SCHEDULE 14A
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(Rule
14A-101)
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INFORMATION REQUIRED IN PROXY STATEMENT
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SCHEDULE 14A INFORMATION
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Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
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Filed by the Registrant
o
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Filed by a Party other than the
Registrant
x
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Check the appropriate box:
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x
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Preliminary Proxy Statement
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Confidential, for
Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to
240.14a-12
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TIER
TECHNOLOGIES, INC.
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(Name
of Registrant as Specified In Its Charter)
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DISCOVERY
EQUITY PARTNERS, L.P., DISCOVERY GROUP I, LLC,
DANIEL
J. DONOGHUE AND MICHAEL R. MURPHY
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(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the
appropriate box):
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x
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No fee required
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o
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Fee computed on table below per
Exchange Act Rules 14(a)-6(i)(4) and 0-11.
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1)
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Title of each class of securities to
which transaction applies:
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2)
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Aggregate number of securities to
which transaction applies:
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3)
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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):
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4)
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Proposed maximum aggregate value of
transaction:
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5)
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Total fee paid:
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o
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Fee paid previously with preliminary
materials
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o
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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.
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1)
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Amount Previously Paid:
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2)
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Form, Schedule or Registration
Statement No.:
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3)
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Filing Party:
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4)
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Date Filed:
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PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED JANUARY 28, 2009
TIER TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 11, 2009
PROXY STATEMENT OF
DISCOVERY EQUITY PARTNERS, L.P., DISCOVERY GROUP I, LLC,
DANIEL J. DONOGHUE AND MICHAEL R. MURPHY
February [
], 2009
To Tier Technologies, Inc. Stockholders:
Discovery Equity Partners, L.P. (Discovery Equity
Partners), Discovery Group I, LLC (Discovery Group I), Daniel J. Donoghue
and Michael R. Murphy (collectively, the Discovery Group) are furnishing this
Proxy Statement to holders of the common stock, $0.01 par value (Common
Stock), of Tier Technologies, Inc., a Delaware corporation (the Company
or Tier), in connection with our solicitation of proxies for use at the 2009
Annual Meeting of Stockholders of the Company and at any and all adjournments
or postponements thereof (the Stockholder Meeting). The Company has stated that the Stockholder
Meeting will be held at the headquarters of the Company, 10780 Parkridge Boulevard,
Reston, Virginia, on Wednesday, March 11, 2009, at 10:00 a.m.,
Eastern Standard Time. The Board of
Directors of the Company (the Board of Directors or the Board) has fixed
the close of business on January 16, 2009 as the record date for determining
the stockholders entitled to receive notice of, to attend, and to vote at the
Stockholder Meeting.
This Proxy Statement and the accompanying
WHITE proxy card are first being sent or given to stockholders of the Company
on or about February [ ], 2009.
This solicitation is being conducted by the Discovery
Group. The Discovery Group beneficially
owns approximately 9.9% of the Common Stock reported by the Company as
outstanding as of January 16, 2009.
As more fully discussed below, the Discovery Group is soliciting proxies
to be used at the Stockholder Meeting for the following actions:
(1) To
elect Mr. Daniel J. Donoghue and Mr. Michael R. Murphy as directors
of the Company (collectively, the Discovery Group Nominees);
(2) To
ratify the selection of McGladrey & Pullen, LLP as the Companys
independent registered public accounting firm for the fiscal year ending September 30,
2009;
(3)
To approve a stockholder proposal submitted
by Discovery Equity Partners to the Company under SEC Rule 14a-8 that requests
that the Board of Directors restore to stockholders their rights to directly
influence the strategic direction and possible sale of the Company by (i) terminating
the Companys poison pill rights plan and (ii) reinstating the ability
of stockholders owning at least 10% of the voting power to call special
meetings of stockholders.
According to the Companys Preliminary Proxy Statement
filed on January 20, 2009, there were 19,734,863 shares of Common Stock
outstanding as of January 16, 2009.
The Companys stockholders are entitled to one vote per share of Common
Stock. However, the Companys
certificate of incorporation provides that stockholders have cumulative voting
rights with respect to the election of directors. There are no conditions precedent to the
exercise of cumulative voting rights by the Company stockholders. Cumulative voting rights entitle you to give
a nominee as many votes as is equal to the number of shares you own multiplied
by the number of directors to be elected, or you may distribute your votes
among the nominees as you see fit.
You may specify how your votes are to be cumulated
with respect to the Discovery Group Nominees by giving instructions on the
enclosed WHITE proxy card. If you do not
specify how your votes are to be cumulated among the Discovery Group Nominees,
the enclosed WHITE proxy card authorizes the proxy holders named on the WHITE
proxy card to cumulate your votes in their discretion, provided that the proxy
holders will not cumulate votes for any Discovery Group Nominee from whom you
have withheld the authority to vote. The
Discovery Group intends to cumulate any votes over which it has discretionary
authority in such a way as to assure that the maximum number of Discovery Group
Nominees are elected to the Board of Directors.
We urge you to elect the Discovery Group Nominees to
the Board of Directors because we believe that the election of new members to
the Board would be beneficial to the Company and its stockholders. The
Discovery Group Nominees have extensive experience as executives of
financial institutions, advisors to public and private companies, founders of a
successful investment firm, publishers of research on small capitalization
public companies, valuation experts and leaders of M&A transactions. Discovery Groups investment of approximately
$16 million in the Company aligns the interests of the Discovery Group Nominees
with all fellow stockholders. The
Discovery Group Nominees intend to bring the perspective of a large investor to
the Board and will seek to work constructively with the other members of the
Board, as well as the existing Tier management team. The Discovery Group Nominees hope to help the
Company expeditiously to reduce what the Discovery Group believes is excessive
overhead, to determine if Company capital should be returned to stockholders,
to eliminate any unnecessary corporate takeover defenses, and to proactively
evaluate all strategic alternatives to unlock the value of the Companys
Electronic Payment Processing (EPP) business for stockholders.
Accordingly, we urge you to sign and date the WHITE
proxy card supplied by the Discovery Group and return it in the enclosed
postage-paid envelope, whether or not you plan to attend the meeting, in order
to vote:
(A) FOR the election of Daniel J. Donoghue and
Michael R. Murphy to the Board of Directors,
(B) FOR the ratification of the selection of
McGladrey & Pullen, LLP as the Companys independent registered public
accounting firm for the fiscal year ending September 30, 2009, and
(C)
FOR the stockholder
proposal (the Stockholder Proposal) requesting that the Companys Board of
Directors restore to stockholders their rights to directly influence the
strategic direction and possible sale of the Company by (i) terminating
the Companys poison pill rights plan and (ii) reinstating the ability
of stockholders owning at least 10% of the voting power to call special
meetings of stockholders.
If your shares are held in
the name of a brokerage firm, bank or nominee, only that entity can vote such
shares and only upon receipt of your specific instruction. Accordingly, we urge you to contact the
person responsible for your account and instruct that person to execute the
WHITE proxy card on your behalf.
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YOUR VOTE IS IMPORTANT. If you agree with the reasons for the
Discovery Groups solicitation set forth in this Proxy Statement and believe
that the election of the Discovery Group Nominees to the Board of Directors and
the adoption of the Stockholder Proposal can make a difference, please vote for
the election of the Discovery Group Nominees and the adoption of the
Stockholder Proposal, no matter how many or how few shares you own.
THE DISCOVERY GROUP URGES
YOU NOT TO SIGN ANY PROXY CARD THAT IS SENT TO YOU BY THE COMPANY, EVEN AS A FORM OF
PROTEST. By executing the WHITE proxy
card, you will authorize us to vote FOR the election of the two Discovery Group
Nominees and for the Stockholder Proposal.
If you have already signed a proxy card sent to you by the Company, you
may revoke that proxy at any time prior to the time a vote is taken by (i) submitting
a duly executed proxy card bearing a later date than your previous proxy card, (ii) filing
with the Corporate Secretary of the Company a later dated written notice of
revocation or (iii) if you are a record holder of Common Stock or have
obtained a valid proxy from such a record holder, attending and voting at the
Stockholder Meeting in person.
Attendance at the Stockholder Meeting will not, by itself, revoke a
proxy.
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Thank you for your support,
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On behalf of the Discovery Group,
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Sincerely,
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/s/ Daniel J. Donoghue
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Daniel J. Donoghue
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/s/ Michael R. Murphy
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Michael R. Murphy
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IF YOU HAVE ANY QUESTIONS, REQUIRE ASSISTANCE IN VOTING THE
WHITE PROXY CARD OR NEED ADDITIONAL COPIES OF OUR PROXY MATERIALS,
PLEASE CALL OUR PROXY SOLICITOR:
THE ALTMAN GROUP
1200 Wall Street
West
Lyndhurst, NJ
07071
Stockholders Call
Toll Free: (866) 856-4969
Banks and Brokerage
Firms Call Collect: (201) 806-7300
3
GENERAL
The Board of Directors currently consists of eight
directors who serve for a one year term.
According to the Companys proxy statement (the Company Proxy
Statement), filed in preliminary form on January 20, 2009, nine directors
are to be elected to the Board of Directors at the Stockholder Meeting, to hold
office until their successors have been elected and qualified. The Company has nominated seven current
members of the Board to stand for re-election at the Stockholder Meeting (the
Company Nominees). In addition, the
Company Proxy Statement states that the Company has received notice from Giant
Investment, LLC, an affiliate of Parthenon Capital (together, Parthenon) of
its intention to nominate two nominees for election to the Board of Directors
at the Stockholder Meeting. According to
the Company Proxy Statement, Parthenon has represented that it does not intend
to solicit proxies for its nominees.
We are currently seeking your proxy for the election
to the Board of Directors of two individuals - Mr. Daniel J. Donoghue and Mr. Michael
R. Murphy. We are also seeking your
proxy to vote for the Stockholder Proposal and for the ratification of the
selection of McGladrey & Pullen, LLP as the Companys independent
registered public accounting firm for the fiscal year ending September 30,
2009.
For information concerning voting procedures at the
Stockholder Meeting, see Voting and Proxy Procedures.
BACKGROUND OF THIS
SOLICITATION
The Discovery Group has been a stockholder of the
Company since March 2007. The
Discovery Group acquired shares of Common Stock through open market purchases
as part of its proprietary investment strategy and, as of the date of this
Proxy Statement, the Discovery Group beneficially owns 1,957,563 shares of
Common Stock, representing approximately 9.9% of the outstanding Common
Stock. 1,684,608 of the shares of Common
Stock beneficially owned by the Discovery Group are owned directly by Discovery
Equity Partners, and the remaining 272,955 shares of Common Stock beneficially
owned by the Discovery Group are owned directly by another investment
partnership. (the Other Partnership) for which Discovery Group I is the investment
manager and over which shares Discovery Group I exercises discretionary
investment management authority.
In connection with its investment in the Company, the
Discovery Group reviews the Companys business affairs, financial position,
management, capital structure, and future plans on an ongoing basis. In addition, as part of its review,
representatives of the Discovery Group have held meetings and telephone
conversations with the Companys management, directors, other stockholders, and
other interested parties, including companies and other institutions having
operations in the electronic payments industry, regarding the Companys
performance, its business plan and strategic alternatives available to it.
On May 12, 2008, the Discovery Group filed a
Schedule 13D with the Securities and Exchange Commission (the SEC) indicating
that we had acquired 5.8% of the outstanding Common Stock. In the Schedule 13D, t
he Discovery Group indicated that it had
acquired such shares of Common Stock because of its belief that the trading
prices of the Common Stock do not adequately reflect the potential value of the
Companys underlying business and assets.
The Discovery Group indicated that it had held meetings with certain
members of the Companys management and directors and had also sent written
communication to the entire Board of Directors, and that during these meetings
and correspondences, the Discovery Group had expressed certain recommendations
to the Company, including a strong desire for the Board of Directors to engage
an investment bank to explore all strategic alternatives available to the
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Company,
including the potential sale of the Company.
