The following summary of certain provisions of our common stock does not purport to be complete. You should refer to our Restated Articles of Organization and our Amended and Restated By-Laws, both of which are included as exhibits to the registration statement we have filed with the SEC in connection with this offering. The summary below is also qualified by provisions of applicable law.
Under our Restated Articles of Organization, our authorized capital stock consists of 30,000,000 shares of common stock, $ 0.10 par value per share. As of November 28, 2012, 10,522,859
shares of our common stock were issued and outstanding and there were 495 holders of record of our common stock. We are also authorized to issue 5,000,000 shares of Series B Preferred Stock, no shares of which are issued and outstanding.
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders and do not have cumulative voting rights. An election of directors by our shareholders shall be determined by a plurality of the votes cast by the shareholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors. In the event of our liquidation, dissolution, or winding up of the Company, the holders of common stock are entitled to receive ratably the net assets of the Company available after the payment of all debts and other liabilities and subject to the prior rights of any outstanding Preferred Stock. Massachusetts law provides that if we make a distribution to our shareholders, other than a distribution of our capital stock, when we are insolvent, or that renders us insolvent, then our shareholders would be required to pay back to us the amount of the distribution we made to them, or the portion of the distribution that causes us to become insolvent.
All of our common stock is subject the Company's Amended and Restated Rights Agreement (the "Rights Agreement"), dated July 23, 2008, which entitles the holders of common stock to purchase from the Company shares of our Series B Preferred Stock. The description of our Series B Preferred Stock Purchase Rights are more fully described in the Registration Statement on Form 8-A (SEC file no. 001-34135) filed with the Commission on July 25, 2008, which description is incorporated by reference herein.
Our common stock is listed for quotation on The NASDAQ Global Market under the symbol "DRCO." On November 28, 2012, the last reported sale price of our common stock was $5.21 per share.
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC.
Our Restated Articles of Organization and Amended and Restated By-Laws contain the following provisions that could have the effect of delaying or deferring a change of control of the Company.
To be timely, a proposal notice for an annual meeting must be received by the Company not less than 90 calendar days nor more than 120 calendar days prior to the anniversary date of the immediately preceding annual meeting of stockholders or special meeting in lieu thereof (the "Anniversary Date").
A proposal notice for a special meeting (if for a date more than 90 days before the Anniversary Date) must be received by the Company not later than the close of business on:
A nomination notice for a special meeting must be received by the Company not later than the close of business on:
As to each person whom the stockholder proposes to nominate for election or re-election as a director, the nomination notice must contain:
As to the stockholder giving the notice, the nomination notice must contain:
A "Related Person" is defined as any person that together with its affiliates and associates owns in the aggregate 10% or more of the outstanding shares of any class or series of voting stock, and any affiliate or associate of any such Related Person; provided that "Related Person" shall not include (1) the Company or any subsidiary (2) any trustee holding stock for the benefit of employees of the Company or any Subsidiary pursuant to any employee benefit plan, employee stock ownership plan or similar arrangement or (3) any person that together with its affiliates or associates owned in the aggregate 5% or more of the outstanding shares of Common Stock of the Company on December 31, 1986.
Our 2000 Employee Stock Purchase Plan, or ESPP, is a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. The ESPP provides a voluntary, systematic method for eligible participants to purchase shares of our common stock through periodic payroll deductions. In 2011, we discovered that shares of our common stock issued under the ESPP exceeded the number of shares we had registered on Form S-8 by 148,466 shares, as we had inadvertently failed to file an amendment to our registration statement on Form S-8 when the number of shares issuable under the ESPP was increased. We first exceeded the number of shares registered on Form S-8 on July 31, 2007 by 3,133 of the shares that were issued on that date. Our inadvertent failure to register with the Securities and Exchange Commission the sale of certain shares of our common stock under the ESPP may have constituted a violation of Section 5 of the Securities Act (which generally requires registration of offers and sales of securities) and may give rise to liability under Section 12 of the Securities Act (which generally provides a rescission remedy for offers and sales of securities in violation of Section 5 of the Securities Act).
The rescission offer is being made to 318 purchasers that purchased a total of up to 148,466 shares of common stock through accumulated payroll deductions pursuant to, between July 31, 2007 and May 31, 2011, which we refer to as the Purchase Period. We did not register these shares under the Securities Act or under any state securities laws. In addition, because of the frequency and amount of sales made pursuant to ESPP subscription agreements during the Purchase Period, as well as the nature of the purchasers, we do not believe that a valid exemption under the Securities Act was available for these stock issuances, nor did we take the steps required to ensure the availability of many applicable exemptions from qualification under state securities laws with respect to these shares. Consequently, these shares may have been issued in violation of the Securities Act, as well as a number of state securities laws, and may be subject to rescission.
In order to address this issue, we are making the rescission offer to all employees and former employees who purchased outstanding shares subject to rescission during the periods set forth in this prospectus, depending on the state in which the purchaser resides. These shares are held by our current and former employees, including two of our executive officers. Our current executive officers who purchased shares through the ESPP during the Purchase Period have advised us that they will not be participating in the rescission offer.
If our rescission offer is accepted by all offerees, we will be required to make an aggregate payment to the holders of these shares of up to approximately $0.9 million, which includes statutory interest. The price at which the shares of common stock subject to the rescission offer were originally sold exceeded market value by $0.3 million based on the November 28, 2012 stock price of our common stock. The rescission offer will be kept open for 30 days and will be registered under the Securities Act and qualified in each state where such qualification is required under applicable state securities laws.
We are offering to rescind certain stock issuances pursuant to our ESPP during the Purchase Period. By making this rescission offer, we are not waiving any applicable statutes of limitations.
