaction by FDC or any
Affiliate.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Representations and Warranties of Bank One and Bank One Affiliates. As
an inducement to FDC to enter into this Agreement, and to cause one of its
Affiliates to enter into the Operating Agreement, the Revenue Sharing Agreement
and the Revised Processing Agreement, and to consummate the transactions
contemplated hereby and thereby, Bank One represents and warrants to FDC and
agrees as follows except as may be otherwise provided in the Confidential
Disclosure letter of Bank One attached hereto:
(a) Organization, Corporate Power, Etc. Bank One is a bank holding
company duly organized and validly existing as a corporation under the laws
of the State of Delaware. Each Bank One Affiliate (other than Alpha and its
Subsidiaries) that will be a party to any of the agreements contemplated by
this Agreement is a corporation or other entity duly organized and validly
existing under the laws of its respective jurisdiction of organization.
Bank One is duly licensed or qualified to do business as a foreign
corporation in all of the jurisdictions in which Bank One is required to be
so licensed or qualified with respect to the Alliance, except where the
failure to be so licensed or qualified would not have a material adverse
effect on the operations or financial condition of the Alliance. Bank One
and each of its Affiliates (other than Alpha and its Subsidiaries) that
will be performing obligations under any other agreement contemplated by
this Agreement, has all requisite corporate power and authority to own,
operate and lease its assets and to carry on its business as it is now
being conducted except where the failure to have such power and authority
would not have a material adverse effect on the operations or financial
condition of
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Bank One or the applicable Affiliate, and Bank One and each such Affiliate
has all requisite corporate power and authority to perform its respective
obligations hereunder and thereunder.
(b) Authority of Bank One. Bank One and each of its applicable
Affiliates (other than Alpha and its Subsidiaries) has full power and
authority to execute, deliver and perform this Agreement, the Operating
Agreement, the Revenue Sharing Agreement, the Revised Processing Agreement
and any other agreement contemplated hereby to which Bank One or such
applicable Affiliate is a party. The execution, delivery and performance of
this Agreement, the Operating Agreement, the Revenue Sharing Agreement, the
Revised Processing Agreement and any other agreement contemplated hereby by
Bank One or such Affiliate have been duly authorized and approved by Bank
One or such Affiliate, as the case may be, and do not require any further
authorization or consent of Bank One, any such Affiliate or their
respective boards of directors or stockholders. This Agreement has been,
and the Operating Agreement, the Revenue Sharing Agreement and the Revised
Processing Agreement will be, duly authorized, executed and delivered by
Bank One or such Affiliate and are or will be upon execution, the legal,
valid and binding obligations of Bank One or such Affiliate enforceable in
accordance with its terms.
Neither the execution and delivery of this Agreement, the Operating
Agreement, the Revenue Sharing Agreement, the Revised Processing Agreement
or any other agreement contemplated hereby, or the consummation of any of
the transactions contemplated hereby or thereby nor compliance with or
fulfillment of the terms, conditions and provisions hereof or thereof will
(i) conflict with, violate, result in a breach of, or constitute a default
under the charter or By-laws of Bank One or any such Affiliate, (ii)
conflict with (A) any Court Order to which Bank One or any such Affiliate
is a party or by which Bank One or any such Affiliate is bound, or (B) any
Requirements of Laws affecting Bank One or any such Affiliate, or (iii)
conflict with or violate in any material manner or result in a material
breach of, or constitute a material default under any material note,
instrument, agreement, mortgage, lease, license, franchise, permit or other
authorization, right, restriction or obligation to which Bank One or any
such Affiliate is a party or by which Bank One or any such Affiliate is
bound.
(c) Consents and Approvals. Except for such consents, approvals or
authorizations to be applied for under the HSR Act or as may be required
under licenses or other agreements relating to the Alliance, if any, no
consent, approval or authorization of, or declaration, filing or
registration with, or notice to, or order or action of, any court,
administrative agency or other Governmental Body or any other Person
(including, without limitation, any financial institution or Card
Association) is required to be made or obtained by Bank One or any of its
Affiliates (excluding Alpha and its Subsidiaries) in connection with the
execution and delivery by Bank One or any such Affiliate of this Agreement,
the Operating Agreement, the Revenue Sharing Agreement, the Revised
Processing Agreement or any other agreement contemplated hereby, the
consummation by Bank One of the transactions contemplated hereby or thereby
and the performance by Bank One or any such Affiliate of its obligations
contained herein or therein.
(d) Card Association Rules. To the best of Bank One's knowledge, Bank
One or its applicable clearing affiliate is, and, since January 1, 1998 has
been, in substantial compliance with all applicable Card Association rules,
by-laws and regulations and has received no notice of any material
violations thereof.
(e) Financial Statements of Alpha. Bank One has no knowledge that (i)
the audited balance sheets of Alpha as of June 30, 1998 and 1997 and the
related statements of income and cash flows for the years then ended,
together with the appropriate notes to such financial statements, or (ii)
the unaudited balance sheet of Alpha as of September 30, 1998 and 1997 and
the related statements of income and cash flows for the three months then
ended have not been prepared in conformity with generally accepted
accounting principles consistently applied, or do not fairly present the
financial position and results of operations of Alpha as of their
respective dates and for the respective periods covered thereby, except as
set forth therein or in the notes thereto.
(f) Changes Since September 30, 1998. Bank One has no knowledge that
since September 30, 1998, (i) there has been any material adverse change in
the Contributed Assets or the business or operations, liabilities, profits,
prospects or condition (financial or otherwise) of Alpha or (ii) Alpha has
not generally conducted its business in the ordinary course and in
conformity with past practice.
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(g) No Broker or Finder. No broker, finder or investment banker is
entitled to any fee or commission from Bank One or any of its Affiliates in
connection with the transactions contemplated by this Agreement, the
Operating Agreement, the Revenue Sharing Agreement or the Revised
Processing Agreement, but not including the transactions contemplated by
the Merger Agreement.
(h) Knowledge of Bank One. As used in this Agreement, knowledge of Bank
One when used in phrases such as "Bank One has no knowledge", "to the best
of Bank One's knowledge" or similar phrases shall be limited to actual
knowledge of the officers and employees of Bank One identified on Exhibit D
hereto.