The Schedule 13D indicated that the Discovery Groups recommendations
were based on (i) discussions with large transaction processing companies
expressing an interest in acquiring the Company, (ii) a competitive
takeover valuation that will provide a significant premium to the Companys
current stock price, (iii) competitive threats to the Company from larger,
more efficient industry participants, and (iv) obstacles that will prevent
the Company from achieving a significant increase in shareholder value on a
stand-alone basis, including senior management turnover, an extremely high cost
structure, and the Companys lack of credibility with public investors.
On
June 9, 2008, representatives of the Discovery Group made a presentation
by conference call to two members of the Companys Board of Directors. In addition to reiterating the recommendation
that the Board engage an investment bank and explore strategic alternatives,
the Discovery Group representatives presented the Board members with feedback
from informal discussions with several large Company investors, wherein the
investors had expressed the view that they were disappointed with the
performance of management of the Company, had a strong desire to for the Board
to authorize the Company to repurchase shares, and would like to see the
Company sold to a strategic buyer.
On September 9, 2008, Discovery Equity Partners
submitted to the Company the Stockholder Proposal under SEC Rule 14a-8 for
inclusion in the Companys proxy statement for the Companys 2009 Annual
Meeting of Stockholders.
Under the Companys bylaws, a stockholder may
present a proposal for inclusion in the proxy statement for an annual meeting,
if the stockholder follows the procedures set forth in Rule 14a-8 under
the Securities Exchange Act of 1934, as amended (the Exchange Act).
On October 28, 2008,
Discovery Equity Partners received a letter dated October 27, 2008 from
the Vice President and General Counsel of the Company stating that the Company
had no record of having received the Stockholder Proposal.
On October 30, 2008,
Discovery Equity Partners sent a letter to the Vice President and General
Counsel of the Company providing detailed evidence that Discovery Equity
Partners proposal was properly submitted to the Company in the manner and
within the time period required by SEC Rule 14a-8, and that
representatives of the Company have been aware of the submission of such
proposal since the time of such submission.
On December 4, 2008, Discovery Equity Partners
delivered to the Company a notice required under the Companys bylaws of Discovery
Equity Partners intention to nominate the Discovery Group Nominees for
election at the Stockholder Meeting.
Pursuant to the Companys bylaws,
stockholders of record on the date of the notice described in this paragraph
and on the record date for the determination of stockholders entitled to vote
at a stockholder meeting have the right to nominate director candidates,
without any action or recommendation on the part of the Governance and
Nominating Committee of the Board or of the Board, if timely written notice in
proper form of the intent to make a nomination at a meeting of stockholders is
received by the Companys corporate secretary at: Tier Technologies, Inc.,
c/o Corporate Secretary, 10780 Parkridge Boulevard, Suite 400, Reston,
Virginia 20191. To be timely under the Companys bylaws, the notice
must be delivered not less than 60 nor more than 90 days prior to the first
anniversary of the preceding years annual meeting; provided, however, that in
the event that less than 70 days notice or prior public disclosure of the
date of the annual meeting is given or made to stockholders, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the 10th day following the day on which such notice of the date
of the annual meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs. To be in proper
form, the notice must contain prescribed information about the proponent and
each nominee, including such information about each nominee and proponent as
would be required to be included in a proxy statement made in connection with a
solicitation of proxies for elections of directors pursuant to Section 14
of the Exchange Act and the rules and regulations promulgated
thereunder. Discovery Equity
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Partners
believes that its notice to the Company of its
intention to nominate the
Discovery Group Nominees for election at the Stockholder Meeting complied with
these requirements of the Companys bylaws.
Also on December 4, 2008, Discovery Equity
Partners delivered to the Company a letter addressed to the Board of Directors
setting forth certain of its reasons for its intention to nominate the
Discovery Group Nominees. The Discovery
Group also issued a press release with respect to its intention to nominate the
Discovery Group Nominees.
On December 17, 2008, Discovery Equity Partners
sent to the Company a written request as permitted by the Delaware General
Corporation Law with respect to the inspection and use of the Companys
stockholders list and related materials in connection with the solicitation of
proxies for the Stockholder Meeting. On December 23,
2008, the Company sent to Discovery Equity Partners a letter agreeing to
provide such materials subject to Discovery Equity Partners entering into a
confidentiality agreement with respect to the use and disclosure thereof, and
agreeing to pay certain costs of the Company in connection with the production
thereof. Discovery Equity Partners has
entered into such confidentiality agreement and agreed to pay such costs, and
has been advised by the Companys proxy solicitor that it will be provided a
stockholder list as of the record date for the Stockholder Meeting.
On January 9, 2009, the Discovery Group filed a
preliminary version of this Proxy Statement with the SEC. On January 28, 2009, the Discovery Group
filed a revised preliminary version of this Proxy Statement with the SEC.
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REASONS FOR THIS
SOLICITATION
We expect that the Discovery Group Nominees, if elected, would bring
the fresh perspective of a large investor to the Board of Directors. We
believe that the Discovery Group Nominees, if elected, can work with the other
members of the Board of Directors to:
·
expeditiously
reduce what the Discovery Group believes is excessive overhead at the Company,
·
promptly return
to stockholders what the Discovery Group believes is the Companys excess
capital,
·
eliminate any
unnecessary corporate takeover defenses, and
·
proactively
evaluate all strategic alternatives to unlock the value of the Companys EPP
business for stockholders.
There can be no assurance that the Discovery Group Nominees and the
Board of Directors will succeed in creating stockholder value. The Discovery Group Nominees, if elected,
would constitute a minority of the Board of Directors. In order to effect change for the benefit of
shareholders, the Discovery Group Nominees, if elected, would need to gain the
support of the other directors in addressing the issues and pursuing the
opportunities identified above. While
there can be no assurance that the Discovery Group Nominees can gain such
support, they believe that they have, in the course of investing substantial
amounts of the Discovery Groups capital in Tier stock, thoroughly investigated
these issues and opportunities to enhance shareholder value and, as a result,
are prepared to make effective arguments to the Board with respect to these
issues and opportunities.
Under Delaware corporate law, the Board of Directors is charged with
the management of the Company, including determining its strategic
direction. The Discovery Group believes that if the Discovery Group
Nominees are elected, they would be in a position as directors of the Company
to influence the strategic direction of the Company by bringing to the Board
the perspective of a significant stockholder. The Discovery Group
believes that public stockholders are best served by a Board of Directors where
a significant number of individual directors have a strong alignment of
financial interest through stock ownership with the financial success of the
Company. The Discovery Group is troubled
by the fact that no renominated director or current executive officer of the
Company beneficially owns more
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than 2.2% of the outstanding stock, and that the
ownership level of this entire group is less than 0.3% if unexercised options
are excluded from the calculation, as shown in the following table:
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Number of
Shares Held
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%
Outstanding
Common Stock
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Options &
Warrants
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Total Beneficial
Ownership
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%
Fully Diluted
Common
Stock
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Executive Officers and Directors (1)
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Renominated Directors
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Ronald L. Rossetti (Chairman, CEO)
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27,365
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0.1
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%
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415,000
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442,365
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2.2
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%
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Samuel Cabot III (Director)
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19,810
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0.1
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%
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195,000
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214,810
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1.1
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%
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Morgan P. Guenther (Director)
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1,000
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0.0
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%
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150,000
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151,000
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0.8
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%
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Charles W. Berger (Director)
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0.0
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%
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140,000
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140,000
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0.7
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%
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John J. Delucca (Director)
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0.0
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%
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40,000
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40,000
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0.2
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%
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Philip G. Heasley (Director)
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0.0
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%
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10,002
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10,002
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0.1
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%
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David A. Poe (Director)
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0.0
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%
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6,668
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6,668
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0.0
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%
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Management
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Kevin C. Connell (Sr. VP, Sales &
Marketing)
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0.0
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%
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77,400
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77,400
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0.4
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%
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Keith S. Omsberg (VP, Corp. Secretary)
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0.0
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%
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21,900
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21,900
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0.1
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%
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Ronald W. Johnston (CFO)
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0.0
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%
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0.0
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%
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Total (10 persons)
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48,175
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0.2
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%
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1,055,970
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1,104,145
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5.6
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%
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(1)
All information is derived from the Company
Proxy Statement, is as of January 16, 2009 and includes shares issuable
upon the exercise of options exercisable on or before March 17, 2009. Share numbers exclude restricted stock units that
may be granted under the Companys enterprise value award plan and payments
that may be made as part of the Companys performance stock unit plan.
While the Discovery Group believes such persons will
seek to act in the best interests of the Company and its stockholders, they
inevitably lack the perspective that results from a significant cash investment
in the Common Stock.
As members of the Board of Directors, the Discovery Group Nominees
would be able to present initiatives to the entire Board of Directors, actively
participate in Board discussions and argue in support of positions that they
believe would benefit the Companys stockholders. If elected, the
Discovery Group Nominees would have greater access to Company information and
management, which would allow them to be more knowledgeable and effective
advocates in favor of these positions. While the Discovery Group Nominees
will not constitute a majority of the Board of Directors, the Discovery Group
Nominees believe that the other directors of the Company will, in the discharge
of their fiduciary duties under Delaware law, consider all reasonable proposals
to enhance stockholder value by exploring these proposals and acting on them if
they determine that such proposals are in the best interests of the Companys
stockholders.
The Discovery Group Nominees believe that the following matters should
be addressed by the Board of Directors as soon as possible and, if elected, the
Discovery Group Nominees will work to have the Board address them.
Corporate Overhead
. The Discovery Group Nominees believe that the
Board of Directors has sanctioned what the Discovery Group Nominees think is an
excessive level of corporate overhead, given the Companys revenue base and
profitability. If the Company is to
become profitable, the Discovery Group Nominees believe its level of corporate
overhead must be reduced rapidly and significantly.
This is illustrated by information in the Companys
recently issued Annual Report for the fiscal year ended September 30, 2008
(the 2008 Annual Report). In the
Annual Report, the costs and expenses attributed to Corporate &
Eliminations (which the Company describes as corporate overhead
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and other costs that
could not be directly assigned to our EPP operations or to our Discontinued
Operations, as well as eliminations for transactions between our Continuing and
Discontinued Operations) are shown as $27.2 million, $16.6 million and $16.8
million for fiscal years 2006, 2007 and 2008, respectively. These costs have contributed materially to
the amount of the Companys reported loss from continuing operations for those
same years of $(19.6) million, $(18.4) million and $(12.0) million.
While the Company has sought to somewhat decrease
corporate overhead, the Companys Chief Executive Officer has publicly stated
that corporate overhead would only be reduced to a run rate of $10 million at
the end of fiscal year 2009 (with projected corporate overhead of approximately
$12 million for the full 2009 fiscal year) and a run rate of $9 million at the
end of fiscal year 2010. Even if these
projections are achieved, the reduction in overhead seems inadequate. The Companys EPP business is now the
Companys predominant business (the 2008 Annual Report indicates that the
Companys only other
business
is one remaining Packaged Software Systems Integration operation for
which it continues to seek a buyer) and the EPP business stand-alone Income from
Continuing Operations for 2008, 2007 and 2006 was only $3.2 million, $5.9
million and $5.6 million, respectively, as reported in the 2008 Annual
Report. Thus, even if the Companys
corporate overhead projection is achieved, the run rate for corporate overhead
for at the end of 2009 would still exceed EPPs 2008 income by more than 3
times.
In the view of the Discovery Group Nominees, the
current level of corporate overhead is unsustainable and must be reduced
rapidly, and the Discovery Group Nominees plan to work with the Board and
Company management to seek ways to effect such a reduction. The Discovery Group Nominees, if elected,
would constitute a minority of the Board of Directors. Thus, in order to be effective in helping the
Company to achieve corporate overhead reductions, the Discovery Group Nominees
would need to gain the support of other directors. The Discovery Group Nominees would seek to
gain additional Board support by analyzing the threat to Tiers ability to
remain a going concern if overhead is allowed to continue to produce operating
losses. The Discovery Group Nominees, if
elected, plan to propose specific and attainable targets for Tiers overhead
based on a study of industry benchmarks for profitability and to analyze in
detail Tiers existing overhead to identify areas in which reductions are
possible.
