OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DATA RESEARCH ASSOCIATES, INC.
AT
$11.00 NET PER SHARE IN CASH
BY
MCGUIRE ACQUISITION INC.,
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
SIRSI HOLDINGS CORP.
----------------------------------------------------------------------
OUR OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, AUGUST 21, 2001, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
WE ARE MAKING OUR OFFER PURSUANT TO THE TERMS OF AN AGREEMENT AND PLAN OF
MERGER (THE "MERGER AGREEMENT") DATED AS OF MAY 16, 2001, AS AMENDED ON JUNE 27,
2001, JULY 12, 2001 AND JULY 24, 2001, BY AND AMONG MCGUIRE ACQUISITION INC.,
SIRSI HOLDINGS CORP. AND DATA RESEARCH ASSOCIATES, INC. ("DRAI").
OUR OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF OUR OFFER, NOT
LESS THAN THAT NUMBER OF SHARES OF DRAI'S COMMON STOCK WHICH CONSTITUTES AT
LEAST 75% OF THE SHARES OF DRAI'S COMMON STOCK OUTSTANDING ON A FULLY DILUTED
BASIS (AFTER GIVING EFFECT TO THE CONVERSION OR EXERCISE OF ALL OUTSTANDING
OPTIONS, WARRANTS AND OTHER RIGHTS AND SECURITIES EXERCISABLE OR CONVERTIBLE
INTO SHARES OF DRAI'S COMMON STOCK, WHETHER OR NOT EXERCISED OR CONVERTED AT THE
TIME OF DETERMINATION), EXCLUDING ANY SHARES OF DRAI'S COMMON STOCK HELD BY DRAI
OR ANY OF ITS SUBSIDIARIES AND (2) ALL MATERIAL GOVERNMENTAL OR REGULATORY
NOTICES, APPROVALS OR OTHER REQUIREMENTS NECESSARY TO CONSUMMATE THE MERGER
SHALL HAVE BEEN GIVEN, OBTAINED OR COMPLIED WITH. WE REFER TO CONDITION
(1) ABOVE AS THE "MINIMUM CONDITION." OUR OFFER IS ALSO SUBJECT TO CERTAIN OTHER
CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. WE REFER YOU TO "THE TENDER
OFFER--CONDITIONS OF OUR OFFER," WHICH SETS FORTH IN FULL THE CONDITIONS TO OUR
OFFER.
DRAI'S BOARD OF DIRECTORS (1) UNANIMOUSLY DETERMINED THAT EACH OF THE MERGER
AGREEMENT, OUR OFFER, THE MERGER (AS DEFINED HEREIN) AND THE OTHER TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT IS FAIR TO, ADVISABLE AND IN THE BEST
INTERESTS OF DRAI'S SHAREHOLDERS, (2) UNANIMOUSLY APPROVED THE MERGER AGREEMENT,
OUR OFFER, THE MERGER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
AND (3) UNANIMOUSLY RECOMMENDS THAT DRAI'S SHAREHOLDERS ACCEPT OUR OFFER, TENDER
THEIR SHARES PURSUANT TO OUR OFFER AND, IF REQUIRED, APPROVE AND ADOPT THE
MERGER AGREEMENT.
July 25, 2001.
IMPORTANT
If you desire to tender all or any portion of your shares of DRAI's common
stock, you should either:
- complete and sign the enclosed Letter of Transmittal (the "Letter of
Transmittal") (or a facsimile copy) in accordance with the instructions in
the Letter of Transmittal, have your signature guaranteed (if required by
Instruction 1 to the Letter of Transmittal), mail or deliver the Letter of
Transmittal (or a facsimile copy) and any other required documents to
Computershare Trust Company of New York (the "Depositary"), and either
deliver the certificates for your shares along with the Letter of
Transmittal to the Depositary or tender your shares pursuant to the
procedures for book-entry transfer set forth in "The Tender Offer--
Procedures For Accepting Our Offer And Tendering Shares"; or
- request your broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for you. If your shares are registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee you must contact your broker, dealer, commercial bank, trust
company or other nominee to tender your shares.
If you desire to tender shares and certificates evidencing your shares, and
your shares are not immediately available, or if you cannot comply with the
procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, or if you cannot deliver all required documents to our Depositary
prior to the expiration of our offer, you may tender your shares by following
the procedures for guaranteed delivery set forth in "The Tender
Offer--Procedures For Accepting Our Offer And Tendering Shares."
Questions and requests for assistance may be directed to Innisfree M&A
Incorporated (our "Information Agent") at its address and/or telephone number
set forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal and other related documents may be
obtained from the Information Agent or from brokers, dealers, commercial banks,
trust companies or other nominees.
TABLE OF CONTENTS
PAGE
--------
1
SUMMARY TERM SHEET...................................................
7
INTRODUCTION.........................................................
11
THE TENDER OFFER.....................................................
1. Background Of Our Offer; Contacts With DRAI, Negotiations
And Agreements............................................ 11
2. Purposes, Effects And Plans................................. 14
3. Terms Of Our Offer; Expiration Date......................... 16
4. Acceptance For Payment And Payment For Shares............... 18
5. Procedures For Accepting Our Offer And Tendering Shares..... 19
6. Withdrawal Rights........................................... 21
7. Material Federal Income Tax Consequences.................... 22
8. Price Range Of DRAI's Common Stock.......................... 23
9. Possible Effects Of Our Offer On The Market For The Shares;
Nasdaq Listing; Margin Regulations And Exchange Act
Registration.............................................. 23
10. Information Concerning DRAI................................. 24
11. Information Concerning Us, Our Parent And SIRSI
Corporation............................................... 26
12. Source And Amount Of Funds.................................. 28
13. Merger Agreement; Support Agreement; Employment Agreements;
Confidentiality Agreement................................. 31
14. Conditions Of Our Offer..................................... 40
15. Legal Matters And Regulatory Approvals...................... 42
16. State Takeover Laws......................................... 43
17. Rights Of Dissenting Shareholders........................... 44
18. Fees And Expenses........................................... 45
19. Miscellaneous............................................... 45
SCHEDULE I-- DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER, PARENT AND SIRSI
CORPORATION
SCHEDULE II-- SECTION 351.455 OF THE GENERAL AND BUSINESS CORPORATION LAW OF
MISSOURI
SUMMARY TERM SHEET
THIS SUMMARY TERM SHEET HIGHLIGHTS SELECTED INFORMATION FROM THIS OFFER TO
PURCHASE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO
BETTER UNDERSTAND OUR OFFER AND FOR A COMPLETE DESCRIPTION OF THE TERMS OF OUR
OFFER, YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT AND THE ACCOMPANYING
LETTER OF TRANSMITTAL. QUESTIONS OR REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO
INNISFREE M&A, INCORPORATED AT THE ADDRESS AND TELEPHONE NUMBER LISTED ON THE
BACK COVER OF THIS OFFER TO PURCHASE. WHEN WE USE THE TERMS "PURCHASER," "WE,"
"US" OR "OUR," WE ARE REFERRING TO MCGUIRE ACQUISITION INC.
WHO IS OFFERING TO BUY MY SECURITIES?
- We are McGuire Acquisition Inc., a Delaware corporation and an indirect
wholly owned subsidiary of SIRSI Holdings Corp. We were organized in
connection with this offer and we have not carried on any activities other
than in connection with this offer.
- SIRSI Holdings Corp. is a Delaware corporation that, through SIRSI
Corporation, its wholly owned subsidiary and the holder of all of our
outstanding capital stock, is principally engaged in the business of
providing software and services for libraries around the globe.
- Please see "The Tender Offer--Information Concerning Us, Our Parent And
SIRSI Corporation."
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THIS OFFER?
- We are offering to purchase all the issued and outstanding shares of
common stock, par value $0.01 per share, of Data Research Associates, Inc.
Please see the "Introduction" and "The Tender Offer--Terms Of Our Offer;
Expiration Date."
HOW MUCH ARE YOU OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
- We are offering to pay $11.00 for each share of Data Research Associates,
Inc.'s common stock, net to you in cash, less any required withholding
taxes and without interest. If you are the record owner of your shares and
you tender your shares directly to the transfer agent, you will not have
to pay brokerage fees or incur similar expenses. If you own your shares
through a broker, and your broker tenders the shares on your behalf, your
broker may charge you a fee for doing so. You should consult your broker
or other nominee to determine whether any charges will apply. Please see
"Introduction" and "The Tender Offer--Terms Of Our Offer; Expiration
Date."
WHAT ARE THE MOST SIGNIFICANT CONDITIONS OF YOUR OFFER?
- We are not obligated to purchase any tendered shares of Data Research
Associates, Inc.'s common stock unless, after the purchase of all of the
shares validly tendered and not properly withdrawn, we would beneficially
own at least 75% of the outstanding shares of Data Research Associates,
Inc.'s common stock on a fully diluted basis (after giving effect to the
conversion or exercise of all of the outstanding convertible securities,
warrants, options and other rights and securities exercisable or
convertible into shares of common stock of Data Research Associates, Inc.
whether or not exercised or converted at the time of determination). In
calculating the number of shares we beneficially own, we are required to
count shares beneficially owned by SIRSI Holdings Corp. Please see the
"Introduction," "The Tender Offer--Terms Of Our Offer; Expiration Date,"
"The Tender Offer--Merger Agreement; Support Agreement; Employment
Agreements; Confidentiality Agreement" and "The Tender Offer--Conditions
Of Our Offer."
- We are not obligated to purchase any shares unless and until all material
governmental or regulatory notices, approvals or other requirements
necessary to consummate the merger have been given, obtained or complied
with. Please see "The Tender Offer--Conditions Of Our Offer" and "The
Tender Offer--Legal Matters And Regulatory Approvals."
- Our offer is not conditional upon any financing arrangements; however, our
liability and the liability of SIRSI Holdings Corp. is limited to
$1 million plus reimbursement of reasonable out-of-pocket expenses if we
fail to consummate our offer solely because we fail to obtain debt
financing.
- Our offer is also subject to certain other conditions. Please see "The
Tender Offer--Conditions Of Our Offer," which sets forth in full the
conditions to our offer.
DO YOU HAVE ENOUGH FINANCIAL RESOURCES TO MAKE PAYMENT?
- We expect to obtain all necessary funds to purchase all of the shares of
Data Research Associates, Inc.'s common stock from a combination of
(1) up to approximately $6.9 million from an equity contribution from
SIRSI Corporation, (2) a new $45 million credit facility established by
SIRSI Corporation, including approximately $10.7 million to be used to
refinance SIRSI Corporation's existing indebtedness and (3) approximately
$18.2 million of the amount of Data Research Associates, Inc.'s cash
expected to be on hand at the expiration of this offer after Data Research
Associates, Inc. pays its transaction expenses. To support us, SIRSI
Holdings Corp. and SIRSI Corporation in advance of finalizing the
documentation for such financing, BNP Paribas has provided SIRSI
Corporation with a commitment letter with respect to the proposed credit
facility. Our offer is not conditional upon any financing arrangements;
however, our liability and the liability of SIRSI Holdings Corp. is
limited to $1 million plus reimbursement of reasonable out-of-pocket
expenses if we fail to consummate our offer solely because we fail to
obtain debt financing. For a more detailed description of the financing
for our offer and the merger, see "The Tender Offer--Source And Amount Of
Funds."
WHAT DOES DATA RESEARCH ASSOCIATES'S BOARD OF DIRECTORS THINK OF OUR OFFER?
- Data Research Associates, Inc.'s board of directors (1) unanimously
determined that each of the merger agreement, our offer, the merger and
the other transactions contemplated by the merger agreement is fair to,
advisable and in the best interests of Data Research Associates, Inc.'s
shareholders, (2) unanimously approved the merger agreement, our offer,
the merger and the transactions contemplated by the merger agreement and
(3) unanimously recommends that Data Research Associates, Inc.'s
shareholders accept our offer, tender their shares pursuant to our offer
and, if required, approve and adopt the merger agreement.
WHAT AGREEMENTS DO YOU HAVE WITH DATA RESEARCH ASSOCIATES OR ANY OF ITS
SHAREHOLDERS RELATING TO YOUR OFFER?
- Simultaneously with entering into the merger agreement, we and SIRSI
Holdings Corp. also entered into a support agreement with Michael J.
Mellinger, Chairman, President and Chief Executive Officer of Data
Research Associates and F. Gilbert Bickel III, a director of Data Research
Associates, and their respective spouses, in which such shareholders
agreed to tender all of their shares in the tender offer and agreed to
vote all of their shares in favor of the merger and the merger agreement
and against certain alternative transactions. The shares subject to the
support agreement represent approximately 53.2% of the outstanding shares
of Data Research Associates, Inc.'s common stock on a fully diluted basis
as of July 20, 2001.
- Simultaneously with the execution of the merger agreement, SIRSI
Corporation entered into an employment agreement with Mr. Mellinger. The
employment agreement provides that
2
Mr. Mellinger will continue as Chairman of Data Research Associates, Inc.
and will serve as a member of the board of directors of SIRSI Corporation.
- Please see "The Tender Offer--Merger Agreement; Support Agreement;
Employment Agreements; Confidentiality Agreement."
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN YOUR OFFER?
- You will have until at least 12:00 midnight, New York City time, on
Tuesday, August 21, 2001 to tender your shares, which is the initial
scheduled expiration date of our offer. We may extend the expiration of
our offer as described below. If you cannot deliver everything that is
required in order to make a valid tender by that time, you may be able to
use the guaranteed delivery procedure that is described in "The Tender
Offer--Procedures For Accepting Our Offer And Tendering Shares."
CAN YOUR OFFER BE EXTENDED, AND UNDER WHAT CIRCUMSTANCES?
- We have the right, in our sole discretion, but subject to the terms of the
merger agreement and applicable law, to extend the period of time during
which our offer remains open.
- We have agreed that, if on Tuesday, August 21, 2001, the initial scheduled
expiration date of our offer, assuming the purchase of all of the shares
validly tendered and not properly withdrawn, we would beneficially own
less than 75% of the outstanding shares of Data Research Associates,
Inc.'s common stock on a fully diluted basis (after giving effect to the
conversion or exercise of all of the then outstanding convertible
securities, warrants, options and other rights and securities exercisable
or convertible into shares of Data Research Associates, Inc.'s common
stock, whether or not exercised or converted at the time of determination)
or any other conditions to our offer have not been satisfied or waived, we
will extend our offer from time to time until October 3, 2001.
- We have agreed that, if on any scheduled expiration date, assuming the
purchase of all the shares validly tendered and not properly withdrawn, we
would beneficially own more than 75% of the outstanding shares of Data
Research Associates, Inc.'s common stock on a fully diluted basis but less
than 90% of the outstanding shares of Data Research Associates, Inc.'s
common stock, we will accept all of the shares then validly tendered and
not properly withdrawn if all the conditions to the offer are then
satisfied or waived, but extend our offer for all the shares not then
validly tendered or properly withdrawn for additional periods of time by
means of subsequent offering periods of up to twenty business days in the
aggregate. Please see "The Tender Offer--Terms Of Our Offer; Expiration
Date" and "The Tender Offer--Merger Agreement; Support Agreement;
Employment Agreements; Confidentiality Agreement."
HOW WILL I BE NOTIFIED IF YOUR OFFER IS EXTENDED?
- If we decide to extend our offer, we will inform Computershare Trust
Company of New York of that fact, and we will issue a press release giving
the new expiration date no later than 9:00 a.m., New York City time, on
the first business day after the day on which our offer was previously
scheduled to expire. Please see "The Tender Offer--Terms Of Our Offer;
Expiration Date."
HOW DO I TENDER MY SHARES?
To tender your shares in our offer, you must:
- complete and sign the accompanying Letter of Transmittal (or a manually
signed facsimile of the Letter of Transmittal) in accordance with the
instructions in the Letter of Transmittal and mail
3
or deliver it together with your stock certificates and any other required
documents, to Computershare Trust Company of New York or tender your
shares by book-entry transfer as described in "The Tender
Offer--Procedures For Accepting Our Offer And Tendering Shares;" or
- if your stock certificates are not immediately available or if you cannot
deliver your stock certificates and any other required documents to
Computershare Trust Company of New York prior to the expiration of our
offer, or you cannot complete the procedure for delivery by book-entry
transfer on a timely basis, you may still tender your shares if you comply
with the guaranteed delivery procedures described in "The Tender
Offer--Procedures For Accepting Our Offer And Tendering Shares."
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
- You may withdraw any previously tendered shares at any time prior to the
expiration of our offer. Any accepted shares may not be withdrawn. Also,
any shares tendered during any subsequent offering period may not be
withdrawn. Please see "The Tender Offer--Withdrawal Rights."
HOW DO I WITHDRAW MY PREVIOUSLY TENDERED SHARES?
- In order to withdraw your tender of shares, you must deliver a written or
facsimile notice of withdrawal with the required information to
Computershare Trust Company of New York while you still have the right to
withdraw. If you tendered shares by giving instructions to a broker or
bank, you must instruct the broker or bank to arrange for the withdrawal
of your shares. Please see "The Tender Offer--Withdrawal Rights."
WHAT WILL HAPPEN IF ALL THE SHARES ARE NOT TENDERED?
- If we are able to acquire beneficial ownership of at least 75% of the
outstanding shares of Data Research Associates, Inc.'s common stock on a
fully diluted basis, then, in accordance with the Delaware General
Corporation Law and the General Business and Corporation Law of Missouri,
we will merge with and into Data Research Associates, Inc., and Data
Research Associates, Inc. will become a wholly owned subsidiary of SIRSI
Corporation and an indirect wholly owned subsidiary of SIRSI Holdings
Corp. In calculating the number of shares of Data Research Associates,
Inc.'s common stock we beneficially own, we are required to count shares
of Data Research Associates, Inc.'s common stock owned by SIRSI Holdings
Corp. Each share that is outstanding at the time of the merger (other than
any shares held in the treasury of Data Research Associates, Inc., and
other than shares held by shareholders who have objected to the merger,
demanded payment of the fair value of their shares under applicable
Missouri law and, as of the effective time of the merger, have neither
effectively withdrawn nor lost the right to such demand) will be canceled
and converted automatically into the right to receive the same
consideration as received by shareholders who tendered their shares in our
offer.
- If we are not able to acquire beneficial ownership of at least 75% of the
outstanding shares of Data Research Associates, Inc.'s common stock on a
fully diluted basis, we will either extend our offer or terminate our
offer in the manner specified in the merger agreement.
- If we extend our offer in connection with a subsequent offering period, we
will pay the same price per share in the subsequent offering periods as we
pay in our offer.
- If we acquire 90% or more of the shares of Data Research Associates,
Inc.'s common stock we expect to complete a "short form" merger. This type
of merger does not require Data Research Associates, Inc.'s shareholders
to approve the merger. See "Introduction," "The Tender Offer--
4
Purposes, Effects And Plans" and "The Tender Offer--Legal Matters And
Regulatory Approvals."
- Because Mr. Mellinger, Mr. Bickel and their respective spouses have agreed
to tender, subject to the support agreement, approximately 53.2% of the
outstanding shares of Data Research Associates, Inc.'s common stock on a
fully diluted basis as of July 20, 2001, approximately 21.8% of the
outstanding shares of Data Research Associates, Inc.'s common stock must
be tendered, in addition to the shares held by such shareholders, to
satisfy our minimum tender condition.
- See "The Tender Offer--Merger Agreement; Support Agreement; Employment
Agreements; Confidentiality Agreement."
WILL DATA RESEARCH ASSOCIATES CONTINUE AS A PUBLIC COMPANY?
- If the merger occurs, Data Research Associates, Inc. will no longer be
publicly owned. Even if the merger does not occur, if we purchase all of
the shares validly tendered and not properly withdrawn, (1) there may be
so few remaining shareholders and publicly held shares that Data Research
Associates, Inc.'s common stock may no longer be eligible to trade on the
Nasdaq National Market, (2) there may not be a public trading market for
Data Research Associates, Inc.'s common stock, or (3) Data Research
Associates, Inc. may cease making filings with the Securities and Exchange
Commission or otherwise cease being required to comply with the Securities
and Exchange Commission's rules relating to publicly held companies.
