UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO
FILED PURSUANT TO RULE 13d-2(1)
(Amendment No.)*
Evans & Sutherland Computer Corporation
(Name of Issuer)
Common Stock, $.20 par value
(Title of Class of Securities)
299096107
(CUSIP Number)
F. Thomas Dunlap
Vice President, General Counsel and Secretary
Intel Corporation
2200 Mission College Boulevard
Santa Clara, CA 95052
Telephone: (408) 765-8080
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 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 (e), 13d-1 (f) or 13d-1 (g), 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 the disclosures provided
in a prior cover page.
The information required in 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 (the "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 1 of 86 Pages
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CUSIP No. 299096107 13D Page 2 of 86
1. NAME OF REPORTING PERSON: INTEL CORPORATION
S.S. or I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 94-
1672743
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:
DELAWARE
7. SOLE VOTING POWER:
NUMBER OF 1,282,128
SHARES 8. SHARED VOTING POWER:
BENEFICIALLY 0
OWNED BY EACH 9. SOLE DISPOSITIVE POWER:
REPORTING 1,282,128
PERSON WITH 10. SHARED DISPOSITIVE POWER:
0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON: 1,282,128
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES**
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
11.3%
14. TYPE OF REPORTING PERSON:**
CO
**SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No. 299096107 13D Page 3 of 86
ITEM 1. Security and Issuer.
(a) Name of Principal Executive Offices of Issuer:
Evans & Sutherland Computer Corporation (the
"Issuer")
600 Komas Drive
Salt Lake City, Utah 84108
(b) Title of Class of Equity Securities:
Common Stock, $.20 par value
ITEM 2. Identity and Background.
(a) Name of Person Filing:
Intel Corporation (the "Reporting Person")
(b) Address of Principal Business Office:
2200 Mission College Boulevard
Santa Clara, CA 95052-8119
(c) Principal Business:
Manufacturer of microcomputer components,
modules and systems
(d) Criminal Proceedings:
During the last five years, neither the
Reporting Person nor any executive officer or
director of the Reporting Person has been
convicted in any criminal proceeding.
(e) Civil Proceedings:
During the last five years, neither the
Reporting Person nor any executive officer or
director of the Reporting Person has been party
to any civil proceeding of a judicial or
administrative body of competent jurisdiction
as a result of which such person was or is
subject to any 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.
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CUSIP No. 299096107 13D Page 4 of 86
(f) Place of Organization:
Delaware
Attached hereto as Appendix A is information required
by this Item 2 with respect to the executive officers
and directors of the Reporting Person. All such
individuals are U.S. citizens, except as otherwise
indicated on Appendix A.
ITEM 3. Source and Amount of Funds or Other Consideration.
(a) Source of Funds:
Funds for the purchase of the Securities (as
defined in Item 4) were derived from the
Reporting Person's working capital.
(b) Amount of Funds:
$23,999,988 was paid to acquire 901,408 shares
of Series B Preferred Stock (as defined in Item
4). Up to $12,595,688 will be paid should the
Reporting Person exercise the Warrant (as
defined in Item 4).
ITEM 4. Purpose of the Transaction.
On July 22, 1998, the Reporting Person acquired
901,408 shares (the "Shares") of the Issuer's Class B-
1 Preferred Stock, no par value ("Series B Preferred
Stock"), and a warrant for 378,462 shares of Series B
Preferred Stock (the "Warrant" and together with the
Shares, the "Securities"). The Series B Preferred
Stock is non-voting preferred stock, convertible at
any time into Common Stock, initially on a one-to-one
basis. The shares of Series B Preferred Stock subject
to the Warrant are fully vested and immediately
convertible into Common Stock. The exercise price for
such shares is $33.28125 per share. The Warrant
expires on July 22, 2001.
The Reporting Person presently holds the Securities as
an investment. Depending upon the Reporting Person's
evaluation of market conditions, market price,
alternative investment opportunities, liquidity needs
and other factors, the Reporting Person will from time
to time explore opportunities for liquidating all or a
portion the Securities, through one or more sales
pursuant to public or private offerings or otherwise.
The Reporting Person may determine to retain some
portion of the Securities as an investment.
In addition, the Reporting Person acquired the
Securities in connection with a Development and
Manufacturing Agreement between the Issuer and the
Reporting Person pursuant to which the Issuer and
Reporting Person will.
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CUSIP No. 299096107 13D Page 5 of 86
collaborate to accelerate the development of high-end
graphics and video subsystems for Intel-based
workstations. Such purpose is further described in
the Press Release (as defined below in Item 7)
attached as Exhibit 4 to this Schedule 13D
ITEM 5. Interest in Securities of the Issuer.
(a) Number of Shares
Beneficially Owned: 1,282,128(1)(2)
Right to Acquire: 1,279,870 shares
of Common Stock(2)
Percent of Class: 11.3%(1)(2) (based
upon
11,335,054(1)(2)
shares of Common
Stock outstanding,
determined from
representations
made by the Issuer
to the Reporting
Person in the
Purchase Agreement
(as defined in
Item 7).
(b) Sole Power to Vote, Direct
the Vote of, Dispose of, or
Direct the Disposition of 1,282,128(1)(2)
Shares:
(c) Recent Transactions: As described more
fully in Item 4,
on July 22, 1998,
the Reporting
Person acquired
901,408 shares of
the Series B
Preferred Stock
for cash in the
amount of $26.625
per share and a
warrant for
378,462 shares of
Series B Preferred
Stock.
(1)Includes 2,258 shares of Common Stock.
(2)Includes (a) the 901,408 shares of Common Stock that the
Reporting Person has a right to acquire upon conversion of
901,408 shares of the Series B Preferred Stock pursuant to the
Certificate of Designation (as defined in Item 7) and (b) the
378,462 shares of Common Stock that the Reporting Person has a
right to acquire upon exercise of the Warrant (as defined and
described in Item 4) for 378,462 shares of Series B Preferred
Stock and upon conversion of such Series B Preferred Stock
pursuant to the Certificate of Designation (as defined in Item
7). Such shares are beneficially owned by the Reporting Person
under Rule 13d-3 because the Reporting Person has a right to
acquire such shares within the next 60 days.
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CUSIP No. 299096107 13D Page 6 of 86
On June 26, 1998,
the Reporting
Person acquired
2,258 shares of
Common Stock of
the Issuer as a
result of the
Issuer's
acquisition of
AccelGraphics,
Inc. In this
acquisition, each
of the 17,500
shares of common
stock of
AccelGraphics,
Inc. owned by the
Reporting Person
were valued at
$5.75 and
converted into
approximately .129
shares of Common
Stock of the
Issuer and $2.76
in cash. The
Issuer's
acquisition of
AccelGraphics,
Inc. is described
more fully in the
Issuer's Current
Report on Form 8-K
filed on July 13,
1998.
(d) Rights with Respect to
Dividends or Sales N/A
Proceeds:
(e) Date of Cessation of Five
Percent Beneficial N/A
Ownership:
ITEM 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the
Issuer.
Pursuant to the Purchase Agreement (as defined in Item
7), the Reporting Person has, under certain
circumstances, various rights related to: (a)
registration of the Common Stock issuable upon
conversion or exchange of the Series B Preferred Stock
pursuant to certain shelf, demand and piggyback
registration rights granted to the Reporting Person;
(b) a representative of the Reporting Person to
observe board of director and committee meetings of
the Issuer in a non-voting capacity; (c) certain
rights of consent, notification, first refusal and
first negotiation in connection with certain sales of
securities, acquisitions, asset sales, grants of
licenses and other corporate events of the Issuer or
any of its significant subsidiaries; and (d) the
participation in future issuances of securities by the
Issuer and the maintenance of the Reporting Person's
percentage ownership of the Issuer. Pursuant to the
Purchase Agreement, the Reporting Person has
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CUSIP No. 299096107 13D Page 7 of 86
certain standstill obligations relating to its
acquisition of voting securities of the Issuer. In
addition, the Purchase Agreement, the Certificate of
Designation (as defined in Item 7) and the Warrant (as
defined in Item 4) place certain restriction on the
transfer of the Securities. See the Purchase
Agreement, the Certificate of Designation and the
Warrant for a further description of these and other
provisions.
ITEM 7. Material to be Filed as Exhibits.
Exhibit 1 Evans & Sutherland Computer Corporation
Series B Preferred Stock and Warrant
Purchase Agreement dated July 20, 1998
(the "Purchase Agreement")
Exhibit 2 Certificate of Designation, Preferences
and Other Rights of the Class B-1
Preferred Stock of Evans & Sutherland
Computer Corporation filed July 21, 1998
(the "Certificate of Designation")
Exhibit 3 Evans & Sutherland Computer Corporation
Warrant to Purchase Series B Preferred
Stock effective as of July 22, 1998
Exhibit 4 Press Release dated July 22, 1998 (the
"Press Release")
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CUSIP No. 299096107 13D Page 8 of 86
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated as of August 3, 1998.
INTEL CORPORATION
By:
F. Thomas Dunlap, Jr.
Vice President, General
Counsel and Secretary
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CUSIP No. 299096107 13D Page 9 of 86
APPENDIX A
DIRECTORS
The following is a list of all Directors of Intel Corporation and
certain other information with respect to each Director:
Name: Craig R. Barrett
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal President and Chief Executive Officer of Intel
Occupation: Corporation
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization in
which employment
is conducted:
Name: John Browne
Business The British Petroleum Company plc, Britannic
Address: House, 1 Finsbury Circus, London EC2M 7BA
Principal Group Chief Executive
Occupation:
Name, principal The British Petroleum Company plc, an
business and integrated oil company.
address of Britannic House, 1 Finsbury Circus
corporation or London EC2M 7BA
other
organization in
which employment
is conducted:
Citizenship: British
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CUSIP No. 299096107 13D Page 10 of 86
Name: Winston H. Chen
Business Paramitas Foundation, 3945 Freedom Circle,
Address: Suite 760, Santa Clara, CA 95054
Principal Chairman of Paramitas Foundation
Occupation:
Name, principal Paramitas Foundation, a charitable foundation.
business and 3945 Freedom Circle, Suite 760
address of Santa Clara, CA 95054
corporation or
other
organization in
which employment
is conducted:
Name: Andrew S. Grove
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Chairman of the Board of Directors of Intel
Occupation: Corporation
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization in
which employment
is conducted:
Name: D. James Guzy
Business 1340 Arbor Road, Menlo Park, CA 94025
Address:
Principal Chairman of The Arbor Company
Occupation:
Name, principal The Arbor Company, a limited partnership
business and engaged in the electronics and computer
address of industry.
corporation or 1340 Arbor Road
other Menlo Park, CA 94025
organization in
which employment
is conducted:
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CUSIP No. 299096107 13D Page 11 of 86
Name: Gordon E. Moore
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Chairman Emeritus of the Board of Intel
Occupation: Corporation
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization in
which employment
is conducted:
Name: Arthur Rock
Business One Maritime Plaza, Suite 1220, San Francisco,
Address: CA 94111
Principal Venture Capitalist
Occupation:
Name, principal Arthur Rock and Company, a venture capital
business and firm.
address of One Maritime Plaza, Suite 1220
corporation or San Francisco, CA 94111
other
organization in
which employment
is conducted:
Name: Jane E. Shaw
Business 1310 Orleans Drive, Sunnyvale, CA 94089
Address:
Principal Chairman and Chief Executive Officer
Occupation:
Name, principal AeroGen, Inc., a private company specializing
business and in controlled delivery of drugs to the lungs
address of 1310 Orleans Drive
corporation or Sunnyvale, CA 94089
other
organization in
which employment
is conducted:
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CUSIP No. 299096107 13D Page 12 of 86
Name: Leslie L. Vadasz
Business 2200 Mission College Boulevard, Santa Clara,
Address: CA 95052
Principal Senior Vice President, Director, Corporate
Occupation: Business Development, Intel Corporation
Name, principal Intel Corporation, a manufacturer of
business and microcomputer components, modules and systems.
address of 2200 Mission College Boulevard
corporation or Santa Clara, CA 95052
other
organization in
which employment
is conducted:
Name: David B. Yoffie
Business Harvard Business School, Morgan Hall 247,
Address: Soldiers Field Road, Boston, MA 92163
Principal Max and Doris Starr Professor of International
Occupation: Business Administration
Name, principal Harvard Business School, an educational
business and institution.
address of Harvard Business School
corporation or Morgan Hall 247,Soldiers Field Road
other Boston, MA 92163
organization in
which employment
is conducted:
Name: Charles E. Young
Business 10920 Wilshire Boulevard, Los Angeles, CA
Address: 90024
Principal Chancellor Emeritus
Occupation:
Name, principal University of California at Los Angeles, an
business and educational institution.
address of 10920 Wilshire Boulevard
corporation or Los Angeles, CA 90024
other
organization in
which employment
is conducted:
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CUSIP No. 299096107 13D Page 13 of 86
EXECUTIVE OFFICERS
The following is a list of all executive officers of Intel
Corporation excluding executive officers who are also directors.
Unless otherwise indicated, each officer's business address is
2200 Mission College Boulevard, Santa Clara, California 95052-
8119, which address is Intel Corporation's business address.
Name: Paul S. Otellini
Title: Executive Vice President, Director, Intel
Architecture Business Group
Name: Gerhard H. Parker
Title: Executive Vice President, General Manager, New
Business Group
Name: Albert Y. C. Yu
Title: Senior Vice President, General Manager,
Microprocessor Products Group
Name: Andy D. Bryant
Title: Vice President and Chief Financial Officer
Name: F. Thomas Dunlap, Jr.
