<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ______)*
AccelGraphics, Inc.
-------------------
(Name of Issuer)
Common Stock par value $.001 per share
--------------------------------------
(Title of Class of Securities)
00430P 10 4
-----------
(CUSIP Number)
David K. Armstrong Edmund S. Ruffin, Jr.
Snell & Wilmer, L.L.P. Venture Law Group
Broadway Centre A Professional Corporation
111 East Broadway, Suite 900 2800 Sand Hill Road
Salt Lake City, Utah 84111 Menlo Park, California 94025
(801)237-1900 (650)854-4488
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 22, 1998
--------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
13D
________________________________________________________________________________
CUSIP No. 00430P 10 4 Page 2 of 10 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSON
SS. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
EVANS & SUTHERLAND COMPUTER CORPORATION
EIN: 87-0278175
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A
GROUP (a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UTAH
________________________________________________________________________________
7 SOLE VOTING POWER
3,159,963
__________________________________________________________
NUMBER OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY 3,159,963
OWNED BY EACH __________________________________________________________
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH -0-
__________________________________________________________
10 SHARED DISPOSITIVE POWER
-0-
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
3,159,963
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW
(11)
37.4%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON*
CO
________________________________________________________________________________
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CUSIP No. 00430P 10 4 Page 3 of 10 Pages
________________________________________________________________________________
ITEM 1. SECURITY AND ISSUER.
The title of the class of equity securities to which this statement relates
is the common stock, $.001 par value per share, of AccelGraphics, Inc., a
Delaware corporation (the "Issuer"). The Issuer's principal executive office is
located at 1873 Barber Lane, Milpitas, CA 95035.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is filed by Evans & Sutherland Computer Corporation
("E&S"), a Utah corporation. E&S's address is 600 Komas Drive, Salt Lake City,
Utah 84108. To the best of E&S's knowledge, during the last five years, neither
E&S nor any of its executive officers or directors has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
has been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction resulting in a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws, or finding any violation with respect to such laws.
The name, business address, present principal occupation (including the
name and address of the corporation or organization in which such employment is
conducted) and, citizenship of each executive officer and director of E&S is set
forth in Schedule A to this Schedule 13D and is specifically incorporated herein
by reference in its entirety.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
This Statement relates to a voting agreement and associated proxy granted
to E&S by Stephen L. Bartlett, Nancy E. Bush, Jeffrey W. Dunn, Lew S. Epstein,
David W. Pidwell, Niraj Swarup, Arthur Yan, Advanced Technology Ventures IV,
L.P., STF II, L.P., Asset Management Associates 1996, L.P., AVI Capital, L.P.,
Associated Venture Investors II, L.P., AVI Partners Growth Fund II, L.P., and
AVI Silicon Valley Partners, L.P. (the "Stockholders") with regard to their
shares of Common Stock of the Issuer as described in Item 6 below. The voting
agreement and associated proxy were granted to E&S by the Stockholders pursuant
to the Voting Agreement and Irrevocable Proxy dated April 22, 1998 among E&S and
the Stockholders (the "Voting Agreement").
Pursuant to the Voting Agreement, the Stockholders have agreed to vote
their shares of Common Stock of the Issuer (i) in favor of the Merger, (ii)
against any action that would constitute a breach of the Merger Agreement or the
Voting Agreement and (iii) against any action that could interfere with the
transactions contemplated by the Merger Agreement, including, without
limitation, any competing business combination, all as more fully described in,
and under the circumstances set forth in, the Voting Agreement; provided,
however, that the Stockholders are not required to vote in favor of the Merger
if the Board of Directors of the Issuer has determined that the Issuer has
received a Superior Proposal (as such term is defined in the Merger Agreement)
from a third party. In addition, pursuant to the Voting Agreement, each of the
Stockholders has granted E&S an irrevocable proxy to vote their respective
shares of Common Stock if they fail to comply with their obligation to vote
their shares of Common Stock in the manner required by the Voting Agreement.
The source of the funds for all transactions referred to herein is working
capital and common stock of E&S.
ITEM 4. PURPOSE OF TRANSACTION.
On April 22, 1998, E&S, E&S Merger Corp., a wholly owned subsidiary of E&S
(the "Merger Sub"), and the Issuer entered into the Agreement and Plan of
Merger, dated April 22, 1998 (the "Merger Agreement"), which provides that the
Issuer will be merged (the "Merger") with and into Merger Sub on the terms and
subject to the conditions set forth
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________________________________________________________________________________
CUSIP No. 00430P 10 4 Page 4 of 10 Pages
________________________________________________________________________________
in the Merger Agreement, with Merger Sub continuing as the surviving corporation
(the "Surviving Corporation"). E&S requested the Stockholders to enter into the
Voting Agreement as an inducement to E&S to execute the Merger Agreement. The
Voting Agreement described herein is intended to provide greater certainty that
E&S's acquisition of Issuer will be consummated.
If the Merger is consummated in accordance with the terms of the Merger
Agreement, the Board of Directors of the Surviving Corporation shall initially
consist of three (3) members, all of whom shall be officers or employees of E&S.
Additionally, the Common Stock of the Issuer will cease to be quoted on the
NASDAQ system.
Other than described above, E&S has no plans or proposals which related to,
or may result in, any of the matters listed in Items 4(a) - (j) of Schedule 13D
(although E&S reserves the right to develop such plans).
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
As a result of the Voting Agreement, E&S may be deemed to have beneficial
ownership of 3,159,963 shares of Common Stock for purposes of Rule 14d-1 (a)
promulgated under the Securities Act of 1934, as amended, which represents
approximately 37% of the shares of Common Stock outstanding (based on the number
of shares of Common Stock outstanding on March 2, 1998, as represented to E&S by
the Issuer in the Merger Agreement).
To the best of E&S's knowledge, neither E&S nor any other person referred
to in Schedule A attached hereto beneficially owns or has acquired or disposed
of any shares of Common Stock of the Issuer during the past 60 days.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
The Stockholders entered into the Voting Agreement as an inducement to E&S
to enter into the Merger Agreement. Pursuant to the Merger Agreement and subject
to the terms and conditions set forth therein (including approval by the holders
of the Issuer's outstanding shares of Common Stock and expiration or termination
of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended), the Issuer will merge with and into Merger Sub, with Merger
Sub continuing as the Surviving Corporation, and each issued and outstanding
share of Common Stock will be converted into the right to receive a number of
shares of E&S Common Stock having a value equal to $5.75 or, at the option of
each Issuer stock holder, $5.75 in cash. The amount of cash payable by E&S to
the Issuer's stockholders in connection with the acquisition of their shares
will be limited to 48% of the aggregate consideration paid by E&S in order to
preserve the treatment of the Merger as a tax-free reorganization for federal
income tax purposes. No monetary consideration was paid by E&S to the
Stockholders for the Voting Agreement.
Pursuant to the Voting Agreement, the Stockholders have agreed to vote
their shares of Common Stock (i) in favor of the Merger, (ii) against any action
that would constitute a breach of the Merger Agreement or the Voting Agreement
and (iii) against any action that could interfere with the transactions
contemplated by the Merger Agreement, including, without limitation, any
competing business combination, all as more fully described in, and under the
circumstances set forth in, the Voting Agreement; provided, however, that the
Stockholders are not required to vote in favor of the Merger if the Board of
Directors of the Issuer has determined that the Issuer has received a Superior
Proposal (as such term is defined in the Merger Agreement) from a third party.
In addition, pursuant to the Voting Agreement, each of the
<PAGE>
________________________________________________________________________________
CUSIP No. 00430P 10 4 Page 5 of 10 Pages
________________________________________________________________________________
Stockholders has granted E&S an irrevocable proxy to vote their respective
shares of Common Stock if they fail to comply with their obligation to vote
their shares of Common Stock in the manner required by the Voting Agreement.
The descriptions herein of the Voting Agreement and the Merger Agreement
are qualified in their entirety by reference to such agreements, copies of which
are filed hereto as Exhibits 2.1 and 99.1, and which are specifically
incorporated herein by reference in their entirety.
Except as provided in the Merger Agreement and the Voting Agreement, none
of the persons named in Item 2 has any contracts, arrangements, understandings
or relationships (legal or otherwise) with any persons with respect to any
securities of the Issuer, including, but not limited to, transfers or voting of
any securities, finder's fees, joint ventures, loan or option arrangements, puts
or calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit Description
------- -----------
2.1 Agreement and Plan of Merger, dated April 22, 1998, among E&S,
Merger Sub and the Issuer.
99.1 Voting Agreement, dated April 22, 1998, among E&S, Stephen L.
Bartlett, Nancy E. Bush, Jeffrey W. Dunn, Lew S. Epstein, David
W. Pidwell, Niraj Swarup, Arthur Yan, Advanced Technology
Ventures IV, L.P., STF II, L.P., Asset Management Associates
1996, L.P., AVI Capital, L.P., Associated Venture Investors II,
L.P., AVI Partners Growth Fund II, L.P., and AVI Silicon Valley
Partners, L.P.
<PAGE>
________________________________________________________________________________
CUSIP No. 00430P 10 4 Page 6 of 10 Pages
________________________________________________________________________________
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Schedule 13D is true, complete
and accurate.
May 1, 1998 EVANS & SUTHERLAND COMPUTER CORPORATION
By: /S/ Mark C. McBride
-----------------------------------------------
Name: Mark C. McBride
Title: Vice President, Corporate Controller and
Corporate Secretary
<PAGE>
________________________________________________________________________________
CUSIP No. 00430P 10 4 Page 7 of 10 Pages
________________________________________________________________________________
EXHIBIT INDEX
-------------
Exhibit Description
------- -----------
2.1 Agreement and Plan of Merger, dated April 22, 1998, among E&S,
Merger Sub and the Issuer.
99.1 Voting Agreement, dated April 22, 1998, among E&S, Stephen L.
Bartlett, Nancy E. Bush, Jeffrey W. Dunn, Lew S. Epstein, David
W. Pidwell, Niraj Swarup, Arthur Yan, Advanced Technology
Ventures IV, L.P., STF II, L.P., Asset Management Associates
1996, L.P., AVI Capital, L.P., Associated Venture Investors II,
L.P., AVI Partners Growth Fund II, L.P., and AVI Silicon Valley
Partners, L.P.
<PAGE>
________________________________________________________________________________
CUSIP No. 00430P 10 4 Page 8 of 10 Pages
________________________________________________________________________________
SCHEDULE A
Directors and Executive Officers of Evans & Sutherland Computer Corporation
---------------------------------------------------------------------------
I. Directors
<TABLE>
<CAPTION>
Present Principal Occupation
Name and Business Address Citizenship
- ------------------------- ---------------------------- -----------
<S> <C> <C>
Stewart Carrell Chairman of the Board and Director United States
of Evans & Sutherland Computer
Corporation
600 Komas Drive
Salt Lake City, Utah 84108
Gerald S. Casilli Chairman of the Board of United States
Ikos Systems, Inc.
19050 Prune Ridge Ave.
Cupertino, California 95014
Peter O. Crisp General Partner of Venrock United States
Associates
Room 5600
30 Rockefeller Plaza
New York, New York 10112
James R. Oyler Director; President and United States
Chief Executive Officer of
Evans & Sutherland Computer
Corporation
600 Komas Drive
Salt Lake City, Utah 84108
</TABLE>
<PAGE>
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CUSIP No. 00430P 10 4 Page 9 of 10 Pages
________________________________________________________________________________
<TABLE>
<S> <C> <C>
Ivan E. Sutherland Vice President and Fellow for United States
Sun Microsystems, Inc.
2600 Casey Ave.
Building 29
Mountain View, California 94043
John E. Warnock Chairman and Chief Executive United States
Officer of Adobe Systems, Inc.
345 Park Ave.
San Jose, California 95110
</TABLE>
II. Executive Officers
<TABLE>
<CAPTION>
Present Principal Occupation
Name and Business Address Citizenship
- ------------------------- ---------------------------- -----------
<S> <C> <C>
Ronald R. Sutherland Vice President and General United States
Manager of Government
Simulation
600 Komas Drive
Salt Lake City, Utah 84108
John T. Lemley Vice President and Chief United States
Financial Officer
600 Komas Drive
Salt Lake City, Utah 84108
Charles R. Maule Vice President and General United States
Manager of Desktop Graphics
600 Komas Drive
Salt Lake City, Utah 84108
</TABLE>
<PAGE>
________________________________________________________________________________
CUSIP No. 00430P 10 4 Page 10 of 10 Pages
________________________________________________________________________________
<TABLE>
<S> <C> <C>
Mark C. McBride Vice President, Corporate United States
Controller and Corporate
Secretary
600 Komas Drive
Salt Lake City, Utah 84108
</TABLE>
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
ACCELGRAPHICS, INC.,
E&S MERGER CORP.
AND
EVANS & SUTHERLAND COMPUTER CORPORATION
DATED APRIL 22, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I--THE MERGER..................................................... 1
1.01 The Merger....................................................... 1
1.02 Closing; Effective Time.......................................... 1
1.03 Effect of the Merger............................................. 2
1.04 Articles of Incorporation; Bylaws................................ 2
1.05 Directors and Officers........................................... 2
ARTICLE II--CONVERSION OF SECURITIES...................................... 2
2.01 Conversion or Cancellation of Shares............................. 2
2.02 Allocation of Merger Consideration; Election Procedures.......... 3
2.03 Transfers........................................................ 5
2.04 Dissenters' Rights............................................... 5
2.05 Termination of Exchange Fund..................................... 5
2.06 No Fractional Shares............................................. 6
2.07 AGI Options...................................................... 6
2.08 Further Assurances............................................... 6
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF AGI........................ 7
3.01 Organization and Qualification; Subsidiaries..................... 7
3.02 Certificate of Incorporation and Bylaws.......................... 7
3.03 Capitalization................................................... 7
3.04 Authority Relative to This Agreement............................. 8
3.05 No Conflict; Required Filings and Consents....................... 8
3.06 Compliance with Laws; Permits.................................... 9
3.07 SEC Filings; Financial Statements................................ 9
3.08 Absence of Certain Changes or Events............................. 10
3.09 Absence of Litigation............................................ 10
3.10 Employee Benefit; ERISA.......................................... 11
3.11 Labor Matters.................................................... 12
3.12 Title To and Sufficiency of Assets............................... 13
3.13 Intellectual Property............................................ 13
3.14 Tax Matters...................................................... 13
3.15 Environmental Matters............................................ 15
3.16 Material Contracts............................................... 16
3.17 Suppliers........................................................ 16
3.18 Tax Treatment.................................................... 16
3.19 Insurance........................................................ 16
3.20 Approval of AGI Board............................................ 16
3.21 Stockholder Vote Required........................................ 17
3.22 Accuracy of Information.......................................... 17
3.23 Transactions With Affiliates..................................... 17
3.24 Adequacy of Information Systems; No Adverse Warranties........... 17
3.25 Opinion of Financial Advisor..................................... 18
3.26 Brokers.......................................................... 18
3.27 Absence of Certain Business Practices............................ 18
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF E&S AND MERGER SUB.......... 18
4.01 Organization and Qualification; Subsidiaries..................... 18
4.02 Articles of Incorporation and Bylaws............................. 18
4.03 E&S Common Stock To Be Issued in The Merger...................... 18
4.04 Authority Relative to This Agreement............................. 19
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
4.05 No Conflict; Required Filings and Consents....................... 19
4.06 SEC Filings; Financial Statements................................ 19
4.07 Absence of Litigation............................................ 20
4.08 Tax Treatment.................................................... 20
4.09 Absence of Certain Changes or Events............................. 20
4.10 Opinion of Financial Advisor..................................... 20
4.11 Brokers.......................................................... 20
ARTICLE V--CONDUCT OF BUSINESS PENDING THE MERGER......................... 20
5.01 Conduct of Business By AGI Pending The Merger.................... 20
5.02 Conduct of Business By E&S Pending The Merger.................... 22
ARTICLE VI--ADDITIONAL AGREEMENTS......................................... 22
6.01 Registration Statement; Proxy Statement.......................... 22
6.02 Stockholders' Meeting............................................ 23
6.03 Appropriate Action; Consents; Filings............................ 24
6.04 Access to Information; Confidentiality........................... 24
6.05 No Solicitation of Competing Transactions........................ 25
6.06 Indemnification and Insurance.................................... 26
6.07 Notification of Certain Matters.................................. 26
6.08 Stock Exchange Listing........................................... 27
6.09 Public Announcements............................................. 27
6.10 Plan of Reorganization........................................... 27
6.11 Affiliates....................................................... 27
6.12 AGI Employee Stock Purchase Plan................................. 27
6.13 Employment Agreements............................................ 27
6.14 Employees and Employee Benefits.................................. 27
ARTICLE VII--CONDITIONS TO THE MERGER..................................... 28
7.01 Conditions to the Obligations of Each Party...................... 28
7.02 Conditions to the Obligations of E&S and Merger Sub.............. 29
7.03 Conditions to the Obligations of AGI............................. 29
ARTICLE VIII--TERMINATION, AMENDMENT AND WAIVER........................... 30
8.01 Termination...................................................... 30
8.02 Effect of Termination............................................ 30
8.03 Fees and Expenses................................................ 30
8.04 Amendment........................................................ 31
8.05 Waiver........................................................... 31
ARTICLE IX--GENERAL PROVISIONS............................................ 31
9.01 Non-Survival of Representations, Warranties and Agreements....... 31
9.02 Notices.......................................................... 31
9.03 Certain Definitions.............................................. 32
9.04 Accounting Terms................................................. 33
9.05 Severability..................................................... 33
9.06 Entire Agreement; Assignment..................................... 33
9.07 Parties in Interest.............................................. 33
9.08 Specific Performance............................................. 33
9.09 Governing Law.................................................... 33
9.10 Headings......................................................... 33
9.11 Counterparts..................................................... 33
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OF
DEFINED TERM DEFINED TERM
- ------------ ------------
<S> <C>
Affiliate............................................... Section 9.03(a)
Affiliated Person....................................... Section 3.23(a)
AGI Benefit Plans....................................... Section 3.10(a)
AGI Business............................................ Section 9.03(d)
AGI Common Stock........................................ Recitals
AGI Disclosure Schedule................................. Article III
AGI Financial Advisor................................... Section 3.25
AGI Fiscal Year 1997 Balance Sheet...................... Section 3.07(d)
AGI Group............................................... Section 9.03(e)
AGI Intellectual Property............................... Section 3.13
AGI Licenses............................................ Section 3.13
AGI Material Adverse Effect............................. Section 3.01
AGI Pension Plans....................................... Section 3.10(a)
AGI Permits............................................. Section 3.06(b)
AGI SEC Reports......................................... Section 3.07(a)
AGI Stock Option........................................ Section 2.07(a)
AGI Stock Option Plans.................................. Section 2.07(a)
Agreement............................................... Recitals
Beneficial Owner........................................ Section 9.03(b)
Blue Sky Laws........................................... Section 3.05(b)
Business Day............................................ Section 9.03(c)
Cash Consideration...................................... Section 2.01(a)
Cash Election........................................... Section 2.02(b)(ii)
Cash Election Shares.................................... Section 2.02(b)(viii)
Certificate of Merger................................... Section 1.02
Closing Agreement....................................... Section 3.14(a)(i)
Closing Date............................................ Section 1.02
Code.................................................... Recitals
Commonly Controlled Entity.............................. Section 3.10(a)
Competing Transaction................................... Section 6.05(a)
Confidentiality Agreement............................... Section 6.04(a)
Control................................................. Section 9.03(f)
Controlled By........................................... Section 9.03(f)
Current Offering........................................ Section 6.12
DGCL.................................................... Recitals
E&S Common Stock........................................ Recitals
E&S Financial Advisor................................... Section 4.10
E&S Material Adverse Effect............................. Section 4.01
E&S SEC Reports......................................... Section 4.06(a)
Effective Time.......................................... Section 1.02
Election Deadline....................................... Section 2.02(b)(iv)
Environmental Law....................................... Section 3.15(a)(ii)
Environmental Permit.................................... Section 3.15(a)(iii)
ERISA................................................... Section 3.10(a)
ESPP.................................................... Section 3.03
Exchange Act............................................ Section 3.05(b)
Exchange Agent.......................................... Section 2.02(b)(i)
Exchange Fund........................................... Section 2.02(b)(i)
Form of Election........................................ Section 2.02(b)(iii)
Governmental Authority.................................. Section 3.05(b)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OF
DEFINED TERM DEFINED TERM
- ------------ ------------
<S> <C>
Hazardous Substances...................................... Section 3.15(a)(i)
HSR Act................................................... Section 3.05(b)
Knowledge................................................. Section 9.03(h)
Laws...................................................... Section 3.05(a)
Liens..................................................... Section 3.12(a)
Material Contracts........................................ Section 3.16(a)
Merger.................................................... Recitals
Merger Consideration...................................... Section 2.01(a)
Merger Sub................................................ Recitals
NASD...................................................... Section 2.02(b)(iv)
NASDAQ/NMS................................................ Section 2.01(a)
Notice of Superior Proposal............................... Section 6.05(c)
PBGC...................................................... Section 3.10(g)
Person.................................................... Section 9.03(i)
Proxy Statement........................................... Section 2.02(b)(iii)
Real Estate............................................... Section 9.03(j)
Registration Statement.................................... Section 6.01(a)
Representatives........................................... Section 6.04(b)
SEC....................................................... Section 3.07(a)
Securities Act............................................ Section 2.03
Stock Consideration....................................... Section 2.01(a)
Stockholders' Meeting..................................... Section 6.02(a)
Subsidiaries.............................................. Section 9.03(k)
Subsidiary................................................ Section 3.01
Superior Proposal......................................... Section 6.05(c)
Surviving Corporation..................................... Section 1.01
Tax Return................................................ Section 3.14(a)(ii)
Tax Ruling................................................ Section 3.14(a)(iii)
Taxes..................................................... Section 3.14(a)(iv)
Terminating E&S Breach.................................... Section 8.01(d)
Terminating AGI Breach.................................... Section 8.01(e)
The Act................................................... Recitals
Under Common Control With................................. Section 9.03(f)
Voting Agreement.......................................... Recitals
Welfare Plans............................................. Section 3.10(a)
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated April 22, 1998 (this "Agreement") among
EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah corporation ("E&S"), E&S
MERGER CORP., a Utah corporation and a wholly owned subsidiary of E&S ("Merger
Sub"), and ACCELGRAPHICS, INC., a Delaware corporation ("AGI").