6.2. Representations and Warranties of FDC and FDC Affiliates. As an
inducement to Bank One to enter into this Agreement, and to cause one of its
Affiliates to enter into the Operating Agreement, the Revenue Sharing Agreement
and the Revised Processing Agreement and to consummate the transactions
contemplated hereby and thereby, FDC represents and warrants to Bank One and
agrees as follows:
(a) Organization, Corporate Power, Etc. FDC and each of its Affiliates
that will be a party to any of the agreements contemplated hereby is a
corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of organization and is duly licensed or
qualified to do business as a foreign corporation in all of the
jurisdictions in which such entity is required to be so licensed or
qualified, except where the failure to be so licensed or qualified would
not have a material adverse effect on the operations or financial condition
of the Alliance. FDC has all requisite corporate power and authority to
own, operate and lease its assets and to carry on its business as it is now
being conducted except where failure to have such power and authority would
not have a material adverse effect on the operations or financial condition
of FDC or the applicable Affiliate, and FDC and each of its Affiliates that
will be performing obligations under this Agreement, the Operating
Agreement, the Revenue Sharing Agreement, the Revised Processing Agreement
or any other agreement contemplated hereby has all requisite corporate
power and authority to perform its obligations hereunder and thereunder.
(b) Authority of FDC. FDC and each of its applicable Affiliates has full
power and authority to execute, deliver and perform this Agreement, the
Operating Agreement, the Revenue Sharing Agreement, the Revised Processing
Agreement and any other agreement contemplated hereby to which FDC or such
applicable Affiliate is a party. The execution, delivery and performance of
this Agreement, the Operating Agreement, the Revenue Sharing Agreement, the
Revised Processing Agreement and any other agreements contemplated hereby
by FDC or such Affiliate have been duly authorized and approved by the
Board of Directors of FDC or such Affiliate, as the case may be, and do not
require any further authorization or consent of FDC, any of its Affiliates
or their respective stockholders. This Agreement has been, and the
Operating Agreement, the Revenue Sharing Agreement and the Revised
Processing Agreement will be, duly authorized, executed and delivered by
FDC or such Affiliate and are or will be upon execution, the legal, valid
and binding obligations of FDC or such Affiliate enforceable in accordance
with its terms.
Neither the execution and delivery of this Agreement, the Operating
Agreement, the Revenue Sharing Agreement, the Revised Processing Agreement
or any other agreement contemplated hereby, or the consummation of any of
the transactions contemplated hereby or thereby nor compliance with or
fulfillment of the terms, conditions and provisions hereof or thereof will
(i) conflict with, violate, result in a breach of, or constitute a default
under (1) the charter or By-laws of FDC or any such Affiliate, (2) any
Court Order to which FDC or any such Affiliate is a party or by which FDC
or any such Affiliate is bound, or (3) any Requirements of Laws affecting
FDC or any such Affiliate, or (ii) conflict with or violate in any material
manner, or result in a material breach of, or constitute a material default
under any material note, instrument, agreement, mortgage, lease, license,
franchise, permit or other authorization, right, restriction or obligation
to which FDC or any such Affiliate is a party or by which FDC or any such
Affiliate is bound.
(c) Consents and Approvals. Except for such consents, approvals or
authorizations to be applied for under the HSR Act or as may be required
under licenses or other agreements relating to the Alliances, if
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any, no consent, approval or authorization of, or declaration, filing or
registration with, or notice to, or order or action of, any court,
administrative agency or other Governmental Body or any other Person
(including, without limitation, any financial institution or Card
Association) is required to be made or obtained by FDC or any of its
Affiliates in connection with the execution and delivery by FDC or any of
its Affiliates of this Agreement, the Operating Agreement, the Revenue
Sharing Agreement, Revised Processing Agreement or any other agreement
contemplated hereby, the consummation by FDC or any of its Affiliates of
the transactions contemplated hereby or thereby and the performance by FDC
or any of its Affiliates of its obligations contained herein or therein.
(d) Card Association Rules. To the best of FDC's knowledge, FDC or any
of its applicable Affiliates is, and, since January 1, 1998 has been, in
substantial compliance with all applicable Card Association rules, by-laws
and regulations and has received no notice of any material violations
thereof.
(e) Other Alliances. Attached hereto as Exhibit E is a brief description
of the material terms and provisions of all existing restrictions binding
on FDMS or any of its Affiliates that would prohibit, restrict or limit the
right of FDMS or any such Affiliate to transfer Merchant Agreements to the
UMS portfolio as contemplated by Section 4.8 of the Operating Agreement.
(f) No Broker or Finder. No broker, finder or investment banker is
entitled to any fee or commission from FDC or any of its Affiliates in
connection with the transactions contemplated by this Agreement, the
Operating Agreement, the Revenue Sharing Agreement or the Revised
Processing Agreement, but not including the transactions contemplated by
the Merger Agreement.
ARTICLE VII
SCHEDULES OF ALPHA ASSETS AND LIABILITIES
Prior to the Closing Date, FDC and Bank One shall cooperate in the
preparation of Schedules referred to in Exhibit C, which Schedules are intended
to be complete lists of the assets, properties, contracts and other data of
Alpha and its Subsidiaries to the best knowledge of FDC and Bank One,
respectively, identified in such Schedules.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1. Reasonable Access. Between the date hereof and the Closing Date, Bank
One shall use reasonable efforts to cause Alpha and its Subsidiaries to make
available to the employees, agents and representatives of FDC or its
Affiliates, at reasonably acceptable times and at locations reasonably
acceptable and accessible, the books and records of Alpha and its Subsidiaries
and allow employees, agents and representatives of FDC to discuss the business
of Alpha with certain key employees of Alpha and its Subsidiaries to facilitate
the Merger and transfer of the Contributed Assets and to determine whether the
conditions set forth in Article V or in the Merger Agreement have been
satisfied.
8.2. Accuracy of Representations and Warranties. Between the date hereof and
the Closing Date, each of FDC and Bank One will use reasonable efforts not to
take any action or omit to take any action, and to cause its Affiliates
(excluding Alpha and its Subsidiaries) not to take any action or omit to take
any action, that would result in its respective representations or warranties
contained in Article VI of this Agreement, the Operating Agreement, the Revenue
Sharing Agreement or the Revised Processing Agreement not being true and
correct as of the Closing Date. Each party shall promptly notify the other of
the receipt of any written notice regarding any action, suit or proceeding that
shall be instituted or threatened against such party to restrain, prohibit or
otherwise challenge the legality of any transactions contemplated by this
Agreement.