Return of Capital to
Stockholders
. The
Companys cash balance has grown materially and steadily since the end of
fiscal year 2000, when it stood at $19.9 million. At the end of fiscal year 2008,
the Companys cash balance (including cash invested in auction rate securities
that were reclassified by the Company as a long-term investment because of
market illiquidity and in restricted investments) was approximately $87
million. This increase in cash was not
sudden, as the Companys reported cash balance, when compared with the cash
balance at the prior fiscal year-end, increased for fiscal years 2001, 2002,
2004, 2005, 2007 and 2008. The Company
now holds more than $4.50 per share in cash, including its ill-timed
investments in auction rate securities that are now illiquid. The Discovery Group Nominees believe that the
Board of Directors should consider whether this level of cash is actually needed
for the Companys operations and the implementation of its business plan, and
if not, whether the Company should return a portion of such cash to
stockholders through share repurchases or a special dividend or other means. The
Discovery Group Nominees would seek to gain the support of the full Board for a
return of capital to stockholders by developing an analysis of the appropriate
level of capital for the Company based on industry benchmarks and the potential
accretion in stockholder value that can be achieved through the efficient allocation
of capital. In addition, if the Board
were to agree that a return of capital is appropriate, the Discovery Group
Nominees have pertinent public company advisory experience recommending methods
to reallocate excess capital, particularly with respect to companies similar to
the Company where a standard open-market repurchase program such as that
recently authorized by the Board is likely to not achieve its full goals due to
the low level of trading volume in the relevant companys stock. The Discovery Group Nominees, if elected,
would seek to utilize their experience to develop a Board consensus about the
appropriate method to return capital to stockholders.
9
Takeover
Defenses
. In January 2006, the Company adopted a
poison pill stockholder rights plan that the Discovery Group Nominees
believe effectively prevents any person from acquiring 15% or more of the
outstanding common stock without the Boards consent and also adopted a Bylaw
amendment that denied stockholders the right to call special meetings. These actions appear to have been taken in
response to Tiers widely reported operating and accounting problems at the
time. The Discovery Group Nominees
believe that the Board of Directors should now have the confidence to reverse
the defensive mechanisms then adopted, since in the opinion of the Discovery
Group Nominees, they no longer serve the best interests of the Company and its
stockholders and represent a
de facto
transfer of voting rights away from stockholders to management. The Discovery Group Nominees believe that
poison pills reduce accountability and entrench management, prevent investors
from making financially meaningful investments in small capitalization
companies like the Company, and allow a board of directors unilaterally to
block offers for a company that are in the best interests of stockholders. In addition, in the opinion of the Discovery
Group Nominees, if a companys board of directors and management have no
meaningful equity stake (as the Discovery Group Nominees believe is the case
with the Company), this creates the possibility of conflicts of interest
between the board of directors and stockholders. The Discovery Group Nominees note that in
response to stockholder complaints, numerous companies have terminated or not
renewed their poison pills. The
Discovery Group Nominees also believe that the elimination of the right of
stockholders to call special meetings limits the direct voice of stockholders
in the Companys strategic direction by allowing management to unilaterally
decide if a proposal may be presented to stockholders between annual meetings,
and that for a rapidly changing business, annual meetings do not provide the
access necessary for stockholders to bring forward and vote on critical and
timely matters while the company is undergoing such transformations. The Discovery Group Nominees, if elected,
will seek to enlist the support of the full Board to implement the Stockholder
Proposal, if the Stockholder Proposal is approved by the Companys
stockholders, and believe that the Board should give significant weight to the
results of the stockholder vote on the Stockholder Proposal .
Strategic Alternatives
. The Discovery Group Nominees believe that the
Companys EPP business has significant value.
They also believe that one
strategy to unlock the value of the EPP business is to sell Tier to one of the
many strategic parties that are potentially interested in acquiring the
business since a strategic buyer could reduce the effect of the Companys
corporate overhead on EPPs profitability and potentially augment the EPP
business growth and profitability in other ways. The Discovery Group Nominees believe that
because of these benefits to a buyer, a properly negotiated sale or merger
transaction could deliver a premium to the Companys stockholders. The
Discovery Group Nominees, if elected, would constitute a minority of the Board
of Directors. Thus, in order to be
effective in bringing Board-level focus to this opportunity to improve
shareholder value through the evaluation of strategic alternatives, the
Discovery Group Nominees would need to gain the support of other members of the
Board. The Discovery Group Nominees
would seek to gain additional Board support by specifically recommending the
formation of a Special Committee, comprised of only independent directors, that
would hire a nationally recognized investment bank to proactively engage in
discussions with likely potential acquirers of Tier. The Discovery Group Nominees would offer to
serve on that Special Committee and will seek to use their extensive corporate
finance, advisory, investing, and M&A experience to assist the other
members of the Board in comparing the shareholder value that could be achieved
in a sale or merger to both (i) the value that could be achieved by
pursuing other strategic alternatives and (ii) the value likely to result
from the status quo of operating Tier as an independent public company. However, even if the Board were to determine
that a sale or merger is the best option for the Company, there can be no assurance
that such a sale or merger could be consummated, that such a sale or merger
could be consummated at a premium to current market prices for the Common
Stock, or that such a sale or merger could be consummated within any particular
time frame.
10
The Discovery Group Nominees will constitute
approximately twenty-two percent of the Board of Directors if they are elected
and, therefore, even if they vote unanimously, will not be able to adopt any
measures without the support of other members of the Board of Directors. Depending on the responsiveness of the Board
to any proposals or initiatives presented by the Discovery Group Nominees, the
Discovery Group may seek to nominate additional directors independent of both
the Company and the Discovery Group to the Board of Directors at the Companys
2010 annual meeting if the Discovery Group believes that additional
representation on the Board would make Discovery Group Nominees efforts more
effective.
The Discovery Group Nominees do not anticipate that they
will have any conflicts of interest with respect to the Company, if elected,
and recognize their fiduciary duty obligations to all stockholders. None of the Discovery Group Nominees has any
contract, arrangement or understanding with the Company, and no other direct
financial interest concerning the Company, other than through the beneficial
ownership of Common Stock by the Discovery Group as disclosed in this Proxy
Statement.
THE DISCOVERY GROUP RECOMMENDS A VOTE FOR THE ELECTION
OF THE DISCOVERY GROUP NOMINEES BECAUSE THEY BELIEVE THAT THE DISCOVERY GROUP
NOMINEES WOULD CONTRIBUTE TO THE CREATION OF STOCKHOLDER VALUE.
MATTERS TO BE CONSIDERED AT THE STOCKHOLDER MEETING
PROPOSAL 1: ELECTION
OF DIRECTORS
The Board of Directors currently consists of eight
directors. Directors hold office until
the Companys next annual meeting and until their successors are elected and
qualified, unless prior to that time they have resigned, retired or otherwise
left office. According to the Company
Proxy Statement, nine directors are to be elected to the Board at the
Stockholder Meeting. By letter dated December 3,
2008, Discovery Equity Partners gave notice to the Company of its intention to
nominate the Discovery Group Nominees to serve as directors of the Company.
We are seeking your proxy for the election to the
Board of Directors of two individuals - Mr. Daniel J. Donoghue and Mr. Michael
R. Murphy. Under applicable proxy rules,
we are required either to solicit proxies only for Messrs. Donoghue and
Murphy, or to solicit proxies for Messrs. Donoghue and Murphy and for such
number of the Company Nominees or other bona fide nominees as equal the number
of director positions then subject to election.
Due to our decision to solicit proxies only for Messrs. Donoghue
and Murphy, the enclosed WHITE proxy card may only be voted for the Discovery
Group Nominees and does not confer voting power with respect to seven of the
nine Board positions or the Companys Nominees.
Each of the Discovery Group Nominees has consented to
being named as a nominee in this Proxy Statement and to serve as a director of
the Company, if elected. While the
Discovery Group does not expect that either of the Discovery Group Nominees
will be unable to stand for election, if either of the Discovery Group Nominees
is unable to stand for election, the Discovery Group will only nominate and
vote any shares of Common Stock represented by the WHITE proxy card for the
other Discovery Group Nominee.
11
While the Company Proxy Statement does not indicate
any of the Company Nominees intends not to serve as a director if any of the
Discovery Group Nominees are elected, there can be no assurance that any of the
Companys Nominees will serve as directors if any of the Discovery Group
Nominees are elected. In the event that
vacancies on the Board are created by the refusal of any Company Nominee to
serve with any Discovery Group Nominees who are elected, the Discovery Group
Nominees would request that the Board take all actions necessary to fill any
vacancies with other qualified nominees, subject to the requirements of
Delaware law and the Companys bylaws.
The Discovery Group Nominees do not have any current plans or proposals
with respect to the filling of any such vacancy.
Information Regarding the
Discovery Group Nominees
The following information concerning age, principal
occupation and business experience during the last five years, and current
directorships has been furnished to the Discovery Group by the Discovery Group
Nominees.
Daniel J. Donoghue, age 47, is a founder and Managing
Member of each of Discovery Group Holding Company, LLC, a Delaware limited
liability company, Discovery Group I, and Discovery Group II, LLC, a Delaware
limited liability company (Discovery Group II and collectively with Discovery
Group I and Discovery Group Holding Company, LLC, the Discovery Group
Entities). Discovery Group I is the
sole general partner of Discovery Equity Partners, which invests in shares of publicly-traded
small capitalization companies, and Discovery Group I also manages other
private investment accounts (including the investments of the Other
Partnership). Discovery Group II is the
sole general partner of Discovery Financial Partners, L.P., which was formed to
invest in shares of publicly-traded micro-capitalization banks and other
financial institutions but which is not currently conducting business. Mr. Donoghues employment by the
Discovery Group Entities represents his principal occupation or
employment. Mr. Donoghue has been a
Managing Member of one or more of the Discovery Group Entities since January 2007. From January 1997 through January 2007,
Mr. Donoghue was employed by Piper Jaffray & Co., an investment
banking firm, where he was engaged in merger and acquisition advisory
activities. Mr. Donoghue is a
certified public accountant and has a Master of Business Administration degree
in Finance from the University of Chicago.
Michael R. Murphy, age 43, is also a founder and
Managing Member of each of the Discovery Group Entities. Mr. Murphys employment by the Discovery
Group Entities represents his principal occupation or employment. Mr. Murphy has been a Managing Member of
one or more of the Discovery Group Entities since January 2007. From August 1997 through January 2007,
Mr. Murphy was employed by Piper Jaffray & Co., an investment
banking firm, where he was engaged in merger and acquisition advisory
activities. Mr. Murphy has a Master
of Business Administration degree in Finance from the University of Chicago.
If elected, each Discovery Group Nominee would receive
such directors fees as may be payable by the Company to non-employee directors
in accordance with its practice at the time.
Except as described below, no Discovery Group Nominee would receive
additional compensation from the Discovery Group Entities in connection with
this solicitation, and there are no understandings or arrangements between the
Discovery Group Nominees or any other person pursuant to which the nominations
are to be made by the Discovery Group.
Pursuant to the constituent documents of Discovery Equity Partners and
Discovery Group I, Discovery Equity Partners and Discovery Group I will
indemnify and hold harmless each Discovery Group Nominee from any and all
losses, claims costs, damages, liabilities and expenses incurred by the
Discovery Group Nominee resulting from any action, proceeding or investigation
based upon or arising from certain actions, events or occurrences, including
the solicitation of proxies to which this Proxy Statement relates and (if
applicable) such persons ongoing
12
services as a director of
the Company, to the extent not otherwise indemnified by the Company, other than
with respect to certain excluded losses.
As of the date hereof, each Discovery Group Nominee
may be deemed to beneficially own 1,957,563 shares of Common Stock,
representing approximately 9.9% of the outstanding Common Stock
, representing approximately 9.9% of the
19,734,863 shares of Common Stock as reported to be outstanding by the Company
as of January 16, 2009.