WHEREAS, the parties hereto desire to cause AGI, upon the terms and subject
to the conditions of this Agreement and in accordance with the Utah Revised
Business Corporation Act (the "Act") and the Delaware General Corporation Law
("DGCL"), to merge with and into Merger Sub (the "Merger");
WHEREAS, in the Merger, each outstanding share of AGI common stock, par
value $.001 per share ("AGI Common Stock"), shall be converted into the right
to receive cash and or a fraction of a share of E&S common stock, par value
$.20 per share ("E&S Common Stock"), all on the terms set forth in this
Agreement;
WHEREAS, the Board of Directors of AGI has (i) determined that the Merger is
fair to the holders of shares of AGI Common stock, and is in the best
interests of such stockholders and (ii) approved this Agreement and the
transactions contemplated hereby and recommended unanimously that the holders
of shares of AGI Common Stock approve and adopt this Agreement;
WHEREAS, the Board of Directors of E&S has determined that the Merger is in
the best interests of E&S and its stockholders and, as sole stockholder of
Merger Sub, has approved and adopted this Agreement and the transactions
contemplated hereby;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, as a condition and inducement to E&S and Merger Sub entering into
this Agreement and incurring the obligations set forth herein, concurrently
with the execution and delivery of this Agreement, E&S is entering into a
Voting Agreement and Irrevocable Proxy with certain stockholders of AGI, dated
the date hereof (the "Voting Agreement"), pursuant to which, among other
things, such stockholders have agreed, subject to the terms and conditions
contained therein, to vote all shares of AGI Common Stock then owned by such
stockholders to approve and adopt this Agreement, and have granted to E&S an
irrevocable proxy to so vote such shares upon the terms and subject to the
conditions set forth therein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and intending to be legally bound hereby, E&S,
Merger Sub and AGI hereby agree as follows:
ARTICLE I
THE MERGER
1.01 THE MERGER. At the Effective Time (as defined in Section 1.02) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Act and the DGCL, AGI shall be merged with and
into Merger Sub, the separate corporate existence of AGI shall cease and
Merger Sub shall continue as the surviving corporation. Merger Sub as the
surviving corporation in the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
1.02 CLOSING; EFFECTIVE TIME. The closing of the transactions contemplated
hereby (the "Closing") shall take place as soon as practicable after the
satisfaction or waiver of each of the conditions set forth in Article VII
hereof (but in any event within one business day thereof) or at such other
time as the parties hereto agree (the date on which the Closing shall occur,
the "Closing Date"). The Closing shall take place at the offices of Snell
A-1
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& Wilmer, L.L.P., 111 East Broadway, Suite 900, Salt Lake City, Utah 84111, or
at such other location as may be mutually agreed to by the parties. In
connection with the Closing, the parties hereto shall cause the Merger to be
consummated by filing of Articles of Merger (the "Articles of Merger") with
the Division of Corporations and Commercial Code of the State of Utah in
accordance with the provisions of the Act and by filing a certificate of
merger in form reasonably satisfactory to the parties hereto (the "Certificate
of Merger") with the Secretary of State of the State of Delaware in accordance
with the relevant provisions of the DGCL (the time of such filing, the
"Effective Time"). The date on which the Effective Time shall occur is
referred to herein as the "Effective Date."
1.03 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of the
Act and the DGCL. Without limiting the generality of the foregoing and subject
thereto, at the Effective Time, all the property, rights, privileges, powers
and franchises of AGI and Merger Sub shall vest in the Surviving Corporation,
and all debts, liabilities and duties of AGI and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.04 ARTICLES OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Articles of Incorporation of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended; provided,
however, that Article I of the Articles of Incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the corporation
is AccelGraphics, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.05 DIRECTORS AND OFFICERS. The directors of Merger Sub and the officers of
Merger Sub at the Effective Time shall, from and after the Effective Time, be
the directors and officers, respectively, of the Surviving Corporation until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
ARTICLE II
CONVERSION OF SECURITIES
2.01 CONVERSION OR CANCELLATION OF SHARES. By virtue of the Merger and
without any action on the part of E&S, Merger Sub or AGI or the holders of any
of the following securities, the manner of converting or canceling shares in
connection with the Merger shall be as follows:
(a) Conversion of Shares. Subject to the terms of Section 2.02, each
share of AGI Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of AGI Common Stock owned by E&S, Merger
Sub or any other direct or indirect subsidiary of E&S (collectively, the
"E&S Companies") or held in AGI's treasury or shares of AGI Common Stock
that are held by stockholders duly exercising appraisal rights pursuant to
Section 262 of the DGCL ("Dissenting Shares") to the extent such rights
shall be available in connection with the Merger), shall be converted into,
and become exchangeable for, at the election of the record holder thereof,
(i) $5.75 in cash (the "Cash Consideration") or (ii) that portion of a
share of E&S Common Stock, equal to a fraction, the numerator of which is
$5.75 and the denominator of which is the E&S Common Stock Price (the
"Stock Consideration," and, together with the Cash Consideration, the
"Merger Consideration"). For purposes of this Agreement, the term "E&S
Common Stock Price" shall mean an amount equal to the average closing sales
prices of E&S Common Stock on the National Association of Securities
Dealers, Inc. Automated Quotation/National Market System ("NASDAQ/NMS") on
each of the ten (10) consecutive trading days immediately preceding the
second trading day prior to the Effective Date, and the term "Stock
Exchange Ratio" shall mean a fraction the numerator of which is $5.75 and
the denominator of which is the E&S Common Stock Price. At the Effective
Time, all such shares of AGI Common Stock shall no longer be outstanding
and shall be canceled
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and retired and shall cease to exist, and each certificate (each a
"Certificate") representing any of such shares shall thereafter represent
only the right to receive the Merger Consideration (and the right, if any,
to receive cash in lieu of fractional shares) into which such shares have
been converted pursuant to this Article II, or the right, if any, to
receive payment from the Surviving Corporation of the "fair value" of such
shares as determined in accordance with Section 262 of the DGCL;
(b) Cancellation of Shares. Each share of AGI Common Stock issued and
outstanding immediately prior to the Effective Time and owned by any of the
E&S Companies, and each such share issued and held in AGI's treasury
immediately prior to the Effective Time, shall, at the Effective Time and
by virtue of the Merger, and without any action on the part of the holder
thereof, cease to be outstanding, shall be canceled and retired without
payment of any consideration therefor and shall cease to exist;
(c) Merger Sub Capital Stock. At the Effective Time, each share of common
stock, par value $.01 per share, of Merger Sub ("Merger Sub Common Stock")
issued and outstanding immediately prior to the Effective Time shall remain
outstanding and each certificate therefor shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
2.02 ALLOCATION OF MERGER CONSIDERATION; ELECTION PROCEDURES.
(a) Allocation. Notwithstanding anything in this Agreement to the contrary,
the maximum number of shares of AGI Common Stock to be converted into the
right to receive Cash Consideration in the Merger (the "Cash Election Maximum
Number") shall be, except as otherwise required under Section 2.02(b)(xi),
equal to the product of (w) 0.48 (as adjusted to reflect the amount, if any,
of cash payments made pursuant to Section 2.04 or Section 2.06) multiplied by
(x) the total number of shares of AGI Common Stock (other than the number of
shares of AGI Common Stock to be canceled in accordance with Section 2.01(b))
outstanding at the Effective Time. The maximum number of shares of AGI Common
Stock to be converted into the right to receive Stock Consideration in the
Merger (the "Stock Election Maximum Number") shall be equal to the product of
(y) 0.52 multiplied by (z) the total number of shares of AGI Common Stock
(other than the number of shares of AGI Common Stock to be cancelled in
accordance with Section 2.01(b)) outstanding at the Effective Time.
(b) Election Procedures.
(i) As soon as practicable following the Effective Time (but in any event
within two business days thereof), E&S shall deposit, or shall cause to be
deposited, with an exchange agent selected by E&S (the "Exchange Agent"),
with the reasonable concurrence of AGI, for the benefit of the holders of
shares of AGI Common Stock, for exchange in accordance with this Article
II, certificates representing shares of E&S Common Stock and any cash to be
paid upon due surrender of the Certificates pursuant to the provisions of
this Article II (such cash and certificates for shares of E&S Common Stock,
together with the amount of any dividends or distributions payable with
respect thereto, being hereinafter referred to as the "Exchange Fund").
(ii) Subject to allocation and proration in accordance with the
provisions of this Section 2.02, each record holder of shares of AGI Common
Stock (other than Dissenting Shares, if any, that are not to be treated as
Non-Election Shares pursuant to Section 2.04 and shares to be canceled in
accordance with Section 2.01(b)) issued and outstanding immediately prior
to the Election Deadline (as defined below) shall be entitled to elect to
receive in respect of each such share (i) the Cash Consideration (a "Cash
Election") or (ii) the Stock Consideration (a "Stock Election") or to
indicate that such record holder has no preference as to the receipt of
Cash Consideration or Stock Consideration for such shares (a "Non-
Election"). Holders of shares in respect of which a Non-Election is made
(including shares in respect of which such an election is deemed to have
been made pursuant to this Section 2.02 and Section 2.04 (collectively,
"Non-Election Shares")) shall receive 48% of the Merger Consideration in
cash and 52% of the Merger Consideration in E&S Common Stock, subject to
the allocation adjustment provisions set forth in Section 2.02(a).
(iii) Elections pursuant to Section 2.02(b)(ii) shall be made on a form
to be mutually agreed upon by AGI and E&S (a "Form of Election") and
provided by the Exchange Agent for that purpose to holders of
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record of shares of AGI Common Stock, together with appropriate transmittal
materials, at the time of mailing to holders of record of shares of AGI
Common Stock of the AGI's proxy statement with respect to its meeting of
stockholders (the "Proxy Statement") to approve the transactions
contemplated by this Agreement. Elections shall be made by mailing to the
Exchange Agent a duly completed Form of Election. The Form of Election
shall be explicit in permitting a holder of record of AGI Common Stock to
make a Cash Election with respect to a portion of the shares held by such
holder and make a Stock Election with respect to the remainder of the
shares held by such holder.
(iv) To be effective, a Form of Election must be (x) properly completed,
signed and submitted to the Exchange Agent at its designated office, by
5:00 p.m., Eastern Daylight Time on the business day that is two (2)
trading days prior to the Closing Date (which date shall be publicly
announced by E&S as soon as practicable but in no event less than five
trading days prior to Closing Date) (the "Election Deadline") and (y)
accompanied by the Certificates representing the shares of AGI Common Stock
as to which the election is being made (or by an appropriate guarantee of
delivery of such Certificates by a commercial bank or trust company in the
United States or a member of a registered national security exchange or of
the National Association of Securities Dealers, Inc. ("NASD"), provided
such Certificates are in fact delivered to the Exchange Agent within ten
(10) trading days after the date of execution of such guarantee of
delivery). Any holder of shares of AGI Common Stock that does not submit a
Form of Election to the Exchange Agent prior to the Election Deadline shall
be deemed to have made a Non-Election. E&S shall determine, in its sole and
absolute discretion, which authority it may delegate in whole or in part to
the Exchange Agent, whether Forms of Election have been properly completed,
signed, submitted or revoked and whether the Form of Election is otherwise
deemed effective pursuant to this Section 2.02(b)(iv). The decision of E&S
(or the Exchange Agent, as the case may be) in such matters shall be
conclusive and binding. To the extent practicable, E&S or the Exchange
Agent, as the case may be, shall attempt to notify any person who shall
submit a defective Form of Election of such defect prior to the Election
Deadline.
(v) AGI shall use reasonable commercial efforts to make a Form of
Election available to all persons who become holders of record of shares of
AGI Common Stock between the date of mailing of the Proxy Statement
described in Section 2.02(b)(iii) and the Election Deadline.
(vi) An election may be revoked, but only by written notice received by
the Exchange Agent prior to the Election Deadline. Any Certificate or
Certificates that have been submitted to the Exchange Agent in connection
with an election shall be returned without charge to the holder thereof in
the event such election is revoked as aforesaid and such holder requests in
writing the return of such Certificate or Certificates. Upon such
revocation, and unless an effective Form of Election is thereafter
submitted in accordance with this Section 2.02(b), any shares to which such
revocation applies shall be deemed Non-Election Shares. In the event that
this Agreement is terminated pursuant to the applicable provisions of this
Agreement, Certificates submitted prior to such time shall promptly be
returned without charge to the person submitting the same.
(vii) In the event that the aggregate number of shares in respect of
which Cash Elections have been made (collectively, the "Requested Cash
Election Shares") exceeds the Cash Election Maximum Number, all shares in
respect of which Stock Elections have been made (the "Stock Election
Shares") shall receive Stock Consideration, and all Requested Cash Election
Shares shall be converted into the right to receive Stock Consideration or
Cash Consideration such that each holder making a Cash Election shall
receive, for each share of AGI Common Stock for which a Cash Election has
been made, (x) cash in an amount equal to the product of (1) the Cash
Consideration multiplied by (2) a fraction, the numerator of which is the
Cash Election Maximum Number and the denominator of which is the number of
Requested Cash Election Shares (such product, the "Prorated Cash Amount"),
and (y) a portion of a share of E&S Common Stock equal to a fraction, the
numerator of which is equal to the Cash Consideration minus the Prorated
Cash Amount and the denominator of which is equal to the E&S Common Stock
Price.