Please see "The Tender Offer--Purposes, Effects And Plans" and "The Tender
Offer--Possible Effects Of Our Offer On The Market For The Shares; Nasdaq
Listing; Margin Regulations And Exchange Act Registration."
IF I DECIDE NOT TO TENDER, HOW WILL YOUR OFFER AFFECT MY SHARES?
- If you do not validly tender your shares in our offer and the merger
occurs, you will receive in the merger the same amount of cash per share
as you would have received if you tendered your shares in our offer. See
"The Tender Offer--Merger Agreement; Support Agreement; Employment
Agreements; Confidentiality Agreement."
- If you validly tender your shares in our offer and we purchase all the
shares which are validly tendered but the merger does not occur,
(1) there may be so few remaining shareholders and publicly held shares
that Data Research Associates, Inc.'s common stock may no longer be
eligible to trade on the Nasdaq National Market, (2) there may not be a
public trading market for shares of Data Research Associates, Inc.'s
common stock, or (3) Data Research Associates, Inc. may cease making
filings with the Securities and Exchange Commission or otherwise cease
being required to comply with the Securities and Exchange Commission's
rules relating to publicly held companies. Please see "The Tender
Offer--Possible Effects Of Our Offer On The Market For The Shares; Nasdaq
Listing; Margin Regulations And Exchange Act Registration."
WILL I HAVE APPRAISAL RIGHTS?
- We do not believe that appraisal rights are available in connection with
our offer; however, appraisal rights will be available in connection with
the merger subject to and in accordance with applicable Missouri law. If
the merger is consummated, shareholders who have not tendered their shares
in our offer have the right under Missouri law to object to the merger and
demand payment of the fair value of their shares. See "The Tender
Offer--State Takeover Laws", "The Tender Offer--Rights Of Dissenting
Shareholders and Schedule II."
5
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
- On May 16, 2001, the last full trading day before we announced our offer,
the closing price per share on the Nasdaq National Market was $5.91 per
share; our offer of $11.00 per share represents a premium of 86% over this
closing price. On July 24, 2001, the last full day of trading before the
printing of this Offer to Purchase, the closing price per share on the
Nasdaq National Market was $10.25. See "The Tender Offer--Price Range Of
DRAI's Common Stock."
WITH WHOM MAY I TALK IF I HAVE QUESTIONS ABOUT YOUR OFFER?
- You can call (toll free) Innisfree M&A Incorporated, our Information
Agent, at 1-888-750-5834. See the back cover of this Offer to Purchase.
6
TO THE HOLDERS OF SHARES OF DRAI'S COMMON STOCK:
INTRODUCTION
We hereby offer to purchase all of the outstanding shares of common stock,
par value $0.01 per share of DRAI (the "Shares") for $11.00 per Share, net to
the seller in cash, less any required withholding taxes and without interest,
upon the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (together, with any amendments or
supplements hereto or thereto, collectively constituting the "Offer"). Please
see "The Tender Offer--Information Concerning Us, Our Parent And SIRSI
Corporation" for additional information concerning us, SIRSI Holdings Corp. (our
"Parent") and SIRSI Corporation. You will not be obligated to pay brokerage fees
or commissions in connection with our Offer. We will pay all charges and
expenses of our Depositary, and of our Information Agent.
DRAI'S BOARD OF DIRECTORS (1) UNANIMOUSLY DETERMINED THAT EACH OF THE MERGER
AGREEMENT, OUR OFFER, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE
MERGER AGREEMENT IS FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF DRAI'S
SHAREHOLDERS, (2) UNANIMOUSLY APPROVED THE MERGER AGREEMENT, OUR OFFER, THE
MERGER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, AND
(3) UNANIMOUSLY RECOMMENDS THAT DRAI'S SHAREHOLDERS ACCEPT OUR OFFER, TENDER
THEIR SHARES PURSUANT TO OUR OFFER AND, IF REQUIRED, APPROVE AND ADOPT THE
MERGER AGREEMENT.
Crescendo Capital Partners, LLC ("Crescendo"), financial advisor to the
board of directors of DRAI (the "Board"), has delivered to the Board a written
opinion, dated as of May 15, 2001, to the effect that, as of that date and based
on and subject to the matters described in the opinion, the $11.00 per Share
cash consideration to be received in our Offer and the Merger, by the holders of
DRAI Shares was fair, from a financial point of view, to the holders of Shares.
A copy of Crescendo's written opinion, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the review
undertaken, is included as Annex B to DRAI's Solicitation/Recommendation
Statement on Schedule 14D-9. YOU ARE URGED TO READ THE OPINION CAREFULLY AND IN
ITS ENTIRETY FOR A DESCRIPTION OF THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS ON THE REVIEW UNDERTAKEN BY CRESCENDO.
OUR OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF OUR OFFER, NOT
LESS THAN THAT NUMBER OF SHARES WHICH CONSTITUTES AT LEAST 75% OF THE SHARES
OUTSTANDING ON A FULLY DILUTED BASIS (AFTER GIVING EFFECT TO THE CONVERSION OR
EXERCISE OF ALL OUTSTANDING OPTIONS, WARRANTS AND OTHER RIGHTS AND SECURITIES
EXERCISABLE OR CONVERTIBLE INTO SHARES, WHETHER OR NOT EXERCISED OR CONVERTED AT
THE TIME OF DETERMINATION), EXCLUDING ANY SHARES HELD BY DRAI OR ANY OF ITS
SUBSIDIARIES AND (2) ALL MATERIAL GOVERNMENTAL OR REGULATORY NOTICES, APPROVALS
OR OTHER REQUIREMENTS NECESSARY TO CONSUMMATE THE MERGER SHALL HAVE BEEN GIVEN,
OBTAINED OR COMPLIED WITH. OUR OFFER IS ALSO SUBJECT TO CERTAIN OTHER CONDITIONS
CONTAINED IN THIS OFFER TO PURCHASE. WE REFER YOU TO "THE TENDER
OFFER--CONDITIONS OF OUR OFFER," WHICH SETS FORTH IN FULL THE CONDITIONS TO OUR
OFFER.
We are making this Offer pursuant to the Merger Agreement. The Merger
Agreement provides, among other things, that as promptly as practicable after
the purchase of Shares pursuant to our Offer and the satisfaction or, if
permissible, waiver of the other conditions set forth in the Merger Agreement
and in accordance with the relevant provisions of the Delaware General
Corporation Law and the General Business and Corporation Law of Missouri, we
will merge with and into DRAI (the
7
"Merger"). Upon the due filing of a certificate of merger with the Secretary of
State of the State of Missouri (the "Effective Time"), each Share issued and
outstanding immediately prior to the Effective Time of the Merger (other than
Shares held in the treasury of DRAI and other than Shares held by shareholders
who have objected to the Merger, demanded payment of the fair value of their
Shares under applicable Missouri law and, as of the Effective Time, have neither
withdrawn nor lost the right to such demand) will be canceled and converted
automatically into the right to receive $11.00 in cash (or any higher price that
may be paid per Share in our Offer) without interest. The Merger Agreement is
more fully described in "The Tender Offer--Merger Agreement; Support Agreement;
Employment Agreements; Confidentiality Agreement." The material federal income
tax consequences of the sale of Shares pursuant to our Offer and the Merger are
described in "The Tender Offer--Material Federal Income Tax Consequences."
Simultaneously with the execution of the Merger Agreement, we and our Parent
also entered into a support agreement (the "Support Agreement") with Michael J.
Mellinger, Chairman, President and Chief Executive Officer of DRAI, F. Gilbert
Bickel III, a director of DRAI, and their respective spouses (together, the
"Principal Shareholders") in which the Principal Shareholders agreed to, among
other things:
- tender all of their Shares to us in our Offer;
- vote (1) in favor of the Merger and the Merger Agreement, (2) against any
Acquisition Proposal (as that term is defined in the Merger Agreement),
against any proposal for action or agreement that would result in a breach
of any covenant, representation or warranty or any other obligation or
agreement of DRAI under the Merger Agreement, against any change in the
directors of DRAI, against any change in the present capitalization of
DRAI, against any amendment to DRAI's articles of incorporation or bylaws,
which in each case could reasonably be expected to impede, interfere with,
delay, postpone or materially adversely affect the transactions
contemplated by the Merger Agreement or the likelihood of the transactions
being consummated and (3) in favor of any other matter necessary for
consummation of the transactions contemplated by the Merger Agreement;
- revoke all prior proxies or powers of attorney governing the Shares owned
by them and grant an irrevocable proxy to us and our Parent, or any of our
nominees to vote and act (by written consent or otherwise) with respect to
all of the Shares owned by them at any meeting of DRAI's shareholders or
by written consent in lieu of any meetings with regard to any matter
covered in the paragraph above;
- execute any documents that are necessary or appropriate in order to
effectuate the foregoing, including the ability for us or our nominees to
vote Shares owned by the Principal Shareholders; and
- waive any rights of appraisal or rights to dissent from the Merger.
Please see "The Tender Offer--Merger Agreement; Support Agreement;
Employment Agreements; Confidentiality Agreement."
The Merger Agreement provides that promptly after the later to occur of
(1) the purchase of and payment for any Shares as a result of which Parent and
its subsidiaries own at least a majority of the then outstanding Shares on a
fully diluted basis and (2) compliance with Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14f-1 promulgated
by the Securities and Exchange Commission (the "SEC") thereunder, our Parent
will be entitled to designate the number of directors on the Board as will give
our Parent representation on the Board equal to at least the number of
directors, rounded up to the next whole number, that equals the product of
(i) the total number of directors on the Board (giving effect to the directors
designated as described in this sentence) multiplied by (ii) a fraction, the
numerator of which is the number of Shares that our Parent
8
and its subsidiaries beneficially own when calculating this fraction, and the
denominator of which is the total number of Shares then outstanding. DRAI will,
upon request of our Parent, promptly use its best efforts either to increase the
size of its Board or to secure the resignations of some of its incumbent
directors, or both as is necessary to enable our Parent's designees to be so
elected or appointed to the Board, and DRAI will take all actions available to
DRAI to cause our Parent's designees to be elected or appointed at that time.
We will complete the Merger if conditions specified in the Merger Agreement
are satisfied, which conditions include the consummation of our Offer, and, if
required under Missouri law, the adoption of the Merger Agreement at a meeting
of DRAI's shareholders. For a more detailed description of the conditions to the
Merger, please see "The Tender Offer--Merger Agreement; Support Agreement;
Employment Agreements; Confidentiality Agreement" and "The Tender
Offer--Conditions Of Our Offer." DRAI's articles of incorporation require the
affirmative vote of the holders of at least 75% of the outstanding Shares to
approve any merger, including the Merger provided for in the Merger Agreement.
Consequently, if we acquire (pursuant to our Offer or otherwise) at least 75% of
the outstanding Shares, then we will be able to adopt the Merger Agreement
without the affirmative vote of any other DRAI shareholder. Please see "The
Tender Offer--Merger Agreement; Support Agreement; Employment Agreements;
Confidentiality Agreement" and "The Tender Offer--Conditions Of Our Offer."
Under applicable Missouri and Delaware laws, if we, together with our
Parent, acquire (pursuant to our Offer or otherwise) at least 90% of the then
outstanding Shares, we will be able to effect the Merger without holding a
meeting of DRAI's shareholders to vote on the Merger and without requesting the
affirmative vote of DRAI's other shareholders. If that happens, we, our Parent
and DRAI have agreed to take all necessary and appropriate action to cause the
Merger to become effective in accordance with Missouri law, and without a
meeting of DRAI's shareholders, as soon as practicable after we acquire 90% of
the then outstanding Shares. If, however, we, together with our Parent, do not
acquire at least 90% of the then outstanding Shares and a meeting of DRAI's
shareholders to approve the Merger is required under Missouri law, a
significantly longer period of time will be required in order to effect the
Merger. Please see "The Tender Offer--Legal Matters And Regulatory Approvals."
Pursuant to the Merger Agreement and upon consummation of the transactions
contemplated by the Merger Agreement, options and warrants that are exercisable
for Shares will be (i) converted into the right to receive an amount (the "Net
Amount") equal to the product of (x) the excess, if any, of $11.00 over the per
Share exercise price of the option or warrant, as the case may be, and (y) the
number of Shares subject to the option or warrant, as the case may be or
(ii) cancelled in exchange for payment of the Net Amount.
DRAI has advised us that as of July 20, 2001, 1,057,149 Shares were held in
the treasury of DRAI and 4,826,204 Shares were outstanding on a fully diluted
basis. This number includes the following:
- 4,500,204 Shares issued and outstanding;
- 84,000 Shares subject to outstanding stock options that have an exercise
price below $11 per Share and are either exercisable or will become
exercisable upon the purchase by us of the Shares, but by agreement, are
not exercisable prior to the consummation of the Merger;
- 50,000 Shares subject to an outstanding warrant that may not, by
agreement, be exercised prior to the consummation of the Merger;
- 32,500 Shares subject to stock options that will become exercisable on
January 1, 2002, at which time they may be exercised for the Net Amount;
9
- 68,000 Shares subject to stock options that will become exercisable on
January 1, 2003, at which time they may be exercised for the Net Amount;
and
- 91,500 Shares subject to stock options that have an exercise price above
$11 per Share.
As a result, as of July 20, 2001:
- our Minimum Condition would be satisfied if we had acquired 3,619,653
Shares;
- we would be able to approve the Merger, under applicable Missouri and
Delaware laws, without calling a meeting of DRAI's shareholders or getting
the consent or vote of any other DRAI shareholder, if we acquired
4,050,184 Shares; and
- because the Principal Shareholders have agreed to tender, subject to the
Support Agreement, approximately 53.2% of the outstanding Shares on a
fully diluted basis as of July 20, 2001, approximately 21.8% of the
outstanding Shares must be tendered, in addition to the Shares held by the
Principal Shareholders, to satisfy our Minimum Condition.
Please see "The Tender Offer--Merger Agreement; Support Agreement;
Employment Agreements; Confidentiality Agreement."
We do not believe that appraisal rights are available in connection with our
Offer; however, appraisal rights will be available in connection with the
Merger, subject to and in compliance with applicable Missouri law. If the Merger
is consummated, shareholders who have not tendered their Shares in our Offer
will have the right under applicable Missouri law to object to the Merger and
demand payment of the fair value of their Shares. Please see "The Tender
Offer--State Takeover Laws", "The Tender Offer--Rights Of Dissenting
Shareholders" and Schedule II.
10
THE TENDER OFFER
1. BACKGROUND OF OUR OFFER; CONTACTS WITH DRAI, NEGOTIATIONS AND AGREEMENTS.
The following information concerning DRAI has been provided to us by DRAI:
On January 30, 2001, William K. Luby, one of our directors and a director of
our Parent and SIRSI Corporation, contacted Crescendo, the financial advisor of
DRAI, to communicate our Parent's interest in acquiring DRAI. On February 1,
2001, Crescendo informed Mr. Luby that upon execution of a confidentiality
agreement, DRAI would be interested in pursuing discussions with SIRSI
Corporation and would provide SIRSI Corporation with information about DRAI. On
February 5, 2001, the parties executed the Confidentiality Agreement (as
hereinafter defined in "The Tender Offer--Merger Agreement; Support Agreement;
Employment Agreements; Confidentiality Agreement").
On February 26, 2001, Mr. Luby and Patrick Sommers, the President and Chief
Executive Officer of us, our Parent and SIRSI Corporation, met in St. Louis,
Missouri, with Mr. Mellinger and representatives of Crescendo, to discuss a
potential transaction between SIRSI Corporation and DRAI.
On March 6, 2001, SIRSI Corporation's representatives and DRAI's
representatives held a telephonic meeting to discuss SIRSI Corporation's
interest in acquiring DRAI. At the meeting, DRAI suggested that SIRSI
Corporation submit a formal written proposal to acquire DRAI.
On March 21, 2001, SIRSI Corporation delivered a written, non-binding
proposal to acquire DRAI for $46.4 million (or $10.00 per Share assuming
4.64 million Shares outstanding at such time), subject to its satisfaction with
DRAI's contingent liabilities. SIRSI Corporation's proposal contemplated a
tender offer followed by a merger of us with and into DRAI. The proposal
requested that Mr. Mellinger be retained as a consultant for four years and
Mr. Mellinger would serve on SIRSI Corporation's board of directors. The
proposal contemplated that DRAI would not have any outstanding indebtedness at
closing and the acquisition price would be financed with $21 million of DRAI's
cash and borrowings under a new senior bank credit facility. The proposal did
not contain the conditions to our Offer or other material terms that were left
open for negotiation. Following delivery of the proposal, DRAI provided our
Parent with non-public information concerning DRAI's historical financial
performance and condition, its customers and its prospects.
On March 26, 2001, Crescendo advised Mr. Luby that, in DRAI's opinion, the
$10 per Share proposal did not adequately reflect DRAI's value. Crescendo and
Mr. Luby also discussed other aspects of the proposal, including SIRSI
Corporation's due diligence and the proposed financing structure.
On April 6, 2001, SIRSI Corporation's and DRAI's representatives met at
DRAI's offices in St. Louis, Missouri, to discuss the proposed transaction.
Specifically, the group discussed SIRSI Corporation's review of the publicly
available information on DRAI and the revenue potential for DRAI's new Taos
product line.
On April 10, 2001, Mr. Luby met with Duncan O'Brien of Crescendo to discuss
in greater detail the proposed terms of a transaction between DRAI and SIRSI
Corporation. At the meeting, the parties discussed valuations for DRAI in excess
of $10.00 per share. Mr. Luby indicated that SIRSI Corporation would submit a
revised proposal in the coming days.
On April 12 and 13, 2001, DRAI and Crescendo provided SIRSI Corporation and
its representatives with additional financial information regarding DRAI.
11
On April 16, 2001, SIRSI Corporation delivered a revised written,
non-binding proposal to acquire all of the outstanding Shares for $11.00 per
Share in cash. The revised proposal contemplated the following principal terms:
- SIRSI Corporation would not consummate the acquisition unless DRAI had no
outstanding indebtedness and had at least $22 million in cash at the time
of the closing of our Offer.
- The Principal Shareholders would agree to tender into an offer made to all
shareholders and vote in favor of any merger.
- SIRSI Corporation would retain Mr. Mellinger as a consultant for two years
at a rate equal to $150,000 per annum.
- SIRSI Corporation would finance the acquisition with $22 million of DRAI's
cash and with borrowings under a new senior bank credit facility.
- If SIRSI Corporation did not receive the contemplated financing but all of
the other conditions to SIRSI Corporation's offer were satisfied, SIRSI
Corporation would pay $500,000 to DRAI as a termination fee.
On April 19, 2001, our Parent's and SIRSI Corporation's boards of directors
met to discuss the status of conversations with DRAI.
Following that meeting, SIRSI Corporation received from DRAI comments to the
proposal. DRAI proposed the following changes to the proposal:
- SIRSI Corporation would acknowledge the number of outstanding options and
warrants that DRAI would be obligated to honor following the consummation
of the Merger.
- The Principal Shareholders would state their intention to tender into the
tender offer but would not agree to tender into our Offer or vote in favor
of the Merger.
- DRAI would not commit to have a fixed amount of cash at closing, but would
limit its uses of cash pending closing of the Merger.
- SIRSI Corporation would pay DRAI a termination fee of $2 million if SIRSI
Corporation failed to receive binding commitment letters in regard to the
financing prior to an agreed upon date.
- DRAI would pay SIRSI Corporation a termination fee of $2 million if it
failed to complete the deal with us due to the existence of a more
attractive, unsolicited offer to acquire DRAI.