8.3. Efforts to Consummate. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to negotiate in good faith with
respect to the terms of the Merger Agreement and the Stockholder
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Agreement, and upon the execution of the Merger Agreement and the Stockholder
Agreement agrees to use reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or
advisable to consummate, as promptly as practicable, the transactions
contemplated hereby, in the Operating Agreement, in the Revenue Sharing
Agreement and in the Revised Processing Agreement including, but not limited
to, the obtaining of all necessary consents, waivers, authorizations, orders
and approvals of third parties, whether private or governmental, required of it
by this Agreement, the Operating Agreement, the Revenue Sharing Agreement or
the Revised Processing Agreement; provided, however, that Bank One and FDC
shall each have complete discretion with respect to determining the amount and
type of consideration to be offered for the outstanding Common Stock of Alpha
in the Merger not owned by FDC or an Affiliate of Bank One; provided, further,
that neither FDC nor Bank One shall be required to make any payments (other
than customary administrative and processing fees and reasonable legal
expenses), commence litigation or agree to any material modifications to the
terms of any Contracts, Real Property Leases or Permits in connection with the
foregoing. Each of FDC and Bank One agrees to cooperate fully with the other in
assisting it to comply with the provisions of this Section 8.3.
8.4. No Public Announcement. Neither FDC nor Bank One shall, without the
approval of the other, make any press release or other public announcement
concerning the transactions contemplated by this Agreement, the Operating
Agreement, the Revenue Sharing Agreement or the Revised Processing Agreement,
except as and to the extent that any such party shall be so obligated by law or
the rules of any stock exchange, in which case the other party shall be advised
and the parties shall use their best efforts to cause a mutually agreeable
release or announcement to be issued; provided that the foregoing shall not
preclude communications or disclosures necessary to implement the provisions of
this Agreement, the Operating Agreement, the Revenue Sharing Agreement or the
Revised Processing Agreement or to comply with the accounting and Securities
and Exchange Commission disclosure obligations.
8.5. Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered when
delivered personally, by courier or facsimile transmission or mailed (first
class postage prepaid) to the parties at the addresses or facsimile numbers set
forth below:
If to Bank One, to:
BANK ONE CORPORATION
Law Department
Mail Suite 0287
Chicago, Illinois 60670
Attention: Daniel P. Cooney
Telecopy Number: 312-732-3596 or 312-732-9753
If to FDC, to:
First Data Corporation
5660 New Northside Dr.
Suite 1400
Atlanta, GA 30328
Attention: General Counsel
Telecopy Number: 770-857-0414
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: John M. O'Hare
Telecopy Number: 312-853-7036
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The parties hereto agree that delivery of any copy shall not, by itself, be
considered notice pursuant to this Section 8.5.
All such notices and other communications will (x) if delivered personally
or by courier to the address provided in this Section 8.5, be deemed given upon
delivery, (y) if delivered by facsimile transmission to the facsimile number
provided in this Section 8.5, be deemed given when receipt of transmission has
been electronically confirmed by the sending party, and (z) if delivered by
first class or registered mail in the manner described above to the address as
provided in this Section 8.5, be deemed given three (3) Banking Days after
deposit in the United States mail (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom
a copy of such notice is to be delivered pursuant to this Section 8.5). Any
party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice
specifying such change to the other party.
8.6 Notification of Certain Matters. From the date hereof through the
Closing Date, Bank One and FDC shall give prompt notice to the other of (a) the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any of such party's representations or warranties contained
in this Agreement, the Operating Agreement, the Revenue Sharing Agreement, or
the Revised Processing Agreement to be untrue or inaccurate in any material
respect, and (b) any failure of such party to comply with or satisfy in any
material respect any of its respective covenants, conditions or agreements to
be complied with or satisfied by it under this Agreement, the Operating
Agreement, the Revenue Sharing Agreement, or the Revised Processing Agreement;
provided, however, that such disclosure shall not be deemed to cure any breach
of a representation, warranty, covenant or agreement, or to satisfy any
condition.
8.7. Card Association Approvals. Bank One and FDC shall give or cause to be
given to each applicable Card Association all notices required in connection
with the transaction contemplated hereby.
8.8. Related Party Transactions. Prior to the Closing Date, Bank One shall
and shall cause Alpha to prepare the information required by Exhibit B.
8.9. Operations Prior to Closing Date. Except as set forth on Schedule 8.9
and subject to the matters contemplated by this Agreement, the Merger
Agreement, the Revised Processing Agreement and the Stockholders Agreement,
between the date hereof and the Closing Date, Bank One and FDC shall use
reasonable efforts to cause Alpha to conduct its business only in the ordinary
course and in conformity with past practice.
8.10. Intercompany Agreements. Bank One agrees to, or to cause its
appropriate Affiliates to, (i) terminate the tax sharing agreement between FUSA
and Alpha to the extent the parties reasonably agree portions thereof should be
terminated, (ii) terminate the registration rights agreement between Bank One
and Alpha, (iii) enter into agreements with respect to the provision to Alpha
of office space in Dallas, Texas, certain insurance coverage and a license to
use the name "First USA" and certain other trademarks and such other services
as Bank One or one of its Affiliates are providing to Alpha or its Affiliates
on economic terms consistent with arrangements in effect prior to the Closing
(said economic terms to be in effect for 12 months from and after the Closing
Date and thereafter to be subject to good faith negotiation among the parties),
and (iv) perform the unwritten agreements between Alpha and First USA Bank
described in Section 4.23 of the Company Letter referred to in the Merger
Agreement, in each case on or before the Closing to the extent practicable.
8.11. Cooperation On Debt. If, upon the transfer of the Contributed Assets
by Alpha to the Alliance, or the assumption by Alpha of the Assumed
Liabilities, as contemplated by this Agreement, Alpha would recognize income or
gain for federal income tax purposes as a result of the amount or nature of its
indebtedness (including, without limitation, by reason of all or a portion of
its indebtedness being treated as Member Nonrecourse Debt), then prior to such
contribution and assumption, the parties hereby agree to (and to cause their
respective Affiliates to) take reasonable steps to avoid such income or gain.