The Discovery Group
believes that each Discovery Group Nominee would be independent under the
applicable standards of the NASDAQ Stock Market and the independence standards
applicable to the Company under paragraph (a)(1) of Item 407 of Regulation
S-K under the Exchange Act. In this
regard, each of the Discovery Group Nominees has advised the Discovery Group
that to the best of such Discovery Group Nominees knowledge and belief:
(a)
He
is not, nor at any time during the past three years was, employed by the
Company;
(b)
He
has not accepted, nor does he have a Family Member (as defined below) who has
accepted, any compensation from the Company during any period of twelve
consecutive months within the three years preceding the date hereof.
(c)
He
is not a Family Member of an individual who is, or at any time during the past
three years was, employed by the Company as an executive officer.
(d)
He
is not, nor does he have a Family Member who is, a partner in, or a controlling
shareholder or an executive officer of, any organization to which the Company
made, or from which the Company received, payments for property or services in
the current or any of the past three fiscal years that exceed 5% of the
recipients consolidated gross revenues for that year, or $200,000, whichever
is more.
(e)
He
is not, nor does he have a Family Member who is, employed as an executive
officer of another entity where at any time during the past three years any of
the executive officers of the Company serve on the compensation committee of
such other entity.
(f)
He
is not, nor does he have a Family Member who is, a current partner of the
Companys outside auditor, or was a partner or employee of the Companys
outside auditor who worked on the Companys audit at any time during any of the
past three years.
For purposes of the foregoing, Family Member means a
Discovery Group Nominees spouse, parents, children and siblings, whether by
blood, marriage or adoption, or anyone residing in such persons home.
There are no blood, marriage or adoption relationships
(excepting relationships more remote than first cousin) between either of the
Discovery Group Nominees, or between either of the Discovery Group Nominees and
any director or executive officer of the Company, or to the knowledge of the
Discovery Group as of the date hereof, any nominee of the Company to become a
director or executive officer of the Company.
Except as otherwise disclosed in this Proxy Statement,
(i) no Discovery Group Nominee or any associate of a Discovery Group
Nominee is a party adverse to the Company or any of its subsidiaries or has a
material interest adverse to the Company or any of is subsidiaries in any
material proceeding, and
13
(ii) there is no
event that occurred during the past five years with respect to any Discovery
Group Nominee that is required to be described under Item 401(f) of Regulation
S-K.
No Discovery Group Nominee nor any associate of a
Discovery Group Nominee has any arrangement or understanding with any person (a) with
respect to future employment by the Company or its affiliates (as defined in Rule 12b-2
under the Exchange Act) or (b) with respect to any future transactions to
which the Company or any of its affiliates will be or may be a party.
Except for each Discovery Group Nominees agreement to
stand for election to the Board of Directors and to serve if elected, and except
for each Discovery Group Nominees interest in the Common Stock that may be
deemed to be beneficially owned by him as described herein, no Discovery Group
Nominee has a substantial interest, either direct or indirect, by security
holdings or otherwise, in the matters to be acted on pursuant to this Proxy
Statement.
No Discovery Group Nominee nor any associate of a
Discovery Group Nominee or any immediate family member of any such Discovery
Group Nominee or associate has engaged in or had a direct or indirect material
interest in any transaction, or series of similar transactions, since October 1,
2007, or any currently proposed transaction, or series of similar transactions,
to which the Company or any of its subsidiaries was or is to be a party, in which
the amount involved exceeds $120,000.
No Discovery Group Nominee has failed to file reports
related to the Company that are required by Section 16(a) of the
Exchange Act.
PROPOSAL 2: RATIFICATION
OF SELECTION OF MCGLADREY & PULLEN LLP
According to the Company Proxy Statement, the Company
is soliciting proxies for the ratification of the selection of McGladrey &
Pullen LLP as the Companys independent registered public accounting firm for
the fiscal year ending September 30, 2009.
The Board of Directors has recommended a vote for this proposal. Please refer to the Company Proxy Statement
for a detailed discussion of this proposal, including various arguments in
favor of and/or against such proposal.
We urge you to vote FOR the appointment of McGladrey & Pullen
LLP as the Companys independent registered public accounting firm for the
fiscal year ending September 30, 2009 on the WHITE proxy card. If you do not indicate any voting
instruction, we will vote the WHITE proxy card FOR this proposal.
PROPOSAL 3: APPROVAL
OF THE STOCKHOLDER PROPOSAL
According to the Company Proxy Statement, the Company
has submitted for the consideration of stockholders the Stockholder Proposal
submitted by Discovery Equity Partners to the Company under Rule 14a-8. The Stockholder Proposal, including Discovery
Equity Partners Supporting Statement, reads as follows:
Stockholder Proposal
RESOLVED, that the stockholders of Tier Technologies, Inc.
(Tier) request that Tiers Board of Directors restore to stockholders their rights
to directly influence the strategic direction and possible sale of Tier by (i) terminating
Tiers poison pill rights plan and (ii) reinstating the ability of
stockholders owning at least 10% of the voting power to call special meetings
of stockholders.
14
Supporting Statement
In January 2006, the Board of Tier stripped its
stockholders, without their consent, of their ability to directly receive
offers for Tier by implementing a poison pill that effectively prevents any
person from acquiring 15% or more of the outstanding common stock without the
Boards consent. Further, the Board
eliminated the ability of stockholders to pursue value-creation proposals between
annual meetings by denying stockholders the right to call special
meetings. These actions appear to have
been taken in response to Tiers widely reported operating and accounting
problems.
Nearly three years have passed since these events and
Tier is no longer the poorly integrated collection of weak performing
businesses with inadequate financial controls that it then was. The Board should now have the confidence to
reverse the defensive mechanisms then adopted, since they no longer serve the
best interests of Tier and its stockholders and represent a
de facto
transfer of voting rights away from stockholders to
management.
Poison pills reduce accountability and entrench
management, prevent investors from making financially meaningful investments in
small capitalization companies like Tier, and allow a Board unilaterally to
block offers for a company that are in the best interests of stockholders. If a companys Board and management have no
meaningful equity stake (as is the case with Tier), this creates a significant
conflict of interest between the Board and stockholders. Recently, in response to stockholder
complaints, numerous companies have terminated or not renewed their poison
pills. Tiers Board should remove its
obsolete poison pill that currently acts as an impediment to realizing
shareholder value.
The elimination of the right of stockholders to call
special meetings limits the direct voice of stockholders in Tiers strategic
direction by allowing management to unilaterally decide if a proposal may be
presented to stockholders between annual meetings. Tier is rapidly changing its
Board composition, its management team, its operations, and its overall
strategic direction. Annual meetings do
not provide the access necessary for shareholders to bring forward and vote on
critical and timely matters while the company is undergoing such
transformations.
By supporting this proposal, stockholders can advise
the Board of their concerns regarding Tiers continued maintenance of defenses
against offers and proposals that may maximize shareholder value, and express
their desire that the Board be open to all strategic alternatives for Tier,
including its sale. While the adoption
of this proposal will not legally bind the Board, we trust that given its
fiduciary responsibilities, the Board will honor the stockholders wishes as
reflected in the vote on the proposal.
Discovery, one of Tiers largest shareholders,
strongly urges you to vote
FOR
this
proposal.
According to the Company Proxy Statement, the Board of
Directors has recommended a vote against the Stockholder Proposal. Please refer to the Company Proxy Statement
for the Boards arguments regarding the Stockholder Proposal. In addition, in considering whether it is
advisable to reinstate the ability of a holder or group of holders of the
outstanding Common Stock to call a special meeting of stockholders, you should
consider that the Discovery Group beneficially owns approximately 9.9% of the
Common Stock reported by the Company as outstanding as of January 16, 2009.
For the reasons stated above, the Discovery Group
recommends that stockholders vote FOR the Stockholder Proposal. We urge you to vote FOR the Stockholder
Proposal on the WHITE proxy card. If
15
you do not indicate any voting
instruction, we will vote the WHITE proxy card FOR the Stockholder Proposal.
Except as set forth in this Proxy Statement, the
Discovery Group is not aware of any other matter to be considered at the
Stockholder Meeting. However, if the
Discovery Group learns of any other proposals made at a reasonable time before
the Stockholder Meeting, the Discovery Group will either supplement this Proxy
Statement and provide an opportunity to stockholders to vote by proxy directly
on such matter or will not exercise discretionary authority with respect
thereto. If other proposals are made
thereafter (including at the Stockholder Meeting), the persons named as proxies
on the WHITE proxy card solicited by the Discovery Group will vote such proxies
in their discretion.
INFORMATION ABOUT
THE PARTICIPANTS
Discovery Equity Partners, Discovery Group I, and Messrs. Donoghue
and Murphy are the participants in the solicitation of proxies contemplated
hereby and are herein collectively referred to sometimes as the Participants. The Other Partnership is not a participant in
the solicitation of proxies contemplated hereby.
Discovery Equity Partners is an Illinois limited
partnership which invests in shares of publicly-traded small capitalization
companies.
Discovery Group I is a Delaware limited liability
company that is the sole general partner of Discovery Equity Partners, is the
investment manager of the Other Partnership, and manages other private
investment accounts investing in shares of publicly-traded small capitalization
companies. Discovery Group I is also a
limited partner in the Other Partnership.
Daniel J. Donoghue is a founder and Managing Member of
each of Discovery Group Entities. Mr. Donoghues
employment by the Discovery Group Entities represents his principal occupation
or employment.
Michael R. Murphy is a founder and Managing Member of
each of the Discovery Group Entities. Mr. Murphys
employment by the Discovery Group Entities represents his principal occupation
or employment.
The business address of each of Discovery Equity
Partners, Discovery Group I, and Messrs. Donoghue and Murphy is
191 North Wacker Drive, Suite 1685,
Chicago, Illinois 60606.
Discovery Equity Partners is the record owner of 500
shares of Common Stock and the beneficial owner of 1,684,108 shares of Common
Stock that are not owned of record by Discovery Equity Partners, representing
approximately 8.5% of the 19,734,863 shares of Common Stock as reported to be
outstanding by the Company as of January 16, 2009. Discovery Group I and
Messrs. Donoghue and Murphy may be
deemed to beneficially own 1,957,563 shares of Common Stock, representing
approximately 9.9% of the 19,734,863 shares of Common Stock as reported to be
outstanding by the Company as of January 16, 2009. Discovery Group I and Messrs. Donoghue
and Murphy do not directly own any shares of Common Stock or other securities
of the Company. The members of the Discovery Group are parties to joint filing
agreements pursuant to which they have agreed to file jointly the Statement on
Schedule 13D and amendments thereto with respect to their beneficial ownership
of the Common Stock.
16
Additional information
concerning the Participants and their associates is set forth in Appendix A to
this Proxy Statement. Additional
information concerning transactions in securities of the Company effected
during the past two years by the Participants and their associates is set forth
in Appendix B to this Proxy Statement.
SOLICITATION; EXPENSES
Proxies may be solicited by mail, advertisement, the
Internet, courier, telephone, facsimile, email and personal solicitation by the
Discovery Group, the Discovery Group Nominees and the Discovery Groups proxy
solicitor. No additional compensation will
be paid to the Discovery Group Nominees for the solicitation of proxies. Banks, brokerage houses and other custodians,
nominees and fiduciaries will be requested to forward the Discovery Groups
solicitation material to their customers for whom they hold shares, and the
Discovery Group will reimburse them for their reasonable out-of-pocket
expenses.
Discovery Group I has on behalf of the Discovery Group
retained The Altman Group to assist in the solicitation of proxies and to act
as an advisor and consultant in connection with the solicitation of
proxies. Discovery Group I will pay The
Altman Group a fee of up to $30,000 in connection with the solicitation, which
fee includes a base fee, a fee payable when definitive proxy solicitation
materials are mailed to stockholders, and certain success fees. Discovery Group I has also agreed to
reimburse The Altman Group for its out-of-pocket expenses, set up fees and
telephone call fees. Approximately
fifteen persons will be used by The Altman Group in its solicitation
efforts. Pursuant to the terms of the
agreement with The Altman Group, Discovery Group I will indemnify The Altman
Group and its officers, directors and employees, from any and all losses
incurred by The Altman Group in connection with, among other things, the
solicitation of the proxies for the Stockholder Meeting.