- Upon resolution of all issues, the parties would execute definitive
agreements and would deposit the signed agreements into escrow for a two
business day period during which SIRSI Corporation would be given the
opportunity to discuss DRAI's business and DRAI's products with the
University of California at Los Angeles and at least two other customers
of DRAI's. At the end of the two business day period, if SIRSI Corporation
notified DRAI that it was satisfied with its discussions, the agreements
would be released from escrow.
- SIRSI Corporation would acknowledge that DRAI planned on entering into
employment agreements with five members of its management team, including
Mr. Mellinger.
12
Between April 19, 2001 and April 23, 2001, SIRSI Corporation's
representatives and DRAI's representatives negotiated the terms of a transaction
between us and DRAI. On April 24, 2001, the parties agreed to a revised proposal
reflecting substantially the terms set forth above except as follows:
- At closing, SIRSI Corporation would pay holders of vested DRAI options an
amount equal to the excess of $11.00 per Share over the per Share exercise
price.
- SIRSI Corporation would pay a termination fee of $1 million if SIRSI
Corporation failed to receive binding commitment letters in regard to the
financing prior to an agreed upon date. The parties did not agree on
whether there would be a financing condition in the Merger Agreement
following receipt of such commitment letters.
- The Principal Shareholders would agree to tender into our Offer and vote,
in their capacity as shareholders, in favor of the Merger.
- SIRSI Corporation would retain Mr. Mellinger as an employee for six months
following closing and for an additional six months thereafter as a
consultant. SIRSI Corporation would pay Mr. Mellinger $25,000 per month
during the employment and consulting terms. Following the consulting term,
SIRSI Corporation would pay Mr. Mellinger $100,000 per annum for a three
year period in exchange for his agreement not to compete with SIRSI
Corporation and its subsidiaries.
Each proposal was subject to substantial conditions, including SIRSI
Corporation's satisfaction with the results of its due diligence. In addition,
SIRSI Corporation informed DRAI that for it to incur costs or expenses for its
due diligence activities, DRAI must agree not to solicit or negotiate with any
third parties for a limited period of time. On April 24, 2001, DRAI executed an
exclusivity letter pursuant to which it agreed not to solicit competing offers
or negotiate with third parties until May 11, 2001.
On April 29, 2001, SIRSI Corporation's representatives delivered initial
drafts of the Merger Agreement and the Support Agreement to representatives of
DRAI. On April 30, 2001, SIRSI Corporation's representatives met in St. Louis,
Missouri, with DRAI's representatives to conduct formal due diligence on DRAI.
From May 2, 2001 through the signing of the Merger Agreement, SIRSI
Corporation's legal and financial advisors and the DRAI's legal and financial
advisors engaged in extensive negotiations over the terms of the draft merger
agreement.
On May 7, 2001, SIRSI Corporation's representatives met in St. Louis,
Missouri, with DRAI's representatives to conduct additional due diligence.
On May 11, 2001, to allow for continued negotiations and due diligence, the
parties extended the expiration of the exclusivity period until May 14, 2001.
On May 14, 2001, the parties agreed to amend the Confidentiality Agreement
to provide for the scope of the conduct of our customer due diligence and
extended the exclusivity period to May 16, 2001. Between May 14 and May 16,
2001, the parties reached agreement on the remaining open issues in the Merger
Agreement and SIRSI Corporation concluded its customer due diligence to its
satisfaction.
On May 16, 2001, the parties executed the Merger Agreement, the Support
Agreement, and the Mellinger Employment Agreement (as defined below).
On or about June 25, 2001, we determined that we were not able to arrange
senior debt financing from our prospective lender adequate to consummate the
transactions. In response, the parties considered various options, including our
proposal to reduce the per Share cash price to be paid in the
13
Offer and the Merger to $10 per Share. During this period, on two occasions, the
parties extended the deadline for obtaining commitment letters for the senior
debt financing and for commencing the offer. After extensive negotiations among
the parties, our Parent's shareholders and Patrick Sommers, the President and
Chief Executive Officer of us, our Parent and SIRSI Corporation, informed us
that they would be willing to provide shareholder loans and make equity
contributions of up to $1 million and $2.2 million, respectively, to our Parent.
The proposed equity contributions and loans from our Parent's shareholders and
Mr. Sommers, when taken together with the senior debt financing from our
prospective lender and SIRSI Corporation's and DRAI's available cash, would
provide sufficient funds to consummate the transactions at the $11.00 per Share
purchase price and to pay the related fees and expenses. Accordingly, after
receiving a commitment letter that was in satisfactory form, we commenced our
Offer.
In addition, prior to commencing our Offer, the parties amended the Merger
Agreement for, among other things, the following:
- DRAI provided representations and warranties to the effect that it
obtained agreements from holders of its outstanding stock options and
warrants exercisable for Shares at any time up to the Effective Time (as
defined herein) pursuant to which such holders agreed not to exercise
their stock options and warrants until the later of the Effective Time and
the termination of the Merger Agreement.
- The parties deleted the requirement to file a notification under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, because
the transaction size will not meet the requisite threshold.
- Upon consummation of our Offer and acceptance by us for payment of Shares
tendered pursuant to our Offer (without giving effect to any subsequent
offering period), DRAI will provide our Parent with a Bridge Loan (as
defined herein) in an amount of up to $18.7 million less the amount of
DRAI's transaction expenses.
2. PURPOSES, EFFECTS AND PLANS.
PURPOSE OF OUR OFFER; THE MERGER. The purpose of our Offer and the Merger
is for our Parent to acquire control of, and the entire equity interest in,
DRAI. Our Offer, as the first step in the acquisition of DRAI, is intended to
facilitate the acquisition of all outstanding Shares. The purpose of the Merger
is to acquire all of the outstanding Shares not purchased pursuant to our Offer
or otherwise. If, after consummation of our Offer, we own at least 90% of the
Shares then outstanding, we will be able to cause the Merger to occur under
applicable Missouri and Delaware law without holding a meeting of DRAI's
shareholders to adopt the Merger Agreement and without the affirmative vote of
DRAI's other shareholders. If, however, after consummation of our Offer, we own
less than 90% of the Shares then outstanding but our Minimum Condition has been
satisfied, we will have sufficient voting power to cause the approval and
adoption of the Merger without the affirmative vote of any other DRAI
shareholder.
EFFECTS OF OUR OFFER. Upon the consummation of our Offer and the Merger,
the entire equity interest in DRAI will be beneficially owned by our Parent. The
current shareholders of DRAI will no longer have any interest in, and will not
be shareholders of, DRAI, but will have the right to receive $11.00 in cash,
without interest, for each Share held (other than Shares held in the treasury of
DRAI and other than Shares held by shareholders who object to the Merger, demand
payment of the fair value of their Shares under applicable Missouri law and, as
of the Effective Time have neither withdrawn nor lost the right to such demand
(the "Dissenting Shareholders")). In addition, holders of options or warrants
will have the right to receive a cash payment in exchange for such options or
14
warrants in an amount equal to the Net Amount. See "The Tender Offer--Merger
Agreement; Support Agreement; Employment Agreements; Confidentiality Agreement."
In addition, after the Merger, DRAI will no longer be subject to the
reporting requirements of the Exchange Act, which will allow DRAI to eliminate
the time devoted by its management and other employees to matters that relate
exclusively to DRAI being a publicly held company. DRAI's officers, directors
and the owners of more than 10% of the Shares will no longer be subject to the
reporting and the short-swing profit provisions of Section 16 of the Exchange
Act.
Depending upon the number of Shares purchased pursuant to our Offer, DRAI's
common stock may no longer meet the standards for continued quotation the Nasdaq
National Market. According to Nasdaq's published guidelines, the Shares would
not be eligible quotation if, among other things, the number of Shares that are
not held directly or indirectly by any officer or director of DRAI and by any
other person who is the beneficial owner of more than 10% of the total Shares
outstanding is less than 750,000, or the number of holders of at least 100
Shares falls below 400. If, as a result of the purchase of Shares pursuant to
our Offer, the Merger, the Merger Agreement or otherwise, DRAI's common stock no
longer meets the requirements of the Nasdaq National Market for continued
quotation, the quotation of the Shares will be discontinued. If that happens,
the market for the Shares would be adversely affected. If the Shares are no
longer eligible for listing on the Nasdaq National Market, quotations might
still be available from other sources. The extent of the public market for the
Shares and the availability of quotations would, however, depend upon the number
of shareholders remaining at the time, the interest in maintaining a market in
the Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act as described below and other
factors. Assuming we acquire the requisite number of Shares to effect the
eligibility of the Shares for quotation, we intend to cause the Shares to cease
to be quoted by Nasdaq following consummation of our Offer.
PLANS FOR DRAI. Upon completion of our Offer, we intend to effect the
Merger in accordance with the terms and conditions of the Merger Agreement.
The Merger Agreement provides that promptly after the later to occur of
(1) the purchase of and payment for any Shares as a result of which Parent and
its subsidiaries own at least a majority of the then outstanding Shares on a
fully diluted basis and (2) compliance with Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated by the SEC thereunder, our Parent will be entitled to
designate the number of directors on the Board as will give our Parent
representation on the Board equal to at least the number of directors, rounded
up to the next whole number, that equals the product of (i) the total number of
directors on the Board (giving effect to the directors designated as described
in this sentence) multiplied by (ii) a fraction, the numerator of which is the
number of Shares that our Parent and its subsidiaries beneficially own when
calculating this fraction, and the denominator of which is the total number of
Shares then outstanding. DRAI will, upon request of our Parent, promptly use its
best efforts either to increase the size of its Board or to secure the
resignations of some of its incumbent directors, or both as is necessary to
enable our Parent's designees to be so elected or appointed to the Board, and
DRAI will take all actions available to DRAI to cause our Parent's designees to
be elected or appointed at that time. Please see "The Tender Offer--Merger
Agreement; Support Agreement; Employment Agreements; Confidentiality Agreement."
Except as otherwise described in this Offer to Purchase and except for the
transactions contemplated by the Merger Agreement, we have no current plans or
proposals that relate to or would result in: (1) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation involving DRAI;
(2) a sale or transfer of a material amount of assets of DRAI; (3) any change in
the management of DRAI or any change in any material term of the employment
contract of any executive officer of DRAI; or (4) any other material change in
DRAI's corporate structure or business.
15
Nevertheless, we may initiate a review of DRAI and its assets, corporate
structure, capitalization, operations, properties, policies, management and
personnel to determine what changes, if any, would be desirable following the
Merger in order best to organize and coordinate the activities of DRAI and our
Parent, its subsidiaries and its shareholders. Furthermore, in connection with
our ongoing review of DRAI's long term strategy, we may, in the future, consider
the disposition or acquisition of material assets, alliances, joint ventures,
other forms of cooperation with third parties or other extraordinary
transactions affecting DRAI or its operations.
3. TERMS OF OUR OFFER; EXPIRATION DATE.
Upon the terms and subject to the conditions of our Offer (including any
terms and conditions of any extension or amendment), we will accept for payment
and pay for all Shares validly tendered (and not properly withdrawn in
accordance with the procedures set forth in "The Tender Offer--Withdrawal
Rights") on or prior to the "Expiration Date." The "Expiration Date" means 12:00
midnight, New York City time, on Tuesday, August 21, 2001, unless and until we
(subject to the terms and conditions of the Merger Agreement) extend the period
during which our Offer is open, in which case "Expiration Date" will mean the
latest time and date at which our Offer, as we have extended it, will expire.
Our Offer is subject to the conditions described in "The Tender
Offer--Conditions Of Our Offer," including the satisfaction of the Minimum
Condition and the receipt of material governmental approvals. Subject to the
terms of the Merger Agreement, we expressly reserve the right to waive any
condition to our Offer in whole or in part, in our sole discretion, and also
expressly reserve the right to increase the price per Share payable in our Offer
and to make any other changes in the terms and conditions of our Offer; but,
without the consent of DRAI, we will not amend or waive the Minimum Condition.
We cannot legally waive material governmental approvals. We also agreed that,
without the prior written consent of DRAI, no change in our Offer may be made
(i) which decreases the price per Share payable in the Offer, (ii) which changes
the form of consideration to be paid in the Offer, (iii) which reduces the
maximum number of Shares to be purchased in the Offer or the Minimum Condition,
(iv) which imposes conditions to the Offer in addition to those set forth in
"The Tender Offer--Conditions Of Our Offer" or which modifies the conditions set
forth in such section in a manner adverse to the holders of Shares, (v) which
amends any other term of the Offer in a manner inconsistent with the Merger
Agreement and adverse to the holders of Shares, or (vi) which extends the
expiration of the Offer beyond October 3, 2001.
We have agreed to extend our Offer from time to time until October 3, 2001
if, and to the extent that, at the then scheduled Expiration Date, the
conditions to our Offer have not been satisfied or waived (except that the
Minimum Condition may not be waived). In addition, if at the Expiration Date,
the conditions of the Offer have been satisfied or waived, we may accept for
payment all Shares validly tendered and not properly withdrawn and provide for
subsequent offering periods under Rule 14d-11 under the Exchange Act, of not
more than twenty business days, in the aggregate, in an effort to acquire at
least 90% of the outstanding Shares. If we acquire less than 90% of the
outstanding Shares following the then scheduled Expiration Date of the Offer, we
intend to elect to provide one or more subsequent offerings. Pursuant to
Rule 14d-7 under the Exchange Act, no withdrawal rights apply to Shares tendered
during a subsequent offering period and no withdrawal rights apply during a
subsequent offering period with respect to Shares tendered in the Offer and
accepted for payment. The same consideration will be paid to shareholders
tendering Shares in the initial Offer or in a subsequent offering period, if one
is provided. Under no circumstances will interest be paid on the purchase price
for tendered Shares, whether or not our Offer is extended.
Rule 14d-11 under the Exchange Act provides that we may provide for a
subsequent offering period so long as, among other things, (i) the initial 20
business day period of the Offer has expired, (ii) we offer the same form and
amount of consideration for the shares tendered in the subsequent
16
offering period as in the initial Offer, (iii) we immediately accept and
promptly pay for all Shares tendered during the Offer prior to such expiration,
(iv) we announce the results of the Offer, including the approximate number and
percentage of Shares deposited in the Offer, no later than 9:00 a.m., New York
City time, on the next business day after the scheduled Expiration Date and
immediately begin the subsequent offering and (v) we immediately accept and
promptly pay for Shares as they are tendered during the subsequent offering. In
the event that we provide a subsequent offering, we will provide an announcement
to that effect by issuing a press release to a national news service no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
We will pay for all Shares validly tendered and not properly withdrawn
promptly following the acceptance of Shares for payment pursuant to our Offer.
Subject to the rules of the SEC and the terms and conditions of our Offer, we
also expressly reserve the right to delay payment for Shares in order to comply
in whole or in part with applicable law. Any delay will be effected in
compliance with Rule 14e-1(c) under the Exchange Act, which requires us to pay
the consideration offered or to return Shares deposited by or on behalf of
shareholders promptly after the termination or withdrawal of our Offer.
We will, as promptly as practicable, make a public announcement of any
extension, delay, termination, waiver or amendment. If we extend our Offer, we
will make the announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Subject to
applicable law (including Rules 14d-4(d), 14d-6(d) and 14e-1 under the Exchange
Act, which require that material changes be promptly disseminated to you in a
manner reasonably designed to inform you of changes) and without limiting the
manner in which we may choose to make any public announcement, we will have no
obligation to publish, advertise or otherwise communicate any public
announcement other than by issuing a press release to Business Wire.
If we make a material change in the terms of our Offer or the information
concerning our Offer, or if we waive a material condition of our Offer, we will
extend our Offer to the extent required by Rules 14d-4(d), 14d-6(d) and 14e-1
under the Exchange Act. If, before the scheduled Expiration Date, we decide to
increase the consideration being offered pursuant to our Offer, the increase in
the offered consideration will be applicable to all shareholders whose Shares
are accepted for payment pursuant to our Offer. If at the time notice of any
increase in the offered consideration is first published, sent or given, our
Offer is scheduled to expire at any time earlier than the period ending on the
tenth business day from and including the date that the notice is first so
published, sent or given, our Offer will be extended at least ten business days
after that notice.
For purposes of our Offer, a "business day" means any day other than a
Saturday, a Sunday or a day on which commercial banks in New York City are
permitted by law, rule or regulation to be closed.
DRAI has provided us with mailing labels, security position listings and any
available listing or computer file containing the names and addresses of all
record holders of the Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to the record holders whose names appeared on DRAI's
shareholder list on July 20, 2001 and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the shareholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
17
4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of our Offer (including, if our
Offer is extended or amended, the terms and conditions of any extension or
amendment), we will promptly accept for payment all Shares validly tendered
prior to the Expiration Date (and not properly withdrawn in accordance with "The
Tender Offer--Withdrawal Rights") after the occurrence of the Expiration Date.
Additionally, we will pay for all Shares validly tendered and not properly
withdrawn promptly following our acceptance of Shares pursuant to our Offer.
In all cases, we will pay for Shares validly tendered and accepted for
payment pursuant to our Offer only after timely receipt by our Depositary of
(1) the stock certificates evidencing Shares validly tendered and not properly
withdrawn or timely confirmation of a book-entry transfer of Shares into our
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in "The Tender Offer--Procedures
For Accepting Our Offer And Tendering Shares," (2) the Letter of Transmittal (or
a manually signed facsimile of the Letter of Transmittal), properly completed
and duly executed, with any required signature guarantees or an Agent's Message,
in connection with any book-entry transfer and (3) any other documents required
by the Letter of Transmittal. An "Agent's Message" is a message, transmitted by
the Book-Entry Transfer Facility to, and received by, our Depositary and forming
a part of the book-entry confirmation which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the participant in the
Book-Entry Transfer Facility tendering the Shares that are the subject of the
book-entry confirmation, that the participant has received and agrees to be
bound by the Letter of Transmittal and that we may enforce the agreement against
that participant.
For purposes of our Offer, we will be deemed to have purchased Shares that
have been validly tendered and not properly withdrawn if and when we give oral
or written notice to our Depositary of our acceptance for payment of Shares
pursuant to our Offer. Upon the terms and subject to the conditions of our
Offer, payment for the Shares will be made by depositing the aggregate purchase
price with our Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE FOR SHARES PURCHASED IN OUR OFFER OR CONVERTED INTO THE RIGHT TO
RECEIVE CASH IN THE MERGER, REGARDLESS OF ANY DELAY IN MAKING PAYMENT.
If we do not accept tendered Shares for payment for any reason pursuant to
the terms and conditions of our Offer, or if stock certificates are submitted
evidencing more Shares than are tendered, the stock certificates evidencing
Shares not purchased will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into our
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedure set forth in "The Tender Offer--Procedures For Accepting Our Offer And
Tendering Shares," the Shares will be credited to an account maintained at the
Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of our Offer.
We reserve the right to assign, in our sole discretion, any or all of our
rights, interests and obligations contained in the Merger Agreement to our
Parent or to any affiliate of our Parent, but any assignment will not relieve us
of our obligations under our Offer and will in no way prejudice your rights to
receive payment for Shares validly tendered and accepted for payment pursuant to
our Offer.
If you are a record holder of Shares and validly tender your Shares directly
to our Depositary, you will not be obligated to pay brokerage fees or
commissions or, except as provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to our purchase of Shares
pursuant to our Offer. Nonetheless, if you fail to complete and sign the
Substitute Form W-9, which is included in the Letter of Transmittal, you may be
subject to a required back-up U.S. federal income tax withholding certain
amounts of the gross proceeds payable to you. See "The Tender Offer--Material
Federal Income Tax Consequences."