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8.12. Certain Fees. Bank One shall cause the Alliance to pay to FDMS, in
lieu of the amounts that would otherwise have been payable to FDMS under
Section 8.24 of the Alliance Agreement, (i) $666,667 on the last day of each
month or portion thereof remaining in calendar year 1999 after the Closing
Date, (ii) $666,667 on the last day of each month in calendar year 2000, and
(iii) $750,000 on the last day of each month in calendar year 2001.
ARTICLE IX
EMPLOYEE MATTERS
9.1. Employment of Alpha Employees. The employment of each employee of Alpha
who is actively employed (including such employees who are on vacation) as of
the Closing shall be transferred to the Alliance effective as of the Closing at
the same base compensation and wage levels as in effect immediately preceding
the Closing. Notwithstanding anything herein to the contrary, nothing in this
Agreement shall create any obligation on the part of the Alliance or any of its
Affiliates to continue the employment of any employee for any definite period
following the Closing. The Alliance shall offer employment (or severance
benefits if such individual's position is no longer available as allowed by
applicable law) to any individual who was an employee of Alpha who is on sick
or disability leave or who is on an approved leave of absence as of the Closing
as of the date such individual returns to work. The persons who become employed
by the Alliance pursuant to this paragraph shall be referred to herein as
"Transferred Employees."
9.2. Maintenance of Employee Benefits Plans. Effective as of the Closing
Date and until such time as the Alliance implements its own benefit plans,,
FDC, Bank One and the Alliance shall take any reasonable actions necessary
(including but not limited to plan amendment, governmental notices, etc.) to
maintain the participation of the Transferred Employees in the plans, programs,
agreements or arrangements which covered the Transferred Employees as of the
Closing Date.
9.3. Bonuses. The Alliance shall assume all obligations and liabilities for
bonuses and incentive payments in connection with the relevant bonus programs
of Alpha in effect immediately prior to the Closing Date and shall cause the
payment of such bonuses or incentive payments, if any, to be made in accordance
with the terms of such plans consistent with past practice.
9.4. Vacation and Sick Leave. The Alliance shall credit each Transferred
Employee with the number of unused vacation days and sick leave credited to
such individual through the Closing Date under the applicable vacation and sick
leave policies of Alpha and shall permit or cause Transferred Employees to be
permitted to use such vacation days and sick leave.
9.5. Workers' Compensation. The Alliance shall assume the obligation and
liability for any workers' compensation or similar workers' protection claims
with respect to any person who was an Alpha employee.
9.6. Employees of Alliance Members. At the present time both Bank One, POS
and FDMS have employees that provide services in connection with the Alliance
business, although none of such employees are employees of the Alliance. Bank
One and FDC acknowledge that subsequent to the Closing, the Alliance management
will decide whether or not they wish to offer employment to any of these
employees of Bank One, POS or FDMS. In the event that such a decision to offer
employment is made, the Alliance shall be under no restrictions regarding
offering employment to individuals who are dedicated full-time to the Alliance,
and Bank One and FDC shall cooperate, and shall cause their respective
Affiliates, to cooperate, in facilitating the transfer of such employees to the
Alliance.
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ARTICLE X
INDEMNIFICATION; PAYMENT OF CERTAIN COSTS
10.1. Indemnification by FDC. FDC shall indemnify and hold harmless Bank One
and any of its Affiliates from and against any and all Losses and Expenses,
whether or not litigation is commenced, imposed upon, incurred by or asserted
against Bank One or any of its Affiliates in connection with or arising from
the breach by FDC of any representation, warranty, covenant or agreement of FDC
in this Agreement, provided, however, that FDC shall not be required to
indemnify or hold Bank One or any of its Affiliates harmless from or against
any such Losses or Expenses to the extent that such Losses or Expenses arise as
a result of Bank One's or any of its Affiliates' own negligence, willful
misconduct or breach of any of its representations, warranties or obligations
pursuant to this Agreement.
10.2. Indemnification by Bank One. Bank One shall indemnify and hold
harmless FDC and its Affiliates from and against any and all Losses and
Expenses, whether or not litigation is commenced, imposed upon, incurred by or
asserted against FDC or its Affiliates in connection with or arising from the
breach by Bank One of any representation, warranty, covenant or agreement of
Bank One in this Agreement, provided, however, that Bank One shall not be
required to indemnify or hold FDC or any of its Affiliates harmless from or
against any such Losses or Expenses to the extent that such Losses or Expenses
arise as a result of FDC's or one of its Affiliates' own negligence, willful
misconduct or breach of any of its representations, warranties or obligations
pursuant to this Agreement.
10.3. Notice of Claims. (a) If either Bank One, FDC or an Affiliate of
either party (each an "Indemnified Party")shall seek indemnification hereunder,
such Indemnified Party shall give promptly to the party obligated to provide
indemnification to such Indemnified Party (the "Indemnitor") a notice (a "Claim
Notice") describing in reasonable detail the facts giving rise to any claim for
indemnification hereunder and shall include in such Claim Notice (if then
known) the amount or the method of computation of the amount of such claim, and
a reference to the provision of this Agreement or any other agreement, document
or instrument executed hereunder or in connection herewith upon which such
claim is based; provided, however, that a Claim Notice in respect of any action
at law or suit in equity by or against a third Person as to which
indemnification will be sought shall be given promptly after the action or suit
is commenced.
(b) In calculating any Loss or Expense there shall be deducted (i) any
insurance recovery in respect thereof (and no right of subrogation shall
accrue hereunder to any insurer) and (ii) the amount of any tax benefit to
the Indemnified Party (or any of its Affiliates) with respect to such Loss
or Expense (after giving effect to the tax effect of receipt of the
indemnification payments).
(c) After the giving of any Claim Notice pursuant hereto, the amount of
indemnification to which an Indemnified Party shall be entitled under this
Article X shall be determined: (i) by the written agreement between the
Indemnified Party and the Indemnitor; (ii) by a final judgment or decree of
any court of competent jurisdiction; or (iii) by any other means to which
the Indemnified Party and the Indemnitor shall agree. The judgment or
decree of a court shall be deemed final when the time for appeal, if any,
shall have expired and no appeal shall have been taken or when all appeals
taken shall have been finally determined. The Indemnified Party shall have
the burden of proof in establishing the amount of Loss and Expense suffered
by it.