Title: Vice President, General Counsel and Secretary
Name: Sean M. Maloney
Title: Vice President, Director, Sales and Marketing Group
Name: Arvind Sodhani
Title: Vice President, Treasurer
Name: Michael R. Splinter
Title: Vice President, General Manager, Technology and
Manufacturing Group
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CUSIP No. 299096107 13D Page 14 of 86
CONFIDENTIAL
EVANS & SUTHERLAND
COMPUTER CORPORATION
SERIES B PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
JULY 20, 1998
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CUSIP No. 299096107 13D Page 15 of 86
TABLE OF CONTENTS
1. AGREEMENT TO PURCHASE AND SELL STOCK . . . . . . . . . . . .1
(a) Authorization . . . . . . . . . . . . . . . . . . . . . .1
(b) Agreement to Purchase and Sell Securities . . . . . . . . 1
(c) Per Share Purchase Price . . . . . . . . . . . . . . . . 1
(d) Agreement to Purchase and Sell Warrant . . . . . . . . . 2
(e) Total Consideration . . . . . . . . . . . . . . . . . . . 2
2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . 2
(a) Organization Good Standing and Qualification . . . . . . 2
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . 2
(c) Due Authorization . . . . . . . . . . . . . . . . . . . . 3
(d) Valid Issuance of Stock . . . . . . . . . . . . . . . . . 3
(i) Valid Issuance . . . . . . . . . . . . . . . . . . . . 3
(ii) Compliance with Securities Laws . . . . . . . . . . . 4
(e) Governmental Consents . . . . . . . . . . . . . . . . . . 4
(f) Non-Contravention . . . . . . . . . . . . . . . . . . . . 4
(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . 5
(h) Compliance with Law and Charter Documents . . . . . . . . 5
(i) SEC Documents . . . . . . . . . . . . . . . . . . . . . . 5
(i) Reports . . . . . . . . . . . . . . . . . . . . . . . . 5
(ii) Financial Statements . . . . . . . . . . . . . . . . . 5
(j) Absence of Certain Changes Since Balance Sheet Date . . . 6
(k) Invention Assignment and Confidentiality Agreement . . . 6
(l) Intellectual Property . . . . . . . . . . . . . . . . . . 7
(i) Ownership or Right to Use . . . . . . . . . . . . . . . 7
(ii) Licenses; Other Agreements . . . . . . . . . . . . . . 7
(iii) No Infringement . . . . . . . . . . . . . . . . . . . 7
(iv) Employees and Consultants . . . . . . . . . . . . . . 7
(m) Registration Rights . . . . . . . . . . . . . . . . . . . 8
(n) Title to Property and Assets . . . . . . . . . . . . . . 8
(o) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . 8
(p) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 8
(q) Environmental Matters . . . . . . . . . . . . . . . . . . 8
(r) Brokers and Finders . . . . . . . . . . . . . . . . . . . 9
(s) Shareholder Rights Plan . . . . . . . . . . . . . . . . . 9
(t) Full Disclosure . . . . . . . . . . . . . . . . . . . . .10
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . . .10
(a) Organization, Good Standing and Qualification . . . . . .10
(b) Authorization . . . . . . . . . . . . . . . . . . . . . .10
(c) Governmental Consents . . . . . . . . . . . . . . . . . .10
(d) Non-Contravention . . . . . . . . . . . . . . . . . . . .10
(e) Litigation . . . . . . . . . . . . . . . . . . . . . . .11
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CUSIP No. 299096107 13D Page 16 of 86
(f) Purchase for Own Account . . . . . . . . . . . . . . . .11
(g) Investment Experience . . . . . . . . . . . . . . . . . .11
(h) Accredited Investor Status . . . . . . . . . . . . . . .11
(i) Restricted Securities . . . . . . . . . . . . . . . . . .11
(j) Legends . . . . . . . . . . . . . . . . . . . . . . . . .11
(j) Review of Information . . . . . . . . . . . . . . . . . .12
(j) Acknowledgment of Risks . . . . . . . . . . . . . . . . .12
5. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING . . . .12
(a) Representations and Warranties True . . . . . . . . . . .12
(b) Performance . . . . . . . . . . . . . . . . . . . . . . .12
(c) Securities Exemptions . . . . . . . . . . . . . . . . . .12
(d) Proceedings and Documents . . . . . . . . . . . . . . . .12
(i) Certified Charter Documents . . . . . . . . . . . . . .12
(ii) Board Resolutions . . . . . . . . . . . . . . . . . .13
(e) Opinion of Company Counsel . . . . . . . . . . . . . . .13
(f) No Material Adverse Effect . . . . . . . . . . . . . . .13
(g) Other Actions . . . . . . . . . . . . . . . . . . . . . .13
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING . . . .13
(a) Representations and Warranties True . . . . . . . . . . .13
(b) Performance . . . . . . . . . . . . . . . . . . . . . . .13
(c) Payment of Purchase Price . . . . . . . . . . . . . . . .13
(d) Securities Exemptions . . . . . . . . . . . . . . . . . .13
(e) Proceedings and Documents . . . . . . . . . . . . . . . .13
7. COVENANTS OF COMPANY . . . . . . . . . . . . . . . . . . .14
(a) Information Rights . . . . . . . . . . . . . . . . . . .14
(i) Financial Information . . . . . . . . . . . . . . . . .14
(A) Annual Reports . . . . . . . . . . . . . . . . . . .14
(B) Quarterly Reports . . . . . . . . . . . . . . . . . .14
(ii) SEC Filings . . . . . . . . . . . . . . . . . . . . .14
(b) Registration Rights . . . . . . . . . . . . . . . . . . .14
(i) Definitions . . . . . . . . . . . . . . . . . . . . . .14
(A) Registration . . . . . . . . . . . . . . . . . . . .14
(B) Registrable Securities . . . . . . . . . . . . . . .15
(C) Registrable Securities Then Outstanding . . . . . . .15
(D) Holder . . . . . . . . . . . . . . . . . . . . . . .15
(E) Forms S-1, S-2 and S-3 . . . . . . . . . . . . . . .15
(ii) Shelf Registration . . . . . . . . . . . . . . . . . .15
(A) Undertaking to Register . . . . . . . . . . . . . . .15
(B) Selling Procedures; Suspension . . . . . . . . . . .15
(C) Expenses . . . . . . . . . . . . . . . . . . . . . .17
(D) Obligations of the Company . . . . . . . . . . . . .17
(iii) Demand Registration . . . . . . . . . . . . . . . . .17
(A) Request by Holders . . . . . . . . . . . . . . . . .17
(B) Underwriting . . . . . . . . . . . . . . . . . . . .18
(C) Number of Demand Registrations . . . . . . . . . . .18
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CUSIP No. 299096107 13D Page 17 of 86
(D) Deferral . . . . . . . . . . . . . . . . . . . . . .18
(E) Expenses . . . . . . . . . . . . . . . . . . . . . .18
(F) Obligations of the Company . . . . . . . . . . . . .19
(iv) Piggyback Registrations . . . . . . . . . . . . . . .19
(A) Underwriting . . . . . . . . . . . . . . . . . . . .19
(B) Expenses . . . . . . . . . . . . . . . . . . . . . .20
(C) Not Demand Registration . . . . . . . . . . . . . . .20
(D) Obligations of the Company . . . . . . . . . . . . .20
(v) General Registration Obligations of the Company . . . .21
(A) Registration Statement . . . . . . . . . . . . . . .21
(B) Amendments and Supplements . . . . . . . . . . . . .21
(C) Prospectuses . . . . . . . . . . . . . . . . . . . .21
(D) Blue Sky . . . . . . . . . . . . . . . . . . . . . .21
(E) Underwriting . . . . . . . . . . . . . . . . . . . .21
(F) Notification . . . . . . . . . . . . . . . . . . . .21
(G) Opinion and Comfort Letter . . . . . . . . . . . . .21
(vi) Furnish Information . . . . . . . . . . . . . . . . .22
(vii) Indemnification . . . . . . . . . . . . . . . . . . .22
(A) By the Company . . . . . . . . . . . . . . . . . . .22
(B) By Selling Holders . . . . . . . . . . . . . . . . .23
(C) Notice . . . . . . . . . . . . . . . . . . . . . . .23
(D) Defects Eliminated in Final Prospectus . . . . . . .24
(E) Contribution . . . . . . . . . . . . . . . . . . . .24
(F) Survival . . . . . . . . . . . . . . . . . . . . . .24
(viii) Termination of the Company's Obligations . . . . . .24
(ix) No Registration Rights to Third Parties . . . . . . .25
(c) Obligations Regarding Confidential Information . . . . .25
(i) Obligations . . . . . . . . . . . . . . . . . . . . . .25
(ii) Certain Definitions . . . . . . . . . . . . . . . . .25
(iii) Non-Disclosure of Confidential Information . . . . .25
(iv) Public Announcements . . . . . . . . . . . . . . . . .26
(v) Third Party Information . . . . . . . . . . . . . . . .26
(vi) Other Disclosures . . . . . . . . . . . . . . . . . .26
(d) Board and Committee Observer . . . . . . . . . . . . . .26
(e) Rights in the event of a Corporate Event . . . . . . . .27
(i) Corporate Events . . . . . . . . . . . . . . . . . . .27
(ii) Notice of Corporate Events and Ten Percent (10%)
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . 28
(iii) Right of First Refusal . . . . . . . . . . . . . . . 28
(iv) Right of Resale . . . . . . . . . . . . . . . . . . . 29
(v) Right of Notification and Negotiation . . . . . . . . 29
(vi) Right to Consent . . . . . . . . . . . . . . . . . . 30
(vii) Spin-Off of Graphics Business . . . . . . . . . . . 30
(f) Rights of Participation . . . . . . . . . . . . . . . . 30
(i) General . . . . . . . . . . . . . . . . . . . . . . . 30
(ii) Pro Rata Share . . . . . . . . . . . . . . . . . . . 30
<PAGE>
CUSIP No. 299096107 13D Page 18 of 86
(iii) New Securities . . . . . . . . . . . . . . . . . . . 31
(iv) Procedures . . . . . . . . . . . . . . . . . . . . . 31
(v) Failure to Exercise . . . . . . . . . . . . . . . . . 32
(vi) Termination . . . . . . . . . . . . . . . . . . . . . 32
(g) Right of Maintenance . . . . . . . . . . . . . . . . . . 32
(i) General . . . . . . . . . . . . . . . . . . . . . . . 32
(ii) Dilutive Securities . . . . . . . . . . . . . . . . . 32
(iii) Purchase Price . . . . . . . . . . . . . . . . . . . 33
(A) Employee Stock . . . . . . . . . . . . . . . . . . . 33
(B) Other Dilutive Securities . . . . . . . . . . . . . 33
(C) Market Price . . . . . . . . . . . . . . . . . . . . 33
(D) Alternative Purchase Price . . . . . . . . . . . . . 34
(E) Consideration Other than Cash . . . . . . . . . . . 34
(F) Appraiser . . . . . . . . . . . . . . . . . . . . . 34
(iv) Prior Percentage Interest . . . . . . . . . . . . . . 34
(v) Maintenance Amount . . . . . . . . . . . . . . . . . . 34
(vi) Maintenance Notice . . . . . . . . . . . . . . . . . 35
(vii) Purchase of Maintenance Securities . . . . . . . . . 35
(vi) Termination . . . . . . . . . . . . . . . . . . . . . 35
(h) Standstill Agreement . . . . . . . . . . . . . . . . . . 35
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 37
(a) Agreement to Indemnify . . . . . . . . . . . . . . . . . 37
(i) Company Indemnity . . . . . . . . . . . . . . . . . . 37
(ii) Investor Indemnity . . . . . . . . . . . . . . . . . 37
(iii) Equitable Relief . . . . . . . . . . . . . . . . . . 38
(b) Survival . . . . . . . . . . . . . . . . . . . . . . . . 38
(c) Claims for Indemnification . . . . . . . . . . . . . . . 38
(d) Defense of Claims . . . . . . . . . . . . . . . . . . . 39
(e) Certain Definitions . . . . . . . . . . . . . . . . . . 40
9. ASSIGNMENT AND DELEGATION . . . . . . . . . . . . . . . . 40
(a) Information Rights . . . . . . . . . . . . . . . . . . . 40
(b) Registration Rights . . . . . . . . . . . . . . . . . . 40
(c) Confidential Information . . . . . . . . . . . . . . . . 41
(d) Board Observer . . . . . . . . . . . . . . . . . . . . . 41
(e) Rights On Corporate Events . . . . . . . . . . . . . . . 41
(f) Rights of Participation and Maintenance . . . . . . . . 41
10. TRANSFERABILITY OF PURCHASED AND WARRANT SHARES . . . . . 41
11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 41
(a) Successors and Assigns . . . . . . . . . . . . . . . . . 41
(b) Governing Law . . . . . . . . . . . . . . . . . . . . . 42
(c) Counterparts . . . . . . . . . . . . . . . . . . . . . . 42
(d) Headings . . . . . . . . . . . . . . . . . . . . . . . . 42
(e) Notices . . . . . . . . . . . . . . . . . . . . . . . . 42
(f) Amendments and Waivers . . . . . . . . . . . . . . . . . 42
(g) Severability . . . . . . . . . . . . . . . . . . . . . . 42
<PAGE>
CUSIP No. 299096107 13D Page 19 of 86
(h) Entire Agreement . . . . . . . . . . . . . . . . . . . . 42
(i) Further Assurances . . . . . . . . . . . . . . . . . . . 43
(j) Construction . . . . . . . . . . . . . . . . . . . . . . 43
(k) Fees, Costs and Expenses . . . . . . . . . . . . . . . . 43
(l) Competition . . . . . . . . . . . . . . . . . . . . . . 43
(m) Cooperation in HSR Act Filings . . . . . . . . . . . . . 43
(n) Adjustments for Stock Splits, Etc . . . . . . . . . . . 44
(o) Index of Defined Terms . . . . . . . . . . . . . . . . . 44
<PAGE>
CUSIP No. 299096107 13D Page 20 of 86
EVANS & SUTHERLAND
COMPUTER CORPORATION
SERIES B PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT
This Series B Preferred Stock and Warrant Purchase Agreement
(this "Agreement") is made and entered into as of July 20, 1998
by and between Evans & Sutherland Computer Corporation, a Utah
corporation (the "Company"), and Intel Corporation, a Delaware
corporation (the "Investor").
RECITAL
In consideration for twenty-three million nine hundred ninety-
nine thousand nine hundred eighty-eight dollars ($23,999,988) in
cash, the Company shall issue (i) a number of shares of Class B-1
Preferred Stock, no par value, of the Company (the "Series B
Preferred Stock") and (ii) a warrant to purchase three hundred
seventy-eight thousand four hundred sixty-two (378,462) shares of
Series B Preferred Stock, all on the terms and conditions set
forth in this Agreement.
AGREEMENT
In consideration of the foregoing recitals, the mutual promises
hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
(a) Authorization. As of the Closing, the Company's Board
of Directors (the "Board") shall have authorized the issuance,
pursuant to the terms and conditions of this Agreement, of up to
one million five hundred thousand (1,500,000) shares of Series B
Preferred Stock, having the rights, preferences privileges and
restrictions set forth in the Certificate of Designation,
Preferences and Other Rights of the Class B-1 Preferred Stock in
the form attached hereto as Exhibit A (the "Certificate of
Designation") and up to one million two hundred seventy-nine
thousand eight hundred seventy (1,279,870) shares of the
Company's common stock, par value $.20 (the "Common Stock"), for
issuance upon conversion of Series B Preferred Stock.
(b) Agreement to Purchase and Sell Securities. The Company
hereby agrees to issue to the Investor at the Closing, and the
Investor agrees to acquire from the Company at the Closing, nine
hundred one thousand four hundred eight (901,408) shares of
Series B Preferred Stock (collectively, the "Purchased Shares").
(c) Per Share Purchase Price. The per share purchase price
of the Series B Preferred Stock shall be twenty six and six
hundred twenty-five one thousandths dollars ($26.625) (the "Per
Share Purchase Price").
(d) Agreement to Purchase and Sell Warrant. The Company
hereby agrees to issue to the Investor at the Closing a Warrant
in the form attached hereto as Exhibit B (the
<PAGE>
CUSIP No. 299096107 13D Page 21 of 86
"Warrant") to purchase three hundred seventy-eight thousand four
hundred sixty-two (378,462) shares of Series B Preferred Stock
(the "Warrant Shares").
(e) Total Consideration. The total consideration for the
Purchased Shares and the Warrant shall consist of twenty-three
million nine hundred ninety-nine thousand nine hundred eighty-
eight dollars ($23,999,988) in cash.
2. CLOSING. The purchase and sale of the Purchased Shares and
the Warrant (the "Closing") shall take place at the offices of
Gibson, Dunn & Crutcher LLP, 1530 Page Mill Road, Palo Alto,
California, at 10:00 a.m. California time, within three (3)
business days after the conditions set forth in Sections 5 and 6
have been satisfied or waived by the party entitled to waive any
such condition, or at such other time and place as the Company
and the Investor mutually agree upon (which time and place are
referred to in this Agreement as the "Closing Date"). At the
Closing, the Company shall deliver to the Investor certificates
representing the Purchased Shares and the Warrant, all against
delivery to the Company by the Investor of the consideration set
forth in Section 1(e), with the cash portion of the purchase
price paid by wire transfer of funds to the Company. The Company
and the Investor expect that Closing documents shall be delivered
by facsimile with original signature pages sent by overnight
courier.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Investor that the
statements in this Section 3 are true and correct, except as set
forth in the Disclosure Letter from the Company to the Investor
dated as of the date of this Agreement (the "Disclosure Letter")
or disclosed in an SEC Document:
(a) Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Utah and has all
corporate power and authority required to (i) carry on its
business as presently conducted and (ii) enter into this
Agreement and the Warrant, and to consummate the transactions
contemplated hereby and thereby. Each of the Company and its
subsidiaries is qualified to do business and is in good standing
in each jurisdiction in which the failure to so qualify would
have a Material Adverse Effect on the Company. As used in this
Agreement, "Material Adverse Effect" means a material adverse
effect on, or a material adverse change in, or a group of such
effects on or changes in, the business, operations, financial
condition, results of operations, prospects, assets or
liabilities of the applicable party and its subsidiaries, taken
as a whole.
(b) Capitalization. Immediately prior to and without
giving effect to the transactions contemplated by this Agreement,
the capitalization of the Company is as follows:
(i) The authorized capital stock of the Company
consists of: (x) 30,000,000 shares of Common Stock, of which
10,055,184 shares were issued and outstanding as of June 30,
1998; (y) 5,000,000 shares of Class A Preferred Stock, no par
value (the "Series A Preferred Stock"), none of which were issued
and outstanding as of June 30, 1998; and (z) 5,000,000 shares of
Class B Preferred Stock, no par value, none of which were issued
and outstanding as of June 30, 1998 (the Series A Preferred Stock
and the Series B Preferred Stock
<PAGE>
CUSIP No. 299096107 13D Page 22 of 86
together, the "Preferred Stock"). All such shares have been duly
authorized, have been validly issued, are fully paid and
nonassessable and are free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the
holders thereof. As of June 30, 1998, the Company has reserved:
(1) 3,679,999 shares of Common Stock for issuance to officers,
directors, employees or independent contractors or affiliates of
the Company under the Company's 1998 Stock Option Plan; 1989
Stock Option Plan for Non-Employee Directors; 1995 Long Term
Incentive Equity Plan; 1985 Stock Option Plan for Key Employees;
and AccelGraphics, Inc. 1995 Stock Plan; (2) 28,300 shares of
Common Stock for issuance to certain employees of the Company in
connection with the Company's acquisition of substantially all of
the assets of Silicon Reality, Inc. on June 26, 1998; and (3)
18,015,000 shares of Common Stock for issuance upon conversion of
its outstanding 6% Convertible Subordinated Debentures due 2012.
As of June 30, 1998, of the 3,708,299 shares of Common Stock
reserved for issuance upon exercise of options, 2,341,850 shares
remained subject to outstanding options with a weighted average
exercise price of approximately $20.5235 and 290,870 shares were
reserved for future grant. All shares of 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 other equity securities, options,
warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which it is bound
obligating the Company to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend or enter into any such
equity security, option, warrant, call, right, commitment or
agreement. No such outstanding shares were issued in violation
of any preemptive right (whether any such right is created in the
Articles or by contract).
(ii) The shares of Series B Preferred Stock and Common
Stock to be issued pursuant to the transactions contemplated
hereby will, upon issuance in accordance with this Agreement, be
duly authorized, validly issued, fully paid and non-assessable.
(c) Due Authorization. All corporate action on the part of
the Company, its officers, directors and shareholders necessary
for the authorization, execution, delivery of, and the
performance of all obligations of the Company under this
Agreement and the Warrant and for the authorization, issuance,
reservation for issuance and delivery of all of the Purchased
Shares and the Warrant Shares, has been taken prior to the
Closing, and this Agreement constitutes, and the Warrant when
executed and delivered will constitute, valid and legally binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, except (i) as may be
limited by (A) applicable bankruptcy, insolvency, reorganization
or others laws of general application relating to or affecting
the enforcement of creditors' rights generally and (B) the effect
of rules of law governing the availability of equitable remedies
and (ii) as rights to indemnity or contribution may be limited
under federal or state securities laws or by principles of public
policy thereunder.
(d) Valid Issuance of Stock.
(i) Valid Issuance. The Purchased Shares, when
issued, sold and delivered in accordance with the terms of this
Agreement, will be duly and validly issued, fully
<PAGE>
CUSIP No. 299096107 13D Page 23 of 86
paid and nonassessable. The Warrant Shares and the Common Stock
to be issued upon conversion of Purchased Shares and Warrant
Shares (the "Conversion Shares") have been duly and validly
reserved for issuance and, upon issuance, sale and delivery in
accordance with the terms of the Warrant, will be duly and
validly issued, fully paid and nonassessable.
(ii) Compliance with Securities Laws. Assuming the
correctness of the representations made by the Investor in
Section 4, the Purchased Shares, the Warrant, the Warrant Shares
and the Conversion Shares (assuming no change in applicable law
and no unlawful distribution of Purchased Shares or the Warrant
by the Investor or other Persons) will be issued to the Investor
in compliance with applicable exemptions from (A) the
registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and
(B) the registration and qualification requirements of all
applicable securities laws of the states of the United States.
(e) Governmental Consents. No consent, approval, order or
authorization of, or registration qualification, designation,
declaration or filing with, any federal, state or local
governmental authority on the part of the Company or any of its
subsidiaries is required in connection with the consummation of
the transactions contemplated by this Agreement and the Warrant,
except for: (i) compliance with HSR Requirements that may be
required for the voluntary conversion of Series B Preferred Stock
into Common Stock; (ii) the filing of a Form 8-K with the
Securities and Exchange Commission (the "SEC") following the
Closing; (iii) the filing of such qualifications or filings under
the Securities Act and the regulations thereunder and all
applicable state securities laws as may be required in connection
with the transactions contemplated by this Agreement; (iv) the
listing of the Conversion Shares for quotation on the Nasdaq
National Market; and (v) the filing of the Certificate of
Designation with the Secretary of State of the State of Utah.