The directors, officers,
members and employees of the Discovery Group Entities (including the Discovery
Group Nominees) may also participate in the solicitation of proxies. These persons will not be paid additional
remuneration for their efforts.
The entire expense of preparing, assembling, printing
and mailing this Proxy Statement and related materials and the cost of
soliciting proxies will be borne by the Discovery Group.
The Discovery Group estimates that the total
expenditures relating to its proxy solicitation incurred by the Discovery Group
will be approximately $[ ],
approximately $[ ] of which has been
incurred to date.
The Discovery Group
currently intends to seek reimbursement from the Company upon completion of the
solicitation of all expenses incurred in connection with the solicitation of
proxies for the election of the Discovery Group Nominees for the Board at the
Stockholders Meeting if any of the Discovery Group Nominees are elected. The Discovery Group does not intend to submit
the question of such reimbursement to a vote of the stockholders of the
Company.
VOTING AND PROXY PROCEDURES
The Discovery Group believes that it is in the best
interest of the Companys stockholders to elect the Discovery Group Nominees
and to approve the Stockholder Proposal at the Stockholder Meeting. THE DISCOVERY GROUP RECOMMENDS A VOTE FOR THE
ELECTION OF THE DISCOVERY
17
GROUP NOMINEES AND FOR
THE APPROVAL OF THE STOCKHOLDER PROPOSAL BECAUSE THE DISCOVERY GROUP BELIEVES
THAT SUCH ACTIONS WOULD CONTRIBUTE TO THE CREATION OF STOCKHOLDER VALUE.
HOW DO I VOTE BY PROXY?
For the proxy solicited
hereby to be voted, the WHITE proxy card to be supplied by the Discovery Group
Nominees must be signed, dated and returned to the Discovery Group, c/o The
Altman Group, in the enclosed postage-paid envelope in time to be voted at the
Stockholder Meeting. If you wish to vote
for the Discovery Group Nominees, you must submit the WHITE proxy card supplied
by the Discovery Group and must NOT submit the Companys proxy card. While the Companys proxy card can be voted
for the Stockholder Proposal, it CANNOT be voted for the Discovery Group
Nominees.
WHAT IF I AM NOT THE RECORD HOLDER OF MY SHARES?
If your shares are held in the name of a brokerage
firm, bank or nominee, only that entity can vote such shares and only upon
receipt of your specific instruction.
Accordingly, we urge you to contact the person responsible for your
account and instruct that person to execute on your behalf the WHITE proxy
card. If you hold your shares through a
brokerage firm, bank or nominee and wish to vote your shares in person at the
Stockholder Meeting, you must obtain a legal proxy from such custodian in order
to vote in person at the Stockholder Meeting.
IF I PLAN TO ATTEND THE STOCKHOLDER MEETING, SHOULD I
STILL SUBMIT A WHITE
PROXY?
Whether or not you plan to attend the Stockholder
Meeting, we urge you to submit a WHITE proxy card. Returning the enclosed proxy card will not
affect your right to attend and vote at the Stockholder Meeting.
WHAT IF I WANT TO REVOKE MY PROXY?
Any proxy may be revoked as to all matters covered
thereby at any time prior to the time a vote is taken by
(i) submitting a duly executed proxy
card bearing a later date than your previous proxy card, (ii) filing with
the Corporate Secretary of the Company a later dated written notice of
revocation or (iii) if you are a record holder of Common Stock or have
obtained a valid proxy from such a record holder, attending and voting at the
Stockholder Meeting in person.
Attendance at the Stockholder Meeting will not, by itself, revoke a
proxy. The address of the Corporate
Secretary of the Company is 10780 Parkridge Boulevard, Reston, Virginia
20191.
Please note that if you hold your shares through a
brokerage firm, bank or nominee and wish to revoke your proxy, you must follow
the instructions provided by that brokerage firm, bank or nominee to revoke
your earlier vote and revote.
Although a revocation is effective if delivered to the
Company, we request that either the original or a copy of any revocation be
sent to the Discovery Group, c/o The Altman Group, 1200 Wall Street West, Lyndhurst,
NJ 07071, so that the Discovery Group will be aware of all revocations.
IF YOU PREVIOUSLY SIGNED AND
RETURNED A GOLD PROXY CARD TO THE COMPANY, WE URGE YOU TO REVOKE IT BY (1) SIGNING,
DATING AND RETUNING THE WHITE PROXY CARD, (2) ATTENDING THE STOCKHOLDER
MEETING AND
18
VOTING IN
PERSON OR (3) DELIVERING A WRITTEN NOTICE OF REVOCATION TO THE SECRETARY
OF THE COMPANY OR THE DISCOVERY GROUP.
WHAT SHOULD I DO IF I RECEIVE A PROXY CARD SOLICITED
BY THE COMPANY?
If you submit a proxy to us by signing and returning
the enclosed WHITE proxy card, do not sign or return the proxy card solicited
by the Company or follow any voting instructions provided by the Company unless
you intend to change your vote, because only your latest-dated proxy will be
counted.
If you have already sent a proxy card to the Company,
you may revoke it and provide your support to the Discovery Group Nominees by
signing, dating and returning the enclosed WHITE proxy card.
WHO CAN VOTE?
The Board of Directors has established January 16,
2009 as the record date for the Stockholder Meeting (the Record Date). Only holders of record of Common Stock on the
Record Date will be entitled to vote at and attend the Stockholder Meeting. If you are a stockholder of record on the
Record Date, you will retain the voting rights in connection with the
Stockholder Meeting even if you sell such shares after the Record Date. Accordingly, it is important that you vote
the shares of Common Stock held by you on the Record Date, or grant a proxy to
vote such shares on the WHITE proxy card, even if you sell such shares after
such date.
WHAT IS THE REQUIRED QUORUM?
A majority of the shares of Common Stock outstanding
and entitled to vote at the Stockholder Meeting, present in person or by proxy,
constitute a quorum.
WHAT VOTE IS REQUIRED TO ELECT THE DISCOVERY GROUP
NOMINEES AND APPROVE THE STOCKHOLDER PROPOSAL?
Based on the Company Proxy Statement, with respect to
the election of directors at the Stockholder Meeting:
·
the nine
nominees receiving the highest number of affirmative votes at the Stockholder
Meeting will be elected to the Board of Directors; and
·
abstentions and
broker non-votes will be counted as present when determining whether there is
a quorum, but will not be counted toward a nominees attainment of a plurality.
Based on the Company Proxy Statement, with respect to
the approval of the Stockholder Proposal at the Stockholder Meeting:
·
the affirmative
vote of a majority of the shares of Common Stock voting on the matter is
required to approve the Stockholder Proposal; and
·
abstentions and
broker non-votes are included in determining the number of votes present, but
will not be counted in determining whether the Stockholder Proposal is
approved.
19
We intend to vote all of the shares owned by Discovery
Equity Partners and the Other Partnership for the Discovery Group Nominees, for
the ratification of the selection of McGladrey & Pullen as the Companys
independent registered public accounting firm, and for the Stockholder
Proposal.
HOW WILL MY SHARES BE VOTED?
In the election of directors as the Stockholder
Meeting, you are entitled to give a nominee as many votes as is equal to the
number of shares you own multiplied by the number of directors to be elected,
or you may distribute your votes among the nominees as you see fit. For example, if you own 100 shares as of the
Record Date, and if nine directors are to be elected at the Stockholder Meeting,
you have 900 votes that you can allocate among the nominees in any manner you
choose.
You may specify how your votes are to be cumulated
with respect to the Discovery Group Nominees by giving instructions on the
enclosed WHITE proxy card as to how your votes are to be cumulated or, if you
are a record holder or have obtained a valid proxy from the record holder, by
voting in person at the Stockholder Meeting.
If you do not specify how your votes are to be cumulated among the
Discovery Group Nominees, the enclosed WHITE proxy card authorizes the proxies
named on the WHITE proxy card to cumulate your votes in their discretion,
provided that the proxies will not cumulate votes for any Discovery Group
Nominee from whom you have withheld the authority to vote. To specify different directions with respect
to cumulative voting, including to direct that the proxies cumulate votes with
respect to the Discovery Group Nominees in accordance with your directions, you
must mark the appropriate box on the front of the WHITE proxy card and write
your instructions on the reverse side.
The Discovery Group intends to cumulate any votes over which it has
discretionary authority in such a way as to assure that the maximum number of
Discovery Group Nominees are elected to the Board of Directors.
With respect to the approval of the Stockholder
Proposal, each share of Common Stock present in person or by proxy at the
Stockholder Meeting will be entitled to one vote.
Shares of Common Stock represented by a valid,
unrevoked WHITE proxy card will be voted in accordance with the recommendations
made in this Proxy Statement unless you otherwise indicate on the proxy card.
Except as set forth in this Proxy Statement, the
Discovery Group is not aware of any other matter to be considered at the
Stockholder Meeting. However, if the
Discovery Group learns of any other proposals made at a reasonable time before
the Stockholder Meeting, the Discovery Group will either supplement this Proxy
Statement and provide an opportunity to stockholders to vote by proxy directly
on such matter or will not exercise discretionary authority with respect
thereto. If other proposals are made
thereafter (including at the Stockholder Meeting), the persons named as proxies
on the WHITE proxy card solicited by the Discovery Group will vote such proxies
in their discretion.
THE DISCOVERY GROUP IS ONLY PROPOSING TWO NOMINEES,
WHILE NINE DIRECTORS ARE EXPECTED TO BE ELECTED AT THE STOCKHOLDER
MEETING. IF I VOTE MY SHARES ON THE
WHITE PROXY CARD, HOW MANY NOMINEES WILL I BE VOTING FOR?
Due to the Discovery Groups decision to solicit
proxies only for the Discovery Group Nominees, the enclosed WHITE proxy card
may only be voted for the Discovery Group Nominees and does not confer voting
power with respect to seven of the nine Board positions or the Company
Nominees. The Discovery Group is seeking to elect the maximum number of
Discovery Group Nominees. The Discovery Group expects to cumulate all of the
votes over which it has discretionary authority (if any) in favor of the
Discovery Group Nominees. If the two
Discovery Group Nominees are elected, the nominees of the Company or of other
stockholders who receive the greatest number of votes would be elected as the
seven other directors.
20
HOW CAN I FIND THE DISCOVERY GROUPS PROXY MATERIALS
ON THE INTERNET?
This Proxy Statement is available electronically at
http://www.thediscoverygroup.com/tier/.
APPRAISAL RIGHTS
Stockholders of the Company do not have rights of
appraisal or dissenters rights with respect to any matter to be acted upon at
the Stockholder Meeting.
STOCKHOLDER
PROPOSALS FOR THE COMPANYS NEXT ANNUAL MEETING
According to the Company Proxy Statement, if a
stockholder intends to present a proposal for inclusion in the Company proxy
statement for the Companys next annual meeting, the stockholder must follow
the procedures outlined in Rule 14a-8 under the Exchange
Act. Such proposals must be addressed to Tier Technologies, Inc.,
Attention: Corporate Secretary, 10780 Parkridge Boulevard, Suite 400,
Reston, Virginia, 20191, and received no later than October 5, 2009.
Also according to the Company Proxy Statement,
proposals not intended to be included in the Companys proxy statement for the
Companys next annual meeting, but that are instead sought to be presented
directly at the 2010 annual meeting, including nominations of director
candidates, must be received by the Company at the above-mentioned address no
later than 60 days nor more than 90 days prior to the first anniversary of the
date of this years meeting (but if the Company gives less than 70 days advance
notice or prior public disclosure of the date of such meeting, it must receive
such proposals and director nominations by the close of business on the tenth
day following the mailing of notice of the date of such annual meeting or
public disclosure of the date of such annual meeting, whichever comes first)
and must otherwise comply with the requirements of the Companys bylaws.