More specifically, we are offering to rescind the sale of a total of 148,466 shares of our common stock, which shares were originally purchased from the Company by 318 persons. This offer will be made to current and former employees who purchased shares of our common stock pursuant to the ESPP during the Purchase Period (but on a pro rata basis for sales in July 2007 as described under "Purchase Period" below) and who are, or were at the time of issuance, residents of the Rescission States, at prices ranging from $6.63 to $14.12 per share
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If you accept our rescission offer, we will rescind sales of the shares you hold that are subject to the rescission offer at the price per share you paid multiplied by the number of shares owned by you, plus interest at the current statutory rate per year mandated by your state of residence from the date of purchase through the date that the rescission offer expires. If you have sold your shares, you may still be eligible to participate in the rescission offer if you sold your eligible shares at a loss. In such an instance, you would receive the amount for which you purchased the shares, plus statutory interest, minus the amount for which you sold such shares. If you no longer hold the shares that you purchased and did not sell those shares at a loss, then you are not eligible to participate in this rescission offer.
If you accept our rescission offer, you will be entitled to receive interest at the applicable statutory interest rate per year in accordance with your state of residence. You will not, however, be entitled to any payments for interest or otherwise unless you affirmatively elect to participate in the offer. The legal rate of interest for the rescission of sales of shares in each of the Rescission States is zero to 12.00%.
As of November 28, 2012, the closing sale price of our common stock (as reported on The NASDAQ Global Market) was $5.21 per share, and our common stock was held by 495 holders of record. We did not declare any cash dividends in the two years ended December 31, 2011 or in the interim period since then, and do not intend to in the near future.
DRC employees who purchased shares of our common stock from July 2007 to May 2011 are eligible to participate in the rescission offer as follows, in each case to the extent such shares were not resold by such employees at a price greater than the purchase price:
In addition, 8,700 of the 11,833 shares issued under the ESPP in July 2007 were properly registered under state and federal securities laws and are not subject to this rescission offer. Thus, if eligible participants elect to rescind greater than 3,133 of the shares issued in July 2007, we will rescind up to 3,133 shares on a pro rata basis among the holders electing to accept rescission with respect to that issue date. The other 8,700 shares issued in July 2007 are not subject to rescission.
Acceptance
You may accept the rescission offer with respect to shares eligible to be rescinded by completing and signing the enclosed Rescission Offer Election Form indicating the shares for which sales are to be rescinded, together with all other required documentation, so that it is received by us by or before 5:00 p.m., Eastern Time, on , 2013, which date and time that we refer to in this document as the expiration date. All acceptances of the rescission offer will be deemed to be effective on the expiration date and the right to accept the rescission offer will terminate on the expiration date. Acceptances or rejections may be revoked in a written notice to our legal department at Dynamics Research Corporation, Two Tech Drive, Andover, Massachusetts 01810, attention: Assistant General Counsel, and must be received by us prior to the expiration date. If you intend to accept the rescission offer, we recommend that you mail your Rescission Offer Election Form, together with all other required documentation, early enough that we receive it prior to the expiration date.
If you currently own shares and you hold certificates for such Shares, you must enclose with the Rescission Offer Election Form the certificates for the shares to be repurchased by us, properly endorsed for transfer, with your signature guaranteed by an eligible guarantor institution such as a commercial bank, trust company, securities broker or dealer, credit union or savings & loan that is a member of the Medallion Signature Guarantee Program. If the Administrator currently holds certificates for the Shares to be repurchased by us, the Administrator holds such shares in book-entry form or you are a registered holder of uncertificated shares, your signature on the Rescission Offer Election Form must be guaranteed as described above. If you decide to accept the rescission offer and intend to use the mail to return your stock certificates to us, we recommend that you use insured and registered or certified mail, return receipt requested.
If you have already sold shares at a loss, you must enclose with the Rescission Offer Election Form proof reasonably satisfactory to us evidencing the bona fide sale of such shares to a third party, including the sale price for such shares. Satisfactory proof of the sale price of such shares may take the form of a receipt from the broker, dealer or other person conducting the sale. The sale price may have been paid in either cash or property. Subject to the restrictions in the latter part of this paragraph, if the sale price was paid in cash, the sale price will be the cash price paid. If the sale price was paid in property, the price will be deemed to be the fair market value of such property at the time of sale. If the proof of the sale price is not reasonably satisfactory to us, we may require additional proof. In addition, we may require evidence that any such sale of shares was a bona fide transfer to a third party.
If you properly accept the rescission offer, we will mail you, within fifteen business days after the completion of the rescission offer, a check for the proceeds to which you are entitled if you hold your shares directly. If you hold Shares subject to the rescission offer through the DTC, we will mail the check for the proceeds to the DTC participant, and you should contact your DTC participant about having the proceeds properly credited to your account. DTC participants include securities brokers and dealers, banks, trust companies, clearing corporations and other organizations.
The rescission offer will expire at 5:00 p.m., Eastern Time, on , 2013. If you submit a Rescission Offer Election Form after the expiration time, regardless of whether your form is otherwise complete, your election will not be accepted, and you will be deemed to have rejected our rescission offer.
For your election to rescind to be effective, you must return the enclosed Rescission Offer Election Form
in the enclosed return envelope to Dynamics Research Corporation, Two Tech Drive, Andover, Massachusetts 01810, attention: Assistant General Counsel. We must receive a properly completed form before , 2013 in order for your election to be effective. If you otherwise do not submit a Rescission Offer Election Form by the expiration time, you will be deemed to have rejected the rescission offer.
Neither we nor our officers and directors make any recommendations to you with respect to the rescission offer contained herein. You are urged to read the rescission offer carefully and to make an independent evaluation with respect to its terms.
Special Procedures for DTC Participants
To accept the rescission offer on behalf of a beneficial owner of shares registered in the name of DTC, a DTC participant must complete the Rescission Offer Election Form and return it to us along with:
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for all shares you want us to rescind that have been previously sold at a loss, proof reasonably satisfactory to us evidencing the bona fide sale of such shares to a third party, including the sale price for such shares; and
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initiate a Deposit/Withdrawal At Custodian ("DWAC") transaction to transfer to us the shares that are registered in the name of DTC and are being repurchased by us pursuant to the Rescission Offer. We will notify the DTC participant of the date that the DWAC transaction should be initiated.
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Satisfactory proof of sale may take the form of a receipt from the broker, dealer or other person conducting the sale. The signature of a DTC participant on the Rescission Offer Election Form is not required to be guaranteed if the DTC participant is a member of the Medallion Signature Guarantee Program and the DTC participant affixes its Medallion stamp on the Rescission Offer Election Form.