18
5. PROCEDURES FOR ACCEPTING OUR OFFER AND TENDERING SHARES.
In order for you to validly tender Shares pursuant to our Offer, the Letter
of Transmittal (or a manually signed facsimile of the Letter of Transmittal),
properly completed and duly executed, together with any required signature
guarantees or, in the case of a book-entry transfer, an Agent's Message, and any
other documents required by the Letter of Transmittal, must be received by our
Depositary at its address set forth on the back cover of this Offer to Purchase
and either (1) the stock certificates evidencing Shares validly tendered and not
properly withdrawn must be received by our Depositary at its address or the
Shares must be tendered pursuant to the procedure for book-entry transfer
described below and a book-entry confirmation must be received by our Depositary
(including an Agent's Message if you did not deliver a Letter of Transmittal),
in each case prior to the Expiration Date, or (2) you must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF STOCK CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
YOUR OPTION AND RISK, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED BY OUR DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERTY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. Our Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of our Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of the Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing the Book-Entry
Transfer Facility to transfer Shares into the Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures. However, although
delivery of Shares may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal (or a manually signed facsimile of
the Letter of Transmittal), properly completed and duly executed, together with
any required signature guarantees, or an Agent's Message, and any other required
documents, must, in any case, be received by our Depositary at its address
and/or facsimile number, as applicable set forth on the back cover of this Offer
to Purchase prior to the Expiration Date, or you must comply with the guaranteed
delivery procedure described below. Delivery of documents to the Book-Entry
Transfer Facility does not constitute delivery to our Depositary. The
confirmation of a book-entry transfer of the Shares into the Depositary's
account at the Book-Entry Transfer Facility as described above is referred to as
a "Book-Entry Confirmation." Delivery of documents to a Book-Entry Transfer
Facility in accordance with the Book-Entry Transfer Facility's procedures does
not constitute delivery to the Depositary.
SIGNATURE GUARANTEES. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a member of the Security Transfer Agent Medallion
Signature Program, or by any other "eligible guarantor institution," as the term
is defined in Rule 17Ad-15 under the Exchange Act, unless (1) the Letter of
Transmittal is signed by a record holder of Shares (which, for purposes of this
Offer to Purchase, includes any participant in the Book-Entry Transfer
Facility's system whose name appears on a security position listing as the owner
of Shares) and such holder has not completed either the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" on the
Letter of Transmittal or (2) for the account of an eligible guarantor
institution. If a stock certificate is registered in the name of a person other
than the signer of the Letter of Transmittal, or if payment is to be made, or a
stock certificate not accepted for payment or not tendered is to be returned, to
a person other than the record holder(s), then the stock certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the record holder(s) appear on the stock certificate,
with the signature(s) on the stock certificate or stock powers guaranteed by an
eligible guarantor institution. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If you desire to tender Shares pursuant to our Offer
and the stock certificate(s) evidencing your Shares are not immediately
available, you cannot deliver your stock
19
certificate(s) and all other required documents to our Depositary prior to the
Expiration Date, or you cannot complete the procedure for delivery by book-entry
transfer on a timely basis, your Shares may still be validly tendered, provided
that all the following conditions are satisfied:
- the tender is made by or through an eligible guarantor institution;
- a properly completed and duly executed Notice of Guaranteed Delivery is
received prior to the Expiration Date by our Depositary; and
- the stock certificate(s) (or a book-entry confirmation) evidencing all
tendered Shares, in proper form for transfer, in each case together with
the Letter of Transmittal (or a manually signed facsimile of the Letter of
Transmittal), properly completed and duly executed, with any required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message, and any other documents required by the Letter of Transmittal are
received by our Depositary within three trading days after the date of
execution of the Notice of Guaranteed Delivery.
You may deliver your Notice of Guaranteed Delivery by hand, overnight
courier or mail or by telegram or facsimile transmission to our Depositary. Your
Notice of Guaranteed Delivery must include a guarantee by an eligible guarantor
institution in the form set forth in the Notice of Guaranteed Delivery.
In all cases, we will pay for Shares tendered and accepted pursuant to our
Offer only after timely receipt by our Depositary of the stock certificate(s)
evidencing Shares, or a book-entry confirmation of the delivery of Shares, and
the Letter of Transmittal (or a manually signed facsimile of the Letter of
Transmittal), properly completed and duly executed, with any required signature
guarantees or, in the case of a book-entry transfer, an Agent's Message, and any
other documents required by the Letter of Transmittal.
DETERMINATION OF VALIDITY. We will determine, in our sole discretion, all
questions as to the form of documents and the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares.
Our determination will be final and binding on all parties. We reserve the
absolute right to reject any and all tenders determined by us not to be in
proper form or the acceptance for payment of which may be unlawful. We also
reserve the absolute right to waive any condition of our Offer to the extent
permitted by applicable law and the Merger Agreement or any defect or
irregularity in the tender of any Shares of any particular shareholder, whether
or not similar defects or irregularities are waived in the case of other
shareholders. A TENDER OF SHARES WILL NOT HAVE BEEN VALIDLY MADE UNTIL ALL
DEFECTS AND IRREGULARITIES HAVE BEEN CURED OR WAIVED. NEITHER WE, OUR PARENT NOR
ANY OF OUR PARENT'S OR OUR RESPECTIVE AFFILIATES OR ASSIGNS, OUR DEPOSITARY OR
ANY OTHER PERSON WILL BE UNDER ANY DUTY TO GIVE NOTIFICATION OF ANY DEFECTS OR
IRREGULARITIES IN TENDERS OR INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY
NOTIFICATION. Our interpretation of the terms and conditions of our Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding.
If you tender your Shares pursuant to any of the procedures described above,
it will constitute your acceptance of the terms and conditions of our Offer, as
well as your representation and warranty to us that (1) you have the full power
and authority to tender, sell, assign and transfer the tendered Shares (and any
and all other Shares or other securities issued or issuable in respect of your
Shares), and (2) when we accept your Shares for payment, we will acquire good
and unencumbered title thereto, free and clear of all liens, restrictions,
pledges, charges, encumbrances or voting agreements and not subject to any
adverse claims.
OUR ACCEPTANCE OF YOUR SHARES PURSUANT TO ANY OF THE PROCEDURES DESCRIBED
ABOVE WILL CONSTITUTE A BINDING AGREEMENT BETWEEN YOU AND US UPON THE TERMS AND
SUBJECT TO THE CONDITIONS OF OUR OFFER.
20
APPOINTMENT AS PROXY. By executing the Letter of Transmittal, you
irrevocably appoint us and our designees as your agents, attorneys-in-fact and
proxies, each with full power of substitution, in the manner set forth in the
Letter of Transmittal, to the full extent of your rights with respect to the
Shares you tender and we accept for payment (and with respect to any and all
other Shares or other securities issued or issuable on or after July 25, 2001).
These powers of attorney and proxies will be considered irrevocable and coupled
with an interest in the tendered Shares. The appointment will be effective when,
and only to the extent that, we accept your Shares for payment. Upon our
acceptance for payment, all prior powers of attorney and proxies given by you
with respect to your Shares (and your other Shares and securities) will be
revoked, without further action, and no subsequent powers of attorney or proxies
may be given nor any subsequent written consent executed by you (and, if given
or executed, will not be deemed to be effective). Our designees will, with
respect to the Shares for which the appointment is effective, be empowered to
exercise all of your voting and other rights as they in their sole discretion
may deem proper at any annual or special meeting of DRAI's shareholders or any
adjournment or postponement of that meeting, by written consent in lieu of any
meeting, or otherwise. We reserve the right to require that, in order for Shares
to be deemed validly tendered, immediately upon our payment for the Shares, we
must be able to exercise full voting rights with respect to the Shares (and the
other Shares and securities).
6. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to our Offer are irrevocable except that
tendered Shares may be withdrawn at any time prior to the earlier of our
acceptance of such Shares and the Expiration Date (unless such Shares have been
tendered during a "subsequent offering period" provided in accordance with
Rule 14d-11 under the Exchange Act). If we extend our Offer, are delayed in our
acceptance for payment of Shares or are unable to accept Shares for payment
pursuant to our Offer for any reason, then, without prejudice to our rights
under our Offer, our Depositary may, nevertheless, on our behalf, retain
tendered Shares, and those Shares may not be withdrawn except to the extent that
tendering shareholders are entitled to withdrawal rights as described in this
Section 6. Any delay will be by an extension of our Offer to the extent required
by law.
We have agreed with DRAI to extend our Offer beyond the initial Expiration
Date for up to thirty business days, if any of the conditions to our Offer are
not satisfied or waived, until that condition is satisfied or waived (except
that the Minimum Condition may not be waived).
If at the Expiration Date, the conditions of the Offer have been satisfied
or waived, we may accept for payment all Shares validly tendered and not
properly withdrawn and provide for subsequent offering periods, under
Rule 14d-11 under the Exchange Act, of not more than twenty business days, in
the aggregate, in an effort to acquire at least 90% of the outstanding Shares.
If we acquire less than 90% of the outstanding Shares following the Expiration
Date of the Offer, we intend to elect to provide one or more subsequent
offerings. Pursuant to Rule 14d-7 under the Exchange Act, no withdrawal rights
apply to Shares tendered during a subsequent offering period and no withdrawal
rights apply during a subsequent offering period with respect to Shares tendered
in the Offer and accepted for payment. The same consideration will be paid to
shareholders tendering Shares in the initial Offer or in a subsequent offering
period, if one is provided. Under no circumstances will interest be paid on the
purchase price for tendered Shares, whether or not our Offer is extended.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by our Depositary at one of its addresses
set forth on the back cover page of this Offer to Purchase. If you tendered
Shares by giving instructions to a broker or bank, you must instruct the broker
or bank to arrange for the withdrawal of your Shares. Any notice of withdrawal
must specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the record holder of the
Shares, if different from that of the person who tendered the Shares. If stock
certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to our Depositary, then, prior to the physical release of the stock
certificates, the serial
21
numbers shown on the stock certificates must be submitted to our Depositary and
the signature(s) on the notice of withdrawal must be guaranteed by an eligible
guarantor institution, unless the Shares have been tendered for the account of
an eligible guarantor institution. If Shares have been tendered pursuant to the
procedure for book-entry transfer, as set forth in "The Tender Offer--Procedures
For Accepting Our Offer And Tendering Shares," any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Shares.
WE WILL DETERMINE, IN OUR SOLE DISCRETION, ALL QUESTIONS AS TO THE FORM AND
VALIDITY (INCLUDING TIME OF RECEIPT) OF ANY NOTICE OF WITHDRAWAL. OUR
DETERMINATION WILL BE FINAL AND BINDING. NEITHER WE, OUR PARENT, NOR ANY OF OUR
PARENT'S OR OUR RESPECTIVE AFFILIATES OR ASSIGNS, OUR DEPOSITARY, OR ANY OTHER
PERSON WILL BE UNDER ANY DUTY TO GIVE ANY NOTIFICATION OF ANY DEFECTS OR
IRREGULARITIES IN ANY NOTICE OF WITHDRAWAL OR INCUR ANY LIABILITY FOR FAILURE TO
GIVE ANY NOTIFICATION.
Withdrawals of Shares may not be rescinded. If you have properly withdrawn
Shares they will be deemed not to have been validly tendered for purposes of our
Offer. However, withdrawn Shares may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described in "The Tender
Offer--Procedures For Accepting Our Offer And Tendering Shares."
7. MATERIAL FEDERAL INCOME TAX CONSEQUENCES.
The summary of tax consequences below is for general information and the
treatment of each shareholder will depend upon such shareholder's particular
situation. The foregoing discussion applies only to holders of Shares who held
their shares as capital assets, and may not apply to (1) Shares received
pursuant to the exercise of employee stock options or otherwise as compensation,
(2) holders of Shares who are not citizens or residents of the United States of
America, (3) holders who hold their Shares as part of an integrated investment
(including a "straddle"), or (4) holders who are subject to special rules, like
financial institutions or insurance companies. All shareholders should consult
with their tax advisors as to the particular tax consequences of our Offer and
the Merger to them, including the effect of the alternative minimum tax and any
state, local, or foreign income and other tax laws or other changes in such tax
laws.
The receipt of cash pursuant to the Offer and the receipt of cash pursuant
to the Merger will be a taxable transaction for United States federal income tax
purposes under the Internal Revenue Code of 1986, as amended, and may also be a
taxable transaction under applicable state, local or foreign income tax laws.
Generally, for U.S. federal income tax purposes, if Shares are accepted for
payment a tendering shareholder or, if the Merger occurs, all shareholders, will
recognize gain or loss equal to the difference, if any, between the amount of
cash received by the shareholder pursuant to the Offer or Merger, as applicable,
and the aggregate tax basis in the Shares tendered by the shareholder and
purchased pursuant to the Offer or converted into the right to receive cash in
the Merger. Gain or loss will be calculated separately for each block of shares
and rights tendered and purchased pursuant to the Offer or converted into the
right to receive cash in the Merger. Gain or loss recognized by the Shareholder
will be capital gain or loss (assuming the Shares are held as capital assets)
and will be long-term capital gain or loss if the holder's held the Shares for
more than 12 months. In the case of a non-corporate shareholder, long-term
capital gains will be eligible for a maximum United States federal income tax
rate of 20%. In addition, the ability to use capital losses to offset gains is
limited.
A Dissenting Shareholder who exchanges all of his, her or its Shares for
cash in connection with his, her or its demand for payment of the fair value of
his, her or its Shares in accordance with and subject to applicable Missouri law
will generally recognize capital gain or loss in an amount equal to the
difference between the amount of cash received and the shareholder's aggregate
tax basis in the Shares surrendered.
22
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" unless a shareholder who holds Shares (1) provides a
correct taxpayer identification number (which for an individual shareholder, is
the shareholder's social security number) and any other required information, or
(2) is a corporation, or comes within certain other exempt categories and, when
required, demonstrates this fact, and otherwise complies with applicable
requirements of the backup withholding rules. A shareholder that does not
provide a correct taxpayer identification number may be subject to penalties
imposed by the Internal Revenue Service.
If backup withholding applies to a Shareholder, the Depositary is required
to withhold amounts from payments to such Shareholder. Backup withholding is not
an additional tax. Rather, the amount of backup withholding can be credited
against the federal income tax liability of the persons subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in any overpayment of tax, a refund can be obtained
by the Shareholder upon filing a federal income tax return.
8. PRICE RANGE OF DRAI'S COMMON STOCK.
According to DRAI's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2001 (the "DRAI 10-Q") and information supplied by DRAI, the DRAI
shares were approved for quotation on the Nasdaq National Market under the
symbol "DRAI" on July 1, 1992.
According to the DRAI 10-Q, DRAI paid an annual cash dividend on its Shares
of $0.12 per Share on each of January 25, 2001 and January 25, 2000. DRAI agreed
in the Merger Agreement that, without the prior written consent of us and our
Parent, it will not declare, set aside or pay any dividend or other distribution
on any shares of capital stock of DRAI.
The following table sets forth the high and low sales prices per Share on
the Nasdaq National Market for the periods indicated, as reported in published
financial sources.
PERIOD HIGH LOW
- ------ -------- --------
3rd Quarter, 2001 (through July 24, 2001)................. $10.550 $ 7.46
2nd Quarter, 2001 (ending June 30, 2001).................. $10.800 $ 5.870
1st Quarter, 2001 (ending March 31, 2001)................. $ 7.500 $ 6.000
4th Quarter, 2000 (ending December 31, 2000).............. $ 6.625 $ 4.625
3rd Quarter, 2000 (ending September 30, 2000)............. $ 8.250 $ 5.000
2nd Quarter, 2000 (ending June 30, 2000).................. $ 7.859 $ 4.625
1st Quarter, 2000 (ending March 31, 2000)................. $ 9.750 $ 5.125
4th Quarter, 1999 (ending December 31, 1999).............. $10.500 $ 6.750
3rd Quarter, 1999 (ending September 30, 1999)............. $10.875 $ 8.375
2nd Quarter, 1999 (ending June 30, 1999).................. $12.500 $ 7.125
1st Quarter, 1999 (ending March 31, 1999)................. $14.625 $12.500
On May 16, 2001, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the closing sale price
per Share on the Nasdaq National Market was $5.91. On July 24, 2001, the last
full trading day before the commencement of this Offer to Purchase, the closing
sale price per Share on the Nasdaq National Market was $10.25. YOU ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
9. POSSIBLE EFFECTS OF OUR OFFER ON THE MARKET FOR THE SHARES; NASDAQ LISTING;
MARGIN REGULATIONS AND EXCHANGE ACT REGISTRATION.
POSSIBLE EFFECTS OF OUR OFFER ON THE MARKET FOR SHARES OF DRAI. Our
purchase of Shares pursuant to our Offer will reduce the number of Shares that
might otherwise trade publicly and will reduce the number of holders of Shares,
which could adversely affect the liquidity and market value of the remaining
Shares held by the public.
23
NASDAQ LISTING. Depending upon the number of Shares purchased pursuant to
our Offer, DRAI's common stock may no longer meet the standards for continued
quotation by the Nasdaq National Market. According to Nasdaq's published
guidelines, the Shares would not be eligible for quotation if, among other
things, the number of Shares that are not held directly or indirectly by any
officer or director of DRAI and by any other person who is the beneficial owner
of more than 10% of the total Shares outstanding is less than 750,000, or the
number of holders of at least 100 Shares falls below 400. If, as a result of the
purchase of Shares pursuant to our Offer, the Merger, the Merger Agreement or
otherwise, the Shares no longer meet the requirements of the Nasdaq National
Market for continued quotation, the quotation of the Shares will be
discontinued. If that happens, the market for the Shares would be adversely
affected. If the Shares are no longer eligible for listing on the Nasdaq
National Market, quotations might still be available from other sources. The
extent of the public market for the Shares and the availability of quotations
would, however, depend upon the number of shareholders remaining at the time,
the interest in maintaining a market in the Shares on the part of securities
firms, the possible termination of registration of the Shares under the Exchange
Act as described below and other factors. Assuming we acquire the requisite
number of Shares to effect the eligibility of the Shares for quotation, we
intend to cause the Shares to cease to be quoted by Nasdaq following
consummation of our Offer.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. If DRAI has less than 300 record holders, DRAI may, upon
application to the SEC, terminate that registration under the Exchange Act. The
termination of the registration of DRAI's common stock under the Exchange Act
would substantially reduce the information required to be furnished by DRAI to
holders of Shares and to the SEC and would make provisions of the Exchange Act,
like the short-swing profit recovery provisions of Section 16(b) of the Exchange
Act, the requirement of furnishing a proxy statement in connection with
shareholders' meetings pursuant to Section 14(a) or 14(c) of the Exchange Act
and the related requirements of an annual report, and the requirements of
Rule 13e-3 under the Exchange Act with respect to "going private" transactions,
no longer applicable to DRAI's common stock. In addition, once DRAI ceases to
make its public filings, affiliates of DRAI and persons holding "restricted
securities" of DRAI may have difficulty selling their Shares pursuant to
Rule 144 promulgated under the Securities Act. We currently intend to seek to
cause DRAI to terminate the registration of DRAI's common stock under the
Exchange Act as soon after consummation of our Offer as the requirements for
termination of registration are met.
MARGIN REGULATIONS. The Shares are currently "margin securities," as
defined under the rules of the Board of Governors of the Federal Reserve System,
which has the effect, among other things, of allowing brokers to extend credit
on Shares used as collateral. Depending upon factors similar to those described
above regarding listing and market quotations, following our Offer it is
possible that the Shares might no longer constitute "margin securities" for
purposes of the margin regulations of the Board of Governors of the Federal
Reserve Board, with the effect that Shares could no longer be used as collateral
for loans made by brokers. In addition, if we terminate registration of the
Shares under the Exchange Act, the Shares would no longer constitute "margin
securities."
10. INFORMATION CONCERNING DRAI.
Except as otherwise set forth in this Offer to Purchase, all of the
information concerning DRAI contained in this Offer to Purchase, including
financial information, has been furnished by DRAI or has been taken from or
based upon publicly available documents and records on file with the SEC and
other public sources. None of us, our Parent or SIRSI Corporation assumes any
responsibility for the accuracy or completeness of the information concerning
DRAI furnished by DRAI or contained in those documents and records or for any
failure by DRAI to disclose events which may have occurred or may affect the
significance or accuracy of any of that information but which are unknown to us,
our Parent or SIRSI Corporation.