INFORMATION ABOUT THE COMPANY
Based upon documents publicly filed by the Company,
the mailing address of the principal executive offices of the Company is 10780
Parkridge Boulevard, Reston, Virginia 20191.
The Company is subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended, and, in
accordance therewith, is required to file reports, proxy statements and other
information with the SEC. Reports,
registration statements, proxy statements and other information filed by the Company
with the SEC may be inspected at, and copies may be obtained from, the public
reference facilities maintained at the SEC at 100 F Street, N.E.,
Washington, DC 20549. Copies of such
material can also be obtained upon written request addressed to the SEC, Public
Reference Section, 100 F Street, N.E., Washington, DC 20549, at prescribed
rates. You may obtain information on the
operation of the SECs Public Reference Room by calling the SEC at
(800) SEC-0330. The SEC also
maintains a web site on the Internet (
http://www.sec.gov
)
where reports, proxy and information statements and other information regarding
issuers and others that file electronically with the SEC may be obtained free
of charge.
Information regarding the security ownership of
certain beneficial owners and management of the Company is included in Appendix
C to this Proxy Statement. Such
information is based upon
21
information contained in
the Company Proxy Statement and the Participants assume no responsibility for
the accuracy and completeness of such information.
Date: February [
], 2009
|
Discovery Equity Partners, L.P.
|
|
Discovery Group I, LLC
|
|
Daniel J. Donoghue
|
|
Michael R. Murphy
|
22
APPENDIX A
INFORMATION CONCERNING
PARTICIPANTS IN THE PROXY SOLICITATION
The following sets forth the name, business address,
and the number of shares of Common Stock of the Company beneficially owned (as
determined in accordance with Rule 13d-3 under the Exchange Act) as of February [ ], 2009 by each of the Participants:
Name
|
|
Business Address
|
|
Number of Shares of
Common Stock of
the Company
Beneficially Owned
|
|
Percent of Common
Stock of the
Company(1)
|
|
Discovery Equity Partners, L.P. (2)
|
|
191 North Wacker
Drive, Suite 1685, Chicago, Illinois 60606
|
|
1,684,608
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
Discovery Group I, LLC (3)(4)
|
|
191 North
Wacker Drive, Suite 1685, Chicago, Illinois 60606
|
|
1,957,563
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
Daniel J. Donoghue (3)(4)
|
|
191 North
Wacker Drive, Suite 1685, Chicago, Illinois 60606
|
|
1,957,563
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
Michael R. Murphy (3)(4)
|
|
191 North
Wacker Drive, Suite 1685, Chicago, Illinois 60606
|
|
1,957,563
|
|
9.9
|
%
|
(1) All
percentages are based on the 19,734,863 shares of Common Stock outstanding as
of January 16, 2009 according to the Companys Preliminary Proxy
Statement filed on January 20, 2009.
|
|
(2) Discovery
Equity Partners directly owns shares of Common Stock, 500 of which are owned
of record and 1,684,108 of which are held in a nominee account maintained at
a securities brokerage firm. The name and address of the record holder of the
1,684,108 shares beneficially owned by Discovery Equity Partners is
Cede & Co., c/o Depository Trust Co., P.O. Box 20, Bowling
Green Station, New York, New York 10004.
|
|
(3) The
Other Partnership directly owns 272,995 shares of Common Stock, none of which
are owned of record and all
of which are held in a nominee account maintained at a
securities brokerage firm. The name and address of the record holder of the
272,995 shares beneficially owned by the Other Partnership is Cede &
Co., c/o Depository Trust Co., P.O. Box 20, Bowling Green Station, New
York, New York 10004.
|
|
(4) Discovery
Group I is the sole general partner of Discovery Equity Partners and is the
investment manager of the Other Partnership, and has sole discretionary
investment authority with respect to, the
|
23
Partnerships
investment in the Common Stock. Messrs. Donoghue and Murphy are
the sole managing members of Discovery Group I. As a consequence,
Discovery Group I and Messrs. Donoghue and Murphy may be deemed to share
beneficial ownership of all of the shares of Common Stock owned by Discovery
Equity Partners and the Other Partnership.
Messrs. Donoghue and Murphy do not own (i) of record any
shares of Common Stock and (ii) beneficially or of record shares of any
other class of stock or other securities of the Company.
|
|
|
|
|
|
Except as set
forth in this Proxy Statement or in the Appendices hereto, to the knowledge
of the Discovery Group:
|
|
|
|
|
(i)
|
|
no Participant
owns beneficially, directly or indirectly, or has the right to acquire, any
securities of the Company or any parent or subsidiary of the Company;
|
|
|
|
|
|
(ii)
|
|
no Participant
owns any securities of the Company which are owned of record but not
beneficially;
|
|
|
|
|
|
(iii)
|
|
no Participant
has purchased or sold any securities of the Company within the past two
years;
|
|
|
|
|
|
(iv)
|
|
no Participant
is, or was within the past year, a party to any contract, arrangement or
understanding with any person with respect to any securities of the Company
within the past year, including, but not limited to, joint ventures, loan or
option agreements, puts or calls, guarantees against loss or guarantees of
profit, division of losses or profits, or the giving or withholding of
proxies;
|
|
|
|
|
|
(v)
|
|
none of the
associates (as defined below) of any participant beneficially owns, directly
or indirectly, any securities of the Company;
|
|
|
|
|
|
(vi)
|
|
no Participant
nor any associate of a Participant or any immediate family member of any such
Participant or associate has engaged in or had a direct or indirect material
interest in any transaction, or series of similar transactions, since
October 1, 2007, or any currently proposed transaction, or series of
similar transactions, to which the Company or any of its subsidiaries was or
is to be a party, in which the amount involved exceeds $120,000;
|
|
|
|
|
|
(vii)
|
|
no Participant
nor any associate of a Participant has any arrangement or understanding with
any person (a) with respect to future employment by the Company or its
affiliates or (b) with respect to any future transactions to which the
Company or any of its affiliates will be or may be a party; and
|
|
|
|
|
|
(viii)
|
|
no person who is
a party to an arrangement or understanding pursuant to which a nominee for
election as director is proposed to be elected (including, without
limitation, any Participant), has a substantial interest, direct or indirect,
by security holdings or otherwise, in any matter to be acted on at the
Stockholder Meeting.
|
|
|
|
|
|
For purposes of the foregoing, the term associate
shall have the meaning set forth in Rule 14a-1 of Regulation 14A under the
Exchange Act.
24
Information concerning transactions in the Common
Stock by the Participants and their associates effected during the past two
years is set forth in Appendix B to the Proxy Statement.
25
APPENDIX B
TRANSACTIONS IN TIER TECHNOLOGIES, INC. COMMON STOCK
Except for the shares of Common Stock of the Company
owned by Discovery Equity Partners and the Other Partnership, neither Mr. Donoghue
nor Mr. Murphy has purchased or sold any Common Stock of the Company
within the past two years. The following
is a schedule of all transactions by Discovery Equity Partners and the Other
Partnership in the Common Stock within the past two years, which schedule sets
forth with respect to Discovery Equity Partners and the Other Partnership, as
the case may be, the date of such transaction, the number of shares of Common
Stock purchased or sold by Discovery Equity or the Other Partnership, as the
case may be, on such date, and whether such transaction constituted a purchase
or sale (amounts in parentheses indicate a sale of shares).
In connection with the purchases of Common Stock,
Discovery Equity Partners and the Other Partnership used (i) available
cash and (ii) in certain cases, the proceeds of a margin loan facility
which is collateralized by Discovery Equity Partners and the Other
Partnerships portfolios of investment securities, including the Common
Stock. These margin loans were obtained
from one broker under customary terms and conditions. Since the time of such purchases, Discovery
Equity Partners and the Other Partnership have ceased using shares of the
Common Stock as collateral for such margin loans, and thus no margin loans
secured by Common Stock remain outstanding as of the date of this Proxy Statement.
Date
|
|
Discovery
|
|
Other
Partnership
|
|
3/5/07
|
|
255
|
|
45
|
|
3/6/07
|
|