IF A DTC PARTICIPANT FAILS TO NOTIFY US IN WRITING OF YOUR ACCEPTANCE OF THE RESCISSION OFFER ON OR BEFORE THE EXPIRATION DATE, YOU WILL BE DEEMED TO HAVE REJECTED THE RESCISSION OFFER.
Rejection or Failure to Affirmatively Accept
If you fail to accept, or if you affirmatively reject the rescission offer by so indicating on the enclosed Rescission Offer Election Form, you will retain ownership of the shares in accordance with the terms of our ESPP and you will not receive any cash for those shares in connection with the rescission offer. Your shares will be registered and fully tradable under the Securities Act. Your shares will remain subject to any applicable terms and conditions of the original subscription agreement under which they were issued and any subsequent agreement relating to such shares. In addition, you will remain subject to our insider trading policy requirements, is applicable, and any other transfer restrictions entered into with respect to your shares.
Solicitation
We have not retained, nor do we intend to retain, any person to make solicitations or recommendations to you in connection with the rescission offer.
Effect of Rescission Offer
It is unclear whether the rescission offer will terminate our liability, if any, for failure to register or qualify the issuance of the securities under either federal or state securities laws. Accordingly, should the rescission offer be rejected by any or all offerees, we may continue to be contingently liable under the Securities Act and applicable state securities laws for the purchase price of these shares up to an aggregate amount of approximately $1.0 million, which includes statutory interest. If you are a stockholder who acquired shares of our common stock that are subject to the rescission offer, it is possible that you may continue to have rights under common law or fraud in the state in which the potential securities violation with respect to your shares occurred. If a court were to impose a greater remedy, our liability as a result of the potential securities violations would be higher.
We believe that your acceptance of the rescission offer will preclude you from later seeking similar relief under general theories of estoppel, and we are unaware of any federal or state case law to the contrary. However, we urge you to consult with an attorney regarding all of your legal rights and remedies before deciding whether or not to accept the rescission offer.
Regardless of whether you accept the rescission offer, we believe that any remedies you may have after the rescission offer expires would not be greater than an amount you would receive in the rescission offer.
Below is a discussion of our contingent liability as a result of potential securities laws violations resulting from our issuance of the shares covered by the rescission offer on a state-by-state basis. Each state has different laws with respect to rights under common law and fraud and the following discussion of state law does not relate to the antifraud provisions of applicable securities laws or rights under common law or equity. We do not believe that acceptance or rejection of the rescission offer will have any effect on the rights of any holder under applicable antifraud provisions of federal or state securities laws or under common law or at equity.
Alabama
Under Alabama law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Alabama Securities Act. The purchaser may sue to recover the consideration paid for such securities, together with interest at 6.00% per year from the date of payment, court costs and reasonable attorneys' fees, less any income or distributions received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to two years from the date of sale.
However, we may terminate the rights of the purchasers to seek additional remedies under the Alabama Securities Act by making a written rescission offer, before suit, to refund the consideration paid together with interest at 6.00% per year from the date of payment, less the amount of any income received on the securities. If the purchaser owns the securities and fails to accept such offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Alabama law. If the purchaser receives such offer at a time when the purchaser does not own the securities, that purchaser will no longer have any right of rescission under Alabama law unless the purchaser rejects the offer in writing within 30 days of its receipt.
We believe this rescission offer complies in all material respects with the rescission offer requirements of the Alabama Securities Act.
Arizona
Under Arizona law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Securities Act of Arizona. The purchaser may elect to void a sale or contract for sale of any securities in violation of the registration requirements of Arizona law and may sue to recover the consideration paid for such securities, together with interest at 10.00% per year from the date of purchase, taxable court costs and reasonable attorneys' fees, less any income or distributions received on the securities, on tender of the securities purchased, at any time prior to the one year anniversary of the noncompliance with the registration requirements.
Arizona law does not provide for voluntary rescission offers initiated by an issuer as means of curing non-compliance with the requirement to register securities under Arizona law. However, the Arizona Corporate Commission has the administrative authority to order a rescission offer. In that instance, the issuer must file the following materials with and receive prior approval from the Director of Securities:
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a written offer stating the respect in which liability under the registration requirements may have arisen and that includes an offer of a cash price equal to the fair market value of the consideration paid, together with interest at 10.00% for the period from the date of purchase to the date of repayment, less any income or distributions received on the securities;
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a prospectus and other documents providing full disclosure about our financial and business conditions and the risks associated with retention of the securities and other information as the Arizona Corporate Commission may require; and
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a statement that such offer may be accepted by the purchaser at any time within 30 days of its receipt.
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If such a rescission offer is ordered, then we must also provide financial statements prepared in accordance with applicable Arizona law to the Director of the Arizona Corporate Commission demonstrating that the issuer has adequate funds to pay the rescission amount ordered to all eligible purchasers. If the purchaser fails to accept an offer within 30 days of its receipt, that purchaser retains the right of rescission unless the statute of limitations has expired.
While we have not been ordered to hold a rescission offer for ESPP participants in the State of Arizona, we are including in this prospectus the information that would be required if such an offer had been so ordered. Furthermore, while Arizona law does not provide for termination by rescission offer of the rights of holders, we believe that purchasers will be estopped from maintaining such an action following completion of the rescission offer.
California
Under California law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the California Corporate Securities Law of 1968. The issuance and sale of the securities under the ESPP to California residents violated Section 25110 of the California Corporate Securities Law of 1968, which requires that all securities be qualified or exempt before being sold. The purchaser may sue to recover the consideration paid for such securities, together with interest at 7.00% per year, less the amount of any income received from ownership of the securities, upon the tender of such securities, or for damages if the purchaser no longer owns the securities, at any time prior to the earlier of the two year anniversary of the noncompliance with the registration or qualification requirements or the one year anniversary of discovery of such noncompliance by the purchaser.