24
GENERAL. DRAI, headquartered in St. Louis, Missouri, is a leading systems
integrator for libraries and other information providers. It offers its own
propriety information services software; third-party software and hardware;
Internet, Web and other networking services; as well as other related support
services. DRAI provides a selection of automation systems, one of which, Taos,
it began distributing commercially in 1999 (now operational in North America,
South America and Europe). DRAI's software packages are adaptable for use in
academic, public, school, and special libraries ranging from single libraries to
large, multi-branch systems and consortia. Over 2,400 libraries in the United
States, Canada, Europe, South America, and the Pacific Rim have installed DRAI's
systems.
DRAI's principal executive offices are located at 1276 North Warson Road,
P.O. Box 8495, St. Louis, MO 63132-1806, and its telephone number is
(314) 432-1100.
Set forth below is certain selected consolidated financial information with
respect to DRAI and its subsidiaries excerpted from DRAI's Form 10-K for the
fiscal year ended September 30, 2001 (the "DRAI 10-K"), from DRAI's unaudited
interim consolidated financial statements contained in the DRAI 10-Q and from a
Press Release filed as an exhibit to DRAI's Schedule 14d-9-C dated July 19, 2001
(the "Press Release"). More comprehensive financial information is included in
the DRAI 10-K, the DRAI 10-Q and other reports and documents filed by DRAI with
the SEC; the following summary is qualified in its entirety by reference to the
DRAI 10-K, the DRAI 10-Q, the Press Release and such other reports and documents
and all the financial information (including any related notes) contained
therein. The DRAI 10-K, the DRAI 10-Q, the Press Release and such other reports
and documents should be available for inspection and copies thereof should be
obtainable in the manner set forth under "--Available Information" below.
DATA RESEARCH ASSOCIATES, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
NINE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 MARCH 31 YEAR ENDED SEPTEMBER 30,
------------------- ------------------- ------------------------------
2001 2000 2001 2000 2000 1999 1998
-------- -------- -------- -------- -------- -------- --------
INCOME STATEMENT DATA:
Total Net Sales.............. $19,534 $20,422 $12,906 $13,423 $28,268 $29,994 $32,545
Total Cost of Sales.......... * * 4,039 4,082 8,639 8,996 9,703
Gross Profit................. * * 8,867 9,341 19,629 20,998 22,842
Operating Expenses........... * * 9,116 9,193 17,730 18,417 18,368
Income from Operations....... * * (249) 148 1,899 2,581 4,474
Income before Income Taxes... 613 1,497 411 754 2,797 3,415 5,483
Net Income................... 134 1,022 4 515 1,907 2,333 3,700
EARNINGS PER SHARE:
Basic........................ 0.03 0.21 -- 0.11 0.40 0.45 0.68
Diluted...................... 0.03 0.21 -- 0.11 0.40 0.45 0.67
BALANCE SHEET DATA (AT PERIOD
END):
Total Current Assets......... * * 25,525 23,569 27,285 26,122 29,159
Total Current Liabilities.... * * 7,871 6,397 8,421 7,255 7,206
Total Shareholders' Equity... * * 26,390 26,548 27,952 28,705 31,505
Total Liability and
Shareholders' Equity....... * * $36,033 $35,087 $38,313 $37,970 $40,730
- ------------------------
* Information was not provided in the Press Release.
25
AVAILABLE INFORMATION. DRAI is subject to the information and reporting
requirements of the Exchange Act and in accordance therewith is obligated to
file reports and other information with the SEC relating to its business,
financial condition and other matters. Information, as of particular dates,
concerning DRAI's directors and officers, their remuneration, stock options
granted to them, the principal holders of DRAI's securities, any material
interests of such persons in transactions with DRAI and other matters is
required to be disclosed in proxy statements distributed to DRAI's shareholders
and filed with the SEC. Those reports, proxy statements and other information
should be available for inspection at the public reference room at the SEC's
office 450 Fifth Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C., and
also should be available for inspection and copying at the following regional
offices of the SEC: 7 World Trade Center, Suite 1300, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies may be obtained by mail, upon payment of the SEC's customary
charges, by writing to its principal office at 450 Fifth Street, N.W., Room
1024, Judiciary Plaza, Washington, D.C. 20549. Further information on the
operation of the SEC's Public Reference Room in Washington, D.C. can be obtained
by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet
worldwide web site that contains reports, proxy statements and other information
about issuers, such as DRAI, who file electronically with the SEC. The address
of that site is http://www.sec.gov.
11. INFORMATION CONCERNING US, OUR PARENT AND SIRSI CORPORATION.
PURCHASER. We are a newly formed Delaware corporation which is wholly owned
by SIRSI Corporation. To date, we have engaged in no activities other than those
incident to our formation and our Offer and the Merger. Until immediately prior
to the time that we purchase Shares pursuant to our Offer, it is not anticipated
that we will have any significant assets or liabilities or engage in activities
other than those incident to our formation and capitalization and the
transactions contemplated by our Offer and the Merger.
PARENT. Our Parent is a Delaware corporation which was formed on
August 26, 1999. Our Parent's principal business is as the sole shareholder of
SIRSI Corporation.
SIRSI CORPORATION. SIRSI Corporation is a Delaware corporation which was
formed on August 26, 1999. SIRSI Corporation is wholly owned by our Parent and
its principal business is providing software and services for libraries around
the globe. SIRSI Corporation's technology is used for creating electronic
libraries and digital media archives, as well as for the complete automation of
library operations. Services include system installation, data conversion,
training support, consulting and Web services for libraries.
Information concerning our directors and executive officers and the
directors and executive officers of our Parent and SIRSI Corporation can be
found in Schedule I.
Except as described in this Offer to Purchase, none of us, our Parent or
SIRSI Corporation nor, to the best of our, our Parent's and SIRSI Corporation's
knowledge, any of our, our Parent's or SIRSI Corporation's directors or
executive officers or any of the individuals or entities described below under
the heading "--Controlling Persons" has during the last five years (1) been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (2) been a party to any judicial or administrative proceeding
(except for matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state securities
laws or a finding of any violation of such laws. Each such individual or entity
is a citizen of the United States unless otherwise noted.
CONTROLLING PERSONS. The following sets forth information as to the
principal shareholders of our Parent and any of their general partners,
executive officers, directors and certain related persons:
26
CEA Capital Partners USA, L.P. ("CEA"), a Delaware limited partnership, and
CEA Capital Partners USA CI, L.P. ("CEA CI") collectively own shares of capital
stock of Parent representing a majority of the outstanding shares entitled to
vote generally in the election of directors. Each of CEA and CEA CI is
principally engaged in the business of investing in securities.
The general partner of each of CEA and CEA CI is CEA Capital Investment
Partners, L.P. ("CEA IP"), a Delaware limited partnership which is principally
engaged in the business of serving as managing general partner of CEA and CEA
CI.
The principal business address of CEA and of CEA IP is c/o Seaport
Associates, LLC, 199 Water Street, 20th Floor, New York, NY 10038. The principal
business address of CEA CI is c/o W.S. Walker & Company, First Floor, Caledonian
House, Mary Street, P.O. Box 265G, George Town, Grand Cayman, Cayman Islands.
The general partner of CEA IP is CEA Global Partners, LLC, a Delaware
limited liability company. The sole member of CEA Global Partners, LLC is CEA
Private Equity, L.P., a Delaware limited partnership. The principal address of
each of CEA Global Partners, LLC and CEA Private Equity, L.P. is c/o
Communications Equity Associates, LLC, 101 East Kennedy Blvd., Suite 3300,
Tampa, Florida 33602.
The general partner of CEA Private Equity, L.P. is CEA Capital Corp. ("CEA
CAP"), a Florida corporation.
The directors of CEA CAP are J. Patrick Michaels, Jr., Kamal Bahamdan, Alex
Vahabzadeh, David A. Burns, Harold D. Ewen and H. Gene Gawthrop. Kamal Bahamdan
is a citizen of Saudi Arabia. The executive officers of CEA CAP are David A.
Burns, H. Gene Gawthrop, Thomas W. Cardy and Brad A. Gordon. The principal
occupation of each of the directors and executive officers of CEA CAP is as
investment professionals for Communications Equity Associates. The principal
business address of CEA CAP and of each of its directors and executive officers
is c/o Communications Equity Associates, LLC, 101 East Kennedy Blvd., Suite
3300, Tampa, Florida 33602. CEA CAP is wholly owned by J. Patrick Michaels.
CURRENT OWNERSHIP OF SHARES. We, our Parent and SIRSI Corporation may be
deemed to beneficially own, by virtue of the Support Agreement, 2,569,897
Shares. We, our Parent, SIRSI Corporation and each of our affiliates disclaim
such beneficial ownership. Except as described in this Offer to Purchase,
neither we nor our Parent nor, to the best of our, our Parent's and SIRSI
Corporation's knowledge, any of the persons or entities referred to above nor
any director, executive officer or subsidiary of any of these listed persons has
effected any transactions in Shares during the past 60 days.
PAST CONTACTS. Except as provided in the Merger Agreement, the Support
Agreement and the Employment Agreement and as otherwise described in this Offer
to Purchase, none of us, our Parent or SIRSI Corporation nor, to the best of
our, our Parent's and SIRSI Corporation's knowledge, any of our, our Parent's or
SIRSI Corporation's directors or executive officers, has any agreement,
arrangement, understanding, whether or not legally enforceable, with any other
person with respect to any securities of DRAI, including, but not limited to,
the transfer or voting of such securities, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss or the
giving or withholding of proxies, consents or authorizations.
Except as set forth in this Offer to Purchase, none of us, our Parent or
SIRSI Corporation nor, to the best of our, our Parent's and SIRSI Corporation's
knowledge, any of our, our Parent's or SIRSI Corporation's directors or
executive officers, has had any transaction with DRAI or any of its executive
officers, directors or affiliates that is required to be reported under the
rules and regulations of the SEC.
27
Except as described in this Offer to Purchase, there have been no other
negotiations, transactions or material contacts between us, our Parent, SIRSI
Corporation or any of our, our Parent's or SIRSI Corporation's affiliates or, to
the best of our, our Parent's and SIRSI Corporation's knowledge, any of our, our
Parent's or SIRSI Corporation's directors or executive officers, on the one
hand, and DRAI or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer for or other acquisition of any class
of DRAI's securities, an election of DRAI's directors or a sale or other
transfer of a material amount of assets of DRAI. Please see "The Tender
Offer--Background Of Our Offer; Contacts with DRAI, Negotiations and Agreements"
for a description of the past contacts between us, our Parent, SIRSI Corporation
or any of our, our Parent's or SIRSI Corporation's affiliates on the one hand
and DRAI or its affiliates on the other hand.
12. SOURCE AND AMOUNT OF FUNDS.
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF LOANS THAT OUR PARENT
EXPECTS TO RECEIVE FROM ITS SHAREHOLDERS AND PATRICK SOMMERS, A BRIDGE LOAN OUR
PARENT MAY RECEIVE FROM DRAI AND A COMMITMENT LETTER. THIS SUMMARY IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FORM OF SHAREHOLDER NOTE FOR THE SHAREHOLDER
LOANS, THE FORM OF SUBORDINATED NOTE FOR THE BRIDGE LOAN AND THE COMMITMENT
LETTER, WHICH WE INCORPORATE BY REFERENCE, AND HAVE BEEN FILED AS EXHIBITS TO
THE TENDER OFFER STATEMENT ON SCHEDULE TO, (THE "SCHEDULE TO") FILED WITH THE
SEC BY US, OUR PARENT AND SIRSI CORPORATION IN CONNECTION WITH OUR OFFER. THE
FORM OF SHAREHOLDER NOTE FOR THE SHAREHOLDER LOANS, THE FORM OF SUBORDINATED
NOTE FOR THE BRIDGE LOAN AND THE COMMITMENT LETTER MAY BE EXAMINED AND COPIES
MAY BE OBTAINED AT THE PLACES SET FORTH IN "THE TENDER OFFER--INFORMATION
CONCERNING DRAI" OR DOWNLOADED AT HTTP://WWW.SEC.GOV. DEFINED TERMS USED IN THIS
DISCUSSION AND NOT DEFINED HAVE THE MEANINGS GIVEN TO THOSE TERMS IN THE
COMMITMENT LETTER.
The total amount of funds required to purchase all of the outstanding Shares
and to purchase and cancel all of the outstanding and exercisable options and
warrants pursuant to the Offer and the Merger and to pay related fees and
expenses, including the total amount of funds required by SIRSI Corporation to
repurchase or refinance SIRSI Corporation's outstanding indebtedness, is
expected to be approximately $65 million. Our Offer is not conditioned upon our
obtaining financing; however, our liability and the liability of our Parent to
DRAI is limited to $1 million plus reimbursement of reasonable out-of-pocket
expenses if we fail to consummate the Offer solely because we do not receive the
requisite debt financing.
We expect to obtain all necessary funds to purchase the Shares from a
combination of (1) up to approximately $6.9 million from an equity contribution
from SIRSI Corporation, (2) a new $45 million credit facility established by
SIRSI Corporation, including approximately $10.7 million to be used to refinance
SIRSI Corporation's existing indebtedness and (3) approximately $18.2 million of
the amount of DRAI's cash expected to be on hand at the expiration of this offer
after DRAI pays its transaction expenses. To support our Parent in advance of
finalizing the documentation for such financing, BNP Paribas has provided SIRSI
Corporation with a commitment letter with respect to the proposed credit
facility. We do not have any alternative to the proposed financing.
SIRSI Corporation expects to obtain the funds for its equity contribution
from its cash on hand and an equity contribution from our Parent in an amount of
up to $3.2 million. Our Parent expects to obtain the funds for its equity
contribution from subordinated loans and equity investments from our Parent's
shareholders and Mr. Sommers in an amount of up to $1 million and $2.2 million,
respectively (such investments, the "Shareholder Investments"). We expect that
the subordinated loans to our Parent (1) will be unsecured, (2) will be
subordinated to all of SIRSI Corporation's and our Parent's senior indebtedness
and to all of our senior indebtedness, including the Senior Bank Financing (as
defined below), (3) will accrue interest at the rate of 5% per annum until
March 14, 2004 and at 7% per annum thereafter, which will be payable quarterly
and (4) will require the principal to be repaid in three equal installments on
the sixth, seventh and eighth anniversary of the issue date.
28
The funds from DRAI will be provided pursuant to an unsecured bridge loan
(the "Bridge Loan") to our Parent. The proceeds from the Bridge Loan will be
used to make a contribution to SIRSI Corporation, which will use the proceeds to
make an equity contribution to us. The Bridge Loan (1) will be unsecured,
(2) will be subordinated to all of SIRSI Corporation's and our Parent's senior
indebtedness and to all of our senior indebtedness, including the Senior Bank
Financing, (3) will accrue interest at the rate as is applicable to loans made
under the Term Loan Facility (as defined below) at the closing thereof and
(4) will be required to be repaid, together with accrued interest, at the
earlier of the closing of the Merger and the six month anniversary of the issue
date. If we acquire at least 90% of the outstanding Shares pursuant to the
Offer, we will cause the Merger to become effective promptly upon the acceptance
and payment for the Shares. In such case, there will not be a Bridge Loan, but
DRAI, as the surviving corporation, will use its cash on hand to pay for Shares
purchased in the Offer and converted in the Merger into the right to receive
cash.
Pursuant to a commitment letter dated July 24, 2001 (the "Commitment
Letter"), BNP Paribas has committed to lend up to $45 million aggregate
principal amount to SIRSI Corporation, consisting of a $37 million term loan
facility (the "Term Loan Facility") and an $8 million revolving credit facility
(the "Revolving Credit Facility," and together with the Term Loan Facility, the
"Senior Bank Financing"). BNP Paribas informed SIRSI Corporation that it intends
to syndicate the Senior Bank Financing to various lenders, but has committed,
subject to the terms and conditions set forth herein and in the Commitment
Letter, to finance the entire $45 million commitment amount. BNP Paribas
reserved the right, after consultation with SIRSI Corporation, to change the
terms, conditions, pricing, fees and structure of the Senior Bank Financing
described below if BNP Paribas reasonably determines that such changes are
required to ensure the successful syndication of the Senior Bank Financing,
including by substituting subordinated indebtedness for a portion of the Senior
Bank Financing (at a higher rate of interest) and by allowing potential lenders
the opportunity to coinvest up to an aggregate of $500,000 in equity of our
Parent on the same terms as the equity portion of the Shareholder Investments.
However, BNP Paribas has agreed that any such changes will not increase the
interest rate on the Senior Bank Financing by more than one hundred basis
points, increase the fees payable in connection with the Senior Bank Financing
beyond certain limits, shorten the weighted average maturity of the Senior Bank
Financing or decrease the amount of the Senior Bank Financing by substituting
subordinated indebtedness in an amount (the "Incremental Subdebt Amount") such
that the resulting ratio of SIRSI Corporation's consolidated funded senior debt
to consolidated earnings before interest, taxes, depreciation and amortization
is less than 2.50 to 1.00, or in the event that an additional identified lender
has committed to provide at least $15.0 million of the Senior Bank Financing, an
amount not to exceed the lesser of the Incremental Subdebt Amount and
$5.0 million.
USE OF PROCEEDS. Borrowings under the Term Loan Facility may be used by us
to finance the purchase of Shares pursuant to the Offer, to pay the fees and
expenses incurred in connection with the Offer and to refinance outstanding
loans.
The Revolving Credit Facility may be used by SIRSI Corporation and DRAI, as
the surviving corporation for working capital requirements, to finance certain
acquisitions and for other general corporate purposes (including refinancing
certain existing indebtedness). Amounts may also be borrowed from the Revolving
Credit Facility for the purchase of Shares pursuant to the Offer or for the
payment of fees and expenses in connection therewith. However, SIRSI Corporation
will not be allowed to borrow under the Revolving Credit Facility for such
purpose to the extent that the aggregate Senior Bank Financing would exceed 3.30
multiplied by SIRSI Corporation's consolidated pro forma earnings before
interest, taxes, depreciation and amortization. Loans under the Term Loan
Facility may not be reborrowed once repaid. Loans under the Revolving Credit
Facility may be borrowed, repaid and reborrowed after the Effective Time.
MATURITY; AMORTIZATION. The maturity date of the Senior Bank Financing will
be December 31, 2006, and any outstanding balance on the Revolving Credit
Facility will be payable on the maturity date. The Term Loan Facility will be
subject to quarterly amortization payments commencing on December 31, 2001. Such
payments for each quarter will be $800,000 on December 31, 2001 and
$1.15 million in 2002, $1.7 million in 2003, $1.95 million in 2004, $2.05
million in 2005 and $2.2 million in 2006.
29
INTEREST. SIRSI Corporation may elect that the loans under the Senior Bank
Financing bear interest at a rate per annum equal to (1) the higher of (A) 1/2
of 1% in excess of the Federal Funds Rate and (B) the rate that Chase Manhattan
Bank, N.A. announces from time to time as its prime lending rate, as in effect
from time to time or (2) the London Inter-Bank Offering Rate ("LIBOR"), in each
case, plus a margin which will vary between 1.25% and 3.50% per annum, which
margin will be subject to step-downs based on a ratio of debt to consolidated
earnings before interest, taxes, depreciation and amortization; provided that
the applicable margin will be at the highest level until the delivery by SIRSI
Corporation of a compliance certificate for the nine months following the
Effective Time.
GUARANTIES; SECURITY. The Senior Bank Financing will be secured by a first
priority perfected security interest in substantially all tangible and
intangible assets of SIRSI Corporation. In addition, it will be secured by a
pledge of the Shares purchased pursuant to the Offer and Parent will
unconditionally guarantee all amounts owing in respect of the Senior Bank
Financing and pledge its assets to secure the guaranty. After the Effective
Time, DRAI, as the surviving corporation, will unconditionally guarantee all
amounts owing in respect of the Senior Bank Financing, and the lenders will be
entitled to a first priority perfected security interest in substantially all
tangible and intangible assets of DRAI, as the surviving corporation.