50
|
|
|
|
3/12/07
|
|
425
|
|
75
|
|
3/13/07
|
|
2,677
|
|
473
|
|
3/14/07
|
|
935
|
|
165
|
|
3/15/07
|
|
765
|
|
135
|
|
3/16/07
|
|
1,020
|
|
180
|
|
3/19/07
|
|
2,567
|
|
453
|
|
3/20/07
|
|
17,570
|
|
3,100
|
|
3/21/07
|
|
85
|
|
15
|
|
3/22/07
|
|
531
|
|
94
|
|
3/23/07
|
|
425
|
|
75
|
|
3/26/07
|
|
43
|
|
7
|
|
4/10/07
|
|
6,660
|
|
1,175
|
|
4/10/07
|
|
49,300
|
|
8,700
|
|
4/12/07
|
|
4,250
|
|
750
|
|
4/13/07
|
|
2,295
|
|
405
|
|
26
Date
|
|
Discovery
|
|
Other
Partnership
|
|
4/16/07
|
|
3,655
|
|
645
|
|
4/18/07
|
|
2,550
|
|
450
|
|
4/19/07
|
|
935
|
|
165
|
|
4/20/07
|
|
1,530
|
|
270
|
|
4/24/07
|
|
340
|
|
60
|
|
4/25/07
|
|
11,305
|
|
1,995
|
|
4/26/07
|
|
765
|
|
135
|
|
4/30/07
|
|
2,550
|
|
450
|
|
5/1/07
|
|
3,740
|
|
660
|
|
5/1/07
|
|
21,250
|
|
3,750
|
|
5/7/07
|
|
2,975
|
|
525
|
|
5/8/07
|
|
1,275
|
|
225
|
|
5/15/07
|
|
8,500
|
|
1,500
|
|
5/16/07
|
|
2,125
|
|
375
|
|
5/17/07
|
|
6,375
|
|
1,125
|
|
5/18/07
|
|
4,250
|
|
750
|
|
5/21/07
|
|
425
|
|
75
|
|
5/22/07
|
|
6,800
|
|
1,200
|
|
5/23/07
|
|
1,445
|
|
255
|
|
5/24/07
|
|
8,415
|
|
1,485
|
|
5/25/07
|
|
765
|
|
135
|
|
5/29/07
|
|
85,000
|
|
15,000
|
|
5/30/07
|
|
37,400
|
|
6,600
|
|
6/4/07
|
|
4,250
|
|
750
|
|
6/7/07
|
|
510
|
|
90
|
|
6/8/07
|
|
85
|
|
15
|
|
6/11/07
|
|
5,780
|
|
1,020
|
|
6/12/07
|
|
4,250
|
|
750
|
|
6/12/07
|
|
85,000
|
|
15,000
|
|
6/15/07
|
|
4,250
|
|
750
|
|
6/18/07
|
|
4,250
|
|
750
|
|
6/19/07
|
|
4,250
|
|
750
|
|
27
Date
|
|
Discovery
|
|
Other
Partnership
|
|
6/20/07
|
|
4,250
|
|
750
|
|
6/21/07
|
|
3,740
|
|
660
|
|
6/22/07
|
|
2,210
|
|
390
|
|
6/25/07
|
|
4,250
|
|
750
|
|
6/26/07
|
|
18,700
|
|
3,300
|
|
6/26/07
|
|
63,750
|
|
11,250
|
|
6/28/07
|
|
85
|
|
15
|
|
6/29/07
|
|
1,615
|
|
285
|
|
7/3/07
|
|
4,250
|
|
750
|
|
7/5/07
|
|
1,700
|
|
300
|
|
7/6/07
|
|
12,750
|
|
2,250
|
|
7/9/07
|
|
29,325
|
|
5,175
|
|
7/10/07
|
|
17,425
|
|
3,075
|
|
7/11/07
|
|
6,885
|
|
1,215
|
|
7/12/07
|
|
5,355
|
|
945
|
|
7/16/07
|
|
680
|
|
120
|
|
7/17/07
|
|
9,180
|
|
1,620
|
|
7/18/07
|
|
1,275
|
|
225
|
|
7/20/07
|
|
1,615
|
|
285
|
|
7/23/07
|
|
8,160
|
|
1,440
|
|
7/24/07
|
|
21,250
|
|
3,750
|
|
7/26/07
|
|
25,500
|
|
4,500
|
|
7/30/07
|
|
8,500
|
|
1,500
|
|
7/31/07
|
|
7,480
|
|
1,320
|
|
8/1/07
|
|
8,500
|
|
1,500
|
|
8/3/07
|
|
3,825
|
|
675
|
|
8/6/07
|
|
4,250
|
|
750
|
|
8/7/07
|
|
4,250
|
|
750
|
|
8/8/07
|
|
2,550
|
|
450
|
|
8/9/07
|
|
2,550
|
|
450
|
|
8/10/07
|
|
4,250
|
|
750
|
|
8/13/07
|
|
4,250
|
|
750
|
|
28
Date
|
|
Discovery
|
|
Other
Partnership
|
|
8/15/07
|
|
8,500
|
|
1,500
|
|
8/16/07
|
|
9,000
|
|
1,000
|
|
8/17/07
|
|
9,000
|
|
1,000
|
|
8/20/07
|
|
9,000
|
|
1,000
|
|
8/21/07
|
|
7,200
|
|
800
|
|
8/22/07
|
|
3,600
|
|
400
|
|
8/23/07
|
|
9,500
|
|
500
|
|
8/24/07
|
|
14,060
|
|
740
|
|
8/27/07
|
|
190
|
|
10
|
|
8/31/07
|
|
3,966
|
|
209
|
|
9/4/07
|
|
5,533
|
|
292
|
|
9/5/07
|
|
7,600
|
|
400
|
|
9/6/07
|
|
6,650
|
|
350
|
|
9/7/07
|
|
3,800
|
|
200
|
|
9/10/07
|
|
5,700
|
|
300
|
|
9/11/07
|
|
1,045
|
|
55
|
|
9/12/07
|
|
1,235
|
|
65
|
|
9/13/07
|
|
1,375
|
|
72
|
|
9/14/07
|
|
2,045
|
|
108
|
|
9/17/07
|
|
5,700
|
|
300
|
|
9/18/07
|
|
7,125
|
|
375
|
|
9/19/07
|
|
5,700
|
|
300
|
|
9/20/07
|
|
5,320
|
|
280
|
|
9/20/07
|
|
21,250
|
|
3,750
|
|
9/21/07
|
|
950
|
|
50
|
|
9/24/07
|
|
3,325
|
|
175
|
|
9/26/07
|
|
340
|
|
60
|
|
3/20/08
|
|
|
|
(2,593
|
)
|
3/24/08
|
|
|
|
(700
|
)
|
3/25/08
|
|
(800
|
)
|
|
|
3/27/08
|
|
(25,533
|
)
|
(4,505
|
)
|
3/31/08
|
|
(700
|
)
|
|
|
29
Date
|
|
Discovery
|
|
Other
Partnership
|
|
4/8/08
|
|
(400
|
)
|
|
|
4/9/08
|
|
(200
|
)
|
|
|
4/11/08
|
|
(1,955
|
)
|
(345
|
)
|
4/15/08
|
|
(8,160
|
)
|
(1,440
|
)
|
4/16/08
|
|
(8,502
|
)
|
(1,500
|
)
|
4/17/08
|
|
(2,210
|
)
|
(390
|
)
|
4/22/08
|
|
(400
|
)
|
|
|
4/28/08
|
|
700
|
|
|
|
5/1/08
|
|
91,630
|
|
16,170
|
|
5/5/08
|
|
3,911
|
|
690
|
|
5/6/08
|
|
3,570
|
|
630
|
|
5/7/08
|
|
34,727
|
|
6,129
|
|
5/8/08
|
|
26,106
|
|
4,250
|
|
5/9/08
|
|
1,735
|
|
282
|
|
5/12/08
|
|
21,760
|
|
3,840
|
|
6/4/08
|
|
10,395
|
|
1,693
|
|
6/9/08
|
|
600
|
|
|
|
6/10/08
|
|
11,324
|
|
1,844
|
|
6/11/08
|
|
15,490
|
|
2,522
|
|
6/12/08
|
|
2,408
|
|
392
|
|
6/13/08
|
|
3,055
|
|
497
|
|
6/18/08
|
|
2,150
|
|
350
|
|
6/19/08
|
|
4,042
|
|
658
|
|
6/20/08
|
|
4,512
|
|
734
|
|
6/23/08
|
|
1,720
|
|
280
|
|
6/24/08
|
|
1,290
|
|
210
|
|
6/25/08
|
|
3,393
|
|
552
|
|
6/26/08
|
|
1,462
|
|
238
|
|
6/27/08
|
|
2,322
|
|
378
|
|
6/30/08
|
|
2,719
|
|
443
|
|
7/1/08
|
|
3,956
|
|
644
|
|
7/2/08
|
|
6,450
|
|
1,050
|
|
30
Date
|
|
Discovery
|
|
Other
Partnership
|
|
7/3/08
|
|
3,870
|
|
630
|
|
7/7/08
|
|
1,108
|
|
192
|
|
7/8/08
|
|
4,809
|
|
835
|
|
7/10/08
|
|
4,175
|
|
725
|
|
7/11/08
|
|
1,022
|
|
178
|
|
7/14/08
|
|
14,327
|
|
2,489
|
|
7/15/08
|
|
2,556
|
|
444
|
|
7/16/08
|
|
3,067
|
|
533
|
|
7/17/08
|
|
852
|
|
148
|
|
7/18/08
|
|
511
|
|
89
|
|
7/21/08
|
|
|
|
400
|
|
7/23/08
|
|
2,574
|
|
426
|
|
7/24/08
|
|
2,674
|
|
442
|
|
7/25/08
|
|
1,459
|
|
241
|
|
7/28/08
|
|
9,953
|
|
1,647
|
|
7/29/08
|
|
973
|
|
161
|
|
7/30/08
|
|
1,133
|
|
187
|
|
7/31/08
|
|
944
|
|
156
|
|
8/1/08
|
|
1,287
|
|
213
|
|
8/4/08
|
|
515
|
|
85
|
|
8/5/08
|
|
1,287
|
|
213
|
|
8/6/08
|
|
601
|
|
99
|
|
8/7/08
|
|
2,660
|
|
440
|
|
8/13/08
|
|
4,633
|
|
767
|
|
8/14/08
|
|
2,862
|
|
474
|
|
8/15/08
|
|
86,401
|
|
14,299
|
|
8/18/08
|
|
10,468
|
|
1,732
|
|
8/19/08
|
|
3,389
|
|
561
|
|
8/19/08
|
|
50,622
|
|
8,378
|
|
8/22/08
|
|
3,861
|
|
639
|
|
8/25/08
|
|
429
|
|
71
|
|
8/26/08
|
|
2,060
|
|
341
|
|
31
Date
|
|
Discovery
|
|
Other
Partnership
|
|
8/27/08
|
|
1,802
|
|
298
|
|
8/28/08
|
|
971
|
|
161
|
|
9/3/08
|
|
3,003
|
|
497
|
|
9/4/08
|
|
1,373
|
|
227
|
|
9/5/08
|
|
37,752
|
|
6,248
|
|
9/5/08
|
|
4,462
|
|
738
|
|
9/8/08
|
|
12,613
|
|
2,087
|
|
9/9/08
|
|
300
|
|
|
|
9/15/08
|
|
4,554
|
|
754
|
|
9/16/08
|
|
8,580
|
|
1,420
|
|
9/17/08
|
|
1,103
|
|
182
|
|
9/18/08
|
|
8,580
|
|
1,420
|
|
9/19/08
|
|
3,076
|
|
509
|
|
9/22/08
|
|
13,041
|
|
2,158
|
|
9/23/08
|
|
10,542
|
|
1,745
|
|
9/24/08
|
|
7,085
|
|
1,172
|
|
9/25/08
|
|
9,867
|
|
1,633
|
|
9/26/08
|
|
3,775
|
|
625
|
|
9/29/08
|
|
33,033
|
|
5,467
|
|
10/1/08
|
|
4,901
|
|
811
|
|
10/2/08
|
|
8,915
|
|
1,475
|
|
10/6/08
|
|
6,006
|
|
994
|
|
10/7/08
|
|
15,530
|
|
2,570
|
|
10/7/08
|
|
2,831
|
|
469
|
|
10/8/08
|
|
6,625
|
|
1,096
|
|
10/9/08
|
|
2,402
|
|
398
|
|
10/10/08
|
|
2,917
|
|
483
|
|
10/13/08
|
|
2,574
|
|
426
|
|
10/14/08
|
|
1,973
|
|
327
|
|
10/15/08
|
|
2,917
|
|
483
|
|
10/16/08
|
|
27,937
|
|
4,624
|
|
10/17/08
|
|
35,155
|
|
5,818
|
|
32
Date
|
|
Discovery
|
|
Other
Partnership
|
|
10/20/08
|
|
14,669
|
|
2,428
|
|
10/21/08
|
|
9,781
|
|
1,619
|
|
10/22/08
|
|
2,440
|
|
404
|
|
10/23/08
|
|
12,934
|
|
2,141
|
|
10/24/08
|
|
3,689
|
|
611
|
|
10/27/08
|
|
550
|
|
|
|
10/28/08
|
|
1,802
|
|
298
|
|
10/29/08
|
|
858
|
|
142
|
|
11/3/08
|
|
2,746
|
|
454
|
|
11/4/08
|
|
2,059
|
|
341
|
|
11/5/08
|
|
4,594
|
|
760
|
|
11/6/08
|
|
4,153
|
|
687
|
|
11/7/08
|
|
2,574
|
|
426
|
|
11/10/08
|
|
1,716
|
|
284
|
|
11/11/08
|
|
1,459
|
|
241
|
|
11/12/08
|
|
1,888
|
|
312
|
|
11/13/08
|
|
899
|
|
149
|
|
11/14/08
|
|
1,802
|
|
298
|
|
11/18/08
|
|
6,435
|
|
1,065
|
|
11/19/08
|
|
1,680
|
|
278
|
|
11/20/08
|
|
10,124
|
|
1,676
|
|
33
APPENDIX C
SECURITY OWNERSHIP OF
MANAGEMENT
The following table sets forth certain information
regarding the ownership of the Companys Common Stock as of January 16,
2009 by: (i) each director and director nominee; (ii) each of the
named executive officers; and (iii) all executive officers and directors
of Tier as a group. Unless otherwise indicated, beneficial ownership
is direct and the person indicated has sole voting and investment power.
|
|
Common stock
beneficially owned
|
|
Name of beneficial owner(1)
|
|
Total
number of
shares
|
|
Percent
of
class(2)
|
|
Charles W. Berger
|
|
140,000
|
(3)
|
*
|
|
Samuel Cabot III
|
|
214,810
|
(4)
|
1.1
|
%
|
John J. Delucca
|
|
40,000
|
(5)
|
*
|
|
Morgan P. Guenther
|
|
151,000
|
(6)
|
*
|
|
Philip G. Heasley
|
|
10,002
|
(7)
|
*
|
|
David A. Poe
|
|
6,668
|
(8)
|
*
|
|
James R. Stone
|
|
38,337
|
(9)
|
*
|
|
Steven M. Beckerman
|
|
|
|
*
|
|
Kevin C. Connell
|
|
77,400
|
(10)
|
*
|
|
David E. Fountain
|
|
|
|
*
|
|
Ronald W. Johnston
|
|
|
|
*
|
|
Michael A. Lawler
|
|
131,704
|
|
*
|
|
Keith S. Omsberg
|
|
21,900
|
(11)
|
*
|
|
Ronald L. Rossetti
|
|
442,365
|
(12)
|
2.2
|
%
|
Deanne M. Tully
|
|
|
|
*
|
|
All directors and executive officers as a
group (13 persons)
|
|
1,142,482
|
(13)
|
5.5
|
%
|
|
|
|
|
|
|
|
|
*
Less than 1%
(1) Address:
10780 Parkridge Blvd, Suite 400, Reston, Virginia 20191.
(2) The
percentages shown are based on 19,734,863 shares of common stock outstanding as
of January 16, 2009.