10.4. Third Person Claims. (a) In order for an Indemnified Party to be
entitled to any indemnification provided for under this Agreement in respect
of, arising out of or involving a claim or demand made by any third Person
against an Indemnified Party, such Indemnified Party must notify the Indemnitor
in writing, and in reasonable detail, of the third Person claim within 10
Banking Days after receipt by such Indemnified Party of written notice of the
third Person claim. Thereafter, the Indemnified Party shall deliver to the
Indemnitor, within 10 Banking Days after the Indemnified Party's receipt
thereof, copies of all notices and documents (including court papers) received
by the Indemnified Party relating to the third Person claim. Notwithstanding
the foregoing, should an Indemnified Party be physically served with a
complaint with regard to a third Person
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claim, the Indemnified Party must notify the Indemnitor and deliver a copy of
the complaint within 10 Banking Days after receipt thereof and shall deliver to
the Indemnitor within 10 Banking Days after the receipt of such complaint
copies of notices and documents (including court papers) received by the
Indemnified Party relating to the third Person claim.
(b) In the event of the initiation of any legal proceeding, claim or demand
against the Indemnified Party by a third Person, the Indemnitor shall have the
sole and absolute right after the receipt of notice, at its option and at its
own expense, to be represented by counsel reasonably acceptable to the
Indemnified Party and to control, defend against, negotiate, settle or
otherwise deal with any proceeding, claim, or demand which relates to any Loss
or Expense indemnified against hereunder; provided, however, that the
Indemnified Party may participate in any such proceeding with counsel of its
choice and at its expense. The parties hereto agree to cooperate fully with
each other in connection with the defense, negotiation or settlement of any
such legal proceeding, claim or demand. To the extent the Indemnitor elects not
to defend such proceeding, claim or demand, and the Indemnified Party defends
against or otherwise deals with any such proceeding, claim or demand, the
Indemnified Party may retain counsel, at the expense of the Indemnitor, and
control the defense of such proceeding. Neither the Indemnitor nor the
Indemnified Party may settle any such proceeding which settlement obligates the
other party to pay money, to perform obligations or to admit liability without
the consent of the other party, such consent not to be unreasonably withheld.
After any final judgment or award shall have been rendered by a court,
arbitration board or administrative agency of competent jurisdiction and the
time in which to appeal therefrom has expired, or a settlement shall have been
consummated, or the Indemnified Party and the Indemnitor shall arrive at a
mutually binding agreement with respect to each separate matter alleged to be
indemnified by the Indemnitor hereunder, the Indemnified Party shall forward to
the Indemnitor notice of any sums due and owing by it with respect to such
matter and the Indemnitor shall pay all of the sums so owning to the
Indemnified Party by wire transfer, certified or bank cashier's check within 30
days after the date of such notice.
10.5. Limitation. No failure of the Indemnified Party to give the Indemnitor
timely notice as required by Section 10.3 or 10.4 above shall affect such
Indemnified Party's right to indemnification hereunder unless, and then only to
the extent that the rights of the Indemnitor to defend against such claim have
been prejudiced thereby.
ARTICLE XI
TERMINATION
11.1. Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing Date:
(a) by the mutual written consent of Bank One and FDC;
(b) by Bank One or FDC if the Merger Agreement shall be terminated
pursuant to its terms;
(c) by Bank One or FDC if the transactions contemplated by the Merger
Agreement shall not have been consummated on or before October 1, 1999; and
(d) by Bank One or FDC if the Closing shall not have occurred on or
before October 1, 1999.
11.2. Notice of Termination. Any party desiring to terminate this Agreement
pursuant to Section 11.1 shall give written notice of such termination to the
other party to this Agreement.
11.3. Effect of Termination. In the event that this Agreement shall be
terminated pursuant to this Article XI, all further obligations of the parties
under this Agreement (other than Sections 12.8 and 12.11) shall be terminated
without further liability of any party to the other, provided that nothing
herein shall relieve any party from liability for its willful breach of this
Agreement.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1. Counterparts. This Agreement may be executed in several counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
12.2. Entire Agreement. This Agreement, the Operating Agreement, the Revenue
Sharing Agreement and the Revised Processing Agreement and the Exhibits,
Annexes and Schedules hereto and thereto constitute the entire agreement among
the parties hereto and contain all of the agreements among such parties with
respect to the subject matter hereof and thereof. This Agreement, the Operating
Agreement, the Revenue Sharing Agreement and the Revised Processing Agreement
and the Exhibits, Annexes and Schedules hereto and thereto supersede any and
all other agreements, either oral or written, between such parties with respect
to the subject matter hereof and thereof.
12.3. Partial Invalidity. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder
of such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, unless such a construction would be unreasonable.
12.4. Amendment. Except as expressly provided herein, this Agreement may be
amended only by a written agreement executed by each of FDC and Bank One.
12.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
ITS CONFLICTS OF LAW DOCTRINE, EXCEPT TO THE EXTENT THE DELAWARE LIMITED
LIABILITY COMPANY ACT IS CONTROLLING.
12.6. Waiver. Any term or provision of this Agreement may be waived, or the
time for its performance may be extended, by the party or parties entitled to
the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if, as to any party, it is
authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
12.7. Further Assurances. In connection with this Agreement, the Operating
Agreement, the Revenue Sharing Agreement and the Revised Processing Agreement
and the transactions contemplated hereby and thereby, after the Closing each of
FDC and Bank One shall execute and deliver, or use reasonable best efforts to
cause to be executed and delivered (whether by Alpha or by any of its other
Affiliates), any additional documents and instruments, and each will perform,
or use reasonable best efforts to cause to be performed (whether by Alpha or by
any of its other Affiliates), any additional acts that may be necessary or
appropriate to effectuate and perform the provisions of this Agreement, the
Operating Agreement, the Revenue Sharing Agreement, the Revised Processing
Agreement and any other agreement contemplated hereby to which it or any of its
Affiliates is a party and the transactions contemplated hereby and thereby.
12.8. Expenses. Each of FDC and Bank One shall pay its own legal, accounting
and other expenses incident to its negotiation and preparation of this
Agreement, the Operating Agreement, the Revenue Sharing Agreement and the
Revised Processing Agreement and (except as expressly set forth herein or
therein) the consummation of the transactions contemplated hereby and thereby.