REPAYMENTS. Voluntary prepayment and commitment reductions may be made at
any time without premium or penalty, subject to minimum notice and minimum
prepayment or reduction requirements, as the case may be (subject to certain
exceptions in respect of LIBOR based loans). Mandatory repayments of loans under
the Term Loan Facility (and after repaid in full, permanent reductions to the
Revolving Credit Facility) will be required from (1) 100% of the net cash
proceeds from asset sales by Parent and its subsidiaries (other than certain
ordinary course of business sales and dispositions), (2) 100% of the net cash
proceeds from issuances of debt and equity, (3) 75% (reduced to 50% if the ratio
of senior debt to consolidated earnings before interest, taxes, depreciation and
amortization is less than 2.00 to 1) of annual excess cash flow and (4) 100% of
certain insurance proceeds. Such mandatory repayments will be subject to
exceptions and reinvestment rights consistent with those in SIRSI Corporation's
existing credit agreement.
CONDITIONS; REPRESENTATIONS AND WARRANTIES; COVENANTS; EVENTS OF
DEFAULT. The credit agreement relating to the Senior Bank Financing will
contain events of default and covenants comparable to those of SIRSI
Corporation's existing credit facility. The commitment by BNP Paribas to provide
the Senior Bank Financing is dependent upon the satisfaction of customary and
other closing conditions, including, without limitation, the following:
- the negotiation and execution of the agreements called for by the Senior
Bank Financing;
- the absence of any material adverse change to the business, operations,
liabilities, condition or prospects of our Parent or DRAI and their
respective subsidiaries, taken as a whole (a "Material Adverse Effect");
- the absence of any material adverse change in the financial, banking or
capital markets that, in BNP Paribas' reasonable judgment would materially
and adversely affect the syndication of the Senior Bank Financing;
- the absence of any pending, or threatened, litigation which BNP Paribas
determines would be reasonably likely to have a Material Adverse Effect;
- compliance in all material respects with all applicable laws and
regulations;
- adequate insurance coverage of SIRSI Corporation, DRAI, us and our Parent
(collectively, "Credit Parties");
- receipt by our Parent of up to $3.2 million in Shareholder Investments and
BNP Paribas' satisfaction with their terms;
- the satisfaction of BNP Paribas with any amendments to existing
subordinated debt obligations of the Credit Parties;
30
- the satisfaction of BNP Paribas with any terms which may arise in
connection with the transactions contemplated by the Merger Agreement
other than those terms which have been established by the Merger Agreement
and the Support Agreement as of July 24, 2001;
- the agreement of DRAI to lend to our Parent, on a subordinated basis from
its cash on hand (after giving effect to the payment of DRAI's transaction
expenses), any funds required to supplement the Credit Facility prior to
the Effective Time of the Merger pursuant to the Bridge Loan and that all
proceeds of the Shareholder Investments (subject to reduction if there are
sufficient funds available assuming SIRSI Corporation borrows under the
Senior Bank Financing an amount equal to 3.30 multiplied by SIRSI
Corporation's consolidated pro forma earnings before interest, taxes,
depreciation and amortization) and the Bridge Loan shall have been used to
purchase Shares pursuant to the Offer before the Senior Bank Financing is
drawn for such purpose;
- at the time of the execution of the agreements establishing the Credit
Facility, there will be between SIRSI Corporation and DRAI aggregate cash
on hand in an amount acceptable to BNP Paribas; and
- BNP Paribas' satisfaction that SIRSI Corporation's consolidated pro forma
ratio of debt (excluding the Bridge Loan, existing subordinated debt of
SIRSI Corporation and the debt portion of the Shareholder Investments) to
earnings, before interest, taxes, depreciation and amortization, shall not
exceed 3.30 to 1.00.
INDEMNIFICATION; EXPENSES; FEES. In connection with the Commitment Letter,
SIRSI Corporation agreed to indemnify BNP Paribas, the lenders and certain of
their related persons against certain liabilities, and to reimburse BNP Paribas
and its affiliates for all of BNP Paribas' reasonable fees and expenses arising
in connection with the financing documentation and due diligence. SIRSI
Corporation agreed to pay to BNP Paribas financing, commitment and other fees
customary for commitments of the types described herein. All such fees are
non-refundable.
13. MERGER AGREEMENT; SUPPORT AGREEMENT; EMPLOYMENT AGREEMENTS; CONFIDENTIALITY
AGREEMENT.
THE MERGER AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MERGER AGREEMENT, AS
AMENDED. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER
AGREEMENT, WHICH WE INCORPORATE BY REFERENCE, AND HAS BEEN FILED AS AN EXHIBIT
TO THE TENDER OFFER STATEMENT ON SCHEDULE TO, FILED WITH THE SEC BY US, OUR
PARENT AND SIRSI CORPORATION IN CONNECTION WITH OUR OFFER. THE MERGER AGREEMENT
MAY BE EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACES SET FORTH IN "THE
TENDER OFFER--INFORMATION CONCERNING DRAI" OR DOWNLOADED AT HTTP://WWW.SEC.GOV.
DEFINED TERMS USED IN THIS DISCUSSION AND NOT DEFINED HAVE THE MEANINGS GIVEN TO
THOSE TERMS IN THE MERGER AGREEMENT.
OUR OFFER. The Merger Agreement requires us to commence our Offer within
five business days after receiving a commitment letter relating to the debt
financing required to refinance our Parent's indebtedness, pay for the Shares
being purchased in our Offer and converted into the right to receive cash in the
Merger and pay for the related fees and expenses. We received the commitment
letter on July 24, 2001. Our obligation to accept for payment Shares tendered
pursuant to our Offer is subject to the satisfaction of the Minimum Condition
and certain other conditions that are described in "The Tender Offer--Conditions
Of Our Offer." Subject to applicable law and the terms and conditions of the
Merger Agreement, we expressly reserve the right to waive any such condition in
whole or in part, in our sole discretion, and also expressly reserve the right
to increase the price per Share payable in our Offer and to make any other
changes in the terms and conditions of our Offer; except that, without the prior
written consent of DRAI, no change in our Offer may be made (i) which decreases
the price per Share payable in the Offer, (ii) which changes the form of
consideration to be paid in the Offer, (iii) which reduces the maximum number of
Shares to be purchased in the Offer or the Minimum Condition, (iv) which imposes
conditions to the Offer in addition to those set forth in "The
31
Tender Offer--Conditions Of Our Offer" or which modifies the conditions set
forth in such section in a manner adverse to the holders of Shares, (v) which
amends any other term of the Offer in a manner inconsistent with the Merger
Agreement and adverse to the holders of Shares, or (vi) which extends the
expiration of the Offer beyond the thirtieth business day following the initial
scheduled Expiration Date.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions in the Merger Agreement, and in accordance with applicable
Missouri and Delaware laws, we will be merged with and into DRAI. As a result of
the Merger, our separate corporate existence will cease, DRAI will continue as
the surviving corporation and DRAI will become a wholly owned subsidiary of our
Parent. Upon consummation of the Merger, each issued and then-outstanding Share
(other than Shares held in the treasury of DRAI or owned by us, our Parent or
any subsidiary of our Parent and any Shares that are held by Dissenting
Shareholders) will be canceled and converted automatically into the right to
receive the Merger consideration, which will be equal to the consideration given
pursuant to our Offer.
The Merger Agreement provides that our directors immediately prior to the
Effective Time of the Merger, along with Michael J. Mellinger, will be the
directors of DRAI, as the surviving corporation. The Merger Agreement provides
that DRAI's officers immediately prior to the Effective Time of the Merger,
along with Michael J. Mellinger, will be the officers of DRAI, as the surviving
corporation. Pursuant to the Merger Agreement, each of the articles of
incorporation of DRAI and the bylaws of DRAI, as in effect immediately prior to
the Effective Time of the Merger, will be amended and restated to read as set
forth the Merger Agreement.
SHAREHOLDERS' MEETING. If required by applicable law in order to consummate
the Merger, DRAI, acting through its Board, will, in accordance with applicable
law, duly call, give notice of, convene and hold a special meeting of its
shareholders, as promptly as practicable following the acceptance for payment
and purchase of Shares by us pursuant to our Offer, for the purpose of
considering and taking action upon the adoption of the Merger Agreement. If we
acquire at least 75% of the outstanding Shares in our Offer, we will have
sufficient voting power to adopt the Merger Agreement without requiring other
shareholders to vote in favor of adoption of the Merger Agreement. We have
agreed to cause all Shares then owned beneficially by us to be voted in favor of
the adoption of the Merger Agreement. The Merger Agreement provides that, if we
acquire at least 90% of the then outstanding Shares, we, our Parent and DRAI
will take all necessary and appropriate action to cause the Merger to become
effective, in accordance with applicable Missouri and Delaware laws, as soon as
practicable after that acquisition, without a meeting of DRAI's shareholders.
PROXY STATEMENT. If required by applicable law in order to consummate the
Merger, DRAI, acting through its Board, will, in accordance with applicable law:
- prepare and file with the SEC a preliminary proxy or information statement
relating to the Merger and the Merger Agreement;
- use its reasonable efforts to obtain and furnish information required to
be included by the SEC in the proxy statement;
- after consultation with our Parent, respond promptly to any comments made
by the SEC or its staff with respect to the preliminary proxy or
information statement;
- cause the proxy statement to be mailed to its shareholders;
- use its commercially reasonable efforts to solicit proxies in favor of the
adoption of the Merger Agreement; and
- take all other action necessary or advisable to secure any vote or consent
of shareholders required by applicable Missouri law to effect the Merger.
DRAI has agreed to include in the proxy statement the recommendation of the
Board that shareholders of DRAI vote in favor of the adoption of the Merger
Agreement.
CONDUCT OF BUSINESS BY DRAI PENDING THE MERGER. In the Merger Agreement,
DRAI agreed that between May 16, 2001 and the date on which our Parent is
entitled to appoint a majority of the members of the board of directors of DRAI,
except as expressly contemplated by the
32
Merger Agreement or the tender agreements or as agreed in writing by our Parent
(which consent will not be unreasonably withheld), the business of DRAI and each
of its subsidiaries will be conducted only in the usual, regular and ordinary
course and substantially in the same manner as previously conducted, and DRAI
and each of its subsidiaries shall use its commercially reasonable efforts to
preserve its business organization intact in all material respects, keep
available the services of its current executive officers and key employees and
maintain its existing relations with franchisees, customers, suppliers,
creditors, business partners and others having business dealings with it. The
Merger Agreement also contains restrictions on activities of DRAI and its
subsidiaries pending completion of our Offer, including, without limitation,
restrictions on the ability to amend their respective articles of incorporation
or bylaws, issue securities, pay or declare dividends, redeem shares, incur
indebtedness, modify material agreements, make investments, transfer or encumber
assets, change the compensation or benefits provided to officers, directors,
employees, agents or consultants, accelerate the vesting of any stock option,
make certain changes to its accounting practices, make any material tax
elections or settle pending or threatened suits.
BOARD REPRESENTATION. The Merger Agreement provides that promptly after the
later to occur of (1) the purchase of and payment for any Shares by our Parent
or any of its subsidiaries as a result of which our Parent and its subsidiaries
beneficially own at least a majority of then outstanding Shares and
(2) compliance with Section 14(f) of the Exchange Act, and Rule 14f-1
promulgated by the SEC thereunder, our Parent will be entitled to designate such
number of directors on the Board as will give our Parent representation on the
Board equal to at least the number of directors, rounded up to the next whole
number, that equals the product of (i) the total number of directors on the
Board (giving effect to the directors designated as described in this sentence)
multiplied by (ii) a fraction, the numerator of which is the number of Shares
that our Parent and its subsidiaries beneficially own when calculating this
fraction, and the denominator of which is the total number of Shares then
outstanding. DRAI will, upon request of our Parent, use its best efforts
promptly either to increase the size of the Board or to secure the resignations
of such number of its incumbent directors, or both as is necessary to enable
such designees of our Parent to be so elected or appointed to the Board, and
DRAI will take all actions available to DRAI to cause such designees of our
Parent to be so elected or appointed at that time. At that time, DRAI will, if
requested by our Parent, also take all action necessary to cause persons
designated by our Parent to be proportionately represented on each committee of
the Board, each board of directors (or similar body) of each subsidiary of DRAI,
and each committee (or similar body) of each such board of directors.
The parties have agreed that, in the event that our Parent's designees are
elected or appointed to the Board, at least two directors who were directors on
May 16, 2001 and who are not executives of DRAI will remain on the Board. The
affirmative vote of a majority of such directors will be required (after the
acceptance for payment of Shares pursuant to our Offer and prior to the
Effective Time of the Merger) in order for DRAI to (1) amend or terminate the
Merger Agreement, (2) exercise or waive any of its rights, benefits or remedies
under the Merger Agreement if such exercise or waiver would adversely affect
holders of Shares (other than us or our Parent) or (3) take any other action
under or in connection with the Merger Agreement if such action would adversely
affect holders of Shares (other than us or our Parent).
ACCESS TO INFORMATION. DRAI has agreed to (and will cause each of its
subsidiaries to) give the officers, employees, accountants, financing sources,
counsel and other representatives of our Parent, upon reasonable notice given by
our Parent to DRAI prior to the later of the termination date of the Merger
Agreement or the date our Parent appoints a majority of the Board, reasonable
access to all its properties, books, contracts, commitments and records, and,
during that period, DRAI will (and will cause each of its subsidiaries to)
furnish reasonably promptly to our Parent a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws and all other
information concerning its business, properties and personnel as our Parent
reasonably requests. We have agreed to keep that information confidential,
except in limited circumstances.
NONSOLICITATION. Until such time as we and our affiliates have purchased at
least a majority of the Shares or the Merger Agreement has been terminated in
accordance with its terms, DRAI has
33
agreed that it, and its subsidiaries and agents, shall not encourage, solicit,
initiate, resume, or take any action designed to facilitate, any discussions,
inquiries, negotiation or the making of any proposals with respect to or
concerning any Acquisition Proposal. During such time, unless DRAI has breached
its nonsolicitation covenant, DRAI will not be prohibited from disclosing to its
shareholders its position with respect to any unsolicited, third-party bid or
tender offer if, after having consulted with its outside counsel, DRAI
determines in good faith that such disclosure is required by its fiduciary duty
to its shareholders.
NOTIFICATION OF COMPETING TRANSACTIONS. DRAI has agreed to promptly, and in
any event within twenty-four hours, notify our Parent of the existence of any
proposal, discussion, negotiation or inquiry received by DRAI, and to promptly,
and in any event within twenty-four hours, communicate to our Parent the
material terms of any proposal, discussion, negotiation or inquiry, which could
reasonably be expected to lead to an Acquisition Proposal, which it may receive.
DRAI also agreed to promptly, and in any event within twenty-four hours, provide
to our Parent copies of any written materials received by DRAI, any subsidiary
of DRAI or their respective representatives in connection with a proposal,
discussion, negotiation or inquiry and to identify the party making the proposal
or inquiry or engaging in such discussion or, DRAI will promptly, but in any
event within twenty-four hours, provide to our Parent any non-public information
concerning DRAI provided to any other party which was not previously provided to
our Parent.
An "Acquisition Proposal" means any proposal or offer (a) to acquire
(i) all or a substantial part of the business or properties of DRAI or any DRAI
subsidiary or any capital stock of DRAI or any DRAI subsidiary, whether by
merger, tender offer, exchange offer, sale of assets, consolidation, other
business combination, recapitalization, reorganization, liquidation, dissolution
or other transaction involving DRAI or any DRAI subsidiary, or any division or
operating or principal business unit of DRAI or any DRAI subsidiary or
(ii) twenty percent (20%) or more of the capital stock or other equity interests
in DRAI or any DRAI subsidiary or (b) in respect of one or more transactions
which could reasonably be expected, individually or in the aggregate, to
frustrate, prevent or delay the transactions contemplated by the Merger
Agreement.
As a general rule, neither the Board nor any committee thereof can:
- withdraw or modify, or propose to withdraw or modify in a manner adverse
to our Parent or us, the approval or recommendation by such Board or any
such committee of our Offer, the Merger Agreement or the Merger;
- approve or recommend or propose to approve or recommend any Acquisition
Proposal; or
- enter into any agreement with respect to any Acquisition Proposal.
However, prior to the time of acceptance for payment of Shares pursuant to
our Offer, the Board may withdraw or modify its approval or recommendation of
our Offer, the Merger Agreement or the Merger, approve or recommend a Superior
Proposal (as defined below), or enter into an agreement with respect to a
Superior Proposal, in each case at any time after the fifth business day
following our Parent's receipt of written notice from DRAI advising our Parent
that the Board has received a Superior Proposal which it intends to accept,
specifying the material terms and conditions of the Superior Proposal,
identifying the person making the Superior Proposal. DRAI will not be entitled
to enter into any agreement with respect to a Superior Proposal unless and until
the Merger Agreement is terminated and DRAI has paid the termination fee due to
our Parent.
The Merger Agreement does not prohibit DRAI or DRAI's board of directors
from (1) taking and disclosing to DRAI's shareholders a position with respect to
a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2
under the Exchange Act or (2) making disclosure to DRAI's shareholders if, as
and when the board of directors of DRAI determines in good faith, after
consultation with outside counsel, that disclosure is required in order to
comply with their fiduciary duties to DRAI's shareholders under applicable law;
provided, however, that DRAI will not, except as permitted by the Merger
Agreement, withdraw or modify, or propose to withdraw or modify, its position
with respect to our Offer or the Merger, or approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal, or enter into any
agreement with respect to any Acquisition Proposal.
34
A "Superior Proposal" means an unsolicited Acquisition Proposal (but
changing the 20% amount in clause (a)(ii) of the definition of Acquisition
Proposal to 50%) which is (a) (1) a bona fide written offer, (2) capable of
being, and likely to be, funded on the terms disclosed, and (3) likely to be
consummated in accordance with its terms, each as determined in good faith by
the board of directors and consistent with the advice of an independent
investment bank and (b) the board of directors of DRAI determines in good faith
(after (1) receiving advice from DRAI's independent investment banking firm that
the Acquisition Proposal is superior, from a financial point of view, to our
Offer, the Merger and Merger Agreement and (2) consultation with outside legal
counsel that failure to take that action would likely be contrary to its
fiduciary duties to DRAI's shareholders under applicable law.
DRAI agreed not to enter into any agreement with respect to a Superior
Proposal without giving us the opportunity to match the Superior Proposal and
unless and until the Merger Agreement is terminated and DRAI has paid the
termination fee.
TREATMENT OF STOCK OPTIONS AND WARRANTS. CURRENTLY EXERCISABLE OPTIONS AND
WARRANTS. The Merger Agreement provides that outstanding and exercisable stock
options and warrants of DRAI which have a per Share exercise price of less than
$11.00 will be either (i) cancelled at the Effective Time of the Merger in
exchange for an amount of cash equal to the Net Amount or (ii) will be converted
immediately prior to the Effective Time of the Merger into the right to receive
the Net Amount. Except for such payment, DRAI shall not make any payment on
options or warrants without the reasonable consent of the Parent.
OPTIONS AND WARRANTS WHICH ARE NOT YET EXERCISABLE. The 1992 Stock Option
Plan of DRAI and the 2001 Stock Option Plan of DRAI (collectively, the "Option
Plans") and any outstanding option or warrant (other than those subject to
acceleration as described below), to the extent unvested, shall at the Effective
Time of the Merger become obligations of DRAI, as the surviving corporation.