(viii) In the event that the aggregate number of shares in respect of
which Stock Elections have been made (collectively, the "Requested Stock
Election Shares") exceeds the Stock Election Maximum Number,
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all shares in respect of which Cash Elections have been made (the "Cash
Election Shares") shall receive Cash Consideration, and all requested Stock
Election Shares shall be converted into the right to receive Stock
Consideration or Cash Consideration such that each holder making a Stock
Election shall receive, for each share of AGI Common Stock for which a
Stock Election has been made, (x) E&S Common Stock in an amount equal to
the product of (1) the Stock Consideration multiplied by (2) a fraction,
the numerator of which is the Stock Election Maximum Number and the
denominator of which is the number of Requested Stock Election Shares (such
product the "Prorated Stock Amount"), and (y) cash consideration equal to
the total Merger Consideration available for such holder, reduced by the
value of the Prorated Stock Amount.
(ix) In the event that paragraphs (vii) and (viii) of this Section
2.02(b) are not applicable, all Cash Election Shares and 48% of all Non-
Election Shares shall be converted into the right to receive the Cash
Consideration, and all Stock Election Shares and 52% of all Non-Election
Shares shall be converted into the right to receive the Stock Consideration
(and cash in lieu of fractional interests).
(x) The Exchange Agent, in consultation with E&S and AGI, shall make all
computations to give effect to this Section 2.02.
(xi) In the event either or both of the tax opinions of counsel referred
to in Section 7.01(f) cannot be rendered as a result of the Merger
potentially failing to satisfy continuity of interest requirements under
applicable federal income tax principles relating to reorganizations under
Section 368(a) of the Code, then the Cash Election Maximum Number shall be
reduced to the minimum extent necessary to enable the relevant tax opinion
or opinions, as the case may be, to be rendered.
2.03 TRANSFERS. After the Effective Time, there shall be no transfers on the
stock transfer books of AGI of the shares of AGI Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for shares of E&S Common Stock and/or any cash to be
paid upon the due surrender of and in respect of such Certificates pursuant to
this Agreement in accordance with the procedures set forth in this Article II.
Certificates surrendered for exchange by any person constituting an
"affiliate" of AGI for purposes of Rule 145(c) under the Securities Act of
1933, as amended (the "Securities Act"), shall not be exchanged until E&S
shall have received a written agreement from such person as provided in
Section 7.02(c).
2.04 DISSENTERS' RIGHTS. To the extent that appraisal rights shall be
determined to be applicable to the Merger, any stockholder of AGI who shall
have delivered a written demand for appraisal of such stockholder's shares of
AGI Common Stock, as provided in Section 262 of the DGCL (each a "Dissenting
Stockholder"), shall not be entitled to shares of E&S Common Stock or cash
pursuant to this Article II, unless and until the holder thereof shall have
failed to perfect or shall have effectively withdrawn or lost such holder's
right to dissent from the Merger under the DGCL, and shall be entitled to
receive only the payment provided by Section 262 of the DGCL with respect to
such shares. If any Dissenting Stockholder shall fail to perfect or shall have
effectively withdrawn or lost the right to dissent, the Dissenting Shares held
by such Dissenting Stockholder shall thereupon be treated as Non-Election
Shares. AGI shall give E&S (i) prompt notice of any written demands for
appraisal of any Dissenting Shares, attempted withdrawals of such demands, and
any other instruments served pursuant to applicable law received by AGI
relating to stockholders' rights of appraisal and (ii) the opportunity to
direct all negotiations and proceedings with respect to demand for appraisal
under the DGCL. AGI shall not, except with the prior written consent of E&S,
voluntarily make any payment with respect to any demands for appraisals of
Dissenting Shares, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
2.05 TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any shares of E&S
Common Stock) that remains unclaimed by any portion or all of the stockholders
of AGI for one year after the Effective Time shall be paid to E&S. Any
stockholders of AGI who have not theretofore complied with this Article II
shall thereafter look only to E&S for any payment of shares of E&S Common
Stock and/or cash payable upon due surrender of their Certificates, and in
each case, without any interest thereon. Notwithstanding the foregoing, none
of E&S, the Surviving Corporation, the Exchange Agent
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or any other person shall be liable to any former holder of shares of AGI
Common Stock for any amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
2.06 NO FRACTIONAL SHARES. No fraction of a share of E&S Common Stock will
be issued upon the surrender for exchange of Certificates pursuant to this
Article II. In lieu thereof, each holder of shares of AGI Common Stock who
would otherwise be entitled to a fraction of a share of E&S Common Stock
(after aggregating all fractional shares of E&S Common Stock to be received by
such holder) shall receive from E&S an amount of cash (rounded to the nearest
whole cent) equal to the product of (i) the fractional interest to which such
holder would otherwise be entitled, multiplied by (ii) the E&S Common Stock
Price.
2.07 AGI OPTIONS.
(a) Except as set forth below, each outstanding option (an "AGI Stock
Option"), whether or not exercisable and whether or not vested, at the
Effective Time under AGI 1995 Stock Plan, the AGI 1997 Director Option Plan,
or any other plans (the "AGI Stock Option Plans") shall be assumed by E&S and
deemed to constitute an option (an "E&S Option") to acquire, on the same terms
and conditions as were applicable under the E&S Option, the same number of
shares of E&S Common Stock as the holder of such E&S Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
option in full immediately prior to the Effective Time (rounded down to the
nearest whole number), at a price per share (rounded up to the nearest whole
cent) equal to (i) the aggregate exercise price for the shares of E&S Common
Stock otherwise purchasable pursuant to such E&S Option divided by (ii) the
number of full shares of E&S Common Stock deemed purchasable pursuant to such
E&S Option in accordance with the foregoing; provided, however, that, in the
case of any E&S Option to which Section 422 of the Code applies ("incentive
stock options"), the option price, the number of shares purchasable pursuant
to such option and the terms and conditions of exercise of such option shall
be determined in order to comply with Section 424(a) of the Code.
Notwithstanding the above, any AGI Stock Option with an exercise price in
excess of $6.00 per share, shall not be assumed by E&S, but rather shall be
terminated and cancelled as of the Effective Date.
(b) As soon as practicable after the Effective Time, E&S shall deliver to
the participants in the E&S Option Plan appropriate notice setting forth such
participants' rights pursuant thereto and the grants pursuant to the E&S Stock
Option Plans shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 6.5 after giving effect
to the Merger). E&S shall comply with the terms of the E&S Stock Option Plans
and use best efforts to ensure, to the extent required by, and subject to the
provisions of, such E&S Option Plan and Sections 422 and 424(a) of the Code,
that E&S Options which qualified as incentive stock options prior the
Effective Time continue to qualify as incentive stock options after the
Effective Time.
(c) E&S shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of E&S Common Stock for delivery upon exercise of
E&S Options assumed in accordance with this Section 2.07. As soon as
practicable after the Effective Time and in any event no later than five
business days after the Closing Date, E&S shall file a registration statement
on Form S-8 (or any successor or other appropriate forms) under the Securities
Act or another appropriate form with respect to the shares of E&S Common Stock
subject to such options and shall use its best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options remain outstanding.
2.08 FURTHER ASSURANCES. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Merger Sub or AGI acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger or otherwise to carry out this Agreement, the officers of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of each of the Merger Sub and AGI or otherwise, all such deeds,
bills of sale, assignments and assurances and to take and do, in such names
and on such behalves or otherwise, all such other
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actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out
the purposes of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AGI
Except as disclosed in a separate disclosure schedule referring to the
Sections contained in this Agreement, which has been delivered by AGI to E&S
prior to the execution of this Agreement (the "AGI Disclosure Schedule"), AGI
hereby represents and warrants to E&S and Merger Sub that:
3.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of AGI and each
subsidiary of AGI (each, a "Subsidiary") is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has the requisite corporate power and authority and all
necessary governmental approvals to own, lease and operate its properties and
to carry on its business as it is now being conducted, except where the lack
of such power, authority and approval would not, individually or in the
aggregate, have an AGI Material Adverse Effect (as defined below). Each of AGI
and each Subsidiary is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have an AGI Material Adverse Effect. The
term "AGI Material Adverse Effect" means any circumstances, change in, or
effect on, the AGI Group (as defined in Section 9.03), when taken as a
consolidated whole, or affecting the AGI Business (as defined in Section
9.03), which is, or could reasonably be expected in the future to be,
materially adverse to the AGI Group or the AGI Business; provided, however,
that any of such circumstances, changes in, or effects attributable to the
failure of E&S to make any deliveries of products to AGI following the date
hereof in accordance with the terms and specifications set forth in and
required by contractual arrangements between E&S and AGI shall not be taken
into account in determining whether there has been or would be a "AGI Material
Adverse Effect." A true and complete list of all the Subsidiaries, together
with the jurisdiction of incorporation of each Subsidiary and the percentage
of the outstanding capital stock of each Subsidiary owned by AGI and each
other Subsidiary, is set forth in Section 3.01 of AGI Disclosure Schedule.
Except as set forth in Section 3.01 of AGI Disclosure Schedule, AGI does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, limited liability company, joint
venture or other business association or entity.
3.02 CERTIFICATE OF INCORPORATION AND BYLAWS. AGI has heretofore furnished
to E&S complete and correct copies of the Certificate of Incorporation and the
Bylaws or equivalent organizational documents, each as amended to date, of AGI
and each Subsidiary. Such Certificate of Incorporation, Bylaws and equivalent
organizational documents are in full force and effect. Neither AGI nor any
Subsidiary is in violation of any provision of its Certificate of
Incorporation, Bylaws or equivalent organizational documents.
3.03 CAPITALIZATION. The authorized capital stock of AGI consists of (i)
50,000,000 shares of Common Stock, par value $.001 per share, and (ii)
2,000,000 shares of preferred stock, par value $.001 per share, issuable in
such series and with such rights and designations as the Board of Directors of
AGI may from time to time determine (the "AGI Preferred Stock"). As of March
31, 1998, (a) 8,451,088 shares of AGI Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable,
(b) no shares of AGI Common Stock were held in the treasury of AGI or the
Subsidiaries, (c) 2,955,389 shares of AGI Common Stock were reserved for
future issuance pursuant to AGI Stock Option Plans, (d) 371,672 shares of AGI
Common Stock were reserved for future issuance pursuant to the AGI 1997
Employee Stock Purchase Plan ("ESPP"), and (e) no shares of AGI Preferred
Stock were issued and outstanding. All publicly traded shares of AGI Common
Stock have been approved for trading on the NASDAQ/NMS. Set forth in Section
3.03 of AGI
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Disclosure Schedule is a summary setting forth the number of outstanding AGI
Options, stock incentive rights or any other rights to acquire shares of AGI
Common Stock pursuant to AGI Stock Option Plans and the exercise price
therefor as of March 31, 1998. From January 2, 1998 through the date of this
Agreement, AGI has not issued, sold, pledged, disposed of, granted,
encumbered, or authorized the issuance, sale, pledge, disposition, grant or
encumbrance of any shares of capital stock of any class of AGI or any
Subsidiary or any rights to acquire such shares or other equity interests in
AGI or any Subsidiary, except pursuant to the exercise of AGI Options that
were outstanding as of January 2, 1998 and those additional AGI Options
granted since January 2, 1998 that are set forth in Section 3.03 of AGI
Disclosure Schedule. Except as set forth in this Section 3.03 or in Section
3.03 of AGI Disclosure Schedule, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to
the issued or unissued capital stock of AGI or any Subsidiary or obligating
the AGI or any Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, AGI or any Subsidiary. All shares of AGI Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There
are no outstanding contractual obligations of AGI or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of AGI Common Stock or any
capital stock of or any equity interests in any Subsidiary. Each outstanding
share of capital stock of each Subsidiary is duly authorized, validly issued,
fully paid and nonassessable and each such share owned by AGI or any
Subsidiary is free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on AGI's or
such other Subsidiary's voting rights, charges and other encumbrances of any
nature whatsoever.
3.04 AUTHORITY RELATIVE TO THIS AGREEMENT. AGI has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Merger. The execution and delivery
of this Agreement by AGI and the consummation by AGI of the Merger have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of AGI are necessary to authorize this
Agreement or to consummate the Merger (other than, with respect to the Merger,
the adoption of this Agreement by the holders of a majority of the shares of
AGI Common Stock and the filing and recordation of appropriate merger
documents as required by the Act and the DGCL). This Agreement has been duly
and validly executed and delivered by AGI and, assuming the due authorization,
execution and delivery by E&S and Merger Sub, constitutes a legal, valid and
binding obligation of AGI, enforceable against AGI in accordance with its
terms.
3.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by AGI does not, and the
performance of this Agreement by AGI will not, (i) conflict with or violate
the Certificate of Incorporation or Bylaws or equivalent organizational
documents of AGI or any Subsidiary, as applicable, (ii) conflict with or
violate any domestic (federal, state or local) or foreign law, rule,
regulation, order, judgment or decree (collectively, "Laws") applicable to AGI
or any Subsidiary or by which any property or asset of AGI or any Subsidiary
is bound or affected, except for such conflicts or violations that,
individually or in the aggregate, are not reasonably likely to have an AGI
Material Adverse Effect, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of AGI or any Subsidiary pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which AGI or any Subsidiary is
a party or by which AGI or any Subsidiary or any property or asset of AGI or
any Subsidiary is bound or affected, except for any such breaches, defaults or
other occurrences that, individually or in the aggregate, would not have an
AGI Material Adverse Effect and will not prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by AGI does not, and the
performance of this Agreement by AGI will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic, or foreign (a "Governmental
Authority"), except (i) for
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applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act of 1933, as amended (the
"Securities Act"), state securities or "blue sky" laws ("Blue Sky Laws"),
state takeover laws, the pre-merger notification requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HSR Act"), and filing and recordation of
appropriate merger documents as required by the Act and the DGCL and the rules
of the National Association of Securities Dealers ("NASD") and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, individually or in the aggregate, is not
reasonably likely to have an AGI Material Adverse Effect.
3.06 COMPLIANCE WITH LAWS; PERMITS.
(a) Neither AGI nor any Subsidiary is in conflict with, or in default or
violation of, (i) any Laws applicable to AGI or any Subsidiary or by which any
property or asset of AGI or any Subsidiary is bound or affected, or (ii) any
of AGI Permits (as defined below), except for any such conflicts, defaults or
violations that do not, individually or in the aggregate, have an AGI Material
Adverse Effect.
(b) Each of AGI and the Subsidiaries is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders from all federal, state, local
and foreign authorities and agencies, necessary for AGI or any of its
Subsidiaries, to own, lease and operate its properties or to carry on the AGI
Business (the "AGI Permits"), and no suspension or cancellation of any of AGI
Permits is pending or, to AGI's Knowledge, threatened, except where the
failure to have, or the suspension or cancellation of, any of AGI Permits,
individually or in the aggregate, would not have an AGI Material Adverse
Effect.
3.07 SEC FILINGS; FINANCIAL STATEMENTS.
(a) AGI has filed all forms, reports and documents required to be filed by
it with the Securities and Exchange Commission (the "SEC") since April 11,
1997 and has made available to E&S all registration statements filed by AGI
with the SEC, including all exhibits filed in connection therewith (on all
forms applicable to the registration of securities) since April 11, 1997 and
prior to the date of this Agreement (collectively, the "AGI SEC Reports"), and
has heretofore made available to E&S complete (i.e., unredacted) copies of
each exhibit (which is in effect as of the date hereof) to AGI SEC Reports
filed with the SEC. AGI SEC Reports (i) were prepared in all material respects
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations thereunder, and (ii) did not
at the time they were filed contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(b) Except as disclosed in AGI SEC Reports, no Subsidiary is required to
file any form, report or other document with the SEC.
(c) Each of the consolidated financial statements (including, in each case,
any notes and schedules thereto) contained in AGI SEC Reports complied as to
form with the applicable accounting requirements and rules and regulations of
the SEC and was prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto), and each fairly
presents the consolidated financial position, results of operations and cash
flows of AGI and the consolidated Subsidiaries as at the respective dates
thereof and for the respective periods indicated therein in accordance with
United States generally accepted accounting principles (subject, in the case
of unaudited statements, to normal and recurring year-end adjustments which
were not and are not expected, individually or in the aggregate, to have an
AGI Material Adverse Effect).
(d) Except as and to the extent set forth on the consolidated balance sheet
of AGI as of January 2, 1998, including the notes thereto (the "AGI Fiscal
Year 1997 Balance Sheet"), neither AGI nor any Subsidiary has any liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise)
that would be
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required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with United States generally accepted accounting principles,
except for liabilities and obligations (i) disclosed in any AGI SEC Report
filed since January 2, 1998 and prior to the date of this Agreement, (ii)
incurred since January 2, 1998 in the ordinary course of business which,
individually or in the aggregate, do not have an AGI Material Adverse Effect,
or (iii) incurred pursuant to this Agreement.
(e) All of the accounts receivable that are reflected on the AGI Fiscal Year
1997 Balance Sheet, and all accounts receivable which have arisen since the
AGI Fiscal Year 1997 Balance Sheet through the Effective Date, have arisen
from bona fide transactions in the ordinary course of business. AGI has no
knowledge of any facts or circumstances (other than general economic
conditions) that would result in any material increase in the uncollectability
of such accounts receivable.
(f) GI has heretofore furnished to E&S complete and correct copies of all
material amendments and modifications that have not been filed by AGI with the
SEC to all agreements, documents and other instruments that previously had
been filed by AGI with the SEC and are currently in effect.