However, we may terminate the rights of the purchasers to seek additional remedies under the California Corporate Securities Law of 1968 by making a written rescission offer, before suit, approved as to form by the California Commission of Corporations where the offer:
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states the respect in which liability under the registration or qualification requirements may have arisen;
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offers to repurchase the securities for a cash price payable upon delivery of the securities or offering to pay the purchaser an amount in cash equal in either case to the amount recoverable by the purchaser, or offering to rescind the transaction by putting the parties back in the same position as before the transaction;
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provides that such offer may be accepted by the purchaser at any time within a specified period of not less than 30 days after the date of such receipt of the offer unless rejected earlier during such periods by the purchaser;
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sets forth the provisions of the rescission offer requirements under the California Corporate Securities Law of 1968; and
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contains such other information as the California Commissioner of Corporations may require by rule or order.
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If the purchaser fails to accept such offer in writing within the specified time period of not less than 30 days after the date of receipt of the offer, that purchaser will no longer have any right of rescission under California law. We must also file with the California Commissioner of Corporations, in such form as the California Commissioner of Corporations prescribes by rule, an irrevocable consent appointing the Commissioner of Corporations or its successor in office to be our attorney to receive services for any lawful process in any noncriminal suit, action or proceeding against us or our successor, which arises under California law after the consent has been filed with all the same force and validity as if served personally on us.
We have not yet obtained approval as to form by the California Commission of Corporations, but are in the process of doing so. We believe that, once this approval has been obtained, this rescission offer will comply in all material respects with the rescission offer requirements of the California Corporate Securities Law of 1968.
Colorado
Under Colorado law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Colorado Securities Act. The purchaser may sue to recover at law or in equity the consideration paid for such securities, together with interest at 8.00% per year from the date of payment, costs and reasonable attorneys' fees, less any income or distributions received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the two year anniversary of the noncompliance with the registration requirements.
However, we may terminate the rights of the purchasers to seek additional remedies under the Colorado Blue Sky Law by making a written rescission offer, before suit, stating the respect in which liability under the registration requirements may have arisen and advising the purchaser of their rights in connection with the offer. The offer to rescind sales of the securities shall be an amount equal to the purchase price paid, together with interest at 8.00% after the date of purchase, less the amount of any income received on the security. If the purchaser fails to accept an offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Colorado law.
We believe this rescission offer complies in all material respects with the rescission offer requirements of the Colorado Securities Act.
District of Columbia
Under District of Columbia law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the District of Columbia Securities Act of 2000. The purchaser may sue to recover at law or in equity the consideration paid for such securities, together with interest at 6.00% per year from the date of payment, costs and reasonable attorneys' fees, less any income or distributions received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the one year anniversary of the noncompliance with the registration requirements.
However, we may terminate the rights of the purchasers to seek additional remedies under the District of Columbia Securities Act of 2000 by making a written rescission offer, before suit, to refund the consideration paid together with interest at 6.00% from the date of payment, less the amount of any income received on the securities. If the purchaser owns the securities and fails to accept such offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under District of Columbia law. If the purchaser receives such offer at a time when the purchaser does not own the securities, that purchaser will no longer have any right of rescission under District of Columbia law unless the purchaser rejects the offer in writing within 30 days of its receipt.
We believe this rescission offer complies in all material respects with the rescission offer requirements of the District of Columbia Securities Act of 2000.
Florida
Under the Florida Securities and Investor Protection Act, offers and sales of securities are exempt from registration when made under a bona fide employer-sponsored stock purchase plan when offered only to employees of the sponsoring organization or to employees of its controlled subsidiaries. As the ESPP was only available to DRC employees, the offering and sale of the shares was exempt under Florida law and rescission is not available with respect to shares purchased by Florida residents more than one year prior to August 9, 2011.
When rescission is available under Florida law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Florida Securities and Investor Protection Act. The purchaser may sue to recover the consideration paid for such securities, plus interest at 7.00%, less any income or distributions received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the four year anniversary of the date of sale of such securities.
However, we may terminate the rights of the purchasers to seek additional remedies under the Florida Securities and Investor Protection Act by making a written rescission offer to refund the consideration paid, plus interest at 7.00%, less the amount of any income received on the securities. If the purchaser has sold the security, the offer shall be for an amount equal to the difference between the amount paid for the security and the amount received by the sale of the security, plus interest at 7.00%, less any income received on the securities. If the purchaser owns the securities and fails to accept such offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Florida law. If the purchaser receives such offer at a time when the purchaser does not own the securities, that purchaser will no longer have any right of rescission under Florida law unless the purchaser rejects the offer in writing within 30 days of its receipt.
Georgia
Under Georgia law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Georgia Uniform Securities Act of 2008. The purchaser may sue to recover the consideration paid for such securities, together with interest at 6.00% from the date of purchase, costs and reasonable attorneys' fees, less any income received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the two year anniversary of the noncompliance with the registration requirements.
However, we may terminate the rights of the purchasers to seek additional remedies under the Georgia Uniform Securities Act of 2008 by making a written rescission offer, before suit, stating the respect in which liability under the registration requirements may have arisen and advising buyer of their rights in connection with the offer. The offer to rescind sales of the securities shall be for cash, payable on delivery of the security, equal to the consideration paid, together with interest at 6.00%, less the amount of any income received on the security. If the purchaser fails to accept an offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Georgia law.
We believe this rescission offer complies in all material respects with the rescission offer requirements of the Georgia Uniform Securities Act of 2008.
Illinois
Under the Illinois Securities Law of 1953, a security is exempt from state registration requirements when the security issued pursuant to (i) a written compensatory benefit plan (including any purchase plan) and interests in such plans established by one or more of the issuers thereof or its majority-owned subsidiaries for the participation of their employees or (ii) a written contract relating to the compensation of any such person. As the ESPP was only available to DRC employees, the offering and sale of the shares was exempt under Illinois law and rescission is not available with respect to shares purchased by Illinois residents more than one year prior to August 9, 2011.
Under Illinois law, where rescission is available, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Illinois Securities Law of 1953. The purchaser may sue to recover the full amount paid for such securities, together with interest at 10.00% per year from the date of payment, costs and reasonable attorneys' fees, less any income or distributions received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the three year anniversary of discovery of the noncompliance by the person bringing the action of the violation.