All such qualifications and filings will, in the case of
qualifications, be effective on the Closing Date and will, in the
case of filings, be made within the time prescribed by law. As
used herein, the term "HSR Requirements" means compliance with
the filing and other requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act").
(f) Non-Contravention. The execution, delivery and
performance of this Agreement and the Warrant by the Company, and
the consummation by the Company of the transactions contemplated
hereby and thereby, do not and will not: (i) contravene or
conflict with the Company's Articles of Incorporation, as amended
as of the Closing Date (the "Articles") or the Company's bylaws,
as amended as of the Closing Date (the "Bylaws"); (ii) constitute
a violation of any provision of any federal, state, local or
foreign law binding upon or applicable to the Company or any of
its subsidiaries; or (iii) constitute a default or require any
consent under, give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to
which the Company or any of its subsidiaries is entitled under,
or result in the creation or imposition of any lien, claim or
encumbrance on any assets of the Company or any such subsidiary
under, any contract to which the Company or such subsidiary is a
party or any permit, license or similar right relating to the
Company or such subsidiary or by which the Company or such
subsidiary may be bound or affected in such a manner as, together
with all other such matters, would have Material Adverse Effect
on the Company.
<PAGE>
CUSIP No. 299096107 13D Page 24 of 86
(g) Litigation. There is no action, suit, proceeding,
claim, arbitration or investigation (each, an "Action") pending
or, to the Company's best knowledge, threatened: (i) against the
Company or any of its subsidiaries, or any of their respective
activities, properties or assets, or any officer, director or
employee of the Company or any of its subsidiaries in connection
with such officer's, director's or employee's relationship with,
or actions taken on behalf of, the Company or such subsidiary,
that is reasonably likely to have a Material Adverse Effect on
the Company; or (ii) that seeks to prevent, enjoin, alter or
delay any of the transactions contemplated by this Agreement or
the Warrant. None of the Company and its subsidiaries is a party
to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or
instrumentality. No Action by the Company or any of its
subsidiaries is currently pending, nor does the Company or any of
its subsidiaries intend to initiate any Action, that is
reasonably likely to have a Material Adverse Effect on the
Company.
(h) Compliance with Law and Charter Documents. The Company
is not in violation or default of any provision of the Articles
or Bylaws. Each of the Company and its subsidiaries has complied
and is in compliance with all applicable statutes, laws,
regulations and executive orders of the United States of America
and all states, foreign countries and other governmental
authorities having jurisdiction over the Company's or any of its
subsidiaries' business or properties, except for any violations
that would not, either individually or in the aggregate, have a
Material Adverse Effect on the Company.
(i) SEC Documents.
(i) Reports. The Company has furnished to the
Investor prior to the date hereof copies of its Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 ("Form 10-
K"), its Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1998 (the "Form 10-Q"), all amendments to the
Form 10-K and Form 10-Q, and all other registration statements,
reports and proxy statements filed by the Company with the SEC on
or after March 31, 1998 (the Form 10-K, the Form 10-Q's and such
registration statements, reports proxy statements and amendments
thereto are collectively referred to herein as the "SEC
Documents"). Each of the SEC Documents, as of the date thereof
(or if amended or superseded by a filing prior to the Closing
Date, then on the date of such filing), did not, and each of the
registration statements, reports and proxy statements filed by
the Company with the SEC after the date hereof and prior to the
Closing Date will not, as of the date thereof (or if amended or
superseded by a filing prior to the date of this Agreement, then
on the date of such filing), contain any untrue statement of a
material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
Neither the Company nor any of its subsidiaries is a party to any
material contract, agreement or other arrangement that was
required to have been filed as an exhibit to the SEC Documents
that was not so filed.
(ii) Financial Statements. The Company has provided
the Investor with copies of its audited financial statements (the
"Audited Financial Statements") for the fiscal year ended
December 31, 1997, and its unaudited financial statements for the
three (3) month period ended March 31, 1998 (the "Balance Sheet
Date"). Since the Balance Sheet Date, the Company has duly filed
with the SEC all registration statements, reports and proxy
statements
<PAGE>
CUSIP No. 299096107 13D Page 25 of 86
required to be filed by it under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the Securities Act.
The audited and unaudited consolidated financial statements of
the Company included in the SEC Documents filed prior to the date
hereof fairly present, in conformity with generally accepted
accounting principles ("GAAP") (except as otherwise permitted by
Form 10-Q) applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial
position of the Company as at the dates thereof and the
consolidated results of its operations and cash flows for the
periods then ended (subject to normal year-end audit adjustments
in the case of unaudited interim financial statements).
(j) Absence of Certain Changes Since Balance Sheet Date.
Since the Balance Sheet Date, the business and operations of the
Company and each of its subsidiaries have been conducted in the
ordinary course consistent with past practice, and there has not
been:
(i) any declaration, setting aside or payment of any
dividend or other distribution of the assets of the Company with
respect to any shares of its capital stock or any repurchase,
redemption or other acquisition by the Company or any of its
subsidiaries of any outstanding shares of the Company's capital
stock;
(ii) any damage, destruction or loss, whether or not
covered by insurance, except for such occurrences that have not
resulted, and are not expected to result, in a Material Adverse
Effect on the Company;
(iii) any waiver by the Company or any of its
subsidiaries of a valuable right or of a material debt owed to
it, except for such waivers that have not resulted, and are not
expected to result, individually or in the aggregate, in a
Material Adverse Effect on the Company;
(iv) any material change or amendment to, or any waiver
of any material rights under a material contract or other
arrangement by which the Company or any of its subsidiaries, or
any of their respective assets or properties, is bound or
subject, except for changes, amendments or waivers that are
expressly provided for or disclosed in this Agreement or that
have not resulted, and are not expected to result, individually
or in the aggregate, in a Material Adverse Effect on the Company;
(v) any change by the Company or any of its
subsidiaries in its accounting principles, methods or practices
or in the manner in which it keeps its accounting books and
records, except any such change required by a change in GAAP; or
(vi) any other event or condition of any character,
except for such events and conditions that have not resulted, and
are not expected to result, individually or in the aggregate, in
a Material Adverse Effect on the Company.
(k) Invention Assignment and Confidentiality Agreement.
Each employee and consultant or independent contractor of the
Company or any of its subsidiaries whose duties include the
development of products or Intellectual Property, and each former
employee and consultant or independent contractor whose duties
included the development of products or Intellectual Property,
has entered into and executed an invention assignment and
confidentiality
<PAGE>
CUSIP No. 299096107 13D Page 26 of 86
agreement in customary form or an employment or consulting
agreement containing substantially similar terms.
(l) Intellectual Property.
(i) Ownership or Right to Use. The Company or one of
its subsidiaries has sole title to and owns, or is licensed or
otherwise possesses legally enforceable rights to use, all
patents or patent applications, software, know-how, registered or
unregistered trademarks and service marks and any applications
therefor, registered or unregistered copyrights, trade names, and
any applications therefor, trade secrets or other confidential or
proprietary information ("Intellectual Property") necessary to
enable the Company and its subsidiaries to carry on their
respective businesses as currently conducted, except where any
deficiency, or group of deficiencies, therein would not have a
Material Adverse Effect on the Company. The Company covenants
that it shall, where the Company in the exercise of reasonable
judgment deems it appropriate, use reasonable business efforts to
seek copyright and patent registration, and other appropriate
intellectual property protection, for Intellectual Property of
the Company.
(ii) Licenses; Other Agreements. Neither the Company
nor any of its subsidiaries is currently subject to any exclusive
licenses (whether such exclusivity is temporary or permanent) to
any material portion of the Intellectual Property of the Company
or any of its subsidiaries. There are not outstanding any
licenses or agreements of any kind relating to any Intellectual
Property of the Company or any of its subsidiaries, except for
agreements with OEM's and other customers of the Company or any
such subsidiary entered into in the ordinary course of its
business and other licenses and agreements that, individually or
in the aggregate, are not material. Neither the Company nor any
of its subsidiaries is obligated to pay any royalties or other
payments to third parties with respect to the marketing, sale,
distribution, manufacture, license or use of any Intellectual
Property, except as it may be so obligated in the ordinary course
of its business, as disclosed in the Company's SEC Documents or
where the aggregate amount of such payments could not reasonably
be expected to be material.
(iii) No Infringement. To the Company's best
knowledge, neither the Company nor any of its subsidiaries has
violated or infringed, nor is it currently violating or
infringing, and neither the Company nor any of its subsidiaries
has received any communication alleging that either the Company,
any of its subsidiaries or any of their respective employees or
consultants has violated or infringed, any Intellectual Property
of any other Person, to the extent that any such violation or
infringement, either individually or together with all other such
violations and infringements, would have a Material Adverse
Effect on the Company.
(iv) Employees and Consultants. To the Company's best
knowledge, no employee of or consultant to the Company or any of
its subsidiaries is in default under any term of any employment
contract, agreement or arrangement relating to Intellectual
Property of the Company or any of its subsidiaries or any non-
competition arrangement, other contract or restrictive covenant
relating to the Intellectual Property of the Company or any of
its subsidiaries, where such default, together with all other
such defaults, would have a Material Adverse Effect on the
Company. The Intellectual Property of the Company and its
subsidiaries (other than any
<PAGE>
CUSIP No. 299096107 13D Page 27 of 86
Intellectual Property duly acquired or licensed from third
parties) was developed entirely by the employees of or
consultants to the Company or one of its subsidiaries during the
time they were employed or retained by it, and to the Company's
best knowledge, at no time during conception or reduction to
practice of such Intellectual Property of the Company or its
subsidiaries were any such employees or consultants operating
under any grant from a governmental authority or subject to any
employment agreement or invention assignment or non-disclosure
agreement or any other obligation with a third party that would
materially and adversely affect the Company's or any of its
subsidiaries' rights in the Intellectual Property of the Company
or one of its subsidiaries. Such Intellectual Property of the
Company and its subsidiaries does not, to the Company's best
knowledge, include any invention or other intellectual property
of such employees or consultants made prior to the time such
employees or consultants were employed or retained by the Company
or one of its subsidiaries nor any intellectual property of any
previous employer of such employees or consultants nor the
intellectual property of any other Person.
(m) Registration Rights. Except as otherwise provided in
this Agreement, the Company, as of the Closing Date, is not
currently subject to any grant or agreement to grant to any
Person any rights (including piggyback registration rights) to
have any securities of the Company registered with the SEC or
registered or qualified with any other governmental authority.
(n) Title to Property and Assets. The material properties
and assets of the Company and each of its subsidiaries are owned
by the Company or such subsidiary free and clear of all
mortgages, deeds of trust, liens, charges, encumbrances and
security interests except for statutory liens for the payment of
current taxes that are not yet delinquent and liens, encumbrances
and security interests that arise in the ordinary course of
business and do not affect such properties and assets of the
Company and its subsidiaries, taken as a whole. With respect to
the property and assets it leases, each of the Company and its
subsidiaries is in compliance with such leases in all material
respects.
(o) Tax Matters. Each of the Company and it subsidiaries
has filed all material tax returns required to be filed, which
returns are true, complete and correct in all material respects,
and neither the Company nor any of its subsidiaries is in default
in the payment of such taxes, including penalties and interest,
assessments, fees and other charges, shown thereon due or
otherwise assessed, other than those being contested in good
faith and for which adequate reserves have been provided or those
currently payable without interest that were payable pursuant to
said returns or any assessments with respect thereto.
(p) Subsidiaries. The Company does not presently own or
control, directly or indirectly, any more than a 1% interest in
any other Person.
(q) Environmental Matters. During the period that the
Company or any of its subsidiaries has owned or leased its
properties and facilities, (i) there have been no disposals,
releases or threatened releases of Hazardous Materials on, from
or under such properties or facilities which, either individually
or in the aggregate, would have a Material Adverse Effect on the
Company, and (ii) neither the Company, its subsidiaries nor, to
the Company's knowledge,
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CUSIP No. 299096107 13D Page 28 of 86
any other Person, has used, generated, manufactured or stored on,
under or about such properties or facilities or transported to or
from such properties or facilities any Hazardous Materials, where
such use, generation, manufacture or storage, either individually
or in the aggregate, would have a Material Adverse Effect on the
Company. The Company has no knowledge of any presence,
disposals, releases or threatened releases of Hazardous Materials
on, from or under any of such properties or facilities, which may
have occurred prior to the Company or any of its subsidiaries
having taken possession of any of such properties or facilities
and which, either individually or in the aggregate, would have a
Material Adverse Effect on the Company. For purposes of this
Agreement, the terms "disposal," "release," and "threatened
release" shall have the definitions assigned thereto by the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA"). For the purposes of this Agreement, "Hazardous
Materials" means any hazardous or toxic substance, material or
waste which is regulated under, or defined as a "hazardous
substance", "pollutant", "contaminant", "toxic chemical",
"hazardous material", "toxic substance" or "hazardous chemical"
under (A) CERCLA; (B) the Emergency Planning and Community Right-
to-Know Act, 42 U.S.C. Section 11001 et seq.; (C) the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq.;
(D) the Toxic Substances Control Act, 15 U.S.C. Section 2601 et
seq.; (E) the Occupational Safety and Health Act of 1970, 29
U.S.C. Section 651 et seq.; (F) regulations promulgated under any
of the above statutes; or (G) any applicable state or local
statute, ordinance, rule, or regulation that has a scope or
purpose similar to those statutes identified above.
(r) Brokers and Finders. Except for Hambrecht & Quist LLC,
none of the Company, its subsidiaries, their respective directors
or officers and their respective agents has incurred any
obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment
in connection with this Agreement or any of the transactions
contemplated hereby. The Company agrees to pay as and when due
all amounts payable to Hambrecht & Quist LLC in connection with
any of the transactions contemplated by this Agreement. The
Company will indemnify and hold the Investor harmless from any
brokerage or finder's fees or agents' commissions or other
similar payment alleged to be due by or through the Company or
any of such other Persons as a result of the action of the
Company, its subsidiaries, their respective directors or officers
or their respective agents.
(s) Shareholder Rights Plan. Neither the execution and
delivery of this Agreement nor the Warrant, nor the consummation
of any of the transactions contemplated hereby and thereby, will:
(i) result in the Investor, together with or without any of its
"Affiliates" (as defined in the Company's Rights Agreement, dated
as of November 18, 1988, between the Company and Zions First
National Bank, a Utah banking corporation (the "Rights Plan")),
"Associates" (as defined in the Rights Plan) and "Subsidiaries"
(as defined in the Rights Plan) becoming an "Acquiring Person"
(as defined in the Rights Plan); (ii) result in a "Triggering
Event" (as defined in the Rights Plan); or (iii) otherwise
trigger the provisions of the Rights Plan. To the Company's best
knowledge, no event has occurred on or before the Closing Date
which would trigger any of the provisions of the Rights Plan.
Upon issuance, each of the Conversion Shares will be deemed to
represent a Right, as defined in the Rights Plan.
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CUSIP No. 299096107 13D Page 29 of 86
(t) Full Disclosure. The information contained in this
Agreement, the Warrant, the Disclosure Letter and the SEC
Documents with respect to the business, operations, assets,
results of operations and financial condition of the Company, and
the transactions contemplated by this Agreement and the Warrant,
are true and complete in all material respects and do not omit to
state any material fact or facts necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
INVESTOR. The Investor hereby represents and warrants to the
Company and agrees that:
(a) Organization, Good Standing and Qualification. The
Investor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all
corporate power and authority required to (i) carry on its
business as presently conducted and (ii) enter into this
Agreement and the Warrant, and to consummate the transactions
contemplated hereby and thereby. The Investor is qualified to do
business and is in good standing in each jurisdiction in which
the failure to so qualify would have a Material Adverse Effect on
the Investor.
(b) Authorization. This Agreement and the Warrant have
been duly authorized by all necessary corporate action on the
part of the Investor. This Agreement and the Warrant constitute
the Investor's valid and legally binding obligations, enforceable
in accordance with their respective terms, except (i) as may be
limited by (A) applicable bankruptcy, insolvency, reorganization
or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (B) the effect of
rules of law governing the availability of equitable remedies and
(ii) as rights to indemnity or contribution may be limited under
federal or state securities laws or public policy thereunder.
(c) Governmental Consents. No consent, approval, order or
authorization of, or registration qualification, designation,
declaration or filing with, any federal, state or local
governmental authority on the part of the Investor is required in
connection with the consummation of the transactions contemplated
by this Agreement and the Warrant, except for the filing of such
qualifications or filings under the Securities Act or the
Exchange Act and the regulations thereunder and all applicable
state securities laws as may be required in connection with the
transactions contemplated by this Agreement or the Warrant. All
such qualifications and filings will, in the case of
qualifications, be effective on the Closing Date and will, in the
case of filings, be made within the time prescribed by law.
(d) Non-Contravention. The execution, delivery and
performance of this Agreement and the Warrant by the Investor,
and the consummation by the Investor of the transactions
contemplated hereby and thereby, do not and will not: (i)
contravene or conflict with the Investor's certificate of
incorporation or bylaws, each as amended to the Closing Date;
(ii) constitute a violation of any provision of any federal,
state, local or foreign law binding upon or applicable to the
Investor; or (iii) constitute a default or require any consent
under, give rise to any right of termination, cancellation or
acceleration of, or to a loss of any benefit to which the
Investor is entitled under, or result in the creation or
imposition of any lien, claim or
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CUSIP No. 299096107 13D Page 30 of 86
encumbrance on any assets of the Investor under, any contract to
which the Investor is a party or any permit, license or similar
right relating to the Investor or by which the Investor may be
bound or affected in such a manner as, together with all other
such matters, would have a Material Adverse Effect on the
Investor.
(e) Litigation. There is no Action pending that seeks to
prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement or the Warrant.
(f) Purchase for Own Account. The Purchased Shares and the
Warrant are being acquired for investment for the Investor's own
account, not as a nominee or agent, and not with a view to the
public resale or distribution thereof within the meaning of the
Securities Act, and the Investor has no present intention of
selling, granting any participation in, or otherwise distributing
the same. The Investor also represents that it has not been
formed for the specific purpose of acquiring the Purchased Shares
and the Warrant.
(g) Investment Experience. The Investor understands that
the purchase of the Purchased Shares and the Warrant involve
substantial risk. The Investor has experience as an investor in
securities of companies and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment in the
Purchased Shares and the Warrant and has such knowledge and
experience in financial or business matters that it is capable of
evaluating the merits and risks of its investment in the
Purchased Shares and the Warrant and protecting its own interests
in connection with this investment.