3.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 2, 1998, except as
contemplated by this Agreement, disclosed in Section 3.08 of AGI Disclosure
Schedule, or disclosed in any AGI SEC Report filed since April 11, 1997,
AccelGraphics and the Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since
January 2, 1998, there has not been (a) any event or events having,
individually or in the aggregate, an AGI Material Adverse Effect, (b) any
change by AGI in its accounting methods, principles or practices, (c) any
revaluation by AGI of any material asset (including, without limitation, any
writing down or writing up of the value of inventory, writing off of notes or
accounts receivable or reversing of any accruals or reserves), other than in
the ordinary course of business consistent with past practice, (d) any entry
by AGI or any Subsidiary into any commitment or transaction material to AGI
and the Subsidiaries taken as a whole, except in the ordinary course of
business and consistent in all material respects with past practice, (e) any
declaration, setting aside or payment of any dividend or distribution in
respect of any capital stock of AGI or any redemption, purchase or other
acquisition of any of its securities, or (f) other than pursuant to the
contracts referred to in Section 3.10 or as expressly provided for in this
Agreement, any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
AGI or any Subsidiary, except in the ordinary course of business consistent in
all material respects with past practice.
3.09 ABSENCE OF LITIGATION.
(a) Except as disclosed in AGI SEC Reports or in Section 3.09 of AGI
Disclosure Schedule, there is no claim, action, proceeding or investigation
pending or, to AGI's Knowledge, threatened against AGI or any Subsidiary, or
any property or asset of AGI or any Subsidiary, before any court, arbitrator
or Governmental Authority, which, individually or when aggregated with other
claims, actions, proceedings or investigations or product liability claims,
actions, proceedings or investigations which are reasonably likely to result
from facts and circumstances that have given rise to such a claim, action,
proceeding or investigation, would have an AGI Material Adverse Effect. As of
the date hereof, neither AGI nor any Subsidiary nor any property or asset of
AGI or any Subsidiary is subject to any order, writ, judgment, injunction,
decree, determination or award having, individually or in the aggregate, an
AGI Material Adverse Effect.
(b) Neither AGI nor any Subsidiary has received notice from any source that
a reasonable likelihood exists that AGI or any Subsidiary may be liable with
respect to product liability or worker's compensation claims, except for such
claims that, if determined adversely to AGI and the Subsidiaries, would not,
individually or in the aggregate, have an AGI Material Adverse Effect.
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3.10 EMPLOYEE BENEFIT; ERISA.
(a) Section 3.10(a) of AGI Disclosure Schedule contains a list of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "AGI Pension Plans"), "employee welfare benefit plans"
(as defined in Section 3(1) of ERISA) (sometimes referred to herein as
"Welfare Plans"), and each other plan, arrangement or policy (written or oral)
relating to stock options, stock purchases, compensation, deferred
compensation, severance, fringe benefits or other employee benefits, in each
case maintained, or contributed to, by AGI or any of the Subsidiaries or any
other person or entity that, together with AGI is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code (each, together with AGI, a
"Commonly Controlled Entity"), for the benefit of any current or former
employees, officers, agents or directors of AGI or any of its subsidiaries
(all of the foregoing being herein called "AGI Benefit Plans"). AGI has made
available to E&S true and complete copies of (i) each AGI Benefit Plan (or, in
the case of any unwritten AGI Benefit Plans, descriptions thereof), (ii) the
most recent annual report on Form 5500 filed with the Internal Revenue Service
with respect to each AGI Benefit Plan (if any such report was required), (iii)
the most recent summary plan description (or similar document) for each AGI
Benefit Plan for which a summary plan description is required or was otherwise
provided to plan participants or beneficiaries and (iv) each trust agreement
and group annuity contract relating to any AGI Benefit Plan.
(b) Except where non-disclosure would not have an AGI Material Adverse
Effect, all AGI Pension Plans and related trusts that are intended to be tax-
qualified plans have been, since the effective date of the Tax Reform Act of
1986, the subject of determination letters from the Internal Revenue Service
to the effect that such AGI Pension Plans and related trusts are qualified and
exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, and no such determination letter has been revoked
nor, to the Knowledge of AGI, has revocation been threatened; no event has
occurred and no circumstances exist that would adversely affect the tax
qualification of such AGI Pension Plan nor has any such AGI Pension Plan been
amended since the date of its most recent determination letter or application
therefor in any respect that would adversely affect its qualification or
materially increase its costs or require security under Section 302 of ERISA.
(c) Except as would not, individually or in the aggregate, have an AGI
Material Adverse Effect: (i) each AGI Benefit Plan has been administered in
accordance with its terms; (ii) AGI Benefit Plans are, and have been
administered, in compliance with the applicable provisions of ERISA, the Code,
and all other applicable laws; (iii) there are no investigations by any
governmental agency, termination proceedings or other claims (except claims
for benefits payable in the normal operation of AGI Benefit Plans), suits or
proceedings against or involving any AGI Benefit Plan or asserting any rights
to or claims for benefits under any AGI Benefit Plan that could give rise to
any liability, and there are not any facts that would reasonably be expected
to give rise to any liability in the event of any such investigation, claim,
suit or proceeding.
(d) No Commonly Controlled Entity is required to contribute to any
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA or, except as
set forth in Section 3.10(d) of AGI Disclosure Schedule, has withdrawn from
any such multiemployer plan where such withdrawal has resulted or would result
in any material "withdrawal liability" (within the meaning of Section 4201 of
ERISA) that has not been fully paid. Except as set forth in Section 3.10(d) of
AGI Disclosure Schedule, no Commonly Controlled Entity would incur any
material withdrawal liability if it were to withdraw from a multiemployer plan
with respect to which it currently has a contribution obligation. No Commonly
Controlled Entity, nor any officer of any Commonly Controlled Entity, nor any
of AGI Benefit Plans which are subject to ERISA, including AGI Pension Plans,
any trusts created thereunder or any trustee or administrator thereof, has
engaged in a "prohibited transaction" (as such term is defined in Section 406
of ERISA or Section 4975 of the Code) or any other breach of fiduciary
responsibility that could subject any Commonly Controlled Entity or any
officer of any Commonly Controlled Entity to any tax or penalty on prohibited
transactions imposed by such Section 4975 or to any material liability under
Section 502(i) or (l) of ERISA. Neither any of such AGI Benefit Plans nor any
of such trusts has been terminated, nor has there been any "reportable event"
(as that term is defined in Section 4043 of ERISA) with respect thereto,
during the last five years.
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(e) Except as set forth in Section 3.10(e) of AGI Disclosure Schedule,
neither AGI nor any of its Subsidiaries is a party to any agreement, contract
or arrangement that could result, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning of Section 280G
of the Code.
(f) To the Knowledge of AGI, the disallowance of a deduction under Section
162(m) of the Code for employee remuneration will not apply to any amount paid
or payable by AGI or any Subsidiary.
(g) Except as would not have an AGI Material Adverse Effect, no liability
under Title IV of ERISA has been incurred by any Commonly Controlled Entity
that has not been satisfied in full, and no condition exists that presents a
material risk to any Commonly Controlled Entity of incurring a liability under
such Title, other than liability for premiums due the Pension Benefit Guaranty
Corporation ("PBGC") (which premiums have been paid when due). To the extent
this representation applies to sections 4064, 4069 or 4204 of Title IV of
ERISA, it is made not only with respect to each AGI Pension Plan but also with
respect to any employee benefit plan, program, agreement or arrangement
subject to Title IV of ERISA to which AGI or any Commonly Controlled Entity
made, or was required to make, contributions during the five (5) year period
ending on the Closing Date. Except as would not have an AGI Material Adverse
Effect, no AGI Pension Plan or any trust established thereunder has incurred
any "accumulated funding deficiency" (as defined in section 302 of ERISA and
section 412 of the Code), whether or not waived, as of the last day of the
most recent fiscal year of each AGI Pension Plan ended prior to the Closing
Date; and all contributions required to be made with respect thereto (whether
pursuant to the terms of any AGI Pension Plan or otherwise) on or prior to the
Closing Date have been timely made.
(h) AGI and each of its Subsidiaries have not incurred any liability under,
and have complied in all respects with, the Worker Adjustment and Retraining
Notification Act of 1988 and the regulations promulgated thereunder.
3.11 LABOR MATTERS.
(a) With respect to employees of AGI: (i) to the Knowledge of AGI, no senior
executive or key employee has any plans to terminate employment with AGI or
any of its Subsidiaries; (ii) there is no unfair labor practice charge or
complaint against AGI or any of its Subsidiaries pending or, to the Knowledge
of AGI, threatened before the National Labor Relations Board or any other
comparable authority; (iii) there is no demand for recognition made by any
labor organization or petition for election filed with the National Labor
Relations Board or any other comparable authority which, individually or in
the aggregate, would have an AGI Material Adverse Effect; (iv) no grievance or
any arbitration proceeding arising out of or under collective bargaining
agreements is pending and, to the Knowledge of AGI, no claims therefor have
been threatened other than grievances or arbitrations incurred in the ordinary
course of business which, individually or in the aggregate, would not have an
AGI Material Adverse Effect; (v) the consummation of the Merger and related
transactions contemplated by this Agreement will not give rise to termination
of any existing collective bargaining agreement or permit any labor
organization to reopen negotiations in respect of wages, hours or working
conditions under any such existing collective bargaining agreements; and (vi)
there is no litigation, arbitration proceeding, governmental investigation,
administrative charge, citation or action of any kind pending or, to the
Knowledge of AGI, proposed or threatened against AGI relating to employment,
employment practices, terms and conditions of employment or wages and hours
which, individually or in the aggregate, would have an AGI Material Adverse
Effect.
(b) None of AGI nor any of its Subsidiaries has any collective bargaining
relationship or duty to bargain with any Labor Organization (as such term is
defined in Section 2(5) of the National Labor Relations Act, as amended), and
none of AGI nor any of its Subsidiaries has recognized any labor organization
as the collective bargaining representative of any of its employees.
(c) AGI has complied in all material respects with all applicable employment
laws relating to equal employment, fair employment practices, immigration
compliance, prohibited discrimination or other similar employment practices or
acts.
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3.12 TITLE TO AND SUFFICIENCY OF ASSETS.
(a) As of the date hereof AGI and the Subsidiaries own, and as of the
Effective Time AGI and the Subsidiaries will own, good and marketable title to
all of their assets constituting personal property which is material to their
business (excluding, for purposes of this sentence, assets held under leases),
free and clear of any and all mortgages, liens, encumbrances, charges, claims,
restrictions, pledges, security interests or impositions (collectively,
"Liens") the existence of which would have an AGI Material Adverse Effect,
except as set forth in the AGI SEC Reports. Such assets, together with all
assets held by AGI and the Subsidiaries under leases, include all tangible and
intangible personal property, contracts and rights necessary or required for
the operation of the AGI Business.
(b) AGI owns no Real Estate. The leases to all Real Estate occupied by AGI
and the Subsidiaries which are material to the operation of AGI Businesses are
in full force and effect and no event has occurred which with the passage of
time, the giving of notice, or both, would constitute a default or event of
default by AGI or any Subsidiary or, to the Knowledge of AGI, any other person
who is a party signatory thereto, other than such defaults or events of
default which, individually or in the aggregate, would not have an AGI
Material Adverse Effect.
3.13 INTELLECTUAL PROPERTY. "AGI Intellectual Property" means all
trademarks, trademark registrations, trademark rights, trade names, trade name
rights, patents, patent rights, patent applications, industrial models,
inventions, invention disclosures, copyrights, copyright registrations,
servicemarks, servicemark registrations, servicemark rights, trade secrets,
applications for trademarks and for servicemarks, know-how and other
proprietary rights, data and information of any nature or form used or held
for use in connection with the businesses of AGI and the Subsidiaries as
currently conducted by AGI, together with all applications currently pending
for any of the foregoing. Except as disclosed in AGI SEC Reports, AGI and the
Subsidiaries own or possess adequate licenses or other valid rights to use all
of AGI Intellectual Property that is necessary or appropriate for the conduct
of AGI's or Subsidiaries' businesses. Section 3.13(a) of AGI Disclosure
Schedule lists each material license or other agreement pursuant to which AGI
has the right to use AGI Intellectual Property utilized in connection with any
product of AGI and the Subsidiaries, the cancellation or expiration of which
would have an AGI Material Adverse Effect (the "AGI Licenses"). There are no
pending, and between the date hereof and the Effective Time, there shall not
be any pending, or to AGI's Knowledge, threatened interferences, re-
examinations, oppositions or nullities involving any patents, patent rights or
applications therefor of AGI or any Subsidiary, except such as would not,
individually or in the aggregate, have an AGI Material Adverse Effect. There
is no material breach or violation by AGI under, and, to AGI's Knowledge,
there is no material breach by any other party to, any AGI License that is
reasonably likely to give rise to any termination or any loss of material
rights thereunder. AGI has put in place policies and procedures to maintain
the confidentiality of, and trade secret rights to, the processes and
formulas, research and development results and other know-how of AGI, the
value of which to AGI is dependent upon the maintenance of the confidentiality
thereof and, to the Knowledge of AGI, such policies and procedures have been
complied with. The conduct of the business of AGI and the Subsidiaries as
currently conducted does not and will not infringe upon or conflict with, in
any way, any license, trademark, trademark right, trade name, trade name
right, patent, patent right, industrial model, invention, service mark,
service right, copyright or any other intellectual property rights of any
third party that, individually or in the aggregate, would have an AGI Material
Adverse Effect. Except as disclosed in AGI SEC Reports, there are no
infringements of any AGI Intellectual Property which, individually or in the
aggregate, would have an AGI Material Adverse Affect. Neither AGI nor any
Subsidiary has licensed or, to the Knowledge of AGI, otherwise permitted the
use by any third party of any proprietary information or AGI Intellectual
Property on terms or in a manner which, individually or in the aggregate,
would have an AGI Material Adverse Effect.
3.14 TAX MATTERS.
(a) Definitions. As used in this Agreement:
(i) "Closing Agreement" means a written and legally binding agreement
with a taxing authority relating to Taxes.
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(ii) "Tax Return" means any report, return, information statement, payee
statement or other information required to be provided to any federal,
state, local or foreign Governmental Authority, or otherwise retained, with
respect to Taxes or AGI Benefit Plans.
(iii) "Tax Ruling" means a written ruling of a taxing authority relating
to Taxes.
(iv) "Taxes" means any and all taxes, levies, imposts, duties,
assessments, charges and withholdings imposed or required to be collected
by or paid over to any federal, state, local or foreign Governmental
Authority or any political subdivision thereof, including without
limitation income, gross receipts, ad valorem, value added, minimum tax,
franchise, sales, use, excise, license, real or personal property,
unemployment, disability, stock transfer, mortgage recording, estimated,
withholding or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, and including any interest, penalties,
fines, assessments or additions to tax imposed in respect of the foregoing,
or in respect of any failure to comply with any requirement regarding Tax
Returns.
(b) Representations. Except as set forth in Section 3.14(b) of AGI
Disclosure Schedule or as would not, individually or in the aggregate, have an
AGI Material Adverse Effect:
(i) Filing of tax returns, payment of taxes. AGI has filed all Tax
Returns that AGI was required to file prior to the date hereof. All such
Tax Returns were correct and complete in all material respects and were
prepared and filed in accordance with applicable law. All Taxes owed by AGI
(whether or not shown on any Tax Return) with respect to Tax Returns the
due date of which preceded the date hereof have been paid or otherwise
contested in good faith. All other Taxes due and payable by AGI with
respect to periods ending on or before the date of the Closing or in
respect of transactions entered into or any state of facts existing on or
before the date of the Closing (whether or not a Tax Return is due on such
date) have been or will be paid on or before the date of the Closing or
have been or will be accrued on or before the date of the Closing. For
purposes of the preceding sentence, in determining the amount of Taxes due
and payable by AGI with respect to periods ending on or before the date of
the Closing or in respect of transactions entered into or any state of
facts existing on or before the date of the Closing, the date of the
Closing shall be deemed to be the last day of any applicable tax period.
All Tax Returns the due date of which (determined without extensions) is on
or after the date hereof but on or before the date of the Closing will be
correct and complete in all material respects and filed in accordance with
applicable law.
(ii) General Tax Matters. With respect to each taxable period for AGI
ending on or before the Closing Date (or as of such other date as set forth
below), (A) AGI will not be required (X) as a result of a change in method
of accounting for a taxable period ending on or prior to the Closing Date,
to include any adjustment under Section 481 of the Code (or any
corresponding provision of state, local, or foreign law) in taxable income
for any taxable period (or portion thereof) beginning after the Closing
Date or (Y) as a result of any "closing agreement," as described in Section
7121 of the Code (or any corresponding provision of state, local, or
foreign law) to include any item of income or exclude any item of deduction
from any taxable period (or portion thereof) beginning after the Closing
Date; (B) AGI is not a party to or bound by any tax allocation or tax
sharing agreement and has no current or potential obligation to indemnify
any other person with respect to any Tax or pay the Taxes of any other
person under Treasury Regulations Section 1.1502-6 (or any similar
provisions of state, local, or foreign law) as a transferee or successor,
by contract or otherwise; (C) AGI has not been a "U.S. real property
holding corporation" (within the meaning of Code Section 897(c)(2)) during
the applicable period specified in Code Section 897(c)(1)(A)(ii); (D) AGI
was not acquired in a qualified stock purchase under Code Section 338(d)(3)
and no elections under Code Section 338(g), protective carryover basis
elections, or offset prohibition elections are applicable to AGI; (E) AGI
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to an employee, independent
contractor, shareholder, or other third party; (F) no income under any
arrangement or understanding to which AGI is a party will be attributed to
AGI which is not represented by income to which AGI is legally entitled;
and (G) AGI owns no interest in any "controlled foreign corporation"
(within the meaning of Code Section 957), "passive foreign investment
company" (within the meaning of Code Section 1296) or other entity the
income of which is required to be included in the income of AGI whether or
not distributed
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(iii) Copies of Tax Returns. AGI has furnished or made available to E&S
copies of all income and sales Tax Returns filed by or with respect to AGI
relating to the period encompassing the three taxable years of AGI
preceding the date hereof. AGI shall provide E&S, prior to the filing
thereof, a copy of any income or sales Tax Returns which are filed prior to
the Effective Time.