Each such option and warrant shall continue to have, and be subject to, the same
terms and conditions set forth in the Option Plans and in the option or warrant
agreement, in each case to the extent applicable. Each such option and warrant
will be converted into the right to receive an amount in cash equal to the Net
Amount at the time such option or warrant becomes exercisable in accordance with
its terms. The option or warrant becomes exercisable on the earlier of the
scheduled vesting date and the termination of the holder's employment by the
surviving corporation without cause.
CERTAIN UNVESTED OPTIONS SUBJECT TO ACCELERATION. Certain unvested options
representing an aggregate of 54,000 Shares shall accelerate and vest upon the
Effective Time and shall thereupon be treated as currently exercisable options.
AGREEMENT NOT TO EXERCISE. In the Merger Agreement, DRAI provided
representations and warranties to the effect that it obtained valid and binding
agreements from holders of its stock options and warrants exercisable for Shares
at any time up to the Effective Time pursuant to which such holders agreed not
to exercise their stock options or warrants until the later of the Effective
Time and the termination of the Merger Agreement.
DIRECTORS' AND OFFICERS' INDEMNIFICATION. The Merger Agreement provides
that, for a period of four years following the Effective Time, DRAI, as the
surviving corporation, will indemnify, defend and hold harmless each person who
is now, has been or becomes prior to the Effective Time a director or officer of
DRAI or its subsidiaries to the full extent permitted under applicable Missouri
law, the terms of the articles of incorporation and by-laws of DRAI and any
agreement, against all losses, damages, liabilities, costs, fees and expenses,
including reasonable fees and disbursements of counsel, and judgments, fines,
losses, liabilities and amounts paid in any settlement effected with the written
consent of our Parent or the surviving corporation, arising out of actions or
omissions occurring at or prior to the Effective Time. Such indemnification
rights will continue in full force and effect for a period of four years from
the Effective Time; provided, however, that all rights to indemnification in
35
respect of any indemnified liabilities asserted or made within that four year
period will continue until the disposition of those indemnified liabilities.
For a period of four years after the Effective Time, our Parent has agreed
to maintain the directors' and officers' insurance policy of DRAI in effect to
the extent that such liability insurance can be maintained for a cost of not
more than one hundred fifty percent of the aggregate premiums paid by DRAI for
the twelve months prior to May 16, 2001, on an annualized basis (the "Maximum
Cost"); provided, however, that if such insurance cannot be so obtained at or
below such cost, our Parent shall maintain as much of such insurance as can be
so obtained at the Maximum Cost. Our Parent may substitute the current
directors' and officers' insurance policy of DRAI with a different policy of
substantially equivalent coverage and amounts, with terms no less favorable to
the former directors or officers.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by DRAI as to its organization and qualification, its
subsidiaries and affiliates, capitalization, authorization of the execution of
the Merger Agreement, receipt of board approval, the vote of shareholders
required for adoption of the Merger Agreement, the necessary consents and
approvals, reports it filed with the SEC, its financial statements, undisclosed
liabilities, interim operations, absence of changes since the date of its most
recent consolidated balance sheet prior to May 16, 2001, litigation, employee
benefit plans, tax matters, leases, environmental issues, intellectual property,
employment matters, compliance with laws, contracts, customers and suppliers,
the information contained in its Schedule 14D-9, opinion of Crescendo, absence
of questionable payments, insider interests, brokers or finders, and insurance.
The representations and warranties will not survive the closing of the Merger.
CONDITIONS TO THE MERGER. Under the Merger Agreement, the respective
obligation of each party to effect the Merger is subject to the satisfaction, at
or prior to the Effective Time, of the following conditions:
- the Merger Agreement has been adopted by the requisite vote of the holders
of the Shares, if required by applicable law, in order to consummate the
Merger;
- no statute, rule or regulation has been enacted or promulgated by any
governmental entity which prohibits the consummation of the Merger, and
there is no order or injunction of a court of competent jurisdiction in
effect precluding consummation of the Merger;
- we have purchased the Shares pursuant to our Offer;
- any governmental or regulatory notices, approvals or other requirements
necessary to consummate the Merger have been given, obtained or complied
with; and
- the preliminary proxy or information statement relating to the Merger and
the Merger Agreement required to be filed by DRAI with the SEC, if so
required, shall have been cleared by the SEC and shall not be subject to
any stop order.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after shareholder approval is obtained:
(a) by the mutual written consent of our Parent and DRAI;
(b) by either of DRAI or our Parent, if (1) our Offer expires and we
have not accepted any Shares pursuant to our Offer prior to the Expiration
Date, except that any party whose failure to fulfill its obligations under
the Merger Agreement is the cause of the failure by us to accept for payment
Shares pursuant to our Offer may not be entitled to terminate the Merger
Agreement or (2) any governmental entity has issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other
action the parties hereto will use their reasonable efforts to lift), which
permanently restrains, enjoins or otherwise prohibits the acceptance for
payment of, or
36
payment for, Shares pursuant to our Offer or the Merger and that order,
decree, ruling or other action has become final and non-appealable.
(c) by DRAI, if (1) the Board withdraws or modifies its approval or
recommendation of our Offer, the Merger Agreement or the Merger, approves or
recommends a Superior Proposal, or enters into an agreement with respect to
a Superior Proposal, in each case at any time after the fifth business day
following our Parent's receipt of written notice from DRAI advising our
Parent that the Board has received a Superior Proposal which it intends to
accept, specifying the terms and conditions of the Superior Proposal,
identifying the person making the Superior Proposal, so long as DRAI makes
simultaneous payment to our Parent of the termination fee or (2) we or our
Parent have breached in any material respect any of our representations,
warranties, covenants or other agreements contained in the Merger Agreement,
which breach would prevent us or our Parent from consummating the Offer and
which has not or cannot be cured within thirty (30) days after the delivery
of written notice by DRAI to us or our Parent.
(d) by our Parent (on behalf of itself and us), if (1) prior to the
purchase of Shares by us pursuant to our Offer, the Board withdraws,
modifies or changes in a manner adverse to us or our Parent its approval or
recommendation of our Offer, the Merger Agreement or the Merger or
recommends the approval or acceptance of an Acquisition Proposal or executes
a letter of intent, agreement in principle or definitive agreement relating
to an Acquisition Proposal or (2) prior to the purchase of Shares by us
pursuant to our Offer, DRAI has breached any representation, warranty,
covenant or other agreement contained in the Merger Agreement which causes
the failure of conditions to our Offer and that breach has not been cured
within 30 days after the giving of written notice by us or our Parent to
DRAI.
EFFECT OF TERMINATION. In the event of the termination or abandonment of
the Merger Agreement or the transactions contemplated thereby by any party to
the Merger Agreement, written notice thereof specifying cause for such
termination is required to be given to the other party or parties. The Merger
Agreement provides that, in such event, there will be no liability on the part
of our Parent, us or DRAI except (a) nothing contained in the Merger Agreement
shall relieve us, our Parent or DRAI of any liability for any breach of any
representation, warranty or covenant occurring prior to such termination and
(b) as set forth below under "--Expenses; Termination Fees."
EXPENSES; TERMINATION FEES. The Merger Agreement provides, in general, that
each party will pay its own costs. However, the Merger Agreement provides that
DRAI must pay our Parent $2,000,000 if the Merger Agreement is terminated
pursuant to clause (c)(1) or clause (d)(1) under "--Termination" above. The
Merger Agreement also provides that DRAI must pay our Parent $2,000,000 if
(1) prior to the termination of the Merger Agreement, any person shall have
commenced, communicated to DRAI or publicly proposed an Acquisition Proposal,
(2) the Merger Agreement shall have been terminated either (A) pursuant to
clause (b)(1) under "--Termination" above (and less than 75% of the Shares were
tendered into the Offer) or (B) pursuant to clause (d)(2) under "--Termination"
above (and the breach giving rise to such termination right is (i) willful or
knowing, (ii) a breach of the provisions described above under
"--Nonsolicitation" above or (iii) generally relates to or arises from such
Acquisition Proposal) and (3) prior to the first anniversary of the termination
date, DRAI shall have consummated or entered into an agreement or letter of
intent in respect of an Acquisition Proposal.
In addition, the Merger Agreement provides that if it is terminated by any
party after the expiration of the Offer without us purchasing any Shares, all of
the conditions set forth in "The Tender Offer--Conditions Of Our Offer" shall
have been satisfied and the sole reason that we do not consummate the Offer is
that we do not receive the financing contemplated by the Commitment Letter, we
will pay to DRAI an amount equal to $1,000,000 and reimburse DRAI for its
reasonable legal fees and expenses incurred in connection with the negotiation,
execution and delivery of the Merger Agreement.
37
SUBORDINATED LOAN. The Merger Agreement provides that upon consummation of
our Offer and acceptance by us for payment of Shares tendered pursuant to our
Offer (without giving effect to any subsequent offering period), DRAI will
provide the Bridge Loan to our Parent in an amount of up to $18.7 million less
the amount of DRAI's transaction expenses. Please see "The Tender Offer--Source
And Amount Of Funds."
SUPPORT AGREEMENT
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE SUPPORT AGREEMENT.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE SUPPORT AGREEMENT,
WHICH WE INCORPORATE BY REFERENCE, AND HAS BEEN FILED AS AN EXHIBIT TO THE
TENDER OFFER STATEMENT ON SCHEDULE TO, FILED WITH THE SEC BY US, OUR PARENT AND
SIRSI CORPORATION IN CONNECTION WITH OUR OFFER. THE SUPPORT AGREEMENT MAY BE
EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACES SET FORTH IN "THE TENDER
OFFER--INFORMATION CONCERNING DRAI" OR DOWNLOADED AT HTTP://WWW.SEC.GOV. DEFINED
TERMS USED IN THIS DISCUSSION AND NOT DEFINED HAVE THE MEANINGS GIVEN TO THOSE
TERMS IN THE SUPPORT AGREEMENT
TENDER OF SHARES. Pursuant to the terms of the Support Agreement, not later
than 10 days following the commencement of the Offer, the Principal Shareholders
shall tender their Shares into the Offer. So long as the Support Agreement is
not terminated, the Principal Shareholders may not withdraw their Shares from
our Offer.
VOTING. Each of the Principal Shareholders further agreed that from
May 16, 2001 until the earlier to occur of (a) the Effective Time, (b) the
termination of the Merger Agreement by its terms or (c) the time the parties
later agree to by mutual written consent, at any meeting of DRAI's shareholders,
however called, and in any action by consent of DRAI's shareholders, they will
vote their Shares:
- in favor of the Merger and the Merger Agreement;
- against any Acquisition Proposal, against any proposal for action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of DRAI under the Merger
Agreement, against any change in the directors of DRAI, against any change
in the present capitalization of DRAI, and against any amendment to DRAI's
articles of incorporation or bylaws which in each case could reasonably be
expected to impede, interfere with, delay, postpone or materially
adversely affect the transactions contemplated by the Merger Agreement or
the likelihood of the consummation of such transactions; and
- in favor of any other matter necessary for consummation of the
transactions contemplated by the Merger Agreement.
The Principal Shareholders agreed that they will execute any documents which
are necessary in order to effectuate the foregoing, including the ability for us
or our nominees to vote directly such Shares owned by the Principal
Shareholders. Additionally, the Principal Shareholders agreed to waive any
rights of appraisal or rights to dissent from the Merger.
IRREVOCABLE PROXY. The Principal Shareholders (1) revoked all prior proxies
and powers of attorney governing the shares owned by them and (2) granted an
irrevocable proxy to us and our Parent, or any of our nominees, to vote and act
(by written consent or otherwise) with respect to all of the shares owned by
them at any meeting of DRAI's shareholders or by written consent in lieu of any
meetings with regard to any matter covered in the paragraph above.
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NO DISPOSITION OR ENCUMBRANCE OF SHARES. Except as contemplated by the
Support Agreement and the Merger Agreement, the Principal Shareholders agreed
not to, directly or indirectly, during the term of the Support Agreement:
- sell, assign, transfer, encumber or otherwise dispose of or enter into any
contract, option, or other arrangement or understanding with respect to
the sale, assignment, transfer, encumbrance or other disposition of their
Shares or any interest in their Shares;
- enter into any agreement or understanding with respect to any transfer of
any or all of their Shares or any interest therein;
- grant any proxy with respect to their Shares; or
- deposit their Shares into a voting trust or other agreement or arrangement
with respect to their Shares.
NOTIFICATION. Each Principal Shareholder agreed to immediately notify our
Parent of the existence of, or events which could reasonably be expected to lead
to, an Acquisition Proposal, identify the person making such proposal or inquiry
and supply to our Parent any non-public information provided to such person
which was not provided to our Parent.
TERMINATION. The Support Agreement and the related proxies will
automatically terminate and be of no further force and effect upon the earlier
to occur of (1) the Effective Time, (2) the termination of the Merger Agreement
by its terms (including termination for acceptance of a Superior Proposal) or
(3) such other time as the parties agree by mutual written consent.
EMPLOYMENT AGREEMENTS
THE FOLLOWING IS A SUMMARY OF CERTAIN PROVISIONS OF THE MELLINGER EMPLOYMENT
AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
EMPLOYMENT AGREEMENT BETWEEN SIRSI CORPORATION AND MICHAEL J. MELLINGER, WHICH
WE INCORPORATE BY REFERENCE, AND HAS BEEN FILED AS AN EXHIBIT TO THE TENDER
OFFER STATEMENT ON SCHEDULE TO FILED WITH THE SEC BY US, OUR PARENT AND SIRSI
CORPORATION IN CONNECTION WITH OUR OFFER. THE MELLINGER EMPLOYMENT AGREEMENT MAY
BE EXAMINED AND COPIES MAY BE OBTAINED AT THE PLACES SET FORTH IN "THE TENDER
OFFER--INFORMATION CONCERNING DRAI" OR DOWNLOADED AT HTTP://WWW.SEC.GOV. DEFINED
TERMS USED IN THIS DISCUSSION AND NOT DEFINED HAVE THE MEANINGS GIVEN TO THOSE
TERMS IN THE EMPLOYMENT AGREEMENT.
MELLINGER EMPLOYMENT AGREEMENT. On May 16, 2001, Michael J. Mellinger and
SIRSI Corporation entered into an employment and consulting agreement (the
"Mellinger Employment Agreement"). Pursuant to the terms of the Mellinger
Employment Agreement, Mr. Mellinger shall serve as the Chairman of DRAI. The
term of Mr. Mellinger's employment (the "Employment Term") under the Mellinger
Employment Agreement begins on the Appointment Date (as such term is defined in
the Merger Agreement) and ends 180 days following such date. The Mellinger
Employment Agreement provides that for the period beginning immediately
following the Employment Term and ending 180 days immediately following such
date (the "Consulting Term"), Mr. Mellinger will provide SIRSI Corporation and
its affiliates with advisory, consultative and other transition services.
The Mellinger Employment Agreement contains (i) non-competition provisions,
pursuant to which Mr. Mellinger has agreed to refrain, for the period commencing
at the beginning of the Employment Term and ending on the third anniversary of
the expiration of the Consulting Term, from engaging in certain activities that
are or could be competitive with the business of SIRSI Corporation and its
affiliates (including DRAI), (ii) confidentiality provisions with respect to
certain information of SIRSI Corporation and its affiliates (including DRAI) and
(iii) provisions for the assignment to SIRSI
39
Corporation of certain intellectual property relevant to the business of SIRSI
Corporation or its affiliates (including DRAI).
In the event that Mr. Mellinger's employment with SIRSI Corporation is
terminated for any reason prior to the end of the Consulting Term,
Mr. Mellinger will be entitled to continue to receive the compensation and
benefits payable to him under the Mellinger Employment Agreement.
In the event that the Merger Agreement is terminated, the Employment
Agreement will be void and Mr. Mellinger's current employment agreement with
DRAI will remain in full force and effect.
OTHER EMPLOYMENT AGREEMENTS. DRAI has informed us that it has entered into
agreements with each of Katharine Kilper, Andrew Morrice, Berit Nelson and Mike
Casale (each an "Employee"), each of whom is employed as a vice-president of
DRAI. Each such agreement provides for a severance payment if such Employee is
terminated without cause within a certain period of time after a change of
control. Our purchase of Shares pursuant to our Offer would constitute such a
change of control. This summary is qualified by reference to the Form of
Employment Agreement, which has been filed as Exhibit (a)(10) to DRAI's
Solicitation/Recommendation Statement on Schedule 14D-9, which is incorporated
herein by reference.
CONFIDENTIALITY AGREEMENT. On February 5, 2001, DRAI entered into a
confidentiality agreement pursuant to which DRAI agreed to supply certain
information to our Parent and our Parent agreed to treat such information as
confidential and to use such information solely in connection with the
evaluation of a possible transaction with DRAI, subject to customary exceptions
(the "Confidentiality Agreement"). The Confidentiality Agreement was
subsequently amended on July 10, 2001 to provide for the scope of the conduct of
SIRSI Corporation's customer due diligence. This summary is qualified by
reference to the Confidentiality Agreement and the amendment thereto, which have
been filed as exhibits to our Tender Offer Statement on Schedule TO.
14. CONDITIONS OF OUR OFFER.
Notwithstanding any other provisions of our Offer, and in addition to (and
not in limitation of) our rights to extend and amend our Offer at any time in
our sole discretion (subject to the provisions of the Merger Agreement), we
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to our obligation to pay for or return tendered Shares promptly after
termination or withdrawal of our Offer), pay for, and may delay the acceptance
for payment of or, subject to the restriction referred to above, the payment
for, any tendered Shares, and may terminate or amend our Offer as to any Shares
not then paid for if (1) the Minimum Condition has not been satisfied, or
(2) at any time on or after the date of the Merger Agreement and before the
Expiration Date (as then extended), any of the following events shall occur or
shall be determined by us to have occurred (terms used but not defined herein,
whether or not capitalized, have the meanings ascribed to them in the Merger
Agreement):
(a) there shall be threatened or pending any suit, action or proceeding
by any Governmental Entity (1) seeking to prohibit or impose any material
limitations on our or our Parent's ownership or operation (or that of any of
our or our Parent's subsidiaries or affiliates) of all or a material portion
of the businesses or assets of us, our Parent, DRAI or any of our, our
Parent's or DRAI's subsidiaries and affiliates, or to compel us, our Parent
or any of our affiliates or subsidiaries to dispose of or hold separate any
material portion of the business or assets of DRAI or Parent or the
subsidiaries of DRAI or our Parent, (2) challenging the acquisition by us or
our Parent of any Shares under our Offer or pursuant to the Support
Agreement, seeking to restrain or prohibit the making or consummation of our
Offer, the Merger or the performance of any of the other Transactions or the
Support Agreement, (3) seeking to obtain from DRAI, our Parent or us any
damages that are material in relation to DRAI and DRAI's subsidiaries,
taking DRAI together with DRAI's subsidiaries as a whole, (4) seeking to
impose material limitations on our ability, or
40
rendering us unable, to accept for payment, pay for or purchase some or all
of the Shares pursuant to our Offer or the Merger, (5) seeking to impose
material limitations on our or our Parent's ability effectively to exercise
full rights of ownership of the Shares, including the right to vote the
Shares purchased by us on all matters properly presented to DRAI's
shareholders or (6) which otherwise is reasonably likely to have a Company
Material Adverse Effect;
(b) there shall be any Applicable Law or Order enacted, entered,
enforced, promulgated or deemed applicable to our Offer or the Merger, or
any other action shall be taken by any Governmental Entity that is
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (1) through (6) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange or in
the NASDAQ National Market System (excluding suspensions or limitations
resulting solely from computerized trading limit or any trading suspension
due to circuit breakers from physical damage or interference with such
exchanges not related to market conditions), (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (iii) a commencement or escalation of a
war, armed hostilities or other international or national calamity directly
involving the United States that has a material adverse effect on bank
syndication or financial markets in the United States, (iv) any limitation
(whether or not mandatory) by any United States or foreign governmental
authority on the extension of credit by banks or other financial
institutions, (v) a change in general financial bank or capital market
conditions which materially or adversely affects the ability of financial
institutions in the United States to extend credit or syndicate loans or
(vi) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
(d) there shall have occurred any Company Material Adverse Effect (or
any development that, insofar as reasonably can be foreseen, is reasonably
likely to result in a Company Material Adverse Effect);
(e) the Board or any committee thereof (i) shall have withdrawn,
modified or changed in a manner adverse to our Parent or us its approval or
recommendation of the Offer, the Merger Agreement or the Merger, (ii) shall
have recommended the approval or acceptance of an Acquisition Proposal from,
or similar business combination with, a person other than our Parent, us or
our affiliates or (iii) shall have executed an agreement in principle or
definitive agreement relating to an Acquisition Proposal from, or similar
business combination with, a person other than our Parent, us or our
affiliates;
(f) any of the representations and warranties of the DRAI contained in
the Merger Agreement shall not be true and correct in all material respects
at and as of May 16, 2001 or at and as of the scheduled Expiration Date with
the same effect as if made at and as of the Expiration Date, except to the
extent such representations specifically relate to an earlier date, in which
case such representations shall be true and correct as of such earlier date
(in each case, except for those representations and warranties that contain
materiality or Company Material Adverse Effect qualifications, which shall
be true and correct in all respects), and DRAI shall have delivered to our
Parent and us a certificate to such effect, executed by the Chief Executive
Officer of DRAI and by the Chief Financial Officer of DRAI;
(g) DRAI shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any agreement
or covenant of DRAI to be performed or complied with by it prior to the
scheduled Expiration Date under the Merger Agreement;
(h) DRAI shall not have delivered to Parent and us a certificate to the
effect set forth in the immediately preceding clauses (f) and (g), executed
by each of the Chief Executive Officer and the Chief Financial Officer of
DRAI;
41
(i) all consents necessary to the consummation of the Offer or the
Merger including consents from parties to any contract (including the credit
agreement relating to SIRSI Corporation's existing indebtedness) and
consents from Governmental Entities shall not have been obtained and be in
full force and effect, other than consents the failure to obtain which would
not reasonably be expected to have a Company Material Adverse Effect;
(j) the Merger Agreement shall have been terminated in accordance with
its terms;
(k) the sum of DRAI's cash, cash equivalents and short-term investments
(in each case determined in accordance with DRAI's historical practices and
in accordance with GAAP) shall be less than $18.7 million (prior to the
payment of DRAI's transaction expenses) and DRAI shall have no obligations
in respect of any indebtedness; or
(l) DRAI shall not have received all material third-party consents.