(h) Accredited Investor Status. The Investor is an
"accredited investor" within the meaning of Regulation D
promulgated under the Securities Act.
(i) Restricted Securities. The Investor understands that
the Purchased Shares and the Warrant are, and the Warrant Shares
upon issuance will be, characterized as "restricted securities"
under the Securities Act, inasmuch as they are being acquired
from the Company in a transaction not involving a public offering
and that under the Securities Act and applicable regulations
thereunder such securities may be resold without registration
under the Securities Act only in certain limited circumstances.
The Investor is familiar with Rule 144 of the SEC, as presently
in effect, and understands the resale limitations imposed thereby
and by the Securities Act.
(j) Legends. The Investor agrees that the certificates for
the Purchased Shares and, upon issuance thereof, the Warrant
Shares will bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 or with any
state securities commission, and may not be transferred or
disposed of by the holder in the absence of a registration
statement which is effective under the Securities Act of
1933 and applicable state laws and rules, or, unless,
immediately prior to the time set for transfer, such
transfer may be effected without violation of the Securities
Act of 1933 and other applicable state laws and rules."
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CUSIP No. 299096107 13D Page 31 of 86
In addition, the Investor agrees that the Company may place stop
transfer orders with its transfer agents with respect to such
certificates. The appropriate portion of the legend and the stop
transfer orders shall be removed promptly upon delivery to the
Company of such satisfactory evidence as reasonably may be
required by the Company that such legend or stop orders are not
required to ensure compliance with the Securities Act.
(k) Review of Information. The Investor has received and
reviewed, and has been given the opportunity to ask questions of
the Company with respect to, the following Company documents:
(i) Form 10-K, dated March 31, 1998, (ii) Proxy Statement, dated
April 20, 1998, (iii) Amendment No. 1 to S-4 Registration
Statement, dated May 15, 1998 (including the prospectus contained
therein), (iv) Form 10-Q, dated May 11, 1998, (v) Form 10-K/A,
dated May 13, 1998, and (vi) Form 8-K, dated July 13, 1998.
(l) Acknowledgment of Risks. The Investor hereby
acknowledges that its investment in the Purchased Shares is
subject to certain risks and uncertainties, including those risks
and uncertainties set forth under "Risk Factors" in the Company's
Amendment No. 1 to S-4 Registration Statement, dated May 15,
1998.
5. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING. The
obligations of the Investor under Sections l and 2 are subject to
the fulfillment or its waiver, before the Closing of each of the
following conditions:
(a) Representations and Warranties True. Each of the
representations and warranties of the Company contained in
Section 3 shall be true and correct in all material respects on
and as of the date hereof and on and as of the Closing Date, with
the same effect as though such representations and warranties had
been made as of the Closing Date.
(b) Performance. The Company shall have performed and
complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or
complied with by it at or before the Closing and shall have
obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
(c) Securities Exemptions. The offer and sale of the
Purchased Shares and the Warrant to the Investor pursuant to this
Agreement shall be exempt from the registration requirements of
the Securities Act and the registration or qualification
requirements of all applicable state securities laws.
(d) Proceedings and Documents. All corporate and other
proceedings of the Company in connection with the transactions
contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to the
Investor, and the Investor shall have received all such
counterpart originals and certified or other copies of such
documents as it may reasonably request. Such documents shall
include the following:
(i) Certified Charter Documents. A complete and
correct copy of: (A) the Articles, certified as of a recent date
by the Secretary of State of Utah, (B) the Certificate
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CUSIP No. 299096107 13D Page 32 of 86
of Designation, certified as of a recent date by the Secretary of
State of Utah and (C) the Bylaws, certified as of the Closing
Date by the Secretary of the Company; and
(ii) Board Resolutions. A copy, certified by the
Secretary of the Company, of the resolutions of the Board
approving this Agreement and the Warrant and the issuance of the
Purchased Shares and the Warrant and the other matters
contemplated hereby and thereby.
(e) Opinion of Company Counsel. The Investor shall have
received an opinion on behalf of the Company, dated as of the
Closing Date, from Snell & Wilmer, counsel to the Company, in
substantially the form attached hereto as Exhibit C.
(f) No Material Adverse Effect. Between the date hereof
and the Closing, there shall not have occurred any Material
Adverse Effect on the Company.
(g) Other Actions. The Company shall have executed such
other certificates, agreements, instruments and other documents,
and taken such other actions, as shall be customary or reasonably
requested by the Investor in connection with the transactions
contemplated hereby.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company under Sections 1 and 2 are subject to
the fulfillment or its waiver before the Closing of each of the
following conditions:
(a) Representations and Warranties True. The
representations and warranties of the Investor contained in
Section 4 shall be true and correct in all material respects on
and as of the date hereof and on and as of the Closing Date with
the same effect as though such representations and warranties had
been made as of the Closing Date.
(b) Performance. The Investor shall have performed and
complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or
complied with by it at or before the Closing and shall have
obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
(c) Payment of Purchase Price. The Investor shall have
delivered to the Company the full purchase price of the Purchased
Shares and the Warrant as specified in Section 1(e).
(d) Securities Exemptions. The offer and sale of the
Purchased Shares and the Warrant to the Investor pursuant to this
Agreement shall be exempt from the registration requirements of
the Securities Act and the registration and qualification
requirements of all applicable state securities laws.
(e) Proceedings and Documents. All corporate and other
proceedings of the Investor in connection with the transactions
contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to the
Company and to the
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CUSIP No. 299096107 13D Page 33 of 86
Company's legal counsel, and the Company shall have received all
such counterpart originals and certified or other copies of such
documents as it may reasonably request.
7. COVENANTS OF COMPANY. The Company covenants and agrees
that:
(a) Information Rights.
(i) Financial Information. For so long as the
Investor holds any of the Purchased Shares, the Warrant, the
Warrant Shares or the Conversion Shares, the Company shall:
(A) Annual Reports. Furnish to the Investor
promptly following the filing of such report with the SEC a copy
of the Company's Annual Report on Form 10-K for each fiscal year,
which shall include a consolidated balance sheet as of the end of
such fiscal year, a consolidated statement of income and a
consolidated statement of cash flows of the Company and its
subsidiaries for such year, setting forth in each case in
comparative form the figures from the Company's previous fiscal
year, all prepared in accordance with generally accepted
accounting principles and practices, consistently applied, and
audited by nationally recognized independent certified public
accountants. If the Company is no longer required to file Annual
Reports on Form 10-K, the Company shall, within ninety (90) days
following the end of each respective fiscal year, deliver to the
Investor a copy of such balance sheets, statements of income and
statements of cash flows.
(B) Quarterly Reports. Furnish to the Investor
promptly following the filing of such report with the SEC, a copy
of each of the Company's Quarterly Reports on Form 10-Q, which
shall include a consolidated balance sheet as of the end of the
respective fiscal quarter, consolidated statements of income and
consolidated statements of cash flows of the Company and its
subsidiaries for the respective fiscal quarter and for the year
to-date, setting forth in each case in comparative form the
figures from the comparable periods in the Company's immediately
preceding fiscal year, all prepared in accordance with generally
accepted accounting principles and practices (except as otherwise
permitted by Form 10-Q), consistently applied, but all of which
may be unaudited. If the Company is no longer required to file
Quarterly Reports on Form 10-Q, the Company shall, within forty-
five (45) days following the end of each of the first three (3)
fiscal quarters of each fiscal year, deliver to the Investor a
copy of such balance sheets, statements of income and statements
of cash flows.
(ii) SEC Filings. The Company shall deliver to the
Investor copies of each other document filed with the SEC on a
non-confidential basis promptly following the filing of such
document with the SEC.
(b) Registration Rights.
(i) Definitions. For purposes of this Agreement:
(A) Registration. The terms "register,"
"registered," and "registration" refer to a registration effected
by preparing and filing a registration statement in compliance
with the Securities Act and the declaration or ordering of
effectiveness of such registration statement.
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CUSIP No. 299096107 13D Page 34 of 86
(B) Registrable Securities. The term
"Registrable Securities" means: (1) all shares of Common Stock
issued or issuable (a) upon conversion of any of the Purchased
Shares or Warrant Shares, (b) pursuant to the Right of
Participation or the Right of Maintenance, and (2) any shares of
Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security that is issued
as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, any of the securities
described in the immediately preceding clause. Notwithstanding
the foregoing, "Registrable Securities" shall exclude any
Registrable Securities sold by any individual, corporation,
partnership, trust or other entity or organization, including a
governmental authority or any political subdivision thereof
(each, a "Person") in a transaction in which rights under this
Section 7(b) are not assigned in accordance with this Agreement
or any Registrable Securities sold in a public offering, whether
sold pursuant to Rule 144 promulgated under the Securities Act,
or in a registered offering, or otherwise.
(C) Registrable Securities Then Outstanding. The
number of shares of "Registrable Securities then outstanding"
shall mean the number of shares of Common Stock that are
Registrable Securities and (1) are then issued and outstanding or
(2) are then issuable pursuant to any conversion of the Warrant
Shares.
(D) Holder. The term "Holder" means any Person
owning of record Registrable Securities that have not been sold
to the public or pursuant to Rule 144 promulgated under the
Securities Act or any permitted assignee of record of such
Registrable Securities to whom rights under this Section 7(b)
have been duly assigned in accordance with this Agreement.
(E) Forms S-1, S-2 and S-3. The terms "Form S-
1," "Form S-2" and "Form S-3" mean, respectively, such forms
under the Securities Act each as are in effect on the date hereof
or such successor registration forms under the Securities Act
subsequently adopted by the SEC requiring similar disclosure and
permitting similar incorporation by reference to other documents
filed by the Company with the SEC.
(ii) Shelf Registration.
(A) Undertaking to Register. Within ninety (90)
days after the Closing Date, the Company shall file a
registration statement on Form S-3 to register all of the
Registrable Securities for resale to the general public (the
"Shelf Registration Statement").
(B) Selling Procedures; Suspension.
(1) Except in the event that paragraph (2)
below applies, the Company shall: (a) if deemed necessary by the
Company, prepare and file from time to time with the SEC a post-
effective amendment to the Shelf Registration Statement or a
supplement to the related prospectus or a supplement or amendment
to any document incorporated therein by reference or file any
other required document so that such registration statement shall
not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading, and so
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CUSIP No. 299096107 13D Page 35 of 86
that, as thereafter delivered to purchasers of the Registrable
Securities being sold thereunder, such prospectus shall not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading; (b) provide the Holders copies of
any documents filed pursuant to the immediately preceding clause
(a); and (c) inform each Holder that the Company has complied
with its obligations in the immediately preceding clause (a) (or
that, if the Company has filed a post-effective amendment to the
Shelf Registration Statement which has not yet been declared
effective, the Company shall notify each such Holder to that
effect, it shall use its best efforts to secure the effectiveness
of such post-effective amendment and shall immediately notify
each Holder pursuant to the immediately preceding clause (a) when
the amendment has become effective).
(2) In the event (a) of any request by the
SEC or any other federal or state governmental authority during
the period of effectiveness of the Shelf Registration Statement
for amendments or supplements thereto or related prospectus or
for additional information; (b) of the issuance by the SEC or any
other federal or state governmental authority of any stop order
suspending the effectiveness of the Shelf Registration Statement
or the initiation of any proceedings for that purpose; (c) of the
receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such
purpose; (d) of any event or circumstance which necessitates the
making of any changes in the registration statement or
prospectus, or any document incorporated or deemed to be
incorporated therein by reference, so that, in the case of the
Shelf Registration Statement, it shall not contain any untrue
statement of a material fact or any omission to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the
prospectus, it shall not contain any untrue statement of a
material fact or any omission to state a material fact required
to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; or (e) that, in the reasonable, good faith judgment
of the Company's management or the Board, (i) the offering of
securities pursuant thereto would materially and adversely affect
(A) a pending or proposed acquisition, merger, consolidation,
reorganization, restructuring or similar transaction of or by the
Company or other material corporate activity or transaction, or
(B) bona fide negotiations, discussions or proposals with respect
to any of the foregoing, and (ii) in the event sales of
Registrable Securities were made under the Shelf Registration
Statement and disclosure of all material information with respect
to the applicable circumstance(s) described in the immediately
preceding clause (e)(i) had not been made, such circumstance(s)
could reasonably be expected to cause a violation of the
Securities Act or the Exchange Act (each a "Suspension Event"),
then, subject to Section 7(b)(ii)(B)(4), the Company shall
deliver a notice in writing to the Holders (a "Suspension
Notice") to the effect of the foregoing and, upon receipt of such
Suspension Notice, each such Holder shall refrain from selling
any Registrable Securities pursuant to the Shelf Registration
Statement (a "Suspension") until such Holder's receipt of copies
of the supplemented or amended prospectus provided for in Section
7(b)(ii)(B)(1)(a), or until it is advised in writing by the
Company that the prospectus may be used, and has received copies
of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in such prospectus.
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CUSIP No. 299096107 13D Page 36 of 86
(3) In the event of any Suspension Event, or
any material delay in effecting the registration under Section
7(b)(ii)(A), the Company shall use its best efforts to ensure
that the use of the prospectus so suspended or delayed may be
commenced or resumed, as the case may be, and that the Suspension
shall terminate and the Holder's ability to sell pursuant to the
prospectus so suspended shall commence or resume, as the case may
be, as soon as practicable and, in the case of a pending
development or event referred to in Section 7(b)(ii)(B)(2)(d) or
(e) as soon, in the reasonable and good faith judgment of the
Board, as disclosure of such pending development, filing or event
or the resumption of sales pursuant to the registration statement
would not have a material adverse effect on the Company's ability
to consummate or materially prejudice the Company's interest with
respect to the transaction, if any, contemplated by such
development, filing or event. Notwithstanding any other
provision of this Agreement, the Company shall have the right to
cause a maximum of two (2) Suspensions pursuant to Section
7(b)(ii)(B)(2)(d) or (e), neither of which may be within sixty
(60) days of the last day of the other, as provided above
(including for this purpose a delay in effecting the registration
pursuant to Section 7(b)(ii)(A)) during any 12-month period after
the initial effective date of the registration statement, and the
total number of days for which all Suspensions (including for
this purpose a delay in effecting the Shelf Registration
Statement pursuant to Section 7(b)(ii)(A)) during any 12-month
period shall not exceed ninety (90) days in the aggregate.
(4) The Company shall use its best efforts
to maintain the effectiveness of the Shelf Registration Statement
pursuant this Section 7(b)(ii) for three (3) years after the
Closing Date. The Company from time to time shall amend or
supplement such registration statement and the prospectus
contained therein to the extent necessary to comply with the
Securities Act and any applicable state securities statue or
regulation. The 3-year period time period referenced in the
preceding sentence during which the Company is obligated to keep
such registration statement effective shall be extended for a
number of days equal to the number of days during which any
Suspension was in effect. The Company shall use best efforts to
obtain the withdrawal of any order suspending the effectiveness
of the Shelf Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification)
of any of the securities for sale in any jurisdiction, at the
earliest practicable moment.
(C) Expenses. The Company shall pay all expenses
incurred in connection with the registration pursuant to this
Section 7(b)(ii), including all federal and Blue Sky
registration, filing and qualification fees, printer's and
accounting fees, and fees and disbursements of the Company's and
the Holder's respective counsel, but excluding underwriters'
discounts and commissions relating to shares sold by the Holders.
(D) Obligations of the Company. Whenever
required to effect the registration of any Registrable Securities
under this Section 7(b)(ii), the Company shall perform all of its
obligations under Section 7(b)(v).
(iii) Demand Registration.
(A) Request by Holders. If the Company, at any
time prior to the third (3rd) anniversary of the Closing Date, is
unable to maintain the effectiveness of the
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CUSIP No. 299096107 13D Page 37 of 86
Shelf Registration Statement, other than in connection with a
Suspension Event, and during such time, the Company receives a
written request from the Holders of at least twenty-five percent
(25%) of the Registrable Securities then outstanding that the
Company file a registration statement under the Securities Act
covering the registration of Registrable Securities, then the
Company shall, within ten (10) business days after the receipt of
such written request, give written notice of such request
("Request Notice") to all Holders, and use its best efforts to
effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that Holders request
to be registered and included in such registration by written
notice given such Holders to the Company within twenty (20) days
after receipt of the Request Notice; provided, however, that the
Registrable Securities requested by all Holders to be registered
pursuant to such request must be at least fifteen percent (15%)
of all Registrable Securities then outstanding. Such
registration shall be effected on a Form S-1 or S-2, whichever is
then available for the Company's use under the rules promulgated
under the Securities Act.
(B) Underwriting. If the Holders initiating a
registration request under this Section 7(b)(iii) ("Initiating
Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, then they shall so
advise the Company as a part of their request, and the Company
shall include such information in the applicable Request Notice.
In such event, the right of any Holder to include such Holder's
Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting, and the
inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in
interest of the initiating Holders and such Holder determined
based on the number of Registrable Securities held by such
Holders and being registered). All Holders proposing to
distribute their securities through such underwriting shall enter
into an underwriting agreement in customary form with the
managing underwriter or underwriters selected for such
underwriting by the Holders of a majority of the Registrable
Securities being registered and reasonably acceptable to the
Company (including a market stand-off agreement of up to 180 days
if required by such underwriters); provided, however, that it
shall not be considered customary to require any of the Holders
to provide representations and warranties regarding the Company
or indemnification of the underwriters for material misstatements
or omissions in the registration statement or prospectus for such
offering.
(C) Number of Demand Registrations. The Company
shall be obligated to effect two (2) registrations pursuant to
this Section 7(b)(iii).
(D) Deferral. Notwithstanding the foregoing, if
the Company shall furnish to Holders requesting the filing of a
registration statement pursuant to this Section 7(b)(iii) a
certificate signed by the President or Chief Executive Officer of
the Company stating that in the reasonable, good faith judgment
of the Board, it would be materially detrimental to the Company
and its shareholders for such registration statement to be filed,
then the Company shall have the right to defer such filing for a
period of not more than sixty (60) days after receipt of the
request of the initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve
(12) month period.