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12.9. Survival of Obligations. All representations, warranties, covenants
and obligations contained in this Agreement shall survive the consummation of
the transactions contemplated by this Agreement; provided, however, that the
representations and warranties contained in Section 6.1(e), (f) and (g) shall
terminate on the Closing Date and the other representations and warranties
contained in Section 6.1 and Section 6.2 shall terminate on the third
anniversary of the Closing Date.
12.10. Successors and Assigns. (a) The rights of either party under this
Agreement shall not be assignable by such party hereto without the written
consent of the other.
(b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors and permitted assigns. The successors and
permitted assigns hereunder shall include without limitation, any permitted
assignee as well as the successors in interest to such permitted assignee
(whether by merger, liquidation (including successive mergers or liquidations)
or otherwise). Nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon any Person other than the parties and
successors and assigns permitted by this Section 12.10 any right, remedy or
claim under or by reason of this Agreement.
12.11. Confidential Nature of Information. Each party agrees that it will
treat in confidence during the period prior to the Closing Date all documents,
materials and other information which it shall have obtained regarding the
other party and its Affiliates during the course of the negotiations leading
to the consummation of the transactions contemplated hereby (whether obtained
before or after the date of this Agreement), the investigation provided for
herein and the preparation of this Agreement and other related documents, and,
in the event the transactions contemplated hereby shall not be consummated,
each party will return to the other party all copies of nonpublic documents
and materials which have been furnished in connection therewith. Such
documents, materials and information shall not be communicated to any third
Person (other than counsel, accountants or financial advisors of FDC and Bank
One). No other party shall use any confidential information in any manner
whatsoever except solely for the purpose of evaluating the transactions. The
obligation of each party to treat such documents, materials and other
information in confidence shall not apply to any information which (i) is or
becomes available to such party from a source other than such party provided
such source is not known by the recipient to be subject to an obligation of
confidentiality with respect to such information, (ii) is or becomes available
to the public other than as a result of disclosure by such party or its
agents, (iii) is required to be disclosed under applicable law or judicial
process, but only to the extent it must be disclosed, or (iv) following prior
written notice to the other party disclosing the nature of the proposed
disclosure and the reasons such disclosure is required, such party reasonably
deems necessary to disclose to obtain any of the consents or approvals
contemplated hereby.
12.12. Informal Dispute Resolution. Any dispute, controversy or claim
between FDC and Bank One, including any dispute, controversy or claim
involving their respective Affiliates, arising from or in connection with this
Agreement or the relationship of the parties under this Agreement, whether
based on contract, tort, common law, equity, statute, regulation, order or
otherwise ("Dispute") shall be resolved as follows:
(a) Upon written request of either party, each party will appoint a
designated representative whose task it will be to meet for the purpose of
endeavoring to resolve such Dispute.
(b) The designated representatives shall meet as often as the parties
reasonably deem necessary to discuss the problem in an effort to resolve
the Dispute without the necessity of any formal proceeding. During the
discussions, all reasonable requests by a party to another party for non-
privileged information reasonably related to the Dispute shall be honored
in order that each party may be fully advised of the other party's
position.
(c) Formal proceedings for the resolution of a Dispute may not be
commenced until the earlier of:
(i) the designated representatives concluding in good faith that
amicable resolution through continued negotiation of the matter does not
appear likely; or
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(ii) the expiration of the fifteen (15) day period immediately
following the initial request to negotiate the Dispute;
provided, however, that this Section 12.12 will not be construed to prevent a
party from instituting formal proceedings earlier to avoid the expiration of
any applicable limitations period, to preserve a superior position with respect
to other creditors, or to seek temporary or preliminary injunctive relief
pursuant to Section 12.14.
12.13. Arbitration.
(a) If the parties are unable to resolve any Dispute as contemplated by
Section 12.12, such Dispute shall be submitted to mandatory and binding
arbitration at the election of any disputing party (the "Disputing Party").
It is the intent of the parties that the arbitration be structured in such
a way as to minimize costs. Except as otherwise provided in this Section
12.13, the arbitration shall be pursuant to the Commercial Arbitration
Rules of the American Arbitration Association (the "AAA").
(b) To initiate the arbitration, the Disputing Party shall notify the
other party in writing (the "Arbitration Demand"), which shall (i) describe
in reasonable detail the nature of the Dispute, (ii) state the amount of
the claim, (iii) specify the requested relief and (iv) name an arbitrator
who (A) has been licensed to practice law in the U.S. for at least ten
years, (B) is not then an employee of Bank One or FDC or an employee of an
Affiliate of Bank One or FDC, and (C) is experienced in representing
clients in connection with mergers and acquisitions and the subject matter
of the Dispute (the "Basic Qualifications"). Within fifteen (15) days after
the other party's receipt of the Arbitration Demand, such other party shall
file and serve on the Disputing Party, a written statement (i) answering
the claims set forth in the Arbitration Demand, including any affirmative
defenses of such party; (ii) asserting any counterclaim, which shall (A)
describe in reasonable detail the nature of the Dispute relating to the
counterclaim, (B) state the amount of the counterclaim, and (C) specify the
requested relief; and (iii) either accepting the arbitrator proposed by the
Disputing Party as the sole arbitrator for the proceedings or naming a
second arbitrator satisfying the Basic Qualifications. The Disputing Party
shall notify the other party within two (2) days whether the Disputing
Party accepts the arbitrator proposed by the other party as the sole
arbitrator for the proceedings or rejects such arbitrator and proposes an
alternate arbitrator, in which event within fifteen (15) days thereafter,
the two arbitrators so named by each party will select a third neutral
arbitrator from a list provided by the AAA of potential arbitrators who
satisfy the Basic Qualifications and who have no past or present
relationships with the parties or their counsel, except as otherwise
disclosed in writing to and approved by the parties. The arbitration will
be heard by a panel consisting of either one arbitrator or three
arbitrators, as determined in accordance with this paragraph (b) (the
"Arbitration Panel") with, in the case of three arbitrators, the third
arbitrator so chosen serving as the chairperson of the Arbitration Panel.
Decisions of a majority of the members of the Arbitration Panel shall be
determinative.
(c) The arbitration hearing shall be held in Chicago, Illinois. The
Arbitration Panel is specifically authorized to render partial or full
summary judgment as provided for in the Federal Rules of Civil Procedure.