(iv) Definition. Any reference to the term "AGI" in this Section 3.14
shall refer to AGI and any Subsidiary of AGI. Further, any reference to any
action of "AGI" in this Section 3.14 shall encompass any action or actions
taken by or at the direction of AGI whether or not such actions taken by or
at the direction of AGI were properly authorized.
3.15 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) petroleum and
petroleum products, by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls, and (B) any other
chemicals, biological or radioactive materials or substances regulated as
toxic or hazardous or as a pollutant, contaminant or waste under any
applicable Environmental Law; (ii) "Environmental Law" means any law, past,
present or future and as amended, and any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent decree or judgment, or common law, relating to pollution or protection
of the environment, health or safety or natural resources, including, without
limitation, those relating to the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Substances; and (iii)
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required under any applicable Environmental
Law.
(b) AGI and the Subsidiaries are and have been in compliance with all
applicable Environmental Laws, have obtained all Environmental Permits and are
in compliance with their requirements, and have resolved all past non-
compliance with Environmental Laws and Environmental Permits without any
pending, ongoing or future obligation, cost or liability, except in each case
where such non-compliance would not, individually or in the aggregate, have an
AGI Material Adverse Effect.
(c) Neither AGI nor any of the Subsidiaries has (i) placed, held, located,
released, transported or disposed of any Hazardous Substances on, under, from
or at any of AGI's or any of the Subsidiaries' properties or any other
properties, other than in a manner that would not, in all such cases taken
individually or in the aggregate, result in an AGI Material Adverse Effect,
(ii) any Knowledge of the presence of any Hazardous Substances on, under,
emanating from, or at any of AGI's or any of the Subsidiaries' properties or
any other property but arising from AGI's or any of the Subsidiaries' current
or former properties or operations, other than in a manner that would not
result in an AGI Material Adverse Effect, or (iii) any Knowledge, nor has it
received any written notice (A) of any violation of or liability under any
Environmental Laws, (B) of the institution or pendency of any suit, action,
claim, proceeding or investigation by any Governmental Entity or any third
party in connection with any such violation or liability, (C) requiring the
response to or remediation of Hazardous Substances at or arising from any of
AGI's or any of the Subsidiaries' current or former properties or operations
or any other properties, (D) alleging noncompliance by AGI or any of the
Subsidiaries with the terms of any Environmental Permit in any manner
reasonably likely to require material expenditures or to result in material
liability or (E) demanding payment for response to or remediation of Hazardous
Substances at or arising from any of AGI's or any of the Subsidiaries' current
or former properties or operations or any other properties, except in each
case for the notices set forth in Section 3.15(c) of AGI Disclosure Schedule.
(d) No Environmental Law imposes any obligation upon AGI or any of the
Subsidiaries arising out of or as a condition to any transaction contemplated
by this Agreement, including any requirement to modify or to transfer any
permit or license, any requirement to file any notice or other submission with
any Governmental Authority, the placement of any notice, acknowledgment or
covenant in any land records, or the modification of or provision of notice
under any agreement, consent order or consent decree. No Lien has been placed
upon any of AGI's or the Subsidiaries' properties under any Environmental Law.
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(e) AGI and the Subsidiaries have made available to E&S copies of any
environmental assessment or audit report or other similar studies or analyses
currently in the possession of AGI or any of the Subsidiaries relating to any
real property currently or formerly owned, leased or occupied by AGI or any of
the Subsidiaries.
3.16 MATERIAL CONTRACTS.
(a) The contracts and agreements listed in Section 3.16(a) of the Disclosure
Schedule are contracts, agreements and arrangements that are material to AGI
and the Subsidiaries or, although not so material, are of unique value to AGI
and the Subsidiaries and are referred to herein collectively as the "Material
Contracts".
(b) Except as would not, individually or in the aggregate, have an AGI
Material Adverse Effect, each AGI License and each Material Contract is a
legal, valid and binding agreement, neither AGI nor any of the Subsidiaries
(or to the Knowledge of AGI, any other party thereto) is in default under any
AGI Licenses or Material Contracts, and none of the AGI Licenses or Material
Contracts has been canceled by the other party thereto; each Material Contract
and AGI License is in full force and effect and no event has occurred which,
with the passage of time or the giving of notice or both, would constitute a
default, event of default or other breach by AGI or applicable Subsidiary
party thereto which would entitle the other party to such Material Contract or
AGI License to terminate the same or declare a default or event of default
thereunder; AGI and the Subsidiaries are not in receipt of any claim of
default under any such agreement; AGI or the applicable Subsidiary party to
such Material Contract or AGI License maintains good business relationships
with the other party to such agreement. AGI has made available to E&S true and
complete copies of all AGI Licenses and all Material Contracts. AGI is not a
party to any contracts or agreements that limit the ability of AGI or any
Subsidiary or, after the Effective Time, E&S or any of its affiliates, to
compete in any line of business or with any person or in any geographic area
or during any period of time, or to solicit any customer or client.
(c) The Material Contracts are freely assignable to the Surviving
Corporation in connection with the Merger.
3.17 SUPPLIERS. Neither AGI nor any Subsidiary has received any notice that
any significant supplier will not sell raw materials, supplies, merchandise
and other goods to AGI or any Subsidiary at any time after the Effective Time
on terms and conditions substantially similar to those used in its current
sales to AGI and the Subsidiaries, subject only to general and customary price
increases, unless comparable raw materials, supplies, merchandise or other
goods are readily available from other sources on comparable terms and
conditions or unless such failure to sell would not have an AGI Material
Adverse Effect.
3.18 TAX TREATMENT. Neither AGI nor, to AGI's Knowledge, any of its
affiliates has taken, agreed to take, or will take any action that would
prevent the Merger from constituting a transaction qualifying under Section
368(a) of the Code. Neither AGI nor, to AGI's Knowledge, any of its affiliates
or agents is aware of any agreement, plan or other circumstance that would
prevent the Merger from qualifying under Section 368(a) of the Code, and, to
AGI's Knowledge, the Merger will so qualify.
3.19 INSURANCE. All fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies maintained by AGI or any of its Subsidiaries that are material to its
business are with reputable insurance carriers, provide full and adequate
coverage for all normal risks incident to the business of AGI and the
Subsidiaries and their respective properties and assets, and are in character
and amount at least equivalent to that carried by persons engaged in similar
businesses and subject to the same or similar perils or hazards, except for
any such failures to maintain insurance policies that, individually or in the
aggregate, would not have an AGI Material Adverse Effect. AGI and each
Subsidiary have made any and all payments required to maintain such policies
in full force and effect. Neither AGI nor any Subsidiary has received notice
of default under any such policy, and has not received written notice or, to
the Knowledge of AGI, oral notice of any pending or threatened termination or
cancellation, coverage limitation or reduction or material premium increase
with respect to such policy.
3.20 APPROVAL OF AGI BOARD. The Board of Directors of AGI has approved
unanimously the execution and delivery of this Agreement for purposes of
Section 203 of the DGCL.
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3.21 STOCKHOLDER VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of AGI Common Stock is the only vote of the
holders of any class or series of capital stock of AGI necessary to approve
the Merger.
3.22 ACCURACY OF INFORMATION. Neither this Agreement (including the
schedules and exhibits hereto) nor any other document or certificates
delivered by AGI or the Subsidiaries pursuant to the terms of the Agreement
contains an untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein not misleading.
3.23 TRANSACTIONS WITH AFFILIATES.
(a) For purposes of this Section 3.23, the term "Affiliated Person" means
(i) any holder of 5% or more of the issued and outstanding AGI Common Stock,
(ii) any director, officer or senior executive of AGI or any Subsidiary, (iii)
any person, firm or corporation that directly or indirectly controls, is
controlled by, or is under common control with, any of AGI or any Subsidiary
or (iv) any member of the immediate family or any of such persons.
(b) Except as set forth in the AGI SEC Reports, to the Knowledge of AGI,
since April 11, 1997, AGI and the Subsidiaries have not, in the ordinary
course of business or otherwise, (i) purchased, leased or otherwise acquired
any material property or assets or obtained any material services from, (ii)
sold, leased or otherwise disposed of any material property or assets or
provided any material services to (except with respect to remuneration for
services rendered in the ordinary course of business as director, officer or
employee of AGI or any Subsidiary), (iii) entered into or modified in any
manner any contract with, or (iv) borrowed any money from, or made or forgiven
any loan or other advance (other than expenses or similar advances made in the
ordinary course of business) to, any Affiliated Person.
(c) Except as set forth in the AGI SEC Reports, to the Knowledge of AGI, (i)
the Material Contracts of AGI and the Subsidiaries do not include any material
obligation or commitment between AGI or any Subsidiary and any Affiliated
Person, (ii) the assets of AGI or any Subsidiary do not include any receivable
or other obligation or commitment from an Affiliated Person to AGI or any
Subsidiary and (iii) the liabilities of AGI and the Subsidiaries do not
include any payable or other obligation or commitment from AGI or any
Subsidiary to any Affiliated Person.
(d) To the Knowledge of AGI and except as set forth in the AGI SEC Reports,
no affiliated Person of any of AGI or any Subsidiary is a party to any
contract with any customer or supplier of AGI or any Subsidiary that affects
in any material manner the business, financial condition or results of
operations of AGI or any Subsidiary.
3.24 ADEQUACY OF INFORMATION SYSTEMS; NO ADVERSE WARRANTIES. Each component
of the management information and operating systems of AGI and the
Subsidiaries relating to or supportive of either companies' sales, accounting,
inventory, distribution, and other material systems and operations, including
all hardware and software relating thereto (collective "MIS Systems"), is
reasonably adequate to support the present and expected future business
operations for the next twelve months. Without limiting the generality of the
foregoing, the MIS Systems (i) include design, function, and performance
capabilities such that the MIS Systems will not abnormally end or have invalid
or incorrect results from and/or performance or functional degradation because
of the then-current date; (ii) the design and function of the MIS Systems
ensure year 2000 functionality and include, without limitation, date data
century recognition, calculations that accommodate same century and
multicentury formulas and date values, and date data interface values that
reflect the then current century; and (iii) are otherwise year 2000 date
compliant with present capability to implement year 2000 century date
conversion without material additional cost or devotion of management,
employees, or other resources, and will suffer no material adverse disruption
resulting from such date conversion. Neither AGI nor any Subsidiary has made
or provided warranties or guaranties, or other assurances expressed or
implied, to any other person that any products or services sold or provided by
either company are year 2000 date compliant in any respect or otherwise will
not or are not likely to experience year 2000 century recognition or
functionality difficulties.
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3.25 OPINION OF FINANCIAL ADVISOR. AGI has received the opinion of Cowen &
Company (the "AGI Financial Advisor"), to the effect that, as of the date
hereof, financial terms of the Merger are fair, from a financial point of
view, to the holders of AGI Common Stock.
3.26 BROKERS. Except for the AGI Financial Advisor, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of AGI. AGI has heretofore furnished to E&S a complete and correct copy
of all agreements between AGI and AGI Financial Advisor pursuant to which such
firm would be entitled to any payment relating to the Merger.
3.27 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither AGI nor any officer,
shareholder, employee, or agent of AGI, or any other person acting on its
behalf, has, directly or indirectly, within the past five years given or
agreed to give any gift, bribe, rebate, or kickback or otherwise provided any
similar benefit to any customer, supplier, governmental employee, or other
person who is or may be in a position to help or hinder AGI (or assist AGI in
connection with any actual or proposed transaction) (i) that subjected or
might have subjected AGI to any material damage or penalty in any civil,
criminal, or governmental litigation or proceeding, (ii) which if not given in
the past, or if not continued in the future, might have a AGI Material Adverse
Effect or subject AGI to suit or penalty in any private or governmental
litigation or proceeding, (iii) for any of the purposes described in Section
162(c) of the Code, or (iv) for the purpose of establishing or maintaining any
concealed fund or concealed bank account.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF E&S AND MERGER SUB
Except as specifically disclosed in E&S SEC Reports (as hereinafter defined)
filed subsequent to December 31, 1997 and prior to the date hereof, E&S and
Merger Sub hereby, jointly and severally, represent and warrant to AGI that:
4.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of E&S and Merger
Sub is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has the requisite
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Each of E&S and Merger Sub is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated
by it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that, individually or in the aggregate, would not have an E&S
Material Adverse Effect. The term "E&S Material Adverse Effect" means any
circumstances, change in, or effect on, E&S, when taken as a consolidated
whole, which is, or could reasonably be expected to in the future be,
materially adverse to business (financial or otherwise), of E&S taken as a
consolidated whole.
4.02 ARTICLES OF INCORPORATION AND BYLAWS. E&S has heretofore furnished to
AGI a complete and correct copy of the Articles of Incorporation and the
Bylaws, each as amended to date, of E&S and Merger Sub. Such Articles of
Incorporation and Bylaws are in full force and effect. Neither E&S nor Merger
Sub is in violation of any provision of its respective Articles of
Incorporation or Bylaws.
4.03 E&S COMMON STOCK TO BE ISSUED IN THE MERGER. The shares of E&S Common
Stock to be issued pursuant to the Merger will be duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute, E&S's Articles of Incorporation or Bylaws or any agreement
to which E&S is a party or by which E&S is bound and will, when issued, be
registered under the Securities Act and the Exchange Act and registered or
exempt from registration under applicable Blue Sky Laws, and will not be
subject to restrictions on resale under the Securities Act, other than
restrictions imposed by Rule 145
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promulgated under the Securities Act and the restrictions imposed by the lock-
up agreements discussed in Section 7.02(d).
4.04 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of E&S and Merger Sub has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the Merger.
The execution and delivery of this Agreement by E&S and Merger Sub and the
consummation by E&S and Merger Sub of the Merger have been duly and validly
authorized by all necessary corporate action and no other corporate
proceedings on the part of E&S or Merger Sub are necessary to authorize this
Agreement or to consummate the Merger (other than, with respect to the Merger,
the filing and recordation of appropriate merger documents as required by the
Act). This Agreement has been duly and validly executed and delivered by E&S
and Merger Sub and, assuming the due authorization, execution and delivery by
AGI, constitutes a legal, valid and binding obligation of each of E&S and
Merger Sub enforceable against each of E&S and Merger Sub in accordance with
its terms. No vote of the stockholders of E&S is required for the approval of
this Agreement or the Merger under the Act or the Articles of Incorporation of
E&S.
4.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by E&S and Merger Sub do
not, and the performance of this Agreement by E&S and Merger Sub will not, (i)
conflict with or violate the Articles of Incorporation or Bylaws of E&S or
Merger Sub, (ii) conflict with or violate any Law applicable to E&S or Merger
Sub or by which any property or asset of E&S or Merger Sub is bound or
affected, except for such conflicts or violations which would not,
individually or in the aggregate, have an E&S Material Adverse Effect, (iii)
prevent or materially delay the consummation of the Merger or (iv) result in
any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which E&S or Merger Sub is a party or by which E&S
or Merger Sub or any property or asset of either of them is bound or affected,
except for any such breaches or defaults which, individually or in the
aggregate, would not have an E&S Material Adverse Effect.
(b) The execution and delivery of this Agreement by E&S and Merger Sub do
not, and the performance of this Agreement by E&S and Merger Sub will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic, foreign
or supranational, except (i) for applicable requirements, if any, of the
Exchange Act, the Securities Act, Blue Sky Laws, state takeover laws, the HSR
Act, and the filing and recordation of appropriate merger documents as
required by the Act and the DGCL and the rules of the NASDAQ/NMS, and (ii)
where failure to obtain such consents, approvals, authorizations or permits,
or to make such filings or notifications, is not reasonably likely to prevent
or materially delay consummation of the Merger, and would not, individually or
in the aggregate, have an E&S Material Adverse Effect.
4.06 SEC FILINGS; FINANCIAL STATEMENTS.
(a) E&S has filed all forms, reports and documents required to be filed by
it with the SEC since January 1, 1995 (collectively, the "E&S SEC Reports")
and has made available to AGI copies of all such documents (including all
exhibits filed in connection therewith). The E&S SEC Reports (i) were prepared
in accordance with the requirements of the Securities Act and the Exchange
Act, as the case may be, and the rules and regulations thereunder, (ii) did
not at the time they were filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading and (iii) did not at
the time they were filed omit any documents required to be filed as exhibits
thereto.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the E&S SEC Reports complied as to form with
the applicable accounting requirements and rules and regulations of the SEC
and was prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each
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fairly presented the consolidated financial position, results of operations
and cash flows of E&S and its consolidated subsidiaries as at the respective
dates thereof and for the respective periods indicated therein in accordance
with United States generally accepted accounting principles (subject, in the
case of unaudited statements, to normal and recurring year-end adjustments
that were not and are not expected, individually or in the aggregate, to have
an E&S Material Adverse Effect).
(c) Except as and to the extent set forth on the consolidated balance sheet
of E&S as of December 31, 1997, including the notes thereto (the "E&S 1997
Balance Sheet"), neither E&S nor any of its consolidated subsidiaries has any
liability or obligation of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet, or in
the notes thereto, prepared in accordance with United States generally
accepted accounting principles, except for liabilities and obligations (i)
disclosed in any E&S SEC Report filed since December 31, 1997 and prior to the
date of this Agreement, (ii) incurred since December 31, 1997 in the ordinary
course of business which, individually or in the aggregate, do not have an E&S
Material Adverse Effect, or (iii) incurred pursuant to this Agreement.