(E) Expenses. The Company shall pay all expenses
incurred in connection with any registration effected pursuant to
this Section 7(b)(iii), including all federal
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CUSIP No. 299096107 13D Page 38 of 86
and Blue Sky registration, filing and qualification fees,
printer's and accounting fees, and fees and disbursements of the
Company's and the Holder's respective counsel, but excluding
underwriters' discounts and commissions relating to shares sold
by the Holders. Each Holder participating in a registration
effected pursuant to this Section 7(b)(iii) shall bear such
Holder's proportionate share (based on the total number of shares
sold in such registration other than for the account of the
Company) of all discounts, commissions or other amounts payable
to underwriters or brokers in connection with such offering by
the Holders. Notwithstanding the foregoing, the Company shall
not be required to pay for any expenses of any registration begun
pursuant to this Section 7(b)(iii) if the registration request is
subsequently withdrawn at the request of the Holders of a
majority of the Registrable Securities to be registered;
provided, however, that if at the time of such withdrawal, the
Holders have learned of a material adverse change in the
condition, business or prospects of the Company not known to the
Holders at the time of their request for such registration and
have withdrawn their request for registration after learning of
such material adverse change, then the Holders shall not be
required to pay any of such expenses.
(F) Obligations of the Company. Whenever
required to effect the registration of Registrable Securities
under this Section 7(b)(iii), the Company shall perform all of
its obligations under Section 7(b)(v).
(iv) Piggyback Registrations. The Company shall notify
all Holders of Registrable Securities in writing at least thirty
(30) days prior to filing any registration statement under the
Securities Act for purposes of effecting a public offering of
securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of
securities of the Company, but excluding registration statements
relating to any employee benefit plan or any merger or other
corporate reorganization) and shall afford each such Holder an
opportunity to include in such registration statement all or any
part of the Registrable Securities then held by such Holder.
Each Holder desiring to include in any such registration
statement all or any part of the Registrable Securities held by
such Holder shall within ten (10) business days after receipt of
the above-described notice from the Company, so notify the
Company in writing, and in such notice shall inform the Company
of the number of Registrable Securities such Holder wishes to
include in such registration statement. If a Holder decides not
to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any
Registrable Securities in any subsequent registration statement
or registration statements as may be filed by the Company with
respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(A) Underwriting. If a registration statement
under which the Company gives notice under this Section 7(b)(iv)
is for an underwritten offering, then the Company shall so advise
the Holders of Registrable Securities. In such event, the right
of any such Holder's Registrable Securities to be included in
such a registration pursuant shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting to the
extent provided in this Section 7(b)(iv). All Holders proposing
to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in
customary form with the managing underwriter or underwriters
selected for such underwriting (including a market stand-off
agreement of up to 180 days if required by such underwriters);
provided, however, that it shall not be considered
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CUSIP No. 299096107 13D Page 39 of 86
customary to require any of the Holders to provide
representations and warranties regarding the Company or
indemnification of the underwriters for material misstatements or
omissions in the registration statement or prospectus for such
offering. Notwithstanding any other provision of this Agreement,
if the managing underwriter determine(s) in good faith that
marketing factors require a limitation of the number of shares to
be underwritten, then the managing underwriter(s) may exclude
shares from the registration and the underwriting, and the number
of shares that may be included in the registration and the
underwriting shall be allocated, first to the Company, and
second, to each of the Holders and other holders of registration
rights on a parity with the Holders requesting inclusion of their
Registrable Securities in such registration statement on a pro
rata basis based on the total number of Registrable Securities
and other securities entitled to registration then held by each
such Holder or other holder; provided, however, that the right of
the underwriters to exclude shares (including Registrable
Securities) from the registration and underwriting as described
above shall be restricted so that: (i) the number of Registrable
Securities included in any such registration is not reduced below
twenty-five percent (25%) of the aggregate number of Registrable
Securities for which inclusion has been requested; and (ii) up to
fifteen percent (15%) of the shares that are not Registrable
Securities but are shares held by any employee, officer or
director of the Company (or any subsidiary of the Company), shall
first be excluded from such registration and underwriting before
any Registrable Securities are so excluded. If any Holder
disapproves of the terms of any such underwriting, such Holder
may elect to withdraw therefrom by written notice to the Company
and the underwriter, delivered at least ten (10) business days
prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the
registration. For any Holder that is a partnership, the Holder
and the partners and retired partners of such Holder, or the
estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing
Persons, and for any Holder that is a corporation, the Holder and
all corporations that are affiliates of such Holder, shall be
deemed to be a single "Holder," and any pro rata reduction with
respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and
individuals included in such "Holder," as defined in this
sentence.
(B) Expenses. The Company shall pay all expenses
incurred in connection with any registration pursuant to this
Section 7(b)(iv), including all federal and Blue Sky
registration, filing and qualification fees, printer's and
accounting fees, and fees and disbursements of the Company's and
the Holders' respective counsel, but excluding any underwriters'
discounts and commissions relating to shares sold by the Holders.
(C) Not Demand Registration. Registration
pursuant to this Section 7(b)(iv) shall not be deemed to be a
demand registration as described in Section 7(b)(iii). Except as
otherwise provided herein, there shall be no limit on the number
of times the Holders may request registration of Registrable
Securities under this Section 7(b)(iv).
(D) Obligations of the Company. Whenever
required to effect the registration of any Registrable Securities
under this Section 7(b)(iii), the Company shall perform all of
its obligations under Section 7(b)(v).
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CUSIP No. 299096107 13D Page 40 of 86
(v) General Registration Obligations of the Company.
Whenever required to effect the registration of any Registrable
Securities under this Agreement, the Company shall, as
expeditiously as reasonably possible:
(A) Registration Statement. Prepare and file
with the SEC a registration statement with respect to such
Registrable Securities and use its best efforts to cause such
registration statement to become effective as promptly as
possible after the filing date; provided, however, that, except
as otherwise required by this Section 7(b), including Section
7(b)(ii)(B)(4), the Company shall not be required to keep any
such registration statement effective for more than ninety (90)
days.
(B) Amendments and Supplements. Prepare and file
with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement.
(C) Prospectuses. Furnish to the Holders such
number of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in
order to facilitate the disposition of the Registrable Securities
owned by them that are included in such registration.
(D) Blue Sky. Use its best efforts to register
and qualify the securities covered by such registration statement
under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such
states or jurisdictions.
(E) Underwriting. In the event of any
underwritten public offering, enter into and perform its
obligations under an underwriting agreement in usual and
customary form, with the managing underwriter(s) of such
offering.
(F) Notification. Notify each Holder of
Registrable Securities covered by such registration statement at
any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(G) Opinion and Comfort Letter. Furnish, at the
request of any Holder requesting registration of Registrable
Securities, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the
registration statement with respect to such securities becomes
effective, (1) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration,
in
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CUSIP No. 299096107 13D Page 41 of 86
form and substance as is customarily given to underwriters in an
underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration,
addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities and (2) a
"comfort" letter dated as of such date, from the independent
certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering
and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable
Securities.
(vi) Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action
pursuant to Section 7(b)(ii), (iii) or (iv) that the selling
Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the
intended method of disposition of such securities as shall
reasonably be required to timely effect the registration of their
Registrable Securities.
(vii) Indemnification. In the event any
Registrable Securities are included in a registration effected
under Section 7(b)(ii), (iii) or (iv):
(A) By the Company. To the extent permitted by
law, the Company shall indemnify and hold harmless each Holder,
the partners, officers, shareholders, employees, representatives
and directors of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each Person, if any, who
controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims,
damages, or Liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions
or violations (each, a "Violation"):
(1) any untrue statement or alleged untrue
statement of a material fact contained in such registration
statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements
thereto;
(2) the omission or alleged omission to
state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; or
(3) any violation or alleged violation by
the Company of the Securities Act, the Exchange Act, any federal
or state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any federal or
state securities law in connection with the offering covered by
such registration statement; for any legal or other expenses
reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage,
liability or action;
provided, however, that the indemnity agreement contained in
paragraph (A) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which
consent shall not be unreasonably
<PAGE>
CUSIP No. 299096107 13D Page 42 of 86
withheld), nor shall the Company be liable in any such case for
any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information
furnished expressly for use in connection with such registration
by such Holder, partner, officer, shareholder, employee,
representative, director, underwriter or controlling person
(within the meaning of the Securities Act) of such Holder.
(B) By Selling Holders. To the extent permitted
by law, each selling Holder shall indemnify and hold harmless the
Company, each of its directors, each of its officers who have
signed the registration statement, each Person, if any, who
controls the Company within the meaning of the Securities Act,
any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's
partners, officers, shareholders, employees, representatives and
directors and any Person who controls such Holder within the
meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages or liabilities (joint or several) to
which the Company or any such officer or director, controlling
person, underwriter or other such Holder, partner, officer,
shareholder, employee, representative, director or controlling
person of such other Holder may become subject under the
Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity
with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder
shall reimburse any legal or other expenses reasonably incurred
by the Company or any such officer or director, controlling
person (within the meaning of the Securities Act), underwriter or
other Holder, partner, officer, shareholder, employee,
representative, director or controlling person of such other
Holder in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that
the indemnity agreement contained in this paragraph (B) shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected
without the consent of the Holder which consent shall not be
unreasonably withheld; and provided further, that the total
amounts payable in indemnity by a Holder under this subsection or
otherwise in respect of any Violation shall not exceed the net
proceeds received by such Holder in the registered offering out
of which such Violation arises.
(C) Notice. Promptly after receipt by an
indemnified party of notice of the commencement of any action
(including any governmental action), such indemnified party
shall, if a claim in respect thereof is to be made against any
indemnifying party under this section, deliver to the
indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party shall have
the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, to the extent that
representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or
potential conflict of interests between such indemnified party
and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement
of any such action shall not
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CUSIP No. 299096107 13D Page 43 of 86
relieve such indemnifying party of liability except to the extent
the indemnifying party is materially prejudiced as a result
thereof.
(D) Defects Eliminated in Final Prospectus. The
foregoing indemnity agreements of the Company and the Holders are
subject to the condition that, insofar as they relate to any
Violation made in a preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or
the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall
not inure to the benefit of any Person if a copy of the Final
Prospectus was timely furnished to the indemnified party and was
not furnished to the Person asserting the loss, liability, claim
or damage at or prior to the time such action is required by the
Securities Act.
(E) Contribution. In order to provide for just
and equitable contribution to joint liability under the
Securities Act in any case in which either (1) any Holder
exercising rights under this Agreement, or any controlling person
of any such Holder, makes a claim for indemnification pursuant to
this Section 7(b)(vii), but it is judicially determined (by the
entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial
of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this section
provides for indemnification in such case, or (2) contribution
under the Securities Act may be required on the part of any such
selling Holder or any such controlling person in circumstances
for which indemnification is provided under this Section
7(b)(vii); then, and in each such case, the Company and such
Holder shall contribute to the aggregate losses, claims, damages
or liabilities to which they may be subject (after contribution
from others) in such proportion so that such Holder is
responsible for the portion represented by the percentage that
the public offering price of its Registrable Securities offered
by and sold under the registration statement bears to the public
offering price of all securities offered by and sold under such
registration statement, and the Company and other selling Holders
are responsible for the remaining portion; provided, however,
that, in any such case: (a) no such Holder shall be required to
contribute any amount in excess of the public offering price of
all such Registrable Securities offered and sold by such Holder
pursuant to such registration statement; and (b) no Person guilty
of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent
misrepresentation.
(F) Survival. The obligations of the Company and
Holders under this Section 7(b)(vii) shall survive until the
fifth (5th) anniversary of the closing date of any offering of
Registrable Securities in a registration statement, regardless of
the expiration of any statutes of limitation or extensions of
such statutes.
(viii) Termination of the Company's Obligations.
The Company shall have no further obligations pursuant to this
Section 7(b) with respect to any Registrable Securities proposed
to be sold by a Holder in a registration pursuant to Section
7(b)(ii), (iii) or (iv) more than three (3) years after the
Closing Date, or, if, in the written opinion of counsel to the
Company, reasonably acceptable to counsel for a Holder, all such
Registrable Securities
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CUSIP No. 299096107 13D Page 44 of 86
proposed to be sold by a Holder may then be sold under Rule 144
under the Securities Act in one transaction without exceeding the
volume limitations thereunder.
(ix) No Registration Rights to Third Parties. So long
as the Investor holds any Purchased Shares, the Warrant or any
Conversion Shares, without the prior written consent of the
Investor, the Company covenants and agrees that it shall not
grant, or cause or permit to be created, for the benefit of any
Person any registration rights of any kind (whether similar to
the registration rights described in this Section 7(b), or
otherwise) relating to shares of the Common Stock or any other
voting securities of the Company, other than rights that are on
parity with or subordinate to the rights of the Holders.
(c) Obligations Regarding Confidential Information.
(i) Obligations. Except to the extent required by law
or judicial order or except as otherwise provided herein, each
party to this Agreement covenants and agrees that such party
shall hold any of the other's Confidential Information in
confidence and shall: (A) use the same degree of care to prevent
unauthorized disclosure or use of the Confidential Information
that the receiving party uses with its own information of like
nature (but in no event less than reasonable care), (B) limit
disclosure of the Confidential Information, including any
materials regarding the Confidential Information that the
receiving party has generated, to such of its employees and
contractors as have a need to know the Confidential Information
to accomplish the purposes of this Agreement, and (C) advise its
employees, agents and contractors of the confidential nature of
the Confidential Information and of the receiving party's
obligations under this Agreement and the Corporate Non-Disclosure
Agreement Number 05331 dated as of June 5, 1992 (the "Non-
Disclosure Agreement").
(ii) Certain Definitions. For purposes of this
Agreement, the term "Confidential Information" refers to this
Agreement, the Warrant, the Project Sapphire Equity Financing
Term Sheet, the Non-Disclosure Agreement and all drafts of such
documents (collectively, the "Transaction Agreements"). Any
employee or contractor of the receiving party having access to
the Confidential Information shall be required to sign a non-
disclosure agreement protecting the Confidential Information if
not already bound by such a non-disclosure agreement.
(iii) Non-Disclosure of Confidential Information.
Except to the extent required by law or judicial or
administrative order or except as otherwise provided herein,
neither party shall disclose any Transaction Agreement or any of
its terms without the other's prior written approval. Either
party may disclose any Transaction Agreement, or the terms
thereof, to the extent required by law or judicial or
administrative order, provided that the disclosing party notifies
the other party promptly before such disclosure and cooperates
with the other party to seek confidential treatment with respect
to the disclosure if requested by the other party.
Notwithstanding the foregoing provisions or any other provision
to the contrary, the Company shall not, without the Investor's
prior written consent (which consent generally will not be
granted), file any Transaction Agreement other than this
Agreement and the Warrant (each of which may be filed) with the
SEC or any other governmental authority or regulatory body (an
"Exhibit Filing"); provided, however, that, in connection with
any offering of securities by the
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CUSIP No. 299096107 13D Page 45 of 86
Company for which registration is sought under the Securities
Act, or any filing required to be made by the Company under the
Exchange Act, the Company may make the Exhibit Filing, but if and
only if: (A) the Company is instructed by the SEC to make the
Exhibit Filing in a written comment provided to the Company as a
part of the SEC's review of such filing, (B) the Company provides
the Investor with a copy of such comment promptly following the
Company's receipt thereof, (C) the Company uses its best efforts
to persuade the SEC to withdraw its comment, (D) the Company
provides the Investor with a reasonable opportunity to comment on
the Company's written response to the SEC with respect to such
comment, (E) the Company provides the Investor with the
opportunity to meet with the Company, in person or by phone,
together with the staff of the SEC to assist the Company in
responding to such comment, and (F) the Company engages in a
conference with the SEC Branch Chief responsible for the
offering, in which a representative of the Investor participates
and is given an opportunity to be heard, and after such
conference the Branch Chief persists in his or her requirement
that such Exhibit Filing be made by the Company. In furtherance
of the foregoing, the Company acknowledges and agrees that,
unless advised by counsel of the Company to the contrary, it
shall not take the position, in connection with any filing or
discussion with, or response to, the SEC or any state securities
regulatory authority, that it is required by law or the rules or
regulations of any federal, state or local organization to file
any Transaction Agreement or any other agreement in existence on
the date hereof between the Company and the Investor with any
regulatory authorities (including the SEC); and the Company shall
not, except as otherwise permitted above, file any of the
Transaction Agreements with the SEC or any other governmental
authority or regulatory body. The Company agrees that it shall
provide the Investor with drafts of any documents, press releases
or other filings in which any Transaction Agreement or the
transactions contemplated thereby are disclosed at least five (5)
business days prior to the filing or disclosure thereof, and
that, unless permitted by the terms of this Section, it shall not
disclose, issue or file any such document, press release or other
filing to which Investor has objected.
(iv) Public Announcements. Prior to the Closing, the
parties shall agree on the content of a joint press release
announcing the existence of this Agreement, which press release
shall only be issued in the form mutually agreed by the parties.
(v) Third Party Information. Neither party shall be
required to disclose to the other any confidential information of
any third party without having first obtained such third party's
prior written consent.
(vi) Other Disclosures. All other confidential
information exchanged by the parties hereto shall be disclosed
pursuant to the Non-Disclosure Agreement.
(d) Board and Committee Observer.
(i) So long as the Investor owns any Purchased Shares,
Warrant Shares or Conversion Shares or the Warrant or any part
thereof equaling or representing the right to receive in the
aggregate at least ninety percent (90%) of the number of
Conversion Shares as of the Closing Date (as may be adjusted
pursuant to Section 11(n)), the Company shall permit a
representative of the Investor, approved by the Company, such
approval not to be unreasonably withheld (the "Observer"), to
attend all meetings of the Board and all committees of the Board,
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CUSIP No. 299096107 13D Page 46 of 86
whether in person, telephonic or other, in a non-voting, observer
capacity and shall provide to the Investor, concurrently with the
members of the Board or such Board committee, notice of such
meeting and a copy of all materials provided to such members. A
majority of the disinterested members of the Board shall be
entitled to recuse the Observer from portions of any Board or
Board committee meeting and to redact portions of Board or Board
committee materials delivered to the Observer where and to the
extent that such majority determines, in good faith, that: (a)
such recusal is reasonably necessary to preserve attorney-client
privilege with respect to a material matter; or (b) the presence
of the Observer would materially inhibit deliberations by the
Board because of a reasonable concern of a conflict of interest
between the Company and Investor.
(ii) Exchanges of confidential and proprietary
information between the Company and the Observer shall be
governed by the terms of the Non-Disclosure Agreement, and any
Confidential Information Transmittal Records provided in
connection therewith.