(3) Consists
entirely of shares issuable upon the exercise of options exercisable on or
before March 17, 2009.
(4) Includes
195,000 shares issuable upon the exercise of options exercisable on or before March 17,
2009.
(5)Consists
entirely of shares issuable upon the exercise of options exercisable on or
before March 17, 2009.
(6) Includes
150,000 shares issuable upon the exercise of options exercisable on or before March 17,
2009.
(7) Consists
entirely of shares issuable upon the exercise of options exercisable on or
before March 17, 2009.
(8) Consists
entirely of shares issuable upon the exercise of options exercisable on or
before March 17, 2009.
(9) Consists
entirely of shares issuable upon the exercise of options exercisable on or
before March 17, 2009.
(10)Consists
entirely of shares issuable upon the exercise of options exercisable on or
before March 17, 2009.
(11)Consists
entirely of shares issuable upon the exercise of options exercisable on or
before March 17, 2009.
(12)
Includes 415,000 shares issuable upon the exercise of options exercisable on or
before March 17, 2009.
(13)
Includes 1,094,307 shares issuable upon the exercise of options exercisable on
or before March 17, 2009.
34
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS
The
following table lists certain persons known by Tier to own beneficially more
than five percent of Tiers outstanding shares of common stock as of January 16,
2009.
Name of beneficial owner
|
|
Amount
and
nature of
beneficial
ownership
|
|
Percent of
class
|
|
|
|
|
|
|
|
Wells Fargo & Company
(1)
|
|
2,624,753
|
|
13.3
|
%
|
|
|
|
|
|
|
Discovery Group I, LLC
(2)
|
|
1,957,563
|
|
9.9
|
%
|
|
|
|
|
|
|
Heartland Advisors, Inc.
(3)
|
|
1,891,430
|
|
9.6
|
%
|
|
|
|
|
|
|
Giant Investment, LLC
(4)
|
|
1,799,322
|
|
9.1
|
%
|
|
|
|
|
|
|
Dimensional Fund Advisors
(5)
|
|
1,764,020
|
|
8.9
|
%
|
|
|
|
|
|
|
Peninsula Capital Management, LP
(6)
|
|
998,524
|
|
5.1
|
%
|
(1) Based
solely on information contained in a Schedule 13G filed with the SEC on January 24,
2008 by Wells Fargo & Company and its subsidiary, Wells Capital
Management Incorporated. The address for Wells Fargo &
Company is 420 Montgomery Street, San Francisco, California
94104. The address for Wells Capital Management Incorporated is 525
Market Street, San Francisco, California 94105. This table reflects
the shares of common stock owned by Wells Fargo & Company and Wells
Capital Management Incorporated as of December 31, 2007.
(2) Address:
191 North Wacker Drive, Suite 1685, Chicago, Illinois 60606. Based
solely on information contained in a Schedule 13D/A filed with the SEC by
Discovery Group I, LLC on December 4, 2008. Discovery Group I,
LLC is the general partner of Discovery Equity Partners,
L.P. Discovery Equity Partners, L.P. beneficially owns 1,684,608
shares of common stock and Discovery Group I, LLC beneficially owns 1,957,563
shares of common stock. In addition, Daniel J. Donoghue and Michael
R. Murphy are the managing members of Discovery Group I, LLC and may be deemed
to beneficially own 1,957,563 shares of common stock.
(3) Address: 789
North Water Street, Milwaukee, Wisconsin 53202. Based solely on
information contained in a Schedule 13G/A filed with the SEC by Heartland
Advisors, Inc. on February 8, 2008. This table reflects the
shares of common stock that may be deemed beneficially owned by
Heartland Advisors, Inc. as of December 31, 2007.
(4) Address: 265
Franklin Street, 18th Floor, Boston, Massachusetts 02110. Based
solely on information contained in a Schedule 13D/A filed with the SEC by Giant
Investments, LLC on December 30, 2008. Parthenon Investors II,
LP, is a managing member of Giant Investment, LLC, PCap Partners II, LLC is a
general partner of Parthenon Investors II, LP, and PCap II, LLC is a managing
member of PCap Partners II, LLC. As parents of Giant Investment, LLC, Parthenon
Investors II, LP, PCap Partners II, LLC, and PCap II, LLC may be deemed to
beneficially own their proportional interest in the shares of common stock
directly and beneficially owned by Giant Investment, LLC, comprising 1,748,401
shares of common stock. In addition, John C. Rutherford and Ernest
K. Jacquet are control persons of various entities indirectly investing in
Giant Investment, LLC and may be deemed to beneficially own a proportional
interest in the shares of common stock owned by Giant Investment, LLC,
comprising 1,799,322 shares of common stock.
(5) Address: 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401. Based
solely on information contained in a Schedule 13G filed with the SEC by
Dimensional Fund Advisors Inc. on February 6, 2008. This table
reflects the shares of common stock owned by Dimensional Fund Advisors Inc. on December 31,
2007.
(6) Address: 235
Pine Street, Suite 1600, San Francisco, California 94104. Based
solely on information contained in a Schedule 13G filed with the SEC by
Peninsula Capital Management, LP and Scott Bedford on April 2,
2008. This table reflects the shares of common stock that may be
deemed beneficially owned by Peninsula Capital Management, LP and Scott Bedford
as of March 13, 2008. Scott Bedford is President of Peninsula
Capital Management, Inc., which is the general partner of Peninsula
Capital Management, LP.
35
IMPORTANT
Please review this Proxy Statement and the enclosed
materials carefully. YOUR VOTE IS VERY
IMPORTANT, no matter how many or how few shares you own.
1.
If
your shares are registered in your own name, please sign, date and mail the
enclosed WHITE proxy card to The Altman Group in the postage-paid envelope
provided.
2.
If
your shares are held in the name of a brokerage firm, bank nominee or other
institution, only it can vote your shares and only after receiving your
specific instructions. Accordingly, you
should contact the person responsible for your account and give instructions
for a WHITE proxy card to be issued representing your shares.
3.
After
signing the enclosed WHITE proxy card, do not sign or return the Companys
proxy card unless you intend to change your vote, because only your latest
dated proxy card will be counted.
4.
If
you have previously signed and returned a proxy card to the Company, you have
every right to change your vote. Only
your latest dated proxy card will count.
You may revoke any proxy card already sent to the Company by signing,
dating and mailing the enclosed WHITE proxy card in the postage-paid envelope
provided. Any proxy may be revoked at
any time prior to the 2009 Stockholder Meeting by delivering a written notice
of revocation or a later-dated proxy for the 2009 Stockholder Meeting as
described in the Proxy Statement, or if you are a record holder of shares or
have obtained a valid proxy from such a record holder, by voting in person at
the 2009 Stockholder Meeting.
If you have any questions concerning this Proxy
Statement, would like to request additional copies of this Proxy Statement or
need help voting your shares or executing your proxy, please contact our proxy
solicitor:
THE ALTMAN GROUP
1200 Wall Street West
Lyndhurst, NJ 07071
Stockholders Call Toll Free: (866) 856-4969
Banks and Brokerage Firms Call Collect: (201) 806-7300
36
PRELIMINARY COPY SUBJECT TO COMPLETION,
DATED JANUARY 28, 2009
DETACH PROXY CARD HERE
PLEASE MARK AN X IN THE
APPROPRIATE BOX BELOW.
WE
RECOMMEND THAT YOU VOTE FOR THE DIRECTOR NOMINEES LISTED IN PROPOSAL 1 BELOW
(THE DISCOVERY GROUP NOMINEES).
1. Election of Directors
FOR
our director nominees
o
|
|
WITHHOLD
for all nominees
o
|
|
|
Nominees:
Mr. Daniel J. Donoghue, Mr. Michael R. Murphy
YOU
MAY WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE BY WRITING THE NAME OF THE
NOMINEE YOU DO NOT SUPPORT ON THE LINE BELOW.
IF YOU WITHHOLD DISCRETIONARY AUTHORITY TO VOTE FOR ONE OF THE DISCOVERY
GROUP NOMINEES, WE WILL ALLOCATE YOUR VOTES TO THE OTHER NOMINEE.
WE RECOMMEND THAT YOU VOTE FOR PROPOSAL 2 BELOW.
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
2. Appointment
of McGladrey & Pullen, LLP as the Companys independent registered
public accounting firm for the fiscal year ending September 30, 2009.
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
WE RECOMMEND THAT YOU VOTE FOR PROPOSAL 3 BELOW.
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
3. Stockholder
Proposal recommending termination of Rights Plan and Reinstatement of
Stockholdersright to call Special Meetings
|
|
o
|
|
o
|
|
o
|
|
|
|
|
|
|
Unless otherwise specified on the reverse side, this proxy authorizes
the proxies named on the reverse side to cumulate votes that the undersigned is
entitled to cast at the annual meeting in connection with the election of
directors; provided that the proxies will not cumulate votes for any nominee
from whom the undersigned has withheld authority to vote. To specify different directions with regard
to cumulative voting, including to direct that the proxy holders cumulate votes
with respect to a specific nominee mark the box below and write your
instruction on the reverse side. If you wish
to direct that the proxy holders cumulate votes with respect to a specific
nominee, please indicate the name(s) and the number of votes to be given
to such nominee
o
Signature
of stockholder
|
|
|
|
|
Signature
if held jointly
|
|
|
|
|
Title,
if applicable
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Please sign exactly as your name appears on this proxy card. All joint owners should sign. If you are signing in a fiduciary capacity or
as a corporate officer, please also provide your full title.
PLEASE
SIGN, DATE AND MAIL THIS PROXY CARD TODAY
TIER TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE DISCOVERY
GROUP
AND NOT ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Daniel J. Donoghue or
Michael R. Murphy, or either of them, with full power of substitution, as
proxies to vote, as indicated herein, for and in the name of the undersigned
all shares of Tier Technologies, Inc. (the Company) that the undersigned
is entitled to vote at the Companys 2009 Annual Meeting of Stockholders scheduled
to be held on March 11, 2009 at the Companys headquarters, 10780
Parkridge Boulevard, Reston, Virginia, at 10:00 a.m. Eastern Standard
Time, and at any adjournments or postponements of that meeting, or at any
meeting held in lieu thereof the Stockholder Meeting. This Proxy Statement is available
electronically at http://www.thediscoverygroup.com/tier/.
This proxy card revokes all previously given by the
undersigned.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
AMONG THE DISCOVERY GROUP NOMINEES AS DIRECTED BY THE STOCKHOLDER. WHERE NO CONTRARY DIRECTION IS GIVEN WHEN THE
DULY EXECUTED PROXY IS RETURNED, SUCH SHARES WILL BE VOTED CUMULATIVELY IN THE
DISCRETION OF THE PROXIES AMONG THE DISCOVERY GROUP NOMINEES NAMED IN PROPOSAL
NO. 1 (EXCEPT FOR ANY NOMINEE FOR WHOM THE UNDERSIGNED HAS WITHHELD AUTHORITY
TO VOTE), FOR PROPOSAL NO. 2 AS SET FORTH IN THE REVERSE SIDE HEREOF, AND
FOR PROPOSAL NO. 3 AS SET FORTH ON THE REVERSE SIDE HEREOF. IN ADDITION, THE PROXIES ARE AUTHORIZED TO
VOTE IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY COME
BEFORE THE STOCKHOLDER MEETING THAT THE PROXIES WERE NOT AWARE OF A REASONABLE
TIME BEFORE THE STOCKHOLDER MEETING.
Cumulative Voting Instructions (Mark the corresponding box on the
reverse side)
IMPORTANT: PLEASE SIGN AND DATE ON THE REVERSE SIDE.
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