(d) E&S has heretofore furnished to AGI complete and correct copies of all
material amendments and modifications that have not been filed by E&S with the
SEC to all agreements, documents and other instruments that previously had
been filed by E&S with the SEC and are currently in effect.
4.07 ABSENCE OF LITIGATION. There is no claim, action, proceeding or
investigation pending or, to E&S's Knowledge, threatened against E&S or any
Subsidiary, or any property or asset of E&S or any Subsidiary, before any
court, arbitrator or Governmental Authority, which, individually or when
aggregated with other claims, actions, proceedings or investigations or
product liability claims, actions, proceedings or investigations which are
reasonably likely to result from facts and circumstances that have given rise
to such a claim, action, proceeding or investigation, would have an E&S
Material Adverse Effect. As of the date hereof, neither E&S nor any Subsidiary
nor any property or asset of E&S or any Subsidiary is subject to any order,
writ, judgment, injunction, decree, determination or award having,
individually or in the aggregate, an E&S Material Adverse Effect.
4.08 TAX TREATMENT. Neither E&S nor, to E&S's Knowledge, any of its
affiliates has taken, agreed to take, or will take any action that would
prevent the Merger from constituting a transaction qualifying under Section
368(a) of the Code. Neither E&S nor, to E&S's Knowledge, any of its affiliates
or agents is aware of any agreement, plan or other circumstance that would
prevent the Merger from qualifying under Section 368(a) of the Code, and to
E&S's Knowledge, the Merger will so qualify.
4.09 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997, except
as disclosed in any E&S SEC Report filed prior to the date hereof, there has
not been any event or events having, or reasonably likely to have,
individually or in the aggregate, an E&S Material Adverse Effect.
4.10 OPINION OF FINANCIAL ADVISOR. E&S has received the opinion of Hambrecht
& Quist LLC (the "E&S Financial Advisor"), to the effect that, as of the date
hereof, the Merger Consideration is fair to E&S from a financial point of
view.
4.11 BROKERS. Except for the E&S Financial Advisor, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of E&S or Merger Sub.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.01 CONDUCT OF BUSINESS BY AGI PENDING THE MERGER. AGI covenants and agrees
that, between the date of this Agreement and the Effective Time, except as set
forth in Section 5.01 of AGI Disclosure Schedule
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or as otherwise expressly provided for in this Agreement, unless E&S shall
otherwise agree (which agreement shall not be unreasonably withheld or
delayed) in writing, AGI Business shall be conducted only in, and AGI and the
Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent in all material respects with past
practice; and AGI shall use its best efforts to preserve intact its business
organization, to keep available the services of the current officers,
employees and consultants of AGI and the Subsidiaries and to preserve the
current relationships of AGI and the Subsidiaries with customers,
distributors, suppliers, licensors, licensees, contractors and other persons
with which AGI or any Subsidiary has significant business relations. By way of
amplification and not limitation, except as contemplated by this Agreement, or
as set forth in Section 5.01 of AGI Disclosure Schedule, neither AGI nor any
of the Subsidiaries shall, between the date of this Agreement and the
Effective Time, directly or indirectly do, any of the following without the
prior written consent of E&S, which consent shall not be unreasonably withheld
or delayed (prior consent shall be requested from John Lemley at E&S
([email protected]), with a copy to Mark McBride ([email protected])):
(a) amend or otherwise change its Certificate of Incorporation or Bylaws
or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant or encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
shares of capital stock of any class of AGI or any Subsidiary, or any
options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of AGI or any
Subsidiary or (ii) any assets of AGI or any Subsidiary, except for sales in
the ordinary course of business and in a manner consistent in all material
respects with past practice and other asset sales for consideration or
having a fair market value aggregating not more than $100,000;
(c) other than regularly scheduled periodic cash dividends in amounts not
in excess of those previously declared, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except that a Subsidiary may, after
consultation with E&S, declare and pay a dividend to AGI;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger, consolidation
or acquisition of stock or assets) any corporation, partnership, limited
liability company, other business organization or any division thereof, or
any material amount of assets; (ii) enter into any contract or agreement
that, if entered into prior to the date of this Agreement, would have been
required to be disclosed as a Material Contract, other than in the ordinary
course of business, consistent in all material respects with past practice;
or (iii) enter into or amend any Material Contract with respect to any
matter set forth in this subsection (e);
(f) (i) incur any additional indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans or advances, except in the ordinary course of business and
consistent in all material respects with past practice and in an amount not
in excess of $100,000; (ii) authorize capital expenditures which are, in
the aggregate, in excess of $300,000 for AGI and the Subsidiaries taken as
a whole; or (iii) enter into or amend any contract, agreement, commitment
or arrangement with respect to any matter set forth in this subsection (f);
(g) (except in the ordinary course of business and consistent in all
material respects with past practice) increase the compensation payable or
to become payable to its officers or employees generally or to any employee
with an annual base salary in excess of $125,000, or grant any bonus,
severance or termination pay in excess of $25,000 to, or enter into any
employment or severance agreement in excess of $25,000 with any director,
officer or other employee of AGI or any Subsidiary, or establish, adopt,
enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee;
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(h) acquire, sell, lease or dispose of any Real Estate or other material
assets, other than sales or leases of fixed assets (other than Real Estate)
or sales of inventory, in each case, in the ordinary course of business;
(i) accelerate the collection of accounts receivable, delay the payment
of accounts payable or take any action with respect to credit, collection
and fiscal policies and practices, other than in the ordinary course of
business and in a manner consistent with past practice with respect to
accounting policies or practices;
(j) make any material Tax election or settle or compromise any material
federal, state, local or foreign income Tax liability;
(k) take any action that would or is reasonably likely to result in any
of the covenants and agreements set forth in this Article V or in Article
VI or any of the conditions set forth in Article VII not being satisfied as
of the Closing Date;
(l) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent in all material respects with
past practice, with respect to accounting policies or procedures
(including, without limitation, procedures with respect to the payment of
accounts payable and collection of accounts receivable);
(m) knowingly take any action that could reasonably be expected to
prevent the Merger from constituting a transaction qualifying under Section
368(a) of the Code; or
(n) except for the payment of reasonable professional fees relating to
the Merger, or otherwise and reasonable fees to financial advisors (which
financial advisory fees have heretofore been disclosed or are otherwise
acceptable, to E&S), pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise) in an amount in excess of $300,000 in the aggregate, other than
the payment, discharge or satisfaction, in the ordinary course of business
and consistent in all material respects with past practice, of liabilities
reflected or reserved against in AGI's 1997 Balance Sheet or subsequently
incurred in the ordinary course of business and consistent in all material
respects with past practice.
5.02 CONDUCT OF BUSINESS BY E&S PENDING THE MERGER. E&S covenants and agrees
that, between the date of this Agreement and the Effective Time, unless E&S
shall otherwise agree (which agreement shall not be unreasonably withheld or
delayed) in writing, E&S Business shall be conducted only in the ordinary
course, and E&S shall not (i) knowingly take any action that could reasonably
be expected to prevent the Merger from constituting a transaction qualifying
under Section 368(a) of the Code, or (ii) directly or indirectly take any
action or fail to take any action that is reasonably likely to result in a
material delay in the declaration of effectiveness of the Registration
Statement (as defined in Section 6.01 below) by the SEC.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 REGISTRATION STATEMENT; PROXY STATEMENT.
(a) As promptly as practicable after the execution of this Agreement, AGI
and E&S shall prepare and file with the SEC preliminary proxy materials
relating to the meeting of the holders of shares of AGI Common Stock to be
held in connection with the Merger (together with any amendments thereof or
supplements thereto, the "Proxy Statement"). As promptly as practicable after
comments are received from the SEC on the preliminary proxy materials and
after the furnishing by AGI and E&S of all information required to be
contained therein, AGI and E&S shall prepare and file with the SEC a
registration statement on Form S-4 (together with all amendments thereto, the
"Registration Statement"), in which the Proxy Statement shall be included as a
prospectus in connection with the registration under the Securities Act of the
shares of E&S Common Stock to be issued to the holders of shares of AGI Common
Stock pursuant to the Merger. E&S shall use all reasonable efforts to cause
the Registration Statement to become effective as promptly as practicable, and
shall take all
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action required under any applicable federal or state securities laws in
connection with the issuance of shares of E&S Common Stock pursuant to the
Merger. AGI shall furnish all information concerning AGI as E&S may reasonably
request in connection with such actions and the preparation of the
Registration Statement. As promptly as practicable after the Registration
Statement shall have become effective, AGI shall mail the Proxy Statement to
its stockholders. The Proxy Statement shall include the unanimous
recommendation of the Board of Directors of AGI in favor of the Merger, unless
otherwise necessary due to the applicable fiduciary duties of the directors of
AGI, as determined by such directors in good faith after consultation with
independent legal counsel (who may be AGI's regularly engaged independent
legal counsel). No change in recommendation by the Board of Directors of AGI
shall in any way affect the obligations of the parties to the Voting
Agreements with respect to the voting of their shares of AGI Common Stock.
(b) The Registration Statement and the information supplied by E&S for
inclusion in the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective by the SEC; (ii) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
holders of shares of AGI Common Stock; (iii) the time of the Stockholders'
Meeting (as defined in Section 6.02); and (iv) the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Effective Time any event
or circumstance relating to E&S or any of its subsidiaries, or their
respective officers or directors, is discovered by E&S which should be set
forth in an amendment or a supplement to the Registration Statement or Proxy
Statement, E&S shall promptly inform AGI, and AGI shall make appropriate
amendments or supplements to the Proxy Statement. The Proxy Statement shall
comply in all material respects as to form and substance with the requirements
of the Securities Act, the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, AGI makes no representation or
warranty with respect to any information supplied by E&S or Merger Sub which
is contained in, or furnished in connection with the preparation of, any of
the foregoing documents.
(c) The Proxy Statement and the information supplied by AGI for inclusion in
the Registration Statement shall not, at (i) the time the Registration
Statement is declared effective by the SEC; (ii) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
holders of shares of AGI Common Stock; (iii) the time of the Stockholders'
Meeting; and (iv) the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If at any
time prior to the Effective Time any event or circumstance relating to AGI or
any of the Subsidiaries, or their respective officers or directors, is
discovered by AGI which should be set forth in an amendment or a supplement to
the Registration Statement or Proxy Statement, AGI shall promptly inform E&S.
The Registration Statement and the Proxy Statement shall comply in all
material respects as to form and substance with the requirements of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Notwithstanding the foregoing, E&S and Merger Sub make no representations or
warranties with respect to any information supplied by AGI which is contained
in, or furnished in connection with the preparation of, any of the foregoing
documents.
6.02 STOCKHOLDERS' MEETING.
(a) Subject to the provisions of Section 6.05 and Section 8.01(f), AGI
shall, consistent with applicable law, call and hold a meeting of the holders
of shares of AGI Common Stock (the "Stockholders' Meeting") as promptly as
practicable for the purpose of voting upon the approval and adoption of this
Agreement and AGI shall use its reasonable best efforts to hold the
Stockholders' Meeting as soon as practicable after the date on which the
Registration Statement becomes effective. For so long as the Board of
Directors of AGI shall be recommending the Merger to the stockholders in
accordance with the last sentence of Section 6.01(a), AGI shall solicit from
the holders of shares of AGI Common Stock proxies in favor of the approval and
adoption of the Merger, and shall take all other action necessary or advisable
to secure the vote or consent of such holders required by the DGCL. Provided
that this Agreement shall not have been terminated in accordance with the
terms of Section 8.01(f), no change in or withdrawal of the recommendation of
the Board of Directors of AGI with
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respect to the Merger shall in any way affect the obligation of AGI to convene
the Stockholders' Meeting in accordance with this Section 6.02(a).
(b) E&S shall vote (or consent with respect to) any shares of AGI Common
Stock beneficially owned by it, or with respect to which it has the power (by
agreement, proxy or otherwise) or cause to be voted (or to provide a consent),
in favor of the approval and adoption of this Agreement at any meeting of the
stockholders of AGI at which this Agreement shall be submitted for approval
and adoption and at all adjournments or postponements thereof (or, if
applicable, by any action of the stockholders of AGI by consent in lieu of a
meeting).
6.03 APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) AGI and E&S shall use their reasonable efforts to (i) take, or cause to
be taken, all appropriate action and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the Merger as promptly as practicable, (ii) obtain
expeditiously from any Governmental Authorities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained
or made by E&S or AGI or any of their Subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation
of the Merger, and (iii) as promptly as practicable, make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Merger required under (A) the Securities Act and the
Exchange Act, and any other applicable federal or state securities Laws, (B)
the HSR Act and any related governmental request thereunder and (C) any other
applicable Law; provided that E&S and AGI shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing
and, if requested, accepting all reasonable additions, deletions or changes
suggested by the other party in connection therewith. From the date of this
Agreement until the Effective Time, each party shall promptly notify the other
party in writing of any pending or, to the knowledge of the first party,
threatened action, proceeding or investigation by any Governmental Authority
or any other person (i) challenging or seeking material damages in connection
with the Merger or the conversion of AGI Common into E&S Common Stock or cash
pursuant to the Merger or (ii) seeking to restrain or prohibit the
consummation of the Merger or otherwise limit the right of E&S or E&S's
subsidiaries to own or operate all or any portion of the businesses or assets
of AGI or its Subsidiaries, which in either case would have an AGI Material
Adverse Effect prior to or after the Effective Time, or an E&S Material
Adverse Effect after the Effective Time.
(b) AGI and E&S shall furnish to each other all information required for any
application or other filing to be made pursuant to the rules and regulations
of any applicable Law (including all information required to be included in
the Proxy Statement and the Registration Statement) in connection with the
transactions contemplated by this Agreement.
(c) (i) Each of E&S and AGI shall give (or shall cause its respective
subsidiaries to give) any notices to third parties and use, and cause its
respective subsidiaries to use, their reasonable efforts to obtain any third
party consents, (A) necessary, proper or advisable to consummate the
transactions contemplated in this Agreement, (B) disclosed or required to be
disclosed in AGI Disclosure Schedule or (C) required to prevent an AGI
Material Adverse Effect from occurring prior to or after the Effective Time or
an E&S Material Adverse Effect from occurring after the Effective Time.
6.04 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) The parties shall comply with, and shall cause their respective
Representatives (as defined below) to comply with, to the extent permitted by
applicable Law, all of their respective obligations under the Confidentiality
Agreement dated March 4, 1998 (the "Confidentiality Agreement") between AGI
and E&S.
(b) Subject to the Confidentiality Agreement, from the date hereof to the
Effective Time, AGI will provide to E&S (and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives, collectively, "Representatives") access to all information
and documents which E&S may reasonably request regarding the business, assets,
liabilities, employees and other aspects of AGI.
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(c) From the date hereof to the Effective Time, AGI shall: (i) provide to
E&S and its Representatives access at reasonable times upon prior notice to
the officers, employees, agents, properties, offices and other facilities of
AGI and its Subsidiaries and to the books and records thereof and (ii) furnish
promptly such information concerning the business, properties, contracts,
assets, liabilities, personnel and other aspects of AGI and its Subsidiaries
as E&S or its Representatives may reasonably request.
(d) From the date hereof to the Effective Time, E&S shall: (i) provide to
AGI and its Representatives access at reasonable times upon prior notice to
the officers, employees, agents, properties, offices and other facilities of
E&S and its Subsidiaries and to the books and records thereof and (ii) furnish
promptly such information concerning the business, properties, contracts,
assets, liabilities, personnel and other aspects of E&S and its Subsidiaries
as AGI or its Representatives may reasonably request.
(e) No investigation by AGI, E&S or Merger Sub, whether prior to the
execution of this Agreement or pursuant to this Section 6.04, shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
6.05 NO SOLICITATION OF COMPETING TRANSACTIONS.
(a) Neither AGI nor any Subsidiary shall, directly or indirectly, through
any officer, director, agent, investment banker, accountant, legal counsel,
financial advisor or otherwise, initiate, solicit or knowingly encourage
(including by way of furnishing non-public information or assistance), or take
any other action to facilitate knowingly, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction (as defined below), or enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain a Competing Transaction, or agree to or endorse
any Competing Transaction, or authorize or permit any of the officers,
directors or employees of AGI or any Subsidiary or any investment banker,
financial advisor, attorney, accountant or other agent or representative of
AGI or any Subsidiary to take any such action, and AGI shall notify E&S orally
(within one business day) and in writing (within 24 hours of oral
notification) of all of the relevant details relating to any inquiry or
proposal which AGI or any Subsidiary or any such officer, director, employee,
investment banker, financial advisor, attorney, accountant or other agent or
representative may receive relating to any of such matters and which AGI and
any of its officers or directors has knowledge of, and if such inquiry or
proposal is in writing, AGI shall deliver to E&S a copy of such inquiry or
proposal. AGI and its officers and directors will, and AGI will cause its
employees, agents, representatives (including, without limitation, any
investment banker, attorney or accountant retained by AGI) to, immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. AGI will promptly request that each person to whom any confidential
documents or information concerning AGI was disclosed by AGI since December
31, 1997 for the purpose of discussing a possible change in control
transaction involving AGI (a "Potential Buyer"), either return all such
confidential documents and information, and all copies thereof, to AGI or
deliver a written certification of such destruction to AGI. AGI shall use all
reasonable efforts to cause each such Potential Buyer to comply with such
request. For purposes of this Agreement, "Competing Transaction" shall mean
any of the following involving AGI or any Subsidiary: (i) any merger,
consolidation, share exchange, recapitalization, business combination, or
other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 15% or more of the assets of AGI and the
Subsidiaries, taken as a whole, in a single transaction or series of related
transactions; (iii) any tender offer or exchange offer for 15% or more of the
shares of AGI Common Stock or the filing of a registration statement under the
Securities Act in connection therewith; (iv) any person having acquired
beneficial ownership or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder) having been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15% or
more of the shares of AGI Common Stock; or (v) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
(b) Provided that there has been no breach of Section 6.05(a), if at any
time prior to the Effective Time, the Board of Directors of AGI is advised in
writing by AGI's legal counsel that it is necessary to do so in order to
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comply with its fiduciary duties to AGI's stockholders under applicable law,
AGI may, in response to an unsolicited inquiry, proposal or offer for a
Competing Transaction (so long as the Board of Directors of AGI in good faith
determines (in consultation with its financial advisor) the proposal or offer
represents a financially superior transaction for the stockholders of AGI as
compared to the Merger), (x) furnish only such information with respect to AGI
to any such person pursuant to a customary confidentiality agreement as was
delivered to E&S prior to the execution of this Agreement, and (y) participate
in the discussions and negotiations regarding such inquiry, proposal or offer.