(iii) The Company acknowledges that the Observer
will likely have, from time to time, information that may be of
interest to the Company ("Information") regarding a wide variety
of matters including, by way of example only, (a) the Investor's
technologies, plans and services, and plans and strategies
relating thereto, (b) current and future investments the Investor
has made, may make, may consider or may become aware of with
respect to other companies and other technologies, products and
services, including, without limitation, technologies, products
and services that may be competitive with those of the Company,
and (c) developments with respect to the technologies, products
and services, and plans and strategies relating thereto, of other
companies, including, without limitation, companies that may be
competitive with the Company. The Company recognizes that a
portion of such Information may be of interest to the Company.
Such Information may or may not be known by the Observer. The
Company, as a material part of the consideration for this
Agreement, agrees that neither the Investor nor the Observer
shall have any duty to disclose any Information to the Company or
permit the Company to participate in any projects or investments
based on any Information, or to otherwise take advantage of any
opportunity that may be of interest to the Company if it were
aware of such Information, and hereby waives, to the extent
permitted by law, any claim based on the corporate opportunity
doctrine or otherwise that could limit the Investor's ability to
pursue opportunities based on such Information or that would
require the Investor or Observer to disclose any such Information
to the Company or offer any opportunity relating thereto to the
Company.
(e) Rights in the event of a Corporate Event.
(i) Corporate Events. A "Corporate Event" shall mean
any of the following, whether accomplished through one or a
series of related transactions: (A) any transaction, other than
an Acquisition Issuance, that results in a greater than thirty-
three percent (33%) change in the total outstanding number of
voting securities (which, for purposes of this Agreement, shall
mean all securities of the Company that presently are, or would
be upon conversion, exchange or exercise, entitled to vote in the
election of directors) of the Company immediately after such
issuance (other than any such change solely as a result of a
stock split, stock dividend or other recapitalization affecting
holders of Common Stock and other classes of
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CUSIP No. 299096107 13D Page 47 of 86
voting securities of the Company on a pro rata basis); (B) an
acquisition of the Company or any of its "Significant
Subsidiaries" (as defined in the SEC's Rule 1-02(w) of Regulation
S-X) by consolidation, merger, share purchase or exchange or
other reorganization or transaction in which the holders of the
Company's or such Significant Subsidiary's outstanding voting
securities immediately prior to such transaction own, immediately
after such transaction, securities representing less than fifty
percent (50%) of the voting power of the Company, any such
Significant Subsidiary or the Person issuing such securities or
surviving such transaction, as the case may be, provided that
this clause (B) shall not apply to the pro rata distribution by
the Company to its shareholders of all the voting securities of
any of its subsidiaries as to which assets, other than Assets of
the Graphics Business, were contributed by the Company in
anticipation of such distribution; (C) the acquisition of all or
substantially all the assets of the Company or any Significant
Subsidiary; (D) the grant by the Company or any of its
Significant Subsidiaries of an exclusive license for any material
portion of the Company's or such Significant Subsidiary's
Intellectual Property to a Person other than the Investor or any
of its subsidiaries; (E) any transaction or series of related
transactions that results in the failure of the majority of the
members of the Board immediately prior to the closing of such
transaction or series of related transactions failing to
constitute a majority of the Board (or its successor) immediately
following such transaction or series of related transactions.
(ii) Notice of Corporate Events and Ten Percent (10%)
Acquisitions. Until expiration of the period (x) beginning on
the Closing Date and (y) ending on the later of twenty-four (24)
months after the Closing Date and six (6) months after the first
commercial shipments of the product code-named Merced by the
Investor, but in no event ending later than December 31, 2000
(the "ROFR Period"), the Company shall provide the Investor with
detailed written notice of terms of any offer (written or oral)
from any Person: (A) for a proposed Corporate Event or (B) to
acquire ten percent (10%) or more of the Company's outstanding
voting securities. Any notice shall be delivered to the Investor
within two (2) business days after the date the Company first
becomes aware of such offer or proposed Corporate Event or ten
percent (10%) acquisition. Without limiting the generality of
the foregoing, such notice shall set forth the identity(ies) of
the Person(s) involved.
(iii) Right of First Refusal. During the ROFR
Period, the Company shall, prior to effecting or entering into
any agreement for any Corporate Event, present to the Investor in
writing the final terms and conditions of the proposed Corporate
Event, including the name of the other party or parties to the
Corporate Event and a copy of the definitive agreements that the
Company is prepared to enter into (such information and
agreements, a "Final Notice"). The Investor shall have thirty
(30) business days after the date of receipt of the Final Notice
to deliver written notice to the Company agreeing to enter into a
written agreement with the Company on substantially the same
terms and conditions specified in the Final Notice, which
agreement shall nevertheless provide for consummation of the
transaction within one-hundred twenty (120) days after the date
of delivery of the Final Notice (such 120 day period subject to
extensions for regulatory compliance). During such 30 business
day period, the Investor shall be entitled to conduct due
diligence with the reasonable cooperation of the Company. If the
Investor fails to so agree in writing within such 30 business day
period, for a period of one hundred twenty (120) days thereafter,
the Company shall have the right to enter into an
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CUSIP No. 299096107 13D Page 48 of 86
agreement regarding such Corporate Event with the party or
parties specified in the applicable Final Notice.
(iv) Right of Resale. If the Investor shall fail to
exercise its right of first refusal as to a Corporate Event
pursuant to Section 7(e)(iii), the Investor shall, upon the
Company's entering into an agreement to consummate a Corporate
Event, have the right to sell to the Company any or all Purchased
Shares, Warrant Shares and Conversion Shares. Such sale shall be
made on the following terms and conditions:
(A) The price per share at which such shares are
to be sold to Company shall be equal to the greater of: (1) Per
Share Purchase Price and (2) either the highest price per share
of capital stock (or equivalent) paid in connection with the
Corporate Event or, if the transaction involves the sale of a
Significant Subsidiary or assets or the licensing of Intellectual
Property, the Investor's pro rata share of the consideration
received, directly or indirectly, by the Company in such
transaction based on its then fully-diluted ownership of the
Company's capital stock.
(B) Immediately prior to the consummation of the
Corporate Event, the Investor shall deliver to the Company the
certificate or certificates representing shares to be sold, each
certificate to be properly endorsed for transfer.
(C) The Company shall, assuming its receipt of
the certificate or certificates for the shares to be sold by the
Investor, pay the aggregate purchase price therefor in cash
immediately upon consummation of the Corporate Event.
(v) Right of Notification and Negotiation. For a
period (X) commencing on the day after the last day of the ROFR
Period and (Y) ending on the day that is the two (2) year
anniversary of such last day, the Company shall, prior to the
Board's approving or disapproving a Corporate Event or the
Company's or any of its subsidiaries' entering into a definitive
agreement with respect to a Corporate Event, notify the Investor
of all terms and conditions of such Corporate Event and then
attempt to negotiate in good faith with the Investor for a period
of not less than fifteen (15) business days for the Investor to
acquire the Company (or Significant Subsidiary, assets or
license, as the case may be) or enter into another Corporate
Event with the Company. During such fifteen (15) business day
period, the Investor shall be entitled to conduct due diligence
with the reasonable cooperation of the Company. During such
fifteen (15) business day period, any alternative proposal made
by the Investor shall be submitted by the Company to the Board
and the Board shall, in good faith, either approve or disapprove
the Investor's alternative proposal. To the extent that the
Company and the Investor do not enter into an agreement with
respect to such an acquisition or other Corporate Event with the
Investor during such fifteen (15) business day period, the Board
shall be free to approve or disapprove such Corporate Event and
the Company shall be free to enter into a definitive agreement
with respect to a Corporate Event with a third party and
subsequently consummate such Corporate Event; provided, however,
that such definitive agreement is entered into within one hundred
twenty (120) days following termination of such fifteen (15)
business day period; provided further, that if during such
fifteen (15) business day period, the Investor shall have made a
written offer for the acquisition of the Company, the Corporate
Event with such a third party
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CUSIP No. 299096107 13D Page 49 of 86
shall be for at least ninety-five percent (95%) of the price
offered by the Investor and on other terms no less favorable to
shareholders of the Company than the terms of the offer proposed
by the Investor with respect to shareholders other than the
Investor.
(vi) Right to Consent. During the ROFR Period, without
the Investor's prior written consent, the Company shall not (and
shall not permit any of its subsidiaries to) enter into or agree
to or consummate any acquisition by it of securities or any
business or assets of another Person where the consideration paid
to any single Person or group of affiliated Persons is voting
securities of the Company (or any other securities exercisable or
exchangeable for or convertible into such voting securities) (an
"Acquisition Issuance ") constituting in the aggregate more than
thirty-three percent (33%) of the Company's voting securities
outstanding immediately after the consummation of such
acquisition.
(vii) Spin-Off of Graphics Business. If (A) the
Company completes a Spin Off of its Graphics Business in which
the Investor receives its pro-rata share of the voting securities
of the Spun-Off Business and (B) the Spun-Off Business has
assumed in a writing reasonably satisfactory to the Investor all
of the Company's obligations under this Section7(e), then the
Company's obligations under this Section 7(e) shall terminate.
As used in this Agreement, (A) "Assets" means all the assets,
properties, rights, licenses, permits, contracts, causes of
action, claims, operations and businesses of the Graphics
Business of every kind and description, as the same shall exist
on the date of the Spin Off; (B) "Graphics Business" means the
development, manufacture, marketing or sale of graphics
controller chips, boards and driver software for the personal
computer market; and (C) "Spin Off" means (1) a transaction
involving the following: (x) the creation by the Company of a
wholly owned subsidiary that contains the Assets (the "Spun-Off
Business"); (y) followed by a distribution by the Company of all
outstanding voting securities of the Spun-Off Business to the
Company's shareholders on a pro-rata basis in exchange for no
consideration; and (z) the written agreement by the Company not
to compete with the Spun-Off Business with respect to the
Graphics Business; or (2) any transaction similar to that
described in the foregoing clause (1) as reasonably approved by
the Investor.
(f) Rights of Participation.
(i) General. The Investor and each subsidiary of
which the Investor beneficially owns, directly or indirectly, at
least fifty percent (50%) of the voting securities (a "Majority
Owned Subsidiary") and to which rights under this Section 7(f)
have been duly assigned (each of the Investor and such assignee,
a "Participation Rights Holder") shall have a right of first
refusal to purchase such Participation Rights Holder's Pro Rata
Share of all (or any part) of any New Securities that the Company
may from time to time issue after the Closing Date (the "Right of
Participation"); provided, however, that a Participation Rights
Holder shall not have the Right of Participation with respect to
any issuance of New Securities that would result in less than a
ten percent (10%) reduction in such Participation Rights Holder's
Pro Rata Share.
(ii) Pro Rata Share. "Pro Rata Share" means the ratio
of (A) the number of Registrable Securities held by such
Participation Rights Holder, to (B) the difference between (1)
the total number of shares of Common Stock (and other voting
securities of the
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CUSIP No. 299096107 13D Page 50 of 86
Company, if any) then outstanding (immediately prior to the
issuance of New Securities giving rise to the Right of
Participation), where for such purposes all Conversion Shares
then issuable (but unissued) are deemed outstanding, and (2) the
number of Dilutive Securities issued since the last Notice Date
excluding any Maintenance Securities issued pursuant to the last
Maintenance Notice.
(iii) New Securities. "New Securities" shall mean
any Common Stock, Preferred Stock or other voting capital stock
of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or Preferred
Stock, and securities of any type whatsoever that are, or may
become, convertible into or exchangeable or exercisable for such
Common Stock, Preferred Stock or other voting capital stock;
provided, however, that the term "New Securities" shall not
include:
(A) any shares of Common Stock (or options or
warrants therefor) issued to employees officers, directors,
contractors, advisors or consultants of the Company pursuant to
incentive agreements or incentive plans approved by the Board;
(B) the Purchased Shares issued under this
Agreement;
(C) the Warrant or any Warrant Shares or shares
of Common Stock issued upon conversion of any Purchased Shares or
Warrant Shares;
(D) any securities issued in connection with any
stock split stock, dividend or other similar event in which all
Participation Rights Holders are entitled to participate on a pro
rata basis;
(E) any securities issued upon the exercise,
conversion or exchange of any outstanding security if such
outstanding security constituted a New Security; or
(F) any securities issued pursuant to the
acquisition of another Person by the Company by consolidation,
merger, purchase of assets, or other reorganization in which the
Company acquires, in a single transaction or series of related
transactions, assets of such Person or fifty percent (50%) or
more of the voting power of such Person or fifty percent (50%) or
more of the equity ownership of such other Person.
(iv) Procedures. If the Company proposes to undertake
an issuance of New Securities (in a single transaction or a
series of related transactions) that would result in an aggregate
ten percent (10%) or greater reduction in the Pro Rata Share of
all Participation Rights Holders, the Company shall give to each
Participation Rights Holder written notice of its intention to
issue New Securities (the "Participation Notice"), describing the
amount and the type of New Securities and the price and the
general terms upon which the Company proposes to issue such New
Securities. Each Participation Rights Holder shall have fifteen
(15) business days from the date of receipt of any such
Participation Notice to agree in writing to purchase such
Participation Rights Holder's Pro Rata Share of such New
Securities for the price and upon the terms and conditions
specified in the Participation Notice by giving written notice to
the Company and stating therein the quantity of New Securities to
be purchased (not to exceed the
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CUSIP No. 299096107 13D Page 51 of 86
Participation Rights Holder's Pro Rata Share). If any
Participation Rights Holder fails to so agree in writing within
such 15 business day period, then such Participation Rights
Holder shall forfeit the right hereunder to participate in such
sale of New Securities. All sales hereunder shall be consummated
concurrently with the closing of the transaction triggering the
Right of Participation.
(v) Failure to Exercise. Upon the expiration of such
fifteen (15) business day period, the Company shall have one
hundred twenty (120) days thereafter to sell the New Securities
described in the Participation Notice (with respect to which the
Participation Rights Holders' rights of first refusal hereunder
were not exercised), or enter into an agreement to do so, within
sixty (60) days thereafter, at no less than ninety-five percent
(95%) of the price and upon non-price terms not materially more
favorable to the purchasers thereof than specified in the
Participation Notice. If the Company has not issued and sold
such New Securities within such 90-day period, or entered into an
agreement to do so within sixty (60) days thereafter, then the
Company shall not thereafter issue or sell any New Securities
without again first offering such New Securities to the
Participation Rights Holders pursuant to this Section 7(f).
(vi) Termination. The Company's obligations under this
Section 7(f) shall terminate upon expiration of the ROFR Period.
(g) Right of Maintenance.
(i) General. Each Participation Rights Holder shall,
pursuant to the terms and conditions of this Section 7(g), have
the right to purchase from the Company shares of Common Stock,
Series B Preferred Stock or other voting capital stock of the
Company, the kind of stock to be determined by each Participation
Rights Holder ("Maintenance Securities"), as a result of
issuances by the Company of Dilutive Securities from time to time
issue after the Closing Date, solely in order to maintain such
Participation Rights Holder's Prior Percentage Interest in the
Company (the "Right of Maintenance"). Each right to purchase
Maintenance Securities pursuant to this Section 7(g) shall be on
the same terms (other than price to the extent provided in
paragraph (iii) or (vii) below, as applicable) as the issuance of
the Dilutive Securities that gave rise to the right to purchase
such Maintenance Securities.
(ii) Dilutive Securities. "Dilutive Securities" means
any Common Stock, voting Preferred Stock or other voting capital
stock of the Company, whether now authorized or not; provided,
however, that the term "Dilutive Securities" shall not include:
(A) any securities other than Common Stock,
voting Preferred Stock or other voting capital stock (e.g.,
warrants or options to purchase Common Stock, Preferred Stock or
other capital stock);
(B) the Purchased Shares issued under this
Agreement;
(C) the Warrant or any Warrant Shares or shares
of Common Stock issued upon conversion of any Purchased Shares or
Warrant Shares;
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CUSIP No. 299096107 13D Page 52 of 86
(D) any securities issued in connection with any
stock split, stock dividend or similar event in which all
Participation Rights Holders are entitled to participate on a pro
rata basis;
(E) any securities for which the issuance gave
rise to the Right of Participation (regardless of whether any
such right was exercised) or to a Corporate Event; or
(F) any securities issuable upon the exercise,
conversion or exchange of any securities described in (D) or (E)
above.
(iii) Purchase Price.
(A) Employee Stock. To the extent that the right
to purchase Maintenance Securities arises out of the issuance of
Dilutive Securities to employees, officers, directors,
contractors, advisors or consultants of the Company pursuant to
incentive agreements or incentive plans approved by the Board
("Employee Stock"), the per share "Purchase Price" of the
Maintenance Securities shall, subject to subparagraph (D) below,
equal the average Market Price of such Maintenance Securities
over the ten (10) trading days immediately preceding the date on
which the Participation Rights Holder elects to purchase such
Maintenance Securities.
(B) Other Dilutive Securities. To the extent
that the right to purchase Maintenance Securities arises out of
any issuance of Dilutive Securities other than Employee Stock,
the per share "Purchase Price" of the Maintenance Securities
shall, subject to subparagraph (D) below, equal the lower of (1)
the weighted average of the per share prices at which such
Dilutive Securities were issued and (2) the average Market Price
of such Maintenance Securities over the ten (10) trading days
immediately preceding the date on which the Participation Rights
Holder elects to purchase such Maintenance Securities. If the
issuance of any Dilutive Securities occurs upon the exercise,
conversion or exchange of other securities ("Exchangeable
Securities"), then the per share price at which such Dilutive
Securities shall be deemed to have been issued shall be the sum
of (x) the per share amount paid upon such exercise, conversion
or exchange, plus (y) the per share amount previously paid for
the Exchangeable Securities (adjusted for any stock splits, stock
dividends or other similar events).
(C) Market Price. For purposes of this Section
7(g)(iii), "Market Price" means, as to any Maintenance Securities
on a given day, the average of the closing prices of such
security's (but, if a Participation Rights Holder has elected to
purchase Series B Preferred Stock, the Common Stock's) sales on
all domestic securities exchanges on which such security may at
the time be listed, or, if there have been no sales on any such
exchange on such day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or, if
on any day such security is not so listed, the average of the
representative bid and asked prices quoted on the Nasdaq National
Market as of 4:00 P.M., New York time, on such day, or, if on any
day such security is not quoted on the Nasdaq National Market,
the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor
organization. If at any time the Maintenance Securities are not
listed on any domestic securities exchange or quoted on the
Nasdaq National Market or the domestic over-the-counter
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CUSIP No. 299096107 13D Page 53 of 86
market ("Unlisted Securities"), the "Market Price" shall be the
fair value thereof determined jointly by the Company and the
Holder.