However, we may terminate the rights of the purchasers to seek additional remedies under the Illinois Securities Law of 1953 by making a written rescission offer, before suit, to refund the full amount paid for such securities, together with interest at 10.00% per year from the date of payment, less any income or distributions received on the securities. If the purchaser fails to accept such offer within 15 days of its receipt, that purchaser will no longer have any right of rescission under Illinois law.
Kansas
Under Kansas law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Kansas Uniform Securities Act. The purchaser may sue to recover the consideration paid for such securities, together with interest at 10.00% per year from the date of payment, costs and reasonable attorneys' fees, less any income received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the one year anniversary of the noncompliance with the registration requirements.
However, we may terminate the rights of the purchasers to seek additional remedies under the Kansas Uniform Securities Act by making a written rescission offer, before suit, stating the respect in which liability under the registration requirements may have arisen and advising buyer of their rights in connection with the offer. The offer to rescind sales of the securities shall be for cash, payable on delivery of the security, equal to the consideration paid and interest at 10.00% from the date of payment, less any income received on the security. If the purchaser owns the securities and fails to accept such offer within 30 days of its receipt, such purchaser will no longer have any right of rescission under Kansas law. If the purchaser receives such offer at a time when the purchaser does not own the securities, that purchaser will no longer have any right of rescission under Kansas law unless the purchaser rejects the offer in writing within 30 days of its receipt.
We believe this rescission offer complies in all material respects with the rescission offer requirements of the Kansas Uniform Securities Act.
Kentucky
Under Kentucky law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Kentucky Securities Act. The purchaser may sue to recover at law or in equity the consideration paid for such securities, together with interest at 8.00% per year from the date of payment, costs and reasonable attorneys' fees, less any income or distributions received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the three year anniversary of the discovery by the person bringing the action of the violation.
However, we may terminate the rights of the purchasers to seek additional remedies under the Kentucky Securities Act by making a written rescission offer, before suit, to refund the consideration paid together with interest at 8.00% from the date of payment, less the amount of any income received on the securities. If the purchaser owns the securities and fails to accept such offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Kentucky law. If the purchaser receives such offer at a time when the purchaser does not own the securities, that purchaser will no longer have any right of rescission under Kentucky law unless the purchaser rejects the offer in writing within 30 days of its receipt.
We believe this rescission offer complies in all material respects with the rescission offer requirements of the Kentucky Securities Act.
Louisiana
Under Louisiana law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Louisiana Securities Law. The purchaser may sue to recover in any court the consideration paid for such securities, together with 4.00% interest from the date of payment, all taxable court costs, and reasonable attorneys' fees, less any income received on the securities. If the purchaser no longer owns the securities, the purchaser may sue for damages. Suits under the applicable securities law may be brought at any time prior to the two year anniversary of the contract for sale of the relevant securities.
However, we may terminate the rights of the purchasers to seek remedies under the Louisiana Securities Law by making a written rescission offer, before suit, to refund the consideration paid in cash or by certified check together with interest at the rate provided in the interest bearing security or, if not an interest bearing security, at the applicable legal rate from the date of payment for the security, less the amount of any income received on the securities. If the purchaser owns the securities and fails to accept such offer within 30 days of its receipt or if the purchaser accepts such offer and the offeror complies with the terms of such offer, that purchaser will no longer have any right of rescission under Louisiana law. If the purchaser receives such offer, with all stated terms, at a time when the purchaser does not own the securities, that purchaser will no longer have any right of rescission under Louisiana law if the purchaser fails to accept such offer within 30 days of its receipt or if the purchaser accepts such offer and the offeror complies with the terms of such offer.
We believe that this rescission offer complies in all material respects with the rescission offer requirements of the Louisiana Securities Law.
Maryland
Under Maryland law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Maryland Securities Act. The purchaser may sue to recover at law or in equity the consideration paid for such securities, together with interest at 10.00% per annum from the date of payment, costs and reasonable attorneys' fees, less any income received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the one year anniversary of the noncompliance with the registration requirements.
However, we may terminate the rights of the purchasers to seek additional remedies under the Maryland Securities Act by making a written rescission offer, before suit, to refund the consideration paid together with interest at 10.00% from the date of payment, less the amount of any income received on the securities. If the purchaser owns the securities and fails to accept such offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Maryland law. If the purchaser receives such offer at a time when the purchaser does not own the securities, that purchaser will no longer have any right of rescission under Maryland law unless the purchaser rejects such offer in writing within 30 days of its receipt.
We believe that this rescission offer complies in all material respects with the rescission offer requirements of the Maryland Securities Act.
Massachusetts
Under Massachusetts law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Massachusetts Uniform Securities Act. The purchaser may sue either at law or in equity to recover the consideration paid for such securities, together with interest at 6.00% per year from the date of payment, costs and reasonable attorneys' fees, less the amount of any income received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the four year anniversary of the discovery by the person bringing the action of a violation of the Massachusetts Uniform Securities Act.
However, we may terminate the rights of the purchasers to seek additional remedies under the Massachusetts Uniform Securities Act by making a written rescission offer, before suit, to refund the consideration paid together with 6.00% interest from the date of payment, less the amount of any income received on the securities. If the purchaser owns the securities and fails to accept such offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Massachusetts law. If the purchaser receives such offer at a time when the purchaser does not own the securities, that purchaser will no longer have any right of rescission under Massachusetts law unless the purchaser rejects the offer in writing within 30 days of its receipt.
We believe that this rescission offer complies in all material respects with the rescission offer requirements of the Massachusetts Uniform Securities Act.
Minnesota
Under Minnesota law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Minnesota Securities Act. The purchaser may sue to recover the consideration paid for such securities, together with interest from the date of payment at a rate of 6.00% per annum, costs and reasonable attorneys' fees determined by the court, less the amount of any income received on the securities. If the initial purchaser no longer holds that security, he or she may bring suit for damages together with interest from the date of purchase, costs, and reasonable attorneys' fees as determined by the court. A purchaser may bring such suits at any time prior to the two year anniversary of the discovery by the person bringing the action or within five years after the violation under Minnesota's securities provisions, whichever is earlier.