The foregoing conditions (other than the Minimum Condition) are for the sole
benefit of Parent and us, may be waived by our Parent or us, in whole or in
part, at any time and from time to time in the reasonable discretion of our
Parent or us. The failure by Parent or us at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
15. LEGAL MATTERS AND REGULATORY APPROVALS.
GENERAL. Based upon its examination of publicly available information with
respect to DRAI and the review of information furnished by DRAI to our Parent
and its affiliates and discussions between representatives of affiliates of our
Parent with representatives of DRAI during our Parent's investigation of DRAI,
except to the extent set forth below, none of us, our Parent or SIRSI
Corporation are aware of any approval or other action by any domestic (federal
or state) or foreign governmental authority, which in either case would be
required prior to our acquisition of Shares pursuant to our Offer. Should any
approval or other action be required, it is our present intention to seek the
approval or action. We do not currently intend, however, to delay the purchase
of Shares tendered pursuant to our Offer pending the outcome of any action or
the receipt of any approval (subject to our right to decline to purchase Shares
if any of the conditions in "The Tender Offer--Conditions Of Our Offer" will
have occurred). There can be no assurance that any approval or other action, if
needed, would be obtained without substantial conditions or that adverse
consequences might not result to our business or the business of DRAI, us, our
Parent or SIRSI Corporation or that parts of our business or the businesses of
DRAI, us, our Parent or SIRSI Corporation or their respective affiliates might
not have to be disposed of or held separate or other substantial conditions
complied with in order to obtain such approval or other action or in the event
that such approval was not obtained or such other action was not taken. Our
obligation under our Offer to accept for payment and pay for Shares is subject
to conditions, including conditions relating to the legal matters discussed in
this Section 15. See "The Tender Offer--Conditions Of Our Offer" for additional
conditions of our Offer.
Our Parent, SIRSI Corporation and DRAI conduct operations in a number of
jurisdictions where other regulatory filings or approvals may be required or
advisable in connection with the completion of the Merger. Our Parent, SIRSI
Corporation and DRAI are currently in the process of reviewing whether filings
or approvals may be required or desirable in these jurisdictions which may be
material to us, our Parent, SIRSI Corporation or DRAI and their respective
subsidiaries. It is possible that one or more of these filings may not be made,
or one or more of these approvals, which are not as a matter of practice
required to be obtained prior to effectiveness of a merger transaction, may not
be obtained, prior to the Merger.
ANTITRUST. The Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
frequently scrutinize the legality under
42
the antitrust laws of transactions such as our proposed acquisition of DRAI.
However, the parties are not required to file a notification under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, because the
transactions will not meet the requisite threshold. At any time before or after
our purchase of Shares pursuant to the Offer, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by us or the divestiture of substantial assets of
our Parent or its subsidiaries, or DRAI or its subsidiaries. Private parties may
also bring legal action under the antitrust laws under certain circumstances.
There can be no assurance that a challenge to the Offer on antitrust grounds
will not be made or, if such a challenge is made, of the results thereof.
SHORT-FORM MERGER. Section 253 of the Delaware General Corporation Law and
Section 351.447 of the General Business and Corporation Law of Missouri each
provide, among other things, that, if a parent corporation owns at least 90% of
the outstanding shares of each voting class of a subsidiary corporation, the
merger of the subsidiary corporation and the parent corporation (including in
the case of corporations incorporated in other states, where such permission is
mutual) may be effected by a resolution adopted and approved by the board of
directors of the parent corporation and the appropriate filings with the
Delaware Secretary of State and the Missouri Secretary of State, without any
action or vote on the part of the shareholders of the subsidiary corporation.
Under applicable Missouri and Delaware laws, if we, together with our Parent,
acquire (pursuant to our Offer or otherwise) at least 90% of the then
outstanding Shares, we will be able to effect the Merger without holding a
meeting of DRAI's shareholders to vote on the Merger and without requesting the
affirmative vote of DRAI's other shareholders. If that happens, we, our Parent
and DRAI have agreed to take all necessary and appropriate action to cause the
Merger to become effective in accordance with Missouri law, and without a
meeting of DRAI's shareholders, as soon as practicable after we acquire 90% of
the then outstanding Shares. If, however, we, together with our Parent, do not
acquire at least 90% of the then outstanding Shares and a meeting of DRAI's
shareholders to approve the Merger is required under Missouri law, a
significantly longer period of time will be required in order to effect the
Merger. Please see "The Tender Offer--Legal Matters And Regulatory Approvals."
Please see "Terms Of Our Offer; Expiration Date."
16. STATE TAKEOVER LAWS.
Sections 351.407 and 351.459 of the General Business and Corporation Law of
Missouri (respectively, the "Control Share Provision" and the "Interested
Shareholder Provision") apply to acquisitions and takeovers of Missouri
corporations.
The Control Share Provision provides, among other things, that if shares are
acquired in an acquisition which (but for the application of the Control Share
Provision) would grant the holder of those shares (when combined with the vote
of such holder's affiliates or group) the right to vote in an election of
directors a percentage of the total vote which exceeds certain thresholds
described within the Control Share Provision, then the acquired shares shall
only have such voting rights as are granted by resolution approved by the
shareholders. The Control Share Provision will not apply, however, if the
issuing corporation has so provided in its bylaws or its articles of
incorporation prior to the acquisition of the shares at issue. Prior to the
execution of the Merger Agreement, the bylaws of DRAI were amended to provide
that the Control Share Provision would not apply to the Merger contemplated by
our Offer or the Support Agreement.
The Interested Shareholder Provision prohibits business combination
transactions involving a Missouri corporation and an "interested shareholder"
(defined generally as any person that directly or indirectly beneficially owns
20% or more of the outstanding voting stock of the subject corporation) for five
years following the date (the "Acquisition Date") such person became an
"interested shareholder" unless, prior to the Acquisition Date, the board of
directors of the subject corporation approved the
43
transactions in which such person became an "interested shareholder" or the
business combination. Because the board of directors of DRAI, at the special
meeting held May 15, 2001, approved the Merger Agreement and the transactions
contemplated thereby, the Interested Shareholder Provision is inapplicable to us
and our Parent in connection with the Support Agreement, the Offer and the
Merger.
OTHER STATES' TAKEOVER LAWS. A number of other states have adopted laws and
regulations applicable to attempts to acquire securities of corporations which
are incorporated, or have substantial assets, shareholders, principal executive
offices or principal places of business, or whose business operations otherwise
have substantial economic effects, in such states. DRAI, directly or through its
subsidiaries, conducts business in a number of states throughout the United
States, some of which have enacted takeover laws. We do not know whether any of
these laws will, by their terms, apply to our Offer or the Merger and have not
complied with any such laws. Should any person seek to apply any state takeover
law, we will take any action as then appears desirable, which may include
challenging the validity or applicability of any such statute in appropriate
court proceedings. In the event it is asserted that one or more state takeover
laws is applicable to our Offer or the Merger, and an appropriate court does not
determine that it is inapplicable or invalid as applied to our Offer, we might
be required to file information with, or receive approvals from, the relevant
state authorities. In addition, if enjoined, we might be unable to accept for
payment any Shares tendered pursuant to our Offer, or be delayed in continuing
or consummating our Offer, and the Merger. In such case, we may not be obligated
to accept for payment any Shares tendered. See "The Tender Offer--Conditions Of
Our Offer."
17. RIGHTS OF DISSENTING SHAREHOLDERS.
We and our Parent do not believe that appraisal rights are available in
connection with our Offer; however, appraisal rights may be available in
connection with the Merger. If the Merger is consummated, shareholders who have
not tendered their Shares in our Offer will have the right under applicable
Missouri law to object to the Merger and demand payment of the fair value of
their Shares. Shareholders who do not tender their Shares in our Offer, object
to the Merger and properly demand payment of the fair value of their Shares in
accordance with and subject to the procedures set forth in Section 351.455 of
the General Business and Corporation Law of Missouri will be entitled to a
determination by a Missouri Court of competent jurisdiction of the fair value of
the Shares as of the day immediately prior to the day on which a vote in respect
of the Merger was taken. In addition, Dissenting Shareholders may be entitled to
receive payment of interest, from the day immediately prior to the day on which
a vote in respect of the Merger was taken to the date of such judgment by the
Court, on the amount determined to be the fair value of their Shares.
We do not intend to object, assuming the proper procedures are followed, to
any shareholder's demand for payment of the fair value of his, her or its
Shares. We intend, however, to cause DRAI, as the surviving corporation, to
argue in a proceeding that, for purposes of the proceeding, the fair value of
each Share is less than or equal to the Merger consideration.
You should be aware that opinions of investment banking firms (including
Crescendo's) as to the fairness from a financial point of view are not
necessarily opinions as to "fair value" under Missouri law.
This summary of the rights of dissenting shareholders under Missouri law is
not a complete statement of the procedures to be followed by Dissenting
Shareholders. The preservation and exercise of demands to receive fair value
require strict adherence to the applicable provisions of Missouri law. See
Section 351.455 of the General Business and Corporation Law of Missouri which is
attached hereto as Schedule II.
44
18. FEES AND EXPENSES.
The Information Agent and the Depositary have been retained by us in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, telegraph and personal interview and may request
brokers, dealers, banks, trust companies and other nominees to forward the Offer
material to beneficial owners. The Information Agent and the Depositary each
will receive reasonable and customary compensation for their services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities and expenses in connection therewith, including
certain liabilities under the Federal securities laws. Neither the Information
Agent nor the Depositary has been retained to make solicitations or
recommendations in connection with the Offer.
No fees or commissions will be paid by or on behalf of us to any broker or
dealer or other person for soliciting tenders of Shares pursuant to the Offer.
Brokers, dealers, commercial banks, trust companies and other nominees will be
reimbursed by us for reasonable expenses incurred by them in forwarding material
to their customers.
19. MISCELLANEOUS.
We are making our Offer to DRAI shareholders solely through this Offer to
Purchase and the related Letter of Transmittal. We are not aware of any
jurisdiction where the making of our Offer is prohibited by any administrative
or judicial action pursuant to any valid state statute. If we become aware of
any valid state statute prohibiting the making of our Offer or the acceptance of
Shares pursuant thereto, we will make a good faith effort to comply with that
state statute. If, after a good faith effort, we cannot comply with that state
statute, our Offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of Shares in that state. In any jurisdiction where the
securities, blue sky or other laws require our Offer to be made by a licensed
broker or dealer, our Offer will be deemed to be made on our behalf by one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
Pursuant to Rule 14d-3 under the Exchange Act, we, our Parent and SIRSI
Corporation have filed with the SEC the Schedule TO, together with exhibits,
furnishing additional information with respect to our Offer. The Schedule TO and
any amendments to the Schedule TO, including exhibits, may be inspected at, and
copies may be obtained from, the same places and in the same manner as set forth
in "The Tender Offer--Information Concerning DRAI" (except that they will not be
available at the regional offices of the SEC).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF US OR OUR PARENT NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, THAT INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
45
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER AND PARENT
OUR DIRECTORS AND EXECUTIVE OFFICERS. The following table sets forth the
name, current business address, and present principal occupation or employment,
and material occupations, positions, offices or employment for the past five
years of each director and executive officer of us. With the exception of
William K. Luby, all directors and officers are principally engaged as executive
officers of SIRSI Corporation and their principal business address is c/o SIRSI
Corporation, 101 Washington Street, SE, Huntsville, Alabama 35801-4827. William
K. Luby is principally engaged as an investment professional for Seaport
Associates, LLC the address of which is c/o Seaport Capital Partners, 199 Water
Street, 20th Floor, New York, New York 10038.
NAME POSITION WITH PURCHASER
- ---------------------------------------- -------------------------------------
Patrick Sommers......................... President and Chief Executive Officer
James J. Young.......................... Chairman of the Board
Larry D. Smith.......................... Director and Chief Financial Officer
William K. Luby......................... Director
DIRECTORS AND EXECUTIVE OFFICERS OF OUR PARENT AND SIRSI CORPORATION. The
following table sets forth the name, current business address, and present
principal occupation or employment, and material occupations, positions, offices
or employment and business addresses thereof of each director and executive
officer of our Parent and SIRSI Corporation.
NAME AND POSITION WITH PARENT PRINCIPAL OCCUPATION AND ADDRESS
- ------------------------------------- ------------------------------------------------------------
Patrick Sommers, President and Chief
Executive Officer.................. President and Chief Executive Officer of SIRSI Corporation
and our Parent since January 2001; President and Chief
Executive Officer of The Dialog Corporation (2000 - 2001);
Chief Operating Officer of The Dialog Corporation (1998 -
2000); Chairman and Chief Executive Officer of Medic
Systems, Inc. (1996 - 1998).(1)
James J. Young, Director and
Executive Officer.................. Executive officer of SIRSI Corporation and our Parent.
Previously President and Chief Executive Officer of SIRSI
Corporation.(1)
Jaqueline B. Young, Director and
Executive Officer.................. Executive officer of SIRSI Corporation and our Parent.(1)
William K. Luby, Director............ Investment Professional, Seaport Capital Partners.(2)
James Collis, Director............... Investment Professional, Seaport Capital Partners.(2)
Allison Mulhern, Director............ Investment Professional, Seaport Capital Partners.(2)
Heidi Daileader, Director............ Investment Professional, Seaport Capital Partners.(2)
Michael Murdock, Director and
Executive Officer.................. Executive Officer of SIRSI Corporation and our Parent.(1)
Reg Murphy, Director................. Vice Chairman, National Geographic Society (1999-present);
Chief Executive Officer, National Geographic Society
(1995-1999).(3)
- ------------------------
(1) SIRSI Corporation, 110 Washington Street, SE, Huntsville, Alabama
35801-4827, tel: (256) 704-7000.
(2) Seaport Capital Partners, 199 Water Street, 20th Floor, New York, New York
10038, tel: (212) 425-1400.
(3) 1145 17th Street N.W., Washington, D.C. 20036-4688 tel: (800) 647-5463.
SCHEDULE II
SECTION 351.455 OF THE GENERAL AND BUSINESS CORPORATION LAW OF MISSOURI
Section 351.455 R.S.Mo. (2001)
Section 351.455. Shareholder who objects to merger may demand value of
shares, when
1. If a shareholder of a corporation which is a party to a merger or
consolidation shall file with such corporation, prior to or at the meeting
of shareholders at which the plan of merger or consolidation is submitted to
a vote, a written objection to such plan of merger or consolidation, and
shall not vote in favor thereof, and such shareholder, within twenty days
after the merger or consolidation is effected, shall make written demand on
the surviving or new corporation for payment of the fair value of his shares
as of the day prior to the date on which the vote was taken approving the
merger or consolidation, the surviving or new corporation shall pay to such
shareholder, upon surrender of his certificate or certificates representing
said shares, the fair value thereof. Such demand shall state the number and
class of the shares owned by such dissenting shareholder. Any shareholder
failing to make demand within the twenty day period shall be conclusively
presumed to have consented to the merger or consolidation and shall be bound
by the terms thereof.
2. If within thirty days after the date on which such merger or consolidation
was effected the value of such shares is agreed upon between the dissenting
shareholder and the surviving or new corporation, payment therefor shall be
made within ninety days after the date on which such merger or consolidation
was effected, upon the surrender of his certificate or certificates
representing said shares. Upon payment of the agreed value the dissenting
shareholder shall cease to have any interest in such shares or in the
corporation.
3. If within such period of thirty days the shareholder and the surviving or
new corporation do not so agree, then the dissenting shareholder may, within
sixty days after the expiration of the thirty day period, file a petition in
any court of competent jurisdiction within the county in which the
registered office of the surviving or new corporation is situated, asking
for a finding and determination of the fair value of such shares, and shall
be entitled to judgment against the surviving or new corporation for the
amount of such fair value as of the day prior to the date on which such vote
was taken approving such merger or consolidation, together with interest
thereon to the date of such judgment. The judgment shall be payable only
upon and simultaneously with the surrender to the surviving or new
corporation of the certificate or certificates representing said shares.
Upon the payment of the judgment, the dissenting shareholder shall cease to
have any interest in such shares, or in the surviving or new corporation.
Such shares may be held and disposed of by the surviving or new corporation
as it may see fit. Unless the dissenting shareholder shall file such
petition within the time herein limited, such shareholder and all persons
claiming under him shall be conclusively presumed to have approved and
ratified the merger or consolidation, and shall be bound by the terms
thereof.
4. The right of a dissenting shareholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall
abandon the merger or consolidation.
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each shareholder of DRAI or
his or her broker, dealer, commercial bank, trust company or other nominee to
the depositary at its address and/or facsimile number set forth below.
THE DEPOSITARY FOR OUR OFFER IS:
COMPUTERSHARE TRUST COMPANY OF NEW YORK
BY HAND: BY OVERNIGHT COURIER: BY MAIL:
Wall Street Plaza, Wall Street Plaza, Wall Street Station,
88 Pine Street, 19th Floor 88 Pine Street, 19th Floor P.O. Box 1010
New York, NY 10005 New York, NY 10005 New York, NY 10268-1010
BY FACSIMILE TRANSMISSION:
FOR ELIGIBLE INSTITUTIONS ONLY:
(212) 701-7636
CONFIRM RECEIPT OF GUARANTEED DELIVERY BY TELEPHONE:
(212) 701-7624
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent at its address and telephone number set
forth below. You also may contact your local broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR OUR OFFER IS:
INNISFREE M&A, INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
Banks and Brokers Call Collect: (212) 750-5833
All Others Call Toll-Free: (888) 750-5834