In the event summary judgment or partial summary judgment is granted, the
non-prevailing party may not raise as a basis for a motion to vacate an
award that the Arbitration Panel failed or refused to consider evidence
bearing on the dismissed claim(s) or issue(s). The Federal Rules of
Evidence shall apply to the arbitration hearing. The party bringing a
particular claim or asserting an affirmative defense will have the burden
of proof with respect thereto. The arbitration proceedings and all
testimony, filings, documents and information relating to or presented
during the arbitration proceedings shall be deemed to be information
subject to the confidentiality provisions of this Agreement. The
Arbitration Panel will have no power or authority, under the Commercial
Arbitration Rules of the AAA or otherwise, to relieve the parties from
their agreement hereunder to arbitrate or otherwise to amend or disregard
any provision of this Agreement, including the provisions of this Section
12.13.
(d) Should an arbitrator refuse or be unable to proceed with arbitration
proceedings as called for by this Section 12.13, the arbitrator shall be
replaced by the party who selected such arbitrator (and approved by the
other party if in a sole arbitrator proceeding), or if such arbitrator was
selected by the two party-
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appointed arbitrators, by such two party-appointed arbitrators selecting a
new third arbitrator in accordance with Section 12.13(b). Each such
replacement arbitrator shall satisfy the Basic Qualifications. If an
arbitrator is replaced pursuant to this Section 12.13(d) after the
arbitration hearing has commenced, then a rehearing shall take place in
accordance with the provisions of this Section 12.13 and the Commercial
Arbitration Rules of the AAA.
(e) At the time of granting or denying a motion for summary judgment as
provided for in paragraph (c) of this Section 12.13 and within fifteen (15)
days after the closing of the arbitration hearing, the Arbitration Panel
shall prepare and distribute to the parties a writing setting forth the
Arbitration Panel's finding of facts and conclusions of law relating to the
Dispute, including the reasons for the giving or denial of any award. The
findings and conclusions and the award, if any, shall be deemed to be
information subject to the confidentiality provisions of this Agreement.
(f) The Arbitration Panel is instructed to schedule promptly all
discovery and other procedural steps and otherwise to assume case
management initiative and control to effect an efficient and expeditious
resolution of the Dispute. Each party's presentation at the arbitration
hearing shall be limited to fourteen (14) hours, and the hearing shall be
completed within ten (10) Banking Days. Summaries of any expert testimony,
along with copies of all documents to be submitted as Exhibits shall be
exchanged as soon as possible and in all events at least ten (10) Banking
Days before the arbitration hearing under procedures set up by the
Arbitration Panel. Except as otherwise specified herein, there shall be no
discovery or dispositive motion practice except as may be permitted by the
Arbitration Panel, who may authorize only such discovery as is shown to be
necessary to insure a fair hearing. No discovery or motions permitted by
the Arbitration Panel shall in any way alter the time limits specified
herein. Both parties shall continue to perform their respective obligations
in accordance with the terms of this Agreement and any agreements
contemplated hereby during any arbitration proceeding. The fact that
arbitration has commenced shall not impair the exercise of any termination
rights set forth in this Agreement. The Arbitration Panel is authorized to
issue monetary sanctions against either party if, upon a showing of good
cause, such party is unreasonably delaying the proceeding.
(g) Any award rendered by the Arbitration Panel will be final,
conclusive and binding upon the parties and any judgment thereon may be
entered and enforced in any court of competent jurisdiction. The
Arbitration Panel may not award punitive damages or any other relief not
contemplated by this Agreement. In particular, the Arbitration Panel may
not order the dissolution, liquidation or other termination of the Company
except as specifically contemplated by the Formation Agreement.
(h) Each party will bear a pro rata share of all fees, costs and
expenses of the arbitrators, and notwithstanding any law to the contrary,
each party will bear all the fees, costs and expenses of its own attorneys,
experts and witnesses; provided, however, that in connection with any
judicial proceeding to compel arbitration pursuant to this Agreement or to
confirm, vacate or enforce any award rendered by the Arbitration Panel, the
prevailing party in such a proceeding will be entitled to recover
reasonable attorneys' fees and expenses incurred in connection with such
proceeding, in addition to any other relief to which it may be entitled.
12.14. Judicial Procedure. Nothing in Sections 12.12 or 12.13 shall be
construed to prevent any party from seeking from a court a temporary
restraining order or other temporary or preliminary relief pending final
resolution of a Dispute pursuant to such Sections 12.12 or 12.13.
12.15. Termination of Alliance Agreement. Except with respect to the
provisions of Sections 3.1(d), 3.1(e), 3.2(d) and 3.2(e) of the Alliance
Agreement and the obligations of the parties under Article V of the Alliance
Agreement with respect to such sections, the Alliance Agreement shall be
terminated in all respects as of the Closing Date.
C-19
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first above
written.
FIRST DATA CORPORATION
By: /s/ David J. Treinan
-------------------------------
Name: David J. Treinan
Title: Senior Vice President
BANK ONE CORPORATION
By: /s/ Richard J. Lehmann
-------------------------------
Name: Richard J. Lehmann
Title: President and Chief
Operating Officer
C-20
<PAGE>
ANNEX D
[Letterhead of Merrill Lynch]
March 22, 1999
Board of Directors
Paymentech, Inc.
1601 Elm Street
Dallas, Texas 75201
Members of the Board of Directors:
Paymentech, Inc. (the "Company"), First Data Corporation (the "Acquiror")
and FB Merging Corporation (the "Acquisition Sub"), a newly formed, wholly
owned subsidiary of FDC Offer Corporation (the "Holdco"), a wholly owned
subsidiary of the Acquiror, propose to enter into the Agreement and Plan of
Merger, dated as of March 22, 1999 (the "Agreement") pursuant to which the
Acquisition Sub would be merged with the Company in a merger (the "Merger") in
which each outstanding share of the Company's common stock, par value $.01 per
share (the "Company Shares") not owned, directly or indirectly, by Bank One
Corporation ("Bank One") and the Acquiror (the Company Shares excluding the
Company Shares owned, directly or indirectly, by Bank One and the Acquiror
being hereinafter referred to as the "Public Shares") would be converted into
the right to receive $25.50 per share in cash (the "Consideration").