However, we may terminate the rights of the purchasers to seek remedies under the Minnesota Securities Act by making a written rescission offer, before suit, to refund the consideration paid together with interest from the date of payment, less the amount of any income received on the securities or, if the purchaser no longer owns the security, damages. The letter must also state the liability under the Securities Act that may have arisen and fairly advise the purchaser of his or her rights in connection with the offer. If the purchaser owns the securities and fails to accept such offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Minnesota law. If the purchaser receives such offer at a time when the purchaser does not own the securities, that purchaser will no longer have any right of rescission under Minnesota law if the purchaser fails to accept the offer in writing within 30 days of its receipt.
We believe that this rescission offer complies in all material respects with the rescission offer requirements of Minnesota's securities provisions.
Missouri
Under the Missouri Securities Act of 2003, any security issued in connection with an employee's stock purchase, savings, pension, profit-sharing or similar benefit plan is exempt from state registration requirements. As the ESPP was only available to DRC employees, the offering and sale of the shares was exempt under Missouri law and rescission is not available with respect to shares purchased by Missouri residents more than one year prior to August 9, 2011.
Under Missouri law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Missouri Securities Act of 2003. The purchaser may sue to recover the consideration paid for such securities, together with interest at 8.00% from the date of purchase, costs and reasonable attorneys' fees determined by the court, less any income received on the securities, or for damages, together with interest at 8.00% from the date of purchase, costs, and reasonably attorneys' fees determined by the court, if the purchaser no longer owns the securities, at any time prior to the one year anniversary of the registration requirements.
However, we may terminate the rights of the purchasers to seek additional remedies under the Missouri Securities Act of 2003 by making a written rescission offer, before suit, stating the respect in which liability under the registration requirements may have arisen and advising buyer of their rights in connection with the offer. The offer to rescind sales of the securities shall be for cash, payable on delivery of the security, equal to the consideration paid, together with interest at 8.00%, less the amount of any income received on the security. If the purchaser fails to accept an offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Missouri law.
New Hampshire
Under New Hampshire law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the New Hampshire Uniform Securities Act. The purchaser may sue either at equity for rescission or at law for damages if the purchaser no longer owns the security. In any suit for rescission under this statute, the purchaser is entitled to recover the consideration paid for the security, together with interest at the legal rate of 10.00% per annum, costs, and reasonable attorneys' fees, less the amount of any income received on the securities. If the purchaser no longer owns the security, he or she is entitled to damages which shall include the consideration paid for the security together with interest at the legal rate to disposition, costs, and reasonable attorneys' fees, less the value of the security at the date of disposition. A suit under this statute may be brought at any time prior to the six year anniversary of the first payment of money for the security by the person bringing the action of a violation under the New Hampshire Uniform Securities Act.
However, we may terminate the rights of the purchasers to seek remedies under the New Hampshire Uniform Securities Act by making a written rescission offer, before suit, to refund the consideration paid together with interest at the legal rate from the date of payment, less the amount of any income received on the securities. If the purchaser no longer owns the security, the rescission letter must include an offer to pay the consideration paid for the security together with interest at the legal rate to disposition, less the value of the security at the date of disposition. If the purchaser, whether he owns or no longer owns the securities, fails to accept such offer in writing within 30 days of its receipt, that purchaser will no longer have any right of rescission under New Hampshire law. A duplicate copy of the rescission offer must be filed with the secretary of state at least 20 days prior to delivery to the purchaser and the secretary must not object to the offer within that 20 day period. We intend to so file a copy of this rescission offer. The offer must contain information any additional information the secretary of state by rule or order prescribes.
We believe that this rescission offer complies in all material respects with the rescission offer requirements of the New Hampshire Uniform Securities Act.
New York
Under New York law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Martin Act. Under this law, unless an exemption is available, issuers must register as a broker-dealer in order to make offers or sales of securities to the public. Purchasers of the unregistered shares have three years to seek a remedy for our failure to register.
While New York law does not provide for termination of these rights by rescission offer, we are including New York purchasers in this rescission offer. Furthermore, while New York residents will not be precluded from seeking remedies following the rescission offer, we believe that employees who purchased unregistered shares will be estopped from maintaining such an action following completion of the rescission offer.
North Carolina
Under the North Carolina Securities Act, any security issued in connection with an employee's stock purchase, savings, pension, profit-sharing or similar benefit plan is exempt from state registration requirements. As the ESPP was only available to DRC employees, the offering and sale of the shares was exempt under North Carolina law and rescission is not available with respect to shares purchased by North Carolina residents more than one year prior to August 9, 2011.
Under North Carolina law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the North Carolina Securities Act. The purchaser may sue to recover the consideration paid for such securities, together with interest at 8.00% from the date of purchase, costs and reasonable attorneys' fees, less any income received on the securities, or for damages, together with interest at 8.00%, if the purchaser no longer owns the securities, at any time prior to the two year anniversary of the noncompliance with the registration requirements.
However, we may terminate the rights of the purchasers to seek additional remedies under the North Carolina Securities Act by making a written rescission offer, before suit, stating the respect in which liability under the registration requirements may have arisen and advising buyer of their rights in connection with the offer. The offer to rescind sales of the securities shall be for cash, payable on delivery of the security, equal to the consideration paid, together with interest at 8.00%, less the amount of any income received on the security. If the purchaser fails to accept an offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under North Carolina law.
Ohio
Under Ohio law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Ohio Revised Code securities chapter. The purchaser may sue at law to recover the full amount paid by the purchaser for such securities plus interest of 10.00% per annum, together with all taxable court costs unless the court determines that the violation did not materially affect the protection contemplated by the violated provision. The plaintiff may bring the suit at any time prior to the two year anniversary of two years of knowing, or having reason to know, of the violation or prior to the five year anniversary of the date of sale or contract for sale, whichever is shorter.
However, we may terminate the rights of the purchasers to seek remedies under Ohio law by making a written rescission offer, after two weeks form the date of sale, to refund the consideration paid for the security. If the purchaser fails to accept such offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Ohio law.
We believe that this rescission offer complies in all material respects with the rescission offer requirements of the Ohio Revised Code securities chapter.