(D) Alternative Purchase Price. If a
Participation Rights Holder does not elect to purchase its
Maintenance Amount at the time of issuance of any Dilutive
Securities specified in a Maintenance Note, and in the written
opinion of the Company's independent auditors, made available to
each Participation Rights Holder upon request, the effect of
determining the Purchase Price after such issuance pursuant to
subparagraph (A) or (B) above would require the Company to take a
charge against earnings in accordance with GAAP, then for
purposes of this Section 7(g)(iii) "Purchase Price" shall mean
the Market Price on the date the Participation Rights Holder
elects to purchase its Maintenance Amount.
(E) Consideration Other than Cash. If Dilutive
Securities or Exchangeable Securities were issued for
consideration other than cash, the per share amounts paid for
such Dilutive Securities or Exchangeable Securities shall be
determined jointly in good faith by the Company and the
Participation Rights Holder.
(F) Appraiser. If the Company and the
Participation Rights Holder are unable to reach agreement within
a reasonable period of time with respect to (1) the Market Price
of Unlisted Securities or (2) the per share amounts paid for
Dilutive Securities or Exchangeable Securities issued for
consideration other than cash, such Market Price or per share
amounts paid, as the case may be, shall be determined by an
appraiser jointly selected by the Company and the Participation
Rights Holder. The determination of such appraiser shall be
final and binding on the Company and the Participation Rights
Holder. The fees and expenses of such appraiser shall be paid
for by the Company.
(iv) Prior Percentage Interest. A Participation Rights
Holder's "Prior Percentage Interest" for purposes of the Right of
Maintenance is the ratio of (A) the number of Registrable
Securities held by such Participation Rights Holder as of the
date of such Maintenance Notice (the "Notice Date"), to (B) the
difference between (1) the total number of shares of Common Stock
(and other voting securities of the Company, if any) outstanding
on the Notice Date (assuming issuance of the Common Stock or
other securities described in such Maintenance Notice), where for
such purposes all Conversion Shares then issuable (but unissued)
are deemed outstanding, and (2) the total number of Dilutive
Securities issued since the later of the Closing Date and the
last Notice Date (but excluding any Maintenance Securities issued
pursuant to the last Maintenance Notice).
(v) Maintenance Amount. A Participation Rights
Holder's "Maintenance Amount" with respect to any Maintenance
Notice shall equal such number of Maintenance Securities as shall
(upon purchase thereof in full by the Participation Rights
Holder) enable such Participation Rights Holder to maintain its
Prior Percentage Interest on a fully-diluted basis. As an
example, assume that the Company had 10,000 shares outstanding
and the Participation Rights Holder holds 20% of such shares (or
2,000 shares). The Company first issues 400 shares to a third
party ("Issuance 1"), an amount insufficient to trigger a Notice
of Issuance pursuant to Section 7(g)(vi). The Company then
proposes to issue 4,600 shares to a third party ("Issuance 2"),
an amount sufficient to trigger a Maintenance Notice. The
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CUSIP No. 299096107 13D Page 54 of 86
Participation Rights Holder shall have the right to maintain its
20% interest after considering Issuances 1 and 2 and the new
shares issued to the Participation Rights Holder. In this
example, the Participation Rights Holder shall have the right to
purchase an additional 1,250 shares, thereby resulting in the
Participation Rights Holder holding 20% of the securities
outstanding (3,250 shares out of 16,250 shares).
(vi) Maintenance Notice. Within fifteen (15) business
days after each anniversary of the Closing Date, and within
fifteen (15) business days before each issuance of Dilutive
Securities which when cumulated with all prior issuances of
Dilutive Securities since the later of (i) the Closing Date and
(ii) the date of the last Notice Date (subsequent to which the
Participation Rights Holder has had an opportunity to purchase
Maintenance Securities), would result in a five percent (5%) or
greater reduction in a Participation Rights Holders' Prior
Percentage Interest, the Company shall give to each Participation
Rights Holder written notice (the "Maintenance Notice")
describing the number of Dilutive Securities issued since such
prior Notice Date and the non-price terms upon which the Company
issued such Dilutive Securities, and the Maintenance Amount that
such Participation Rights Holder is entitled to purchase as a
result of such issuances.
(vii) Purchase of Maintenance Securities. Each
Participation Rights Holder shall have the right to purchase at
the time of issuance of the Dilutive Securities specified in a
Maintenance Notice up to such Participation Rights Holder's
Maintenance Amount at the same purchase price paid by the other
purchasers of such Dilutive Securities and upon the other terms
and conditions applicable to such other purchasers and specified
in the Maintenance Notice. If a Participation Rights Holder
fails to exercise its right to purchase Dilutive Securities
pursuant to the preceding sentence, such Participation Rights
Holder shall have sixty (60) days after the issuance of the
Dilutive Securities specified in the applicable Maintenance
Notice to purchase its Maintenance Amount at the Purchase Price
(as determined pursuant to subparagraphs (A), (B), (C) and (D)
above) and upon the other terms and conditions specified in the
Maintenance Notice. The closing of such purchase shall occur
within ten (10) days after such election to purchase. If any
Participation Rights Holder fails to elect to purchase such
Participation Rights Holder's full Maintenance Amount of
Maintenance Securities within such 60-day period, then such
Participation Rights Holder shall forfeit the right hereunder to
purchase that part of its Maintenance Amount that it did not so
elect to purchase.
(viii) Termination. The Company's obligations under
this Section 7(g) shall terminate upon expiration of the ROFR
Period.
(h) Standstill Agreement. During the ROFR Period, the
Investor shall neither acquire, nor enter into discussions,
negotiations, arrangements or understandings with any third party
to acquire, beneficial ownership of any Voting Stock, any
securities convertible into or exchangeable for Voting Stock, or
any other right to acquire Voting Stock (except, in any case, by
way of stock dividends or other distributions or offerings made
available to holders of any Voting Stock generally) without the
written consent of the Company, if the effect of such acquisition
would be to increase the Voting Power of all Voting Stock then
beneficially owned by the Investor or which it has a right to
acquire to more than fifteen percent (15%) (the
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CUSIP No. 299096107 13D Page 55 of 86
"Standstill Percentage") of the Total Voting Power of the Company
at the time in effect; provided, however, that:
(i) The Investor may acquire Voting Stock without
regard to the foregoing limitation, and such limitation shall be
suspended, but not terminated, if and for as long as: (1) a
tender or exchange offer is made and is not withdrawn or
terminated by another Person or group of Persons to purchase or
exchange for cash or other consideration any Voting Stock that,
if accepted or if otherwise successful, would result in such
Person or group beneficially owning or having the right to
acquire shares of Voting Stock with aggregate Voting Power of
more than ten percent (10%) of the Total Voting Power of the
Company then in effect and such offer is not withdrawn or
terminated prior to the Investor making an offer to acquire
Voting Stock or acquiring Voting Stock; provided, however, that
the foregoing standstill limitation will be reinstated once any
such tender or exchange offer is withdrawn or terminated; (2)
another Person or group of Persons hereafter acquires Voting
Stock that results in such Person or group being required to file
a Schedule 13D, under the rules set forth in Section 13(d)
promulgated under the Exchange Act, as such rules are in effect
on the date hereof;or other similar or successor schedule or
form, indicating that the purpose of such acquisition is other
than for mere investment; provided, however, that the foregoing
standstill limitation will be reinstated once the percentage of
Total Voting Power beneficially owned by such other Person or
group falls below five percent (5%); (3) another Person or group
of Persons hereafter acquires Voting Stock that results in such
Person or group being required to file a Schedule 13G, or other
similar or successor schedule or form, indicating that such other
Person or group beneficially owns or has the right to acquire
Voting Stock with aggregate Voting Power of more than twenty
percent (20%) of the Total Voting Power of the Company; provided,
however, that the foregoing standstill limitation will be
reinstated once the percentage of Total Voting Power beneficially
owned by such other Person or group falls below five percent
(5%); or (4) another Person or group of Persons orally or in
writing contacts the Company and advises the Company of such
person's or group's intention to commence a tender or exchange
offer that, if so commenced, would result in a suspension
pursuant to clause (1) above (e.g., a "bear hug" offer);
provided, however, that the foregoing standstill limitation will
be reinstated if such intention is withdrawn in writing or other
reasonable evidence of such withdrawal is provided to the
Investor. The Company shall notify the Investor in writing of
the occurrence of any event described in clauses (1) through (4)
of the immediately preceding sentence immediately after the
Company has become aware of any such event, and in any case,
shall provide the Investor with written notice of any such event
within twenty-four (24) hours of the occurrence thereof.
(ii) The Investor will not be obliged to dispose of any
Voting Stock if the aggregate percentage of the Total Voting
Power of the Company represented by Voting Stock beneficially
owned by the Investor or which the Investor has a right to
acquire is increased beyond the Standstill Percentage: (1) as a
result of a recapitalization of the Company or a repurchase or
exchange of securities by the Company or any other action taken
by the Company or any of its Affiliates; (2) as the result of
acquisitions of Voting Stock made during the period when the
Investor's "standstill" obligations are suspended pursuant to
Section 7(h)(i); (3) as a result of an equity index transaction,
provided that the Investor shall not vote such shares; (4) by way
of stock dividend or other distribution or right or offering made
available to holders of shares of Voting Stock generally; (5)
with the consent of a simple majority of the authorized
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CUSIP No. 299096107 13D Page 56 of 86
members of the Board; or (6) as part of a transaction on behalf
of the Investor's Defined Benefit Pension Plan, Profit Sharing
Retirement Plan, 401(k) Savings Plan, Sheltered Employee
Retirement Plan and Sheltered Employee Retirement Plan Plus or
any successor or additional retirement plans thereto
(collectively, the "Retirement Plans") where the Company's shares
in such Retirement Plans are voted by a trustee for the benefit
of the Investor's or any of its subsidiaries' employees or, for
those Retirement Plans where the Investor controls voting, where
the Investor agrees not to vote any shares of such Retirement
Plan Voting Stock that would cause the Investor to exceed the
Standstill Percentage.
(iii) As used in this Section 7(h), (1) the term
"Voting Stock" means the Common Stock and any other securities
issued by the Company having the ordinary power to vote in the
election of directors of the Company (other than securities
having such power only upon the happening of a contingency that
has not occurred); (2) the term "Voting Power" with respect to
any Voting Stock means the number of votes such Voting Stock is
entitled to cast in the election of directors of the Company at
any meeting of its shareholders; (3) the term "Total Voting
Power" means the total number of votes which may be cast in the
election of directors of the Company at any meeting of its
shareholders if all Voting Stock was represented and voted to the
fullest extent possible at such meeting other than votes that may
be cast only upon the happening of a contingency that has not
occurred; and (4) the terms "beneficial ownership," "beneficially
own," "beneficially owned," and "beneficially owning" shall have
the same meanings as when used in Rule 13d-3 promulgated under
the Exchange Act. For purposes of this Section 7(h), the
Investor shall not be deemed to have beneficial ownership of any
Voting Stock held by a pension plan or other employee benefit
program of the Investor if the Investor does not have the power
to control the investment decisions of such plan or program.
8. INDEMNIFICATION.
(a) Agreement to Indemnify.
(i) Company Indemnity. The Investor, its Affiliates
and Associates, and each officer, director, shareholder,
employer, representative and agent of any of the foregoing
(collectively, the "Investor Indemnitees") shall each be
indemnified and held harmless to the extent set forth in this
Section 8 by the Company with respect to any and all Damages
incurred by any Investor Indemnitee as a proximate result of any
inaccuracy or misrepresentation in, or breach of, any
representation, warranty, covenant or agreement made by the
Company in this Agreement (including any exhibits, schedules or
disclosure letters hereto). Indemnification or other claims with
respect to the other Transaction Agreements shall be covered by
the provisions of those agreements and not by this Section 8, and
indemnification for claims arising from the registration of
Conversion Shares under federal and state securities laws are
covered by Section 7(b)(vii) and not this Section 8.
(ii) Investor Indemnity. The Company, its respective
Affiliates and Associates, and each officer, director,
shareholder, employer, representative and agent of any of the
foregoing (collectively, the "Company Indemnitees") shall each be
indemnified and held harmless to the extent set forth in this
Section 8, by the Investor, in respect of any and all Damages
incurred by any Company Indemnitee as a proximate result of any
inaccuracy or
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CUSIP No. 299096107 13D Page 57 of 86
misrepresentation in, or breach of, any representation, warranty,
covenant or agreement made by the Investor in this Agreement.
Indemnification or other claims with respect to the other
Transaction Agreements shall be covered by the provisions of
those agreements and not by this Section 8, and indemnification
for claims arising from the registration of Conversion Shares
under federal and state securities laws are covered by Section
7(b)(vii) and not this Section 8.
(iii) Equitable Relief. Nothing set forth in this
Section 8 shall be deemed to prohibit or limit any Investor
Indemnitee's or Company Indemnitee's right at any time before, on
or after the Closing, to seek injunctive or other equitable
relief for the failure of any Indemnifying Party to perform or
comply with any covenant or agreement contained herein.
(b) Survival. All representations and warranties of the
Investor and the Company contained herein and all claims of any
Investor Indemnitee or Company Indemnitee in respect of any
inaccuracy or misrepresentation in or breach hereof, shall
survive the Closing until the third (3rd) anniversary of the
Closing Date, regardless of whether the applicable statute of
limitations, including extensions thereof, may expire. All
covenants and agreements of the Investor and the Company
contained in this Agreement shall survive the Closing in
perpetuity (except to the extent any such covenant or agreement
shall expire by its terms). All claims of any Investor
Indemnitee or Company Indemnitee in respect of any breach of such
covenants or agreements shall survive the Closing until the
expiration of two (2) years following the non-breaching party's
obtaining actual knowledge of such breach.
(c) Claims for Indemnification. If any Investor Indemnitee
or Company Indemnitee (an "Indemnitee") shall believe that such
Indemnitee is entitled to indemnification pursuant to this
Section 8 in respect of any Damages, such Indemnitee shall give
the appropriate Indemnifying Party (which for purposes hereof, in
the case of an Investor Indemnitee, means the Company, and in the
case of a Company Indemnitee, means the Investor) prompt written
notice thereof. Any such notice shall set forth in reasonable
detail and to the extent then known the basis for such claim for
indemnification. The failure of such Indemnitee to give notice
of any claim for indemnification promptly shall not adversely
affect such Indemnitee's right to indemnity hereunder except to
the extent that such failure adversely affects the right of the
Indemnifying Party to assert any reasonable defense to such
claim. Each such claim for indemnity shall expressly state that
the Indemnifying Party shall have only the twenty (20) business
day period referred to in the next sentence to dispute or deny
such claim. The Indemnifying Party shall have twenty (20)
business days following its receipt of such notice either (a) to
acquiesce in such claim by giving such Indemnitee written notice
of such acquiescence or (b) to object to the claim by giving such
Indemnitee written notice of the objection. If the Indemnifying
Party does not object thereto within such twenty (20) business
day period, such Indemnitee shall be entitled to be indemnified
for all Damages reasonably and proximately incurred by such
Indemnitee in respect of such claim. If the Indemnifying Party
objects to such claim in a timely manner, the senior management
of the Company and the Investor shall meet to attempt to resolve
such dispute. If the dispute cannot be resolved by the senior
management, either party may make a written demand for formal
dispute resolution and specify therein the scope of the dispute.
Within thirty (30) days after such written notification, the
parties agree to meet for one (1) day with an impartial mediator
and consider dispute resolution alternatives other than
litigation. If an alternative method of dispute resolution is
not
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CUSIP No. 299096107 13D Page 58 of 86
agreed upon within thirty (30) days after the one day mediation,
either party may begin litigation proceedings. Nothing in this
section shall be deemed to require arbitration.
(d) Defense of Claims. In connection with any claim that
may give rise to indemnity under this Section 8 resulting from or
arising out of any claim or Proceeding against an Indemnitee by a
Person that is not a party hereto, the Indemnifying Party may
(unless such Indemnitee elects not to seek indemnity hereunder
for such claim) but shall not be obligated to, upon written
notice to the relevant Indemnitee, assume the defense of any such
claim or Proceeding if the Indemnifying Party with respect to
such claim or Proceeding acknowledges to the Indemnitee the
Indemnitee's right to indemnity pursuant hereto to the extent
provided herein (as such claim may have been modified through
written agreement of the parties) and provides assurances,
reasonably satisfactory to such Indemnitee, that the Indemnifying
Party shall be financially able to satisfy such claim to the
extent provided herein if such claim or Proceeding is decided
adversely; provided, however, that nothing set forth herein shall
be deemed to require the Indemnifying Party to waive any
crossclaims or counterclaims the Indemnifying Party may have
against the Indemnified Party for damages. The Indemnified Party
shall be entitled to retain separate counsel, reasonably
acceptable to the Indemnifying Party, if the Indemnified Party
shall determine, upon the written advice of counsel, that an
actual or potential conflict of interest exists between the
Indemnifying Party and the Indemnified Party in connection with
such Proceeding. The Indemnifying Party shall be obligated to
pay the reasonable fees and expenses of such separate counsel to
the extent the Indemnified Party is entitled to indemnification
by the Indemnifying Party with respect to such claim or
Proceeding under this Section 8(d). If the Indemnifying Party
assumes the defense of any such claim or Proceeding, the
Indemnifying Party shall select counsel reasonably acceptable to
such Indemnitee to conduct the defense of such claim or
Proceeding, shall take all steps necessary in the defense or
settlement thereof and shall at all times diligently and promptly
pursue the resolution thereof. If the Indemnifying Party shall
have assumed the defense of any claim or Proceeding in accordance
with this Section 8(d), the Indemnifying Party shall be
authorized to consent to a settlement of, or the entry of any
judgment arising from, any such claim or Proceeding, with the
prior written consent of such Indemnitee, not to be unreasonably
withheld; provided, however, that the Indemnifying Party shall
pay or cause to be paid all amounts arising out of such
settlement or judgment concurrently with the effectiveness
thereof; provided further, that the Indemnifying party shall not
be authorized to encumber any of the assets of any Indemnitee or
to agree to any restriction that would apply to any Indemnitee or
to its conduct of business; and provided further, that a
condition to any such settlement shall be a complete release of
such Indemnitee and its Affiliates, directors, officers,
employees and agents with respect to such claim, including any
reasonably foreseeable collateral consequences thereof. Such
Indemnitee shall be entitled to participate in (but not control)
the defense of any such action, with its own counsel and at its
own expense. Each Indemnitee shall, and shall cause each of its
Affiliates, directors, officers, employees and agents to,
cooperate fully with the Indemnifying Party in the defense of any
claim or Proceeding being defended by the Indemnifying Party
pursuant to this Section 8(d). If the Indemnifying Party does
not assume the defense of any claim or Proceeding resulting
therefrom in accordance with the terms of this Section 8(d), such
Indemnitee may defend against such claim or Proceeding in such
manner as it may deem appropriate, including settling such claim
or Proceeding after giving notice of the same to the Indemnifying
Party, on such terms as such Indemnitee may deem appropriate. If
any
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CUSIP No. 299096107 13D Page 59 of 86
Indemnifying Party seeks to question the manner in which such
Indemnitee defended such claim or Proceeding or the amount of or
nature of any such settlement, such Indemnifying Party shall have
the burden to prove by a preponderance of the evidence that such
Indemnitee did not defend such claim or Proceeding in a
reasonably prudent manner.