Concurrently with the execution of the Agreement, Bank One, First USA
Financial, Inc., a wholly owned subsidiary of Bank One ("First USA"), Acquiror
and Acquisition Sub will enter into a separate agreement providing, among
other things, that (i) First USA will contribute all of its Company Shares to
the Holdco in exchange for shares of the Holdco's common stock, (ii) the
Acquiror will contribute to the Holdco an amount of cash sufficient to pay the
aggregate Consideration to be paid to the holders of the Public Shares in the
Merger in exchange for shares of the Holdco's common stock and (iii) each of
First USA and the Acquiror will cause the Holdco to contribute to the
Acquisition Sub all of the Company Shares it receives from First USA and all
of the cash it receives from the Acquiror (the "Stockholder Agreement").
You have asked us whether, in our opinion, the Consideration to be received
by the holders of the Public Shares pursuant to the Merger is fair from a
financial point of view to such holders. It is expressly understood that you
have not requested, and we are not rendering, any opinion with respect to the
transactions contemplated in the Stockholder Agreement or any Company Shares
owned, directly or indirectly, by Bank One or the Acquiror and we have not
taken into account the transactions contemplated in the Stockholder Agreement
in arriving at our opinion.
In arriving at the opinion set forth below, we have, among other things:
1) Reviewed certain publicly available business and financial information
relating to the Company that we deemed to be relevant;
2) Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
the Company furnished to us by the Company;
3) Conducted discussions with members of senior management and
representatives of the Company concerning the matters described in
clauses 1 and 2 above;
4) Reviewed the market prices and valuation multiples for the Company
Shares and compared them with those of certain publicly traded companies
that we deemed to be relevant;
5) Reviewed the results of operations of the Company and compared them with
those of certain publicly traded companies that we deemed to be
relevant;
6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions that we deemed to be
relevant;
D-1
<PAGE>
7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
8) Reviewed a draft dated March 22, 1999 of the Agreement; and
9) Reviewed such other financial studies and analyses and took into account
such other matters as we deemed necessary, including our assessment of
general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have
not assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of the Company. With
respect to the financial forecast information furnished to or discussed with
us by the Company, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of the Company's
management as to the expected future financial performance of the Company. We
have also assumed that the final form of the Agreement will be substantially
similar to the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available
to us as of, the date hereof.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. In
addition, the Company has agreed to indemnify us for certain liabilities
arising out of our engagement. We have, in the past, provided financial
advisory and financing services to the Company, Bank One and the Acquiror
and/or their affiliates and may continue to do so and have received, and may
receive, fees for the rendering of such services. In addition, in the ordinary
course of our business, we may actively trade the Company Shares, as well as
securities of Bank One and the Acquiror for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation
to any shareholder as to how such shareholder should vote on the proposed
Merger or any matter related thereto.
As indicated above, we are not expressing any opinion herein with respect
to the transactions contemplated in the Stockholder Agreement or any Company
Shares owned, directly or indirectly, by Bank One or the Acquiror and we have
not taken into account the transactions contemplated in the Stockholder
Agreement in arriving at our opinion.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Consideration to be received by the holders of the
Public Shares pursuant to the Merger is fair from a financial point of view to
the holders of such shares.
Very truly yours,
Merrill Lynch, Pierce, Fenner &
Smith
Incorporated
D-2
<PAGE>
ANNEX E
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 (S)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 (S)251 (other than a merger effected pursuant to (S)251(g)
of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)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 (S)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
(S)(S)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.
E-1
<PAGE>
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)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 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 subsections (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) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or 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; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. 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
E-2
<PAGE>
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 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
E-3
<PAGE>
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 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.
E-4
<PAGE>
--PRELIMINARY COPIES--
PAYMENTECH, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
SPECIAL MEETING OF STOCKHOLDERS ON , 1999
P
R The undersigned stockholder of Paymentech, Inc. ("Paymentech") hereby
O appoints _____and____, and each of them individually, with full power of
X substitution, the proxy of the undersigned, to vote all shares of common
Y stock, par value $.01 per share, of Paymentech which the undersigned is
entitled, in any capacity, to vote at the special meeting of stockholders to
be held on , 1999 and any and all adjournments or postponements
thereof, with all powers the undersigned would possess if personally present,
as follows:
This proxy, if properly executed and returned, will be voted in accordance
with the instructions appearing on the proxy and at the discretion of the proxy
holders as to any other matters that may properly come before the special
meeting. In the absence of specific instructions, this proxy will be voted FOR
---
approval of each of the proposals stated and at the discretion of the proxy
holders as to any other matter that may properly come before the special
meeting.
Please complete, sign and return the proxy card to register your voting
instructions for all shares owned by you.
(Continued, and to be signed and dated on reverse side)
FOLD AND DETACH HERE
74
<PAGE>
Please mark your [X]
votes as in this
example.
1. To approve and adopt the Agreement FOR AGAINST ABSTAIN
and Plan of Merger among First Data
Corporation, FB Merging Corporation
and Paymentech, pursuant to which FB
Merging Corporation will be merged
with and into Paymentech, with
Paymentech being the surviving [_] [_] [_]
corporation in the merger. If you
vote for the merger, shares of
Paymentech common stock held by
shareholders other than BANK ONE
and its subsidiaries will be
exchanged for $25.50 in cash when
the merger is complete. Approval
of this proposal will also
constitute approval of the transactions
contemplated by the merger agreement,
including the merger.
2. In their discretion, to vote upon all FOR AGAINST ABSTAIN
matters incident to the conduct of the
special meeting and such other matters as [_] [_] [_]
may properly come before the special meeting
or any adjournment or postponement thereof,
other than a proposal to adjourn or postpone
the special meeting.
THE BOARD OF DIRECTORS OF
PAYMENTECH
RECOMMENDS A VOTE
FOR APPROVAL OF
THE STATED PROPOSALS
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT
OF THE NOTICE OF SPECIAL MEETING AND THE PROXY
STATEMENT/PROSPECTUS DATED ,1999 RELATING
TO THE SPECIAL MEETING.
Date
Signature
- ------------------------------------------
Signature if held jointly
Note: Please sign this proxy exactly as name appears herein. If shares are held
by joint tenants, both should sign. Attorneys-in-fact, executors,
administrators, trustees, guardians, corporation officers or others signing in a
representative capacity should indicate the capacity in which they are signing.
PLEASE SIGN, DATE, AND MAIL THIS PROXY PROMPTLY IN THE RETURN ENVELOPE whether
or not you expect to attend the special meeting. You may nevertheless vote in
person if you do attend.
FOLD AND DETACH HERE
75