Oklahoma
Under Oklahoma law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Oklahoma Uniform Securities Act of 2004. The purchaser may sue either at law or in equity to recover the consideration paid for such securities, together with interest at the legal rate of 6.00% from the date of payment, costs and reasonable attorneys' fees determined by the court, less the amount of any income received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the two year anniversary of the discovery by the person bringing the action or within five years after the violation under the Oklahoma Uniform Securities Act of 2004, whichever is earlier.
However, we may terminate the rights of the purchasers to seek additional remedies under the Oklahoma Uniform Securities Act of 2004 by making a written rescission offer, before suit, to refund the consideration paid together with interest from the date of payment, less the amount of any income received on the securities. The purchaser must accept the offer within 30 days of receipt.
We believe that this rescission offer complies in all material respects with the rescission offer requirements of the Oklahoma Uniform Securities Act of 2004.
Pennsylvania
Under the Pennsylvania Securities Act of 1972, a security is exempt from state registration requirements when the security issued to employees in connection with an employee stock purchase plan. As the ESPP was only available to DRC employees, the offering and sale of the shares was exempt under Pennsylvania law and rescission is not available with respect to shares purchased by Pennsylvania residents more than one year prior to August 9, 2011.
Under Pennsylvania law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Pennsylvania Securities Act. The purchaser may sue either at law or in equity to recover the consideration paid for such securities, together with interest at the legal rate of 6.00% from the date of payment, costs and reasonable attorneys' fees, less the amount of any income received on the securities, or for damages if the purchaser no longer owns the securities. Any such action must be brought within one year after a plaintiff receives actual notice or exercise of reasonable diligence should have known of the violation or within five years of the purchase, whichever period is shortest.
However, we may terminate the rights of the purchasers to seek additional remedies under the Pennsylvania Securities Act by making a written rescission offer, before suit, to refund the consideration paid together with interest from the date of payment, less the amount of any income received on the securities. If the purchaser owns the securities and fails to accept such offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Pennsylvania law. If the purchaser receives such offer at a time when the purchaser does not own the securities, that purchaser will no longer have any right of rescission under Pennsylvania law unless the purchaser fails to accept the offer within 30 days of its receipt.
We believe that this rescission offer complies in all material respects with the rescission offer requirements of the Pennsylvania Securities Act.
South Carolina
Under the South Carolina Uniform Securities Act of 2005, any security issued in connection with an employee's stock purchase, savings, pension, profit-sharing or similar benefit plan is exempt from state registration requirements. As the ESPP was only available to DRC employees, the offering and sale of the shares was exempt under South Carolina law and rescission is not available with respect to shares purchased by South Carolina residents more than one year prior to August 9, 2011.
Under South Carolina law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of South Carolina's Uniform Securities Act of 2005. The purchaser may sue to recover the consideration paid for such securities, together with interest at 8.75% from the date of purchase, costs and reasonable attorneys' fees determined by the court, less any income received on the securities, or for damages, together with interest at 8.75% from the date of purchase, costs and reasonable attorneys' fees determined by the court if the purchaser no longer owns the securities, at any time prior to the three year anniversary of the noncompliance with the registration requirements.
However, we may terminate the rights of the purchasers to seek additional remedies under the South Carolina Uniform Securities Act of 2005 by making a written rescission offer, before suit, stating the respect in which liability under the registration requirements may have arisen and advising buyer of their rights in connection with the offer. The offer to rescind sales of the securities shall be for cash, payable on delivery of the security, equal to the consideration paid, including without limitation all commissions and fees, together with interest at 8.75%, less the amount of any income received on the security. If the purchaser fails to accept an offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under South Carolina law.
South Dakota
Under the South Dakota Uniform Securities Act of 2002, any security issued in connection with an employee's stock purchase, savings, pension, profit-sharing or similar benefit plan is exempt from state registration requirements. As the ESPP was only available to DRC employees, the offering and sale of the shares was exempt under South Dakota law and rescission is not available with respect to shares purchased by South Dakota residents more than one year prior to August 9, 2011.
Under South Dakota law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the South Dakota Uniform Securities Act of 2002. The purchaser may sue to recover the consideration paid for such securities, together with interest at 1.00% per month from the date of purchase, costs and reasonable attorneys' fees determined by the court, less any income received on the securities, or for damages, together with interest at 1.00% per month from the date of purchase, costs and reasonable attorneys' fees determined by the court, if the purchaser no longer owns the securities, at any time prior to the one year anniversary of the noncompliance with the registration requirements.
However, we may terminate the rights of the purchasers to seek additional remedies under the South Dakota Uniform Securities Act of 2002 by making a written rescission offer, before suit, stating the respect in which liability under the registration requirements may have arisen and advising buyer of their rights in connection with the offer. The offer to rescind sales of the securities shall be for cash, payable on delivery of the security, equal to the consideration paid, together with interest at 1.00% per month less the amount of any income received on the security. If the purchaser fails to accept an offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under South Dakota law.
Tennessee
Under Tennessee law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Tennessee Securities Act of 1980. The purchaser may sue either at law or in equity to recover the consideration paid for such securities, together with interest at 10.00% from the date of payment, less the amount of any income received on the securities, or for damages if the purchaser no longer owns the securities. Damages are the amount that would be recoverable upon tender, less the value of the security when the purchaser disposed of it and interest at 10.00% from the date of disposition. The purchaser must bring the suit prior to the five year anniversary of the sale that violated the Tennessee Securities Act of 1980 or the two year anniversary of the discovery of the violation, or after such discovery should have been made by the exercise of reasonable diligence, whichever is shorter.
There is no general rule that governs the process for rescission offers given to Tennessee residents. Each rescission offer is supervised by the Division of Securities and may require unique rules and standards depending on the circumstances. Generally, however, the Division of Securities requires: a statement as to the reasons for the rescission offer; full and fair disclosure of all material facts surrounding the offer of rescission as well as any material facts that have arisen with respect to the issue and the investment since the commencement of the initial offering; a notice of the investor's right under the Tennessee Securities Act of 1980 to rescind his or her purchase and recover the consideration paid plus interest at the legal rate of 10.00% from the date of subscription amount was paid by the investor; a statement of the amount of time in which the investor must elect to accept or reject the offer of rescission, which must be no less than thirty days from the date the investor is notified of the offer; a statement describing the effect of the failure of an investor to accept or reject the rescission offer within the designated time period; a description of the procedure for accepting or rejecting the offer; and a statement that the offeree may wish to consult independent counsel before deciding to accept or reject the rescission offer. The Division of Securities may require additional steps depending on the particular situation.