(e) Certain Definitions. As used in this Section 8, (i)
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under direct
or indirect common control with such other Person; (ii)
"Associate" means, when used to indicate a relationship with any
Person, (A) any other Person of which such first Person is an
officer, director or partner or is, directly or indirectly, the
beneficial owner of ten percent (10%) or more of any class of
equity securities, membership interests or other comparable
ownership interests issued by such other Person, (B) any trust or
other estate in which such first Person has a ten percent (10%)
or more beneficial interest or as to which such first Person
serves as trustee or in a similar fiduciary capacity, and (C) if
such first Person is an individual, any relative or spouse of
such first Person who has the same home as such first Person or
who is a director or officer of such first Person; (iii)
"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities,
judgments, awards, fines, response costs, sanctions, taxes,
penalties, charges and amounts paid in settlement, including (A)
interest on cash disbursements in respect of any of the foregoing
at the prime rate of Bank of America NT&SA (or its successor), as
in effect from time to time, compounded quarterly, from the date
each such cash disbursement is made until the date the party
incurring such cash disbursement shall have been indemnified in
respect thereof, and (B) reasonable out-of-pocket costs, fees and
expenses (including reasonable costs, fees and expenses of
attorneys, accountants and other agents of, or other parties
retained by, such party); and (iv) "Proceeding" means any action,
suit, hearing, arbitration, audit, proceeding (public or private)
or investigation that is brought or initiated by or against any
federal, state, local or foreign governmental authority or any
other Person.
9. ASSIGNMENT AND DELEGATION. Notwithstanding anything herein
to the contrary:
(a) Information Rights. The rights of the Investor under
Section 7(a) are transferable to any Holder who acquires or holds
at least one hundred thousand (100,000) Registrable Securities;
provided, however, that no Person may be assigned any of the
foregoing rights unless the Company is given written notice by
the assigning party at the time of such assignment stating the
name and address of the assignee and identifying the securities
of the Company as to which the rights in question are being
assigned; provided further, that any such assignee shall receive
such assigned rights subject to all the terms and conditions of
this Agreement, including the provisions of this Section 9.
(b) Registration Rights. The registration rights of the
Investor under Section 7(b) may be assigned to any Permitted
Transferee who acquires or holds at least one hundred thousand
(100,000) Registrable Securities; provided, however, that no
Person may be assigned any of the foregoing rights unless the
Company is given written notice by the assigning party at the
time of such assignment stating the name and address of the
assignee and identifying the securities of the Company as to
which the rights in question are being assigned; provided
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CUSIP No. 299096107 13D Page 60 of 86
further, that any such assignee shall receive such assigned
rights subject to all the terms and conditions of this Agreement,
including the provisions of this Section 9.
(c) Confidential Information. The obligations of the
Company or the Investor or under Section 7(c) may not be
delegated.
(d) Board Observer. The rights of the Investor under
Section 7(d) may not be assigned.
(e) Rights On Corporate Events. The rights of the Investor
under Section 7(e) may be assigned only in whole, and not in
part, and only to a Majority Owned Subsidiary (and only in
conjunction with a transfer to such subsidiary of all of the
Investor's Purchased Shares, Warrant Shares, Conversion Shares
and interest in the Warrant); provided, however, that no Person
may be assigned any of the foregoing rights unless the Company is
given written notice by the Investor at the time of such
assignment stating the name and address of the assignee; provided
further, that any such assignee shall receive such assigned
rights subject to all the terms and conditions of this Agreement.
(f) Rights of Participation and Maintenance. The rights of
the Investor under Sections 7(f) and 7(g) may be assigned only in
whole, and not in part, and only to a Majority Owned Subsidiary
(and only in conjunction with a transfer to such subsidiary of
all of the Investor's Purchased Shares, Warrant Shares,
Conversion Shares and interest in the Warrant); provided,
however, that no Person may be assigned any of the foregoing
rights unless the Company is given written notice by the Investor
at the time of such assignment stating the name and address of
the assignee; provided further, that any such assignee shall
receive such assigned rights subject to all the terms and
conditions of this Agreement.
10. TRANSFERABILITY OF PURCHASED AND WARRANT SHARES. Without
the prior written consent of the Company (which shall not be
unreasonably withheld), the Investor may sell or otherwise
transfer the Warrant (in whole or in part) or any Purchased
Shares and Warrant Shares only to a Permitted Transferee.
"Permitted Transferee" means (a) the Company or any of its
subsidiaries, (b) a Person that, directly or indirectly,
controls, is controlled by or is under common control with the
Investor or (c) any other Person, including any professional
financial investor (such as a venture capital firm, investment
bank, investment fund or high net worth individual), provided
that such Person has not expressed to the Investor any present
intent to seek changes in the composition of the Board or the
Company's management or otherwise to become actively involved in
operating the Company, and provided further that such Person is
not at the time of such sale a direct, material competitor of the
Company.
11. MISCELLANEOUS.
( a) Successors and Assigns. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon
the respective assigns of the parties, provided such assignment
was made in accordance with Section 9 and upon the respective
successors of the parties.
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CUSIP No. 299096107 13D Page 61 of 86
(b) Governing Law. This Agreement shall be governed by and
construed under the internal laws of the State of Delaware,
without reference to principles of conflict of laws or choice of
laws.
(c) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
(d) Headings. The headings and captions used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. All
references in this Agreement to sections, paragraphs, exhibits
and schedules shall, unless otherwise provided, refer to sections
and paragraphs hereof and exhibits and schedules attached hereto,
all of which exhibits and schedules are incorporated herein by
this reference.
(e) Notices. Any notice required or permitted under this
Agreement shall be given in writing, shall be effective when
received, and shall in any event be deemed received and
effectively given upon personal delivery to the party to be
notified or three (3) business days after deposit with the United
States Post Office, by registered or certified mail, postage
prepaid, or one (1) business day after deposit with a nationally
recognized courier service such as FedEx for next business day
delivery under circumstances in which such service guarantees
next business day delivery, or one (1) business day after
facsimile with copy delivered by registered or certified mail, in
any case, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature
page hereof or at such other address as the Investor or the
Company may designate by giving at least ten (10) days advance
written notice pursuant to this Section 11(e).
(f) Amendments and Waivers. This Agreement may be amended
and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the holders of a majority of the aggregate number
of (i) Warrant Shares issuable upon exercise of the Warrant and
(ii) Purchased Shares, Warrant Shares and Conversion Shares then
outstanding (excluding any of such shares that have been sold in
a transaction in which rights under Section 7(b) are not assigned
in accordance with this Agreement or sold to the public pursuant
to SEC Rule 144 or otherwise). Any amendment or waiver effected
in accordance with this Section 11(f) shall be binding upon the
Investor, the Company and their respective successors and
assigns. Notwithstanding the foregoing, neither Section 7(c),
7(d), 7(e), 7(f) or 7(g) nor Section 9 may be amended without the
written consent of the Company and the Investor, which may be
withheld in either of their sole and absolute discretion.
(g) Severability. If any provision of this Agreement is
held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
(h) Entire Agreement. This Agreement, together with the
other Transaction Agreement and all exhibits and schedules hereto
and thereto constitutes the entire agreement and
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CUSIP No. 299096107 13D Page 62 of 86
understanding of the parties with respect to the subject matter
hereof and supersedes any and all prior negotiations,
correspondence, agreements. understandings duties or obligations
between the parties with respect to the subject matter hereof.
(i) Further Assurances. From and after the date of this
Agreement upon the request of the Company or the Investor, the
Company and the Investor shall execute and deliver such
instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
(j) Construction. Whenever in this Agreement the word
"include" or "including" is used, such term shall be deemed to
mean "include, without limitation," or "including, without
limitation," as the case may be, and the language following
"include" or "including" shall not be deemed to set forth an
exhaustive list. The words "hereof," "herein," '"hereby,"
"hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this
Agreement. Article, Section, subsection, paragraph, exhibit and
schedule references are to this Agreement unless otherwise
specified.
(k) Fees, Costs and Expenses. All fees, costs and expenses
(including attorney's' fees and expenses) incurred by either part
hereto in connection with the preparation, negotiation and
execution of this Agreement and the other Transaction Agreements
and the consummation of the transactions contemplated hereby and
thereby (including the costs associated with any filings with, or
compliance with any of the requirements of, any governmental
authorities), shall be the sole and exclusive responsibility of
such party.
(l) Competition. Nothing set forth herein shall be deemed
to preclude, limit or restrict the Company's or the Investor's
ability to compete with the other.
(m) Cooperation in HSR Act Filings.
(i) In the event of a proposed voluntary conversion of
Purchased Shares and/or Warrant Shares that would require a
filing by Intel under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), the Investor and its
respective affiliates (including any "ultimate parent entity", as
defined in the HSR Act), and the Company and its respective
affiliates (including any "ultimate parent entity", as defined
in the HSR Act), shall promptly prepare and make their respective
filings and thereafter shall make all required or requested
submissions under the HSR Act or any analogous applicable law, if
required. In taking such actions or making any such filings, the
parties hereto shall furnish information required in connection
therewith and seek timely to obtain any applicable actions,
consents, approvals or waivers of governmental authorities;
provided, however, that the parties hereto shall cooperate with
each other in connection with the making of all such filings to
the extent permitted by applicable law. Without limiting the
generality of the foregoing, to the extent permitted by
applicable law and so long as the following shall not involve the
disclosure of confidential or proprietary information of one
party hereto to another, each party shall cooperate with the
other by (A) providing copies of all documents to be filed to the
non-filing party and its advisors prior to filing and, if
requested, accepting reasonable additions, deletions or changes
suggested in
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CUSIP No. 299096107 13D Page 63 of 86
connection therewith and (B) providing to each other party copies
of all correspondence from and to any governmental authority in
connection with any such filing.
(ii) Notwithstanding the foregoing, neither the
Investor nor any of its affiliates shall be under any obligation
to comply with any request or requirement imposed by the Federal
Trade Commission (the "FTC"), the Department of Justice (the
"DofJ") or any other governmental authority in connection with
the compliance with the requirements of the HSR Act, or any other
applicable law, if the Investor, in the exercise of its
reasonable discretion, deems such request or requirement unduly
burdensome. Without limiting the generality of the foregoing,
the Investor shall not be obligated to comply with any request
by, or any requirement of, the FTC, the DofJ or any other
governmental authority: (A) to disclose information the Investor
deems it in its best interests to keep confidential; (B) to
dispose of any assets or operations; or (C) to comply with any
proposed restriction on the manner in which it conducts its
operations. If the Investor shall receive a second request in
respect of its HSR Filing determined by it to be unduly
burdensome and it shall prove unable to negotiate a means
satisfactory to the Investor for complying with such burdensome
second request, or the FTC or DofJ shall impose any condition on
the Investor or its affiliates in respect thereof deemed
unacceptable by the Investor, the Company and the Investor shall
cooperate in good faith to negotiate an alternative transaction
that provides the Investor with the economic benefits it would
receive if it were to convert the Purchased Shares and/or Warrant
Shares.
(n) Adjustments for Stock Splits, Etc. Wherever in this
Agreement there is a reference to a specific number of shares of
capital stock of the Company, then, upon the occurrence of any
subdivision, combination or stock dividend of such shares of
capital stock, the specific number of shares so referenced in
this Agreement shall automatically be proportionally adjusted to
reflect the affect on the outstanding shares of such class or
series of stock by such subdivision, combination or stock
dividend.
(o) Index of Defined Terms. The following terms shall have
the respective meanings given to them in the sections indicated
below:
Acquisition Issuance 7(e)(vi)
Action 3(g)
Affiliate 8(e)
Agreement Preamble
Articles 3(f)
Assets 7(e)(vii)
Associate 8(e)
Audited Financial Statements 3(i)(ii)
Balance Sheet Date 3(i)(ii)
beneficially own 7(h)(iii)
beneficially owned 7(h)(iii)
beneficial ownership 7(h)(iii)
beneficially owning 7(h)(iii)
Board 1(a)
Bylaws 3(f)
CERCLA 3(q)
Certificate of Designation 1(a)
Closing 2
Closing Date 2
Common Stock 1(a)
Company Preamble
Company Indemnitees 8(a)(ii)
Confidential Information 7(c)(ii)
Conversion Shares 3(d)(i)
Corporate Event 7(e)(i)
Damages 8(e)
Dilutive Securities 7(g)(ii)
Disclosure Letter 3
DofJ 11(n)(ii)
Employee Stock 7(g)(iii)(A)
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CUSIP No. 299096107 13D Page 64 of 86
Exchange Act 3(i)(ii)
Exchangeable Securities 7(g)(iii)(B)
Exhibit Filing 7(c)(iii)
Final Notice 7(e)(iii)
Final Prospectus 7(b)(vii)(D)
Form 10-K 3(i)(i)
Form 10-Q 3(i)(i)
Form S-1 7(b)(i)(E)
Form S-2 7(b)(i)(E)
Form S-3 7(b)(i)(E)
FTC 11 (n)(ii)
GAAP 3(i)(ii)
Graphic Business 7(e)(vii)
Hazardous Materials 3(q)
Holder 7(b)(i)(D)
HSR Act 11(n)(i)
HSR Act 3(e)
HSR Requirements 3(e)
Include 11(k)
Including 11(k)
Indemnitee 8(c)
Information 7(d)(iii)
Initiating Holders 7(b)(iii)(B)
Intellectual Property 3(l)(i)
Investor Preamble
Investor Indemnitees 8(a)(i)
Issuance 1 7(g)(v)
Issuance 2 7(g)(v)
Maintenance Amount 7(g)(v)
Maintenance Notice 7(g)(vi)
Maintenance Securities 7(g)(i)
Majority Owned Subsidiary 7(f)(i)
Market Price 7(g)(iii)(C)
Material Adverse Effect 3(a)
New Securities 7(f)(iii)
Non-Disclosure Agreement 7(c)(i)
Notice Date 7(g)(iv)
Observer 7(d)(i)
Participation Notice 7(f)(iv)
Participation Rights Holder 7(f)(i)
Per Share Purchase Price 1(c)
Permitted Transferee 10
Person 7(b)(i)(B)
Preferred Stock 3(b)(i)
Prior Percentage Interest 7(g)(iv)
Pro Rata Share 7(f)(ii)
Proceeding 8(e)
Purchase Price 7(g)(iii)(A)
Purchased Shares 1(b)
Register 7(b)(i)(A)
Registered 7(b)(i)(A)
Registrable Securities 7(b)(i)(B)
Registrable Securities Then Outstanding 7(b)(i)(C)
Registration 7(b)(i)(A)
Request Notice 7(b)(iii)(A)
Retirement Plans 7(h)(ii)
Right of Maintenance 7(g)(i)
Right of Participation 7(f)(i)
Rights Plan 3(s)
ROFR Period 7(e)(iii)
SEC 3(e)
SEC Documents 3(i)(i)
Securities Act 3(d)(ii)
Series B Preferred Stock Recitals
Series A Preferred Stock 3(b)(i)
Shelf Registration Statement 7(b)(ii)(A)
Significant Subsidiary 7(e)(i)
Spin Off 7(e)(vii)
Spun-Off Business 7(e)(vii)
Standstill Percentage 7(h)
Suspension 7(b)(ii)(B)(2)
Suspension Event 7(b)(ii)(B)(2)
Suspension Notice 7(b)(ii)(B)(2)
Total Voting Power 7(h)(iii)
Transaction Agreements 7(c)(ii)
Unlisted Securities 7(g)(iii)(C)
Violation 7(b)(vii)(A)
Voting Power 7(h)(iii)
Voting Stock 7(h)(iii)
Warrant 1(d)
Warrant Shares 1(d)
<PAGE>
CUSIP No. 299096107 13D Page 65 of 86
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
EVANS & SUTHERLAND COMPUTER INTEL CORPORATION
CORPORATION
By: /s/JAMES R. OYLER By: /s/LESLIE L. VADASZ
Name: James R. Oyler Name: Leslie L. Vadasz
President & Chief
Title: Executive Officer Title: Sr. Vice President
Date Signed: 7/20/98 Date Signed: 7/20/98
Address: Address:
Attention: Peter Chiang Attn: Treasurer
600 Komas Drive 2200 Mission College Blvd.
Salt Lake City, Utah 84108 M/S SC4-210
Santa Clara, California 95052
Telephone No: (801) 588-1000 Telephone No: (408) 765-8080
Facsimile No: (801) 588-4510 Facsimile No: (408) 765-6038
With copy to: With copy to:
William C. Gibbs, Esq. Attn: General Counsel
Snell & Wilmer L.L.P. 2200 Mission College Blvd.
111 East Broadway, Suite 900 M/S SC4-203
Salt Lake City, Utah 84111 Santa Clara, California 95052
Telephone No: (801) 237-1900 Telephone No: (408) 765-8080
Facsimile No: (801) 237-1950 Facsimile No: (408) 765-1859
Signature page to
Evans & Sutherland Computer Corporation
Series B Stock and Warrant
Purchase Agreement
<PAGE>
CUSIP No. 299096107 13D Page 66 of 86
CERTIFICATE OF DESIGNATION, PREFERENCES AND OTHER RIGHTS
OF THE