Nothing contained in this Agreement shall prevent AGI or its Board of
Directors from complying with Rules 14d-9 and 14e-2 promulgated under the
Exchange Act with regard to any proposed Competing Transaction.
(c) Except as permitted by this Section 6.05(c), the Board of Directors of
AGI shall not enter into any agreement with respect to, any Competing
Transaction. Notwithstanding the preceding sentence, if the Board of Directors
of AGI determines in its good faith judgment, after consultation with outside
counsel, that it has received a Superior Proposal (as defined below), the
Board of Directors may terminate this Agreement pursuant to Section 8.01(f) by
providing written notice to E&S (a "Notice of Superior Proposal") advising E&S
that the Board of Directors has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and providing notice
of termination of this Agreement. For purposes of this Agreement, a "Superior
Proposal" means any proposal made by a third party to acquire, directly or
indirectly, including pursuant to a merger, liquidation, dissolution or other
similar transaction, 100% of the aggregate voting power or capital stock of
AGI then outstanding or all or substantially all the assets of AGI for a price
per share in excess of $7.65, or, in the case of an asset sale, an aggregate
consideration (consisting of cash and/or securities) in excess of the product
of (i) the total issued and outstanding shares of AGI Common Stock on a fully
diluted basis, and (ii) $7.65.
6.06 INDEMNIFICATION AND INSURANCE.
(a) E&S and the Surviving Corporation agree that, except as may be limited
by applicable Laws, for six (6) years from and after the Effective Time, the
indemnification obligations set forth in AGI's Certificate of Incorporation
and AGI's Bylaws, in each case as of the date of this Agreement, shall survive
the Merger (and, prior to the Effective Time, E&S shall cause the Certificate
of Incorporation and Bylaws of Merger Sub to include such provisions) and
shall not be amended, repealed or otherwise modified after the Effective Time
in any manner that would adversely affect the rights thereunder of the
individuals who on or at any time prior to the Effective Time were entitled to
indemnification thereunder with respect to matters occurring prior to the
Effective Time. From and after the Effective Time, such obligations shall be
the joint and several obligations of the E&S and the Surviving Corporation.
(b) The Surviving Corporation shall maintain in effect, for three (3) years
from and after the Effective Time, directors' and officers' liability
insurance policies covering the persons who are currently covered in their
capacities as such directors and officers by AGI's current directors' and
officers' policies and on terms not materially less favorable than the
existing insurance coverage with respect to matters occurring prior to the
Effective Time.
(c) The Surviving Corporation and E&S shall honor and fulfill in all
respects the obligations of AGI pursuant to indemnification agreements with
AGI's directors and officers existing at or before the Effective Time.
6.07 NOTIFICATION OF CERTAIN MATTERS. From and after the date of this
Agreement until the Effective Time, each party hereto shall promptly notify
the other party hereto of (a) the occurrence, or non-occurrence, of any event
the occurrence or non-occurrence of which would be reasonably likely to cause
any condition to the obligations of any party to effect the Merger not to be
satisfied, or (b) the failure of AGI or E&S, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it pursuant to this Agreement which would be reasonably likely to
result in any condition to the obligations of any party to effect the Merger
not to be satisfied; provided, however, that the delivery of any notice
pursuant to this Section 6.07 shall not be deemed to be an amendment of this
Agreement or any Section in AGI Disclosure
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Schedule and shall not cure any breach of any representation or warranty
requiring disclosure of such matter prior to the date of this Agreement. No
delivery of any notice pursuant to this Section 6.07 shall limit or affect the
remedies available hereunder to the party receiving such notice, including the
rights of E&S under Section 7.02(a) and those of AGI under Section 7.03(a), in
the event that a representation or warranty made by AGI or E&S herein shall
not be true and correct (giving effect to any standards of materiality set
forth in such Sections) as of the date hereof or as of the date when made (if
a different date) and as of the Effective Time.
6.08 STOCK EXCHANGE LISTING. E&S shall as promptly as reasonably practicable
prepare and submit to Nasdaq a listing application covering the shares of E&S
Common Stock to be issued in the Merger and shall use its reasonable efforts
to cause such shares to be approved for listing on the NASDAQ/NMS prior to the
Effective Time. E&S shall also use its reasonable efforts to obtain all
necessary state securities law or "Blue Sky" qualifications, permits and
approvals required to carry out the transactions contemplated by this
Agreement, and AGI shall furnish all information concerning AGI and the
holders of AGI Stock as may be reasonably requested by E&S in connection with
such qualifications, permits and approvals.
6.09 PUBLIC ANNOUNCEMENTS. E&S and AGI shall consult with each other before
issuing any press release or otherwise making any public statements with
respect to this Agreement or any transaction contemplated hereby. E&S and AGI
shall not issue any such press release or make any such public statement
without the prior consent of the other (which consent shall not be
unreasonably withheld), except as may be required by Law or any listing
agreement with the NASD or any national securities exchange to which E&S or
AGI is a party. The parties have agreed on the text of a joint press release
by which E&S and AGI will announce the execution of this Agreement.
6.10 PLAN OF REORGANIZATION. This Agreement is intended to constitute a
"plan of reorganization" within the meaning of Section 1.368-2(g) of the
income tax regulations promulgated under the Code.
6.11 AFFILIATES. Within thirty (30) days from the date hereof, AGI shall
obtain from any person who may be deemed to be an affiliate, as of the date of
this Agreement, of AGI under Rule 145 of the Securities Act, a written
agreement substantially in the form attached hereto as Exhibit 6.11.
6.12 AGI EMPLOYEE STOCK PURCHASE PLAN. AGI shall take all actions necessary
pursuant to the terms of the ESPP in order to shorten the offering period
under such plan which includes the Effective Time (the "Current Offering")
such that a new purchase date shall occur prior to the Effective Time and
shares of AGI Common Stock shall be purchased by ESPP participants prior to
the Effective Time. The Current Offering shall expire immediately following
such new purchase date, and the ESPP shall terminate immediately prior to the
Effective Time. Subsequent to such new purchase date, AGI shall take no action
pursuant to the terms of the ESPP to commence any new offering period.
6.13 EMPLOYMENT AGREEMENTS. E&S shall have entered into Employment
Agreements with Jeff Dunn and Nancy Bush as of the Effective Date hereof in
the form of Exhibit 6.13 hereto, which agreements shall become effective as of
the Effective Time.
6.14 EMPLOYEES AND EMPLOYEE BENEFITS.
(a) From and after the Effective Time, employees of AGI shall be eligible to
participate in the E&S Pension Plan. For purposes of the E&S Pension Plan and
the other E&S employee benefit plans, E&S shall grant all employees of AGI
credit for all service (to the same extent as service with E&S or any
subsidiary of E&S is taken into account with respect to similarly situated
employees of E&S and the subsidiaries of E&S) with AGI and its predecessors
prior to the Effective Time for all purposes (other than vesting under the E&S
Pension Plan) as if such service with AGI was service with E&S or any
subsidiary of E&S; provided, however, that no such past service credit shall
be granted to the extent it would result in duplicative accrual of benefits
for the same period of service; and provided further that all AGI employees
participating in the E&S Pension Plan shall be subject to a vesting period of
5 years from the Effective Date. E&S shall provide or shall cause the
Surviving
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Corporation to provide benefits to any employee of AGI which are not less
favorable in the aggregate than the benefits provided to similarly situated
employees of the E&S and subsidiaries of E&S.
(b) The Surviving Corporation shall assume and continue all of medical and
dental plans of AGI through the end of fiscal year 1998. As of January 1,
1999, all employees of AGI shall be eligible to participate in the E&S medical
and dental plans and shall be subject to the normal policies and procedures of
such plans.
(c) E&S shall cause each participant in the AGI ESPP who becomes employed by
E&S or any of its subsidiaries to become eligible to participate in the E&S
ESPP, with such eligibility to participate as soon as practicable following
the Effective Time.
(d) Prior to the Effective Date, AGI shall adopt appropriate resolutions and
take any and all further actions necessary to terminate the 401(k) Plan
effective as of the date immediately preceding the Closing Date. In addition,
participants in the AGI 401(k) Plan shall make no further contributions to the
AGI 401(k) Plan, except for contributions necessary to fulfill obligations
incurred through the termination date of the AGI 401(k) Plan. E&S shall take
such action that will permit current participants in the AGI 401(k) Plan who
are employed by E&S to participate in the E&S 401(k) Plan as soon as
practicable after the Effective Date. The new participants in the E&S 401(k)
Plan shall be subject to a vesting period of 5 years for the E&S contributions
thereunder.
ARTICLE VII
CONDITIONS TO THE MERGER
7.01 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of AGI,
E&S and Merger Sub to consummate the Merger are subject to the satisfaction
or, if permitted by applicable Law, waiver of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the affirmative vote of the holders of a
majority of the outstanding shares of AGI Common Stock in accordance with
the DGCL and AGI's Certificate of Incorporation;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated;
(c) no order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction shall have been enacted, entered, issued,
promulgated or enforced by any Governmental Authority or a court of
competent jurisdiction which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger;
(d) the Registration Statement shall have been declared effective, and no
stop order suspending the effectiveness of the Registration Statement shall
be in effect and no proceedings for such purpose shall be pending before or
threatened by the SEC;
(e) the shares of E&S Common Stock to be issued in the Merger shall have
been authorized for listing on Nasdaq National Market, subject to official
notice of issuance; and
(f) AGI shall have received the opinion of the Venture Law Group, A
Professional Corporation, counsel to AGI, and E&S and Merger Sub shall have
received the opinion of Snell & Wilmer, L.L.P., counsel to E&S and Merger
Sub, based upon representation letters and stockholder certificates in a
form acceptable to AGI's and E&S's legal counsel, to be provided at
Closing, and such other facts, representations and assumptions concerning,
among other things, the actions of the stockholders of AGI as counsel may
reasonably deem relevant, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization qualifying under the
provisions of Section 368(a) of the Code and that each of E&S, Merger Sub
and AGI will be a party to the reorganization within the meaning of Section
368(b) of the Code, dated on the Closing Date.
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7.02 CONDITIONS TO THE OBLIGATIONS OF E&S AND MERGER SUB. The obligations of
E&S and Merger Sub to consummate the Merger are subject to the satisfaction
or, if permitted by applicable Law, waiver of the following further
conditions:
(a) (i) AGI shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time; (ii) each of the representations and warranties of AGI
contained in this Agreement (disregarding for this purpose any
qualifications with respect to materiality or an AGI Material Adverse
Effect) shall be true and correct in all material respects, in each case as
of the date hereof and as of the Closing Date as if made at and as of such
time, it being understood and agreed by E&S and Merger Sub that this
Section 7.02(a) shall be deemed to have been satisfied unless any failure
of performance or failure to be so true and correct, individually or in the
aggregate, would have an AGI Material Adverse Effect; (iii) E&S shall have
received copies of all third party consents required to assign the Material
Contracts to the surviving corporation, except where the absence of which
would not have a AGI Material Adverse Effect; and (iv) E&S shall have
received a certificate signed by an executive officer of AGI to the
foregoing effect;
(b) E&S shall have received "cold comfort" letters of Price Waterhouse
and dated the date on which the Registration Statement shall become
effective and the Effective Time, respectively, and addressed to E&S, such
"cold comfort" letters being in such form and substance as is reasonably
customary for letters delivered by independent public accountants in
connection with registration statements similar to the Registration
Statement;
(c) E&S shall have received from any person who may be deemed to have
become an affiliate of AGI, as reasonably determined by AGI, pursuant to
Rule 145 under the Securities Act, after the date of this Agreement and on
or prior to the Effective Time, a signed agreement substantially in the
form of Exhibit 6.11 hereto;
(d) E&S shall have received from Jeff Dunn and Nancy Bush signed lock-up
agreements substantially in the form of Exhibit 7.02(d) hereto; and
(e) E&S shall have received from Jeff Dunn and Nancy Bush signed
Employment Agreements substantially in the form of Exhibit 6.13.
(f) E&S shall have received from Lew Epstein, Niraj Swarup, Stephen
Bartlett, Hiroki Kato, Arthur Yan, and Greg Milliken executed waivers,
waiving their rights under Section 2(b) of their respective Key Employee
Retention Agreements with AGI dated November 7, 1997 solely with respect to
any new options granted on April 22, 1998.
7.03 CONDITIONS TO THE OBLIGATIONS OF AGI. The obligations of AGI to
consummate the Merger are subject to the satisfaction or, if permitted by
applicable Law, waiver of the following further conditions:
(a) (i) E&S and Merger Sub shall have performed in all material respects
all of their respective obligations hereunder required to be performed by
them at or prior to the Effective Time; (ii) each of the representations
and warranties of E&S contained in this Agreement (disregarding for this
purpose any qualifications with respect to materiality or E&S Material
Adverse Effect) shall be true and correct in all material respects, in each
case as of the date hereof and as of the Closing Date as if made at and as
of such time; it being understood and agreed by AGI that this Section
7.03(a) shall be deemed to have been satisfied unless any failure of
performance or failure to be so true and correct, individually or in the
aggregate, would have a E&S Material Adverse Effect; and (iii) AGI shall
have received a certificate signed by an executive officer of E&S to the
foregoing effect.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of this Agreement and the transactions
contemplated hereby by the stockholders of AGI:
(a) by written consent duly authorized by the Boards of Directors of each
of E&S and AGI;
(b) by either E&S or AGI if (i) the waiting period applicable to the
consummation of the Merger under the HSR Act shall not have expired or been
terminated prior to September 15, 1998, (ii) any court of competent
jurisdiction in the United States or other United States Governmental
Authority shall have issued an order (other than a temporary restraining
order), decree or ruling, or taken any other action, restraining, enjoining
or otherwise prohibiting the Merger (provided, however, that neither party
may terminate this Agreement pursuant to this Section 8.01(b)(ii) prior to
September 15, 1998 if the party subject to such order, decree or ruling is
using its reasonable best efforts to have such order, decree or ruling
removed, unless such order, decree or ruling shall have become final and
non-appealable), or (iii) the Effective Time shall not have occurred on or
before September 15, 1998; provided that in each case the right to
terminate this Agreement under this Section 8.01(b) shall not be available
to any party whose willful, deliberate or knowing failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date;
(c) by either E&S or AGI, if the Stockholders' Meeting shall have been
held and the holders of outstanding shares of AGI Common Stock shall have
failed to approve and adopt this Agreement at such meeting (including any
adjournment or postponement thereof);
(d) by AGI, upon a breach of any representation, warranty, or agreement
set forth in this Agreement such that the condition set forth in Section
7.03(a) would not be satisfied (a "Terminating E&S Breach"); provided,
however, that, if such Terminating E&S Breach is curable by E&S through the
exercise of its best efforts and E&S continues to exercise such best
efforts, AGI may not terminate this Agreement under this Section 8.01(d)
for a period of 30 days from the date on which AGI delivers to E&S written
notice setting forth in reasonable detail the circumstances giving rise to
such Terminating E&S Breach; or
(e) by E&S, upon a breach of any representation, warranty, or agreement
set forth in this Agreement such that the condition set forth in Section
7.02(a) would not be satisfied (a "Terminating AGI Breach"); provided,
however, that, if such Terminating AGI Breach is curable by AGI through the
exercise of its best efforts and AGI continues to exercise such best
efforts, E&S may not terminate this Agreement under this Section 8.01(e)
for a period of 30 days from the date on which E&S delivers to AGI written
notice setting forth in reasonable detail the circumstances giving rise to
such Terminating AGI Breach; or
(f) by AGI, if AGI shall have delivered to E&S a Notice of Superior
Proposal in accordance with Section 6.05(c).
8.02 EFFECT OF TERMINATION. Except as provided in Section 9.01, in the event
of the termination of this Agreement pursuant to Section 8.01, this Agreement
shall forthwith become void, there shall be no liability under this Agreement
on the part of E&S, Merger Sub or AGI or any of their respective officers or
directors and all rights and obligations of any party hereto shall cease;
provided, however, that nothing herein shall relieve any party from liability
for, or be deemed to waive any rights of specific performance of this
Agreement available to a party by reason of, any willful breach by the other
party or parties of its or their willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
8.03 FEES AND EXPENSES.
(a) In the event that this Agreement is terminated pursuant to Section
8.01(f) then, AGI shall reimburse E&S promptly for its documented out of
pocket expenses incurred in connection with the transactions
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<PAGE>
contemplated by this Agreement (up to $100,000) and in addition, shall pay
to E&S a break up fee of $4,000,000, which amount shall be payable in
immediately available funds at the time of termination of this Agreement.
(b) Except as provided in Section 8.03(a) above, all expenses incurred by
the parties hereto shall be borne solely and entirely by the party which
has incurred the same; provided, however, that E&S and AGI shall bear
equally all expenses related to printing, filing and mailing the
Registration Statement and the Proxy Statement and all SEC and other
regulatory filing fees incurred in connection with the Registration
Statement and the Proxy Statement.
8.04 AMENDMENT. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided that, after the approval and
adoption of this Agreement by the stockholders of AGI, no amendment may be
made which would reduce the amount or change the type of consideration to be
received by the stockholders of AGI pursuant to the Merger. This Agreement may
not be amended except by an instrument in writing signed by the parties
hereto.
8.05 WAIVER. At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any obligation or other act of any
other party hereto, (b) waive any inaccuracy in the representations and
warranties of the other party contained herein or in any document delivered by
the other party pursuant hereto and (c) waive compliance with any agreement or
condition contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
ARTICLE IX
GENERAL PROVISIONS
9.01 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements in this Agreement and any
certificate delivered pursuant hereto by any person shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
8.01, as the case may be, except that the agreements set forth in Articles I
and II and Section 6.06 shall survive the Effective Time indefinitely, and
those set forth in Sections 6.09, 8.02, 8.03, 8.04, 8.05 and this Article IX
shall survive termination indefinitely.
9.02 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) or by a nationally recognized overnight courier service to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
9.02):
if to E&S or Merger Sub:
Evans & Sutherland Computer Corporation
600 Komas Drive
Salt Lake City, Utah 84108
Attn: John T. Lemley
with copies to:
Snell & Wilmer, L.L.P.
111 East Broadway, Suite 900
Salt Lake City, Utah 84111
Attn: David F. Evans, Esq.
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<PAGE>
if to AGI:
AccelGraphics, Inc.
1873 Barber Lane
Milpitas, California 95035
Attn: Jeffrey Dunn
with a copy to:
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
Attn: Steven J. Tonsfeldt, Esq.
9.03 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(b) "beneficial owner" with respect to any shares means a person who
shall be deemed to be the beneficial owner of such shares (i) which such
person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates or any person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any such
shares;
(c) "business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York, New York;
(d) "AGI Business" shall mean, as of the date specified, the collective
reference to AGI's 3-dimensional graphic business and any and all related
businesses, as presently conducted by the entities in the AGI Group and
their respective business operations;
(e) "AGI Group" shall mean AGI, the Subsidiaries and any partnerships in
which AGI or any Subsidiary has an interest, when taken as a whole;
(f) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(g) "Governmental Authority" means any United States (federal, state or
local), foreign or supra-national Government, or governmental, regulatory
or administrative authority, agency or commission;
(h) "Knowledge," with respect to AGI, means the actual knowledge of Jeff
Dunn or Nancy Bush.
(i) "person" means an individual, corporation, limited liability company,
partnership, limited partnership, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency
or instrumentality of a government;
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(j) "Real Estate" means, with respect to AGI or any Subsidiary, as
applicable, all of the fee or leasehold ownership right, title and interest
of such person, in and to all real estate and improvements owned or leased
by any such person and which is used by any such person in connection with
the operation of its business; and
(k) "subsidiary" or "subsidiaries" of any person means any corporation,
partnership, joint venture or other legal entity of which such person
(either above or through or together with any other subsidiary), owns,
directly or indirectly, 50% or more of the stock or other equity interests,
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity.
9.04 ACCOUNTING TERMS. All accounting terms used herein which are not
expressly defined in this Agreement shall have the respective meanings given
to them in accordance with United States generally accepted accounting
principles.
9.05 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law, or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner
in order that the Merger be consummated as originally contemplated to the
fullest extent possible.
9.06 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the Exhibits
and AGI Disclosure Schedule, which are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein) and the
Confidentiality Agreement constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements
and undertakings, both written and oral, among the parties, or any of them,
with respect to the subject matter hereof. This Agreement shall not be
assigned by operation of law or otherwise.
9.07 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 6.06 (which is intended to be for the benefit of
the persons covered thereby and may be enforced by such persons).
9.08 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at
law or in equity.
9.09 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Utah applicable to contracts
executed in and to be performed in that state.
9.10 HEADINGS. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed and delivered (including
by facsimile transmission) in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, E&S, Merger Sub and AGI have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
EVANS & SUTHERLAND COMPUTER
CORPORATION
By: /s/ James R. Oyler
Its: President & C.E.O.
E&S MERGER CORP.
By: /s/ James R. Oyler
Its: President & C.E.O.
ACCELGRAPHICS, INC.
By: /s/ Jeffrey W. Dunn
Its: President/C.E.O.
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
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<PAGE>
EXHIBIT 99.1
VOTING AGREEMENT AND IRREVOCABLE PROXY
VOTING AGREEMENT AND IRREVOCABLE PROXY dated April 22, 1998, among the
several stockholders of ACCELGRAPHICS, INC., a Delaware corporation (the
"Company"), that are parties hereto (each, a "Stockholder" and, collectively,
the "Stockholders"), and EVANS & SUTHERLAND COMPUTER CORPORATION, a Utah
corporation ("E&S").
WHEREAS, E&S and E&S Merger Corp., a Utah corporation and a wholly owned
subsidiary of E&S ("Merger Sub"), propose to enter into an Agreement and Plan
of Merger dated the date hereof (as amended from time to time, the "Merger
Agreement;" capitalized terms being used herein as defined therein unless
otherwise defined herein), with the Company, which provides, among other
things, that the Company will merge with and into Merger Sub (the "Merger");
WHEREAS, as of the date hereof, each Stockholder is the record and
beneficial owner of the number of shares of Common Stock, par value $.001 per
share, of the Company (the "Common Stock"), set forth on Exhibit A attached
hereto (with respect to each Stockholder, such Stockholder's "Existing Shares"
and, together with any shares of Company Common Stock acquired after the date
hereof, whether upon the exercise of warrants, options, conversion of
convertible securities or otherwise, such Stockholder's "Shares"); and
WHEREAS, as a condition to the willingness of E&S to enter into the Merger
Agreement, E&S has requested that the Stockholders agree, and in order to
induce E&S to enter into the Merger Agreement, the Stockholders have agreed,
to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
VOTING AGREEMENT
1.01 VOTING AGREEMENT. Each Stockholder, severally and not jointly, hereby
agrees that, from and after the date hereof and until this Agreement shall
have been terminated in accordance with Article IV hereof, at any meeting of
the stockholders of the Company, however called, and in any action by consent
of the stockholders of the Company, such Stockholder will vote (or cause to be
voted) such Stockholder's Shares: (a) in favor of the approval and adoption of
the Merger Agreement, the Merger and all the transactions contemplated by the
Merger Agreement and this Agreement and otherwise in such manner as may be
necessary to consummate the Merger; (b) except as otherwise agreed to in
writing in advance by E&S or except in the case of a Superior Proposal as
defined in Section 6.05 of the Merger Agreement, against any action, proposal,
agreement or transaction that would result in a breach of any covenant,
obligation, agreement, representation or warranty of the Company contained in
the Merger Agreement or of the Stockholder contained in this Agreement; and
(c) against any action, proposal, agreement or transaction (other than the
Merger Agreement or the transactions contemplated thereby) that could result
in any of the conditions to the Company's obligations under the Merger
Agreement not being fulfilled or that is intended, or could reasonably be
expected, to impede, interfere or be inconsistent with, delay, postpone,
discourage or adversely affect the Merger Agreement, the Merger or this
Agreement. No Stockholder shall enter into any agreement or understanding with
any person or entity to vote such Stockholder's shares or give instructions in
any manner inconsistent with this Section 1.01. The Stockholder acknowledges
receipt and review of a copy of the Merger Agreement.
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1.02 IRREVOCABLE PROXY. If, and only if, any Stockholder fails to comply
with the provisions of Section 1.01 (as determined by E&S in its sole
discretion), such Stockholder hereby agrees that such failure shall result,
without any further action by such Stockholder, in the irrevocable appointment
of E&S, and each of its officers, as such Stockholder's attorney-in-fact and
proxy pursuant to the provisions of Section 212(c) of the General Corporation
Law of the State of Delaware, with full power of substitution, to vote and
otherwise act (by written consent or otherwise) with respect to such
Stockholder's Shares at any meeting of stockholders of the Company (whether
annual or special and whether or not an adjourned or postponed meeting) or
consent in lieu of any such meeting or otherwise, on the matters and in the
manner specified in Section 1.01. THIS PROXY AND POWER OF ATTORNEY ARE
IRREVOCABLE AND COUPLED WITH AN INTEREST AND, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, SHALL BE VALID AND BINDING ON ANY PERSON TO WHOM A STOCKHOLDER
MAY TRANSFER ANY OF HIS SHARES IN BREACH OF THIS AGREEMENT. Each Stockholder
hereby revokes all other proxies and powers of attorney with respect to such
Stockholder's Shares with respect to the matters contemplated by Section 1.01
above that may have heretofore been appointed or granted, and no subsequent
proxy or power of attorney shall be given or written consent executed (and if
given or executed, shall not be effective) by any Stockholder with respect
thereto. All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of any Stockholder and any obligation of the
Stockholder under this Agreement shall be binding upon the heirs, personal
representatives, successors and assigns of such Stockholder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder, severally and not jointly, hereby represents and warrants
to E&S in respect of such Stockholder as follows:
2.01 AUTHORITY RELATIVE TO THIS AGREEMENT. Such Stockholder has all
necessary power and authority to execute and deliver this Agreement, to
perform such Stockholders' obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by such Stockholder and constitutes a legal, valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms.
2.02 NO CONFLICT.
(a) The execution and delivery of this Agreement by such Stockholder does
not, and the performance of this Agreement by such Stockholder shall not,
(i) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to such Stockholder or by which the Shares owned by such
Stockholder are bound or affected or (ii) result in any breach of, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a
lien or encumbrance on any of the Shares owned by such Stockholder pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which such
Stockholder is a party or by which such Stockholder or the Shares owned by
such Stockholder are bound or affected.
(b) The execution and delivery of this Agreement by such Stockholder do
not, and the performance of this Agreement by such Stockholder shall not,
require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental authority, domestic or foreign, except
for applicable requirements, if any, of the Securities Exchange Act of
1934, as amended, or the HSR Act.
2.03 TITLE TO THE SHARES. As of the date hereof, such Stockholder is the
record and beneficial owner of the number of shares of Common Stock set forth
on Exhibit A attached hereto opposite the name of such Stockholder. Such
Shares are all the securities of the Company owned, either of record or
beneficially, by such Stockholder. The Shares owned by such Stockholder are
owned free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on such
Stockholder's voting rights,
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<PAGE>
charges and other encumbrances of any nature whatsoever. Except as provided in
this Agreement, such Stockholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to the Shares owned by
such Stockholder.
ARTICLE III
COVENANTS OF THE STOCKHOLDERS
3.01 NO DISPOSITION OR ENCUMBRANCE OF SHARES. Each Stockholder, severally
and not jointly, hereby agrees that, except as contemplated by the Merger
Agreement, such Stockholder shall not (i) sell, transfer, tender, assign,
contribute to the capital of any entity, hypothecate, give or otherwise
dispose of, grant a proxy or power of attorney with respect to, deposit into
any voting trust, or create or permit to exist any security interest, lien,
claim, pledge, option, right of first refusal, agreement, limitation on such
Stockholder's voting rights, charge or other encumbrance of any nature
whatsoever with respect to, any of such Stockholder's Shares (or agree or
consent to, or offer to do, any of the foregoing), (ii) take any action that
would make any representation or warranty of such Stockholder herein untrue or
incorrect in any material respect or have the effect of preventing or
disabling such Stockholder from performing his or her obligations or, (iii)
directly or indirectly, initiate, solicit or encourage any person to take
actions that could reasonably be expected to lead to the occurrence of any of
the foregoing.
3.02 NO SOLICITATION OF TRANSACTIONS. Each Stockholder, severally and not
jointly, agrees that between the date of this Agreement and the date of
termination of the Merger Agreement, such Stockholder will not (a) solicit,
initiate, consider, encourage or accept any other proposals or offers from any
person relating to any Competing Transaction, or (b) participate in any
discussions, conversations, negotiations and other communications regarding,
or furnish to any other person any information with respect to, or otherwise
cooperate in any way, assist or participate in, facilitate or encourage any
effort or attempt by any other person to seek a Competing Transaction. Each
Stockholder immediately shall cease and cause to be terminated all existing
discussions, conversations, negotiations and other communications with any
persons conducted heretofore with respect to any of the foregoing. Each
Stockholder shall notify E&S promptly if any such proposal or offer, or any
inquiry or other contact with any person with respect thereto, is made and
shall, in any such notice to E&S, indicate in reasonable detail the identity
of the person making such proposal, offer, inquiry or contact and the terms
and conditions of such proposal, offer, inquiry or other contact.
Notwithstanding any term of this Article III, all actions that may be taken
following the date hereof by the Stockholder or any affiliate of the
Stockholder in their capacity as a member of the Board of Directors of the
Company shall be governed solely by the terms of the Merger Agreement and not
by the terms of this Agreement.
ARTICLE IV
TERMINATION
4.01 TERMINATION. This Agreement shall terminate, and no party shall have
any rights or obligations hereunder, and this Agreement shall become null and
void and have no further effect upon the earliest of (a) the Effective Time of
the Merger or (b) the termination of the Merger Agreement pursuant to Section
8.01. Nothing in this Section 4.01 shall relieve any party of liability for
any breach of this Agreement.
ARTICLE V
MISCELLANEOUS
5.01. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of this Agreement is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner
in order that the terms of this Agreement remain as originally contemplated to
the fullest extent possible.
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5.02 FURTHER ASSURANCES. Each Stockholder and E&S will execute and deliver
all such further documents and instruments and take all such further action as
may be necessary in order to consummate the transactions contemplated hereby.
5.03 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at
law or in equity.
5.04 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between E&S and the Stockholders with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral,
between E&S and the Stockholders with respect to the subject matter hereof.
5.05 AMENDMENT; WAIVER. This Agreement may not be amended except by an
instrument in writing signed by all the parties hereto. Any party to this
Agreement may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in
the representations and warranties of the other party contained herein or in
any document delivered by the other party pursuant hereto or (c) waive
compliance with any of the agreements or conditions of the other party
contained herein. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party to be bound thereby. Any
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
5.06 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Utah applicable to contracts
executed in and to be performed in that State, without regard to the conflict
of law provisions thereof.
5.07 EXPENSES. Except as otherwise specified in this Agreement, all costs
and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall have
occurred.
5.08 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be
specified in a notice given in accordance with this Section 5.08):
(a) if to any Stockholder, addressed to such Stockholder:
AccelGraphics, Inc.
1873 Barber Lane
Milpitas, California 95035
Attn: Chief Executive Officer
with a copy to:
Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, California 94025
Attn: Steven J. Tonsfeldt, Esq.
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(b) if to E&S:
Evans & Sutherland Computer Corporation
600 Komas Drive
Salt Lake City, Utah 84108
Attention: John T. Lemley
with copies to:
Snell & Wilmer, L.L.P.
111 East Broadway, Suite 900
Salt Lake City, Utah 84111
Attention: David F. Evans, Esq.
5.09 HEADINGS. The descriptive headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
5.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
EVANS AND SUTHERLAND COMPUTER CORPORATION
/s/ James R. Oyler
By: _________________________________
Name:James R. Oyler
Title:Chief Executive Officer
[VOTING AGREEMENT SIGNATURE PAGE]
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<PAGE>
/s/ Stephen L. Bartlett
-------------------------------------
Stephen L. Bartlett
/s/ Nancy E. Bush
-------------------------------------
Nancy E. Bush
/s/ Jeffrey W. Dunn
-------------------------------------
Jeffrey W. Dunn
/s/ Lew S. Epstein
-------------------------------------
Lew S. Epstein
/s/ David W. Pidwell
-------------------------------------
David W. Pidwell
[VOTING AGREEMENT SIGNATURE PAGE]
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<PAGE>
/s/ Niraj Swarup
-------------------------------------
Niraj Swarup
/s/ Arthur Yan
-------------------------------------
Arthur Yan
ADVANCED TECHNOLOGY VENTURES IV,
L.P.
By: ATV Associates IV, L.P.
/s/ Jos C. Henkens
Name:--------------------------------
(print)
General Partner
Title:
---------------------------------
STF II, L.P.
c/o IndoSuez Ventures
/s/ David E. Gold
By:----------------------------------
David E. Gold
Name:--------------------------------
(print)
General Partner
Title:
---------------------------------
ASSET MANAGEMENT ASSOCIATES 1996,
L.P.
By: AMC Partners 96, L.P.,
its General Partner
/s/ W. Ferrell Sanders
By:----------------------------------
W. Ferrell Sanders
Name:--------------------------------
(print)
General Partner
Title:
---------------------------------
[VOTING AGREEMENT SIGNATURE PAGE]
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<PAGE>
AVI CAPITAL, L.P.
By: AVI Capital Management, L.P.,
its General Partner
/s/ Peter Wolken
Name:--------------------------------
(print)
General Partner
Title:
---------------------------------
ASSOCIATED VENTURE INVESTORS II,
L.P.
By: AVI Management Partners III,
L.P.
/s/ Peter Wolken
Name:--------------------------------
(print)
General Partner
Title:
---------------------------------
AVI PARTNERS GROWTH FUND II, L.P.
By: AVI Management Partners III,
L.P.
/s/ Peter Wolken
Name:--------------------------------
(print)
General Partner
Title:
---------------------------------
AVI SILICON VALLEY PARTNERS, L.P.
By: AVI Management Partners III,
L.P.
/s/ Peter Wolken
Name:--------------------------------
(print)
General Partner
Title:
---------------------------------
[VOTING AGREEMENT SIGNATURE PAGE]
A-3-8