Texas
Under the Texas Securities Act, any security issued in connection with an employee's stock purchase, savings, pension, profit-sharing or similar benefit plan is exempt from state registration requirements so long as the sale is made without any public solicitation or advertisements. As the ESPP was only available to DRC employees and was provided without solicitation or advertisement, the offering and sale of the shares was exempt under Texas law and rescission is not available with respect to shares purchased by Texas residents more than one year prior to August 9, 2011.
Under Texas law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements the Texas Security Act. The purchaser may sue to recover the consideration paid for such securities, together with interest at 6.00% from the date of purchase, less any income received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the three year anniversary of the noncompliance with the registration requirements.
However, we may terminate the rights of the purchasers to seek additional remedies under the Texas Securities Act by making a written rescission offer, before suit, stating the respect in which liability under the registration requirements may have arisen and advising buyer of their rights in connection with the offer. The offer to rescind sales of the securities shall be for cash, payable on delivery of the security, equal to the consideration paid, together with interest at 6.00% less the amount of any income received on the security. If the purchaser fails to accept an offer or fails to make a written rejection while expressly reserving the right to sue within 30 days of its receipt, that purchaser will no longer have any right of rescission under Texas law. If a purchaser makes a written rejection and expressly reserves her right to sue, she must bring within one year after such rejection.
Utah
Under Utah law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Utah Uniform Securities Act. The purchaser may sue either at law or in equity to recover the consideration paid for such securities, together with interest at 12.00% from the date of payment, costs, and reasonable attorneys' fees, less the amount of any income received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the two year anniversary of the discovery by the person bringing the action of violation of the Utah Uniform Securities Act or at any time prior to the five year anniversary of the sale that violated the Utah Uniform Securities Act, whichever is shorter.
However, we may terminate the rights of the purchasers to seek additional remedies under the Utah Uniform Securities Act by making a written rescission offer, before suit, to refund the consideration paid together with interest at 12.00% from the date of payment, less the amount of any income received on the securities. If the purchaser owns the securities and fails to accept such offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Utah law. If the purchaser receives such offer at a time when the purchaser does not own the securities, that purchaser will no longer have any right to sue under the statute unless the purchaser rejects the offer in writing within 30 days of its receipt.
We believe that this rescission offer complies in all material respects with the rescission offer requirements of the Utah Uniform Securities Act.
Virginia
Under the Virginia Securities Act, any security issued in connection with an employee's stock purchase, savings, pension, profit-sharing or similar benefit plan is exempt from state registration requirements. As the ESPP was only available to DRC employees, the offering and sale of the shares was exempt under Virginia law and rescission is not available with respect to shares purchased by Virginia residents more than one year prior to August 9, 2011.
Under Virginia law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Virginia Securities Act. The purchaser may sue either at law or in equity to recover the consideration paid for such securities, together with interest at the rate of 6.00% per year from the date of payment, costs and reasonable attorneys' fees, less the amount of any income received on the securities, or for damages if the purchaser no longer owns the securities, at any time prior to the two year anniversary of the date of sale.
However, we may terminate the rights of the purchasers to seek additional remedies under the Virginia Securities Act by making a written rescission offer, before suit, to refund the consideration paid with interest at 6.00% per year from the date of payment, less the amount of any income received on the securities. If the purchaser fails to accept such offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Virginia law.
We believe this rescission offer complies in all material respects with the rescission offer requirements of the Virginia Securities Act.
Washington
Under Washington law, an issuer is civilly liable to a purchaser of its securities sold in violation of the registration or qualification requirements of the Securities Act of Washington. The purchaser may sue to recover the consideration paid for such securities, together with interest at 8.00% from the date of purchase, costs and reasonable attorneys' fees, less any income received on the securities, or for damages, together with 8.00% interest from the date of disposition, if the purchaser no longer owns the securities, at any time prior to the three year anniversary of the noncompliance with the registration requirements.
However, we may terminate the rights of the purchasers to seek additional remedies under the Securities Act of Washington by making a written rescission offer, before suit, stating the respect in which liability under the registration requirements may have arisen and advising buyer of their rights in connection with the offer. The offer to rescind sales of the securities shall be for cash, payable on delivery of the security, equal to the consideration paid, together with interest at 8.00%, less the amount of any income received on the security. If the purchaser fails to accept an offer within 30 days of its receipt, that purchaser will no longer have any right of rescission under Washington law.
We believe this rescission offer complies in all material respects with the rescission offer requirements of the Securities Act of Washington.
Funding the Rescission Offer
The rescission offer will be funded from our existing cash balances, to the extent available, as well as from borrowings under our revolving credit facility. If all persons eligible to participate accept our offer to rescind sales of common stock to the full extent, our results of operations, cash balances, or financial condition will not be affected materially.
Directors, Officers and Significant Stockholders
Two of our officers, who as of November 28, 2012 held 104,669 shares of common stock, 2,542 of which shares are subject to rescission, are eligible to participate in the rescission offer. We have been advised that they will not be participating in the rescission offer. None of our directors or 5% owners is eligible to participate in this offer. If our eligible officers do not participate in the rescission offer but all other eligible persons accept the rescission offer in full, our officers and directors would not materially increase their respective ownership interests in DRC.
Determinations
All determinations with respect to the Rescission Offer Election Form and the rescission offer (including issues relating to the timeliness, pro rata allocations or effectiveness of any election) will be made by Dynamics Research Corporation, which determination shall be final and binding.
Questions about the Rescission Offer
All questions regarding the rescission offer can be directed to our office of corporate legal counsel, Monday through Friday, between the hours of 9:00 a.m. and 5:00 p.m. Eastern Time, by calling (978) 289-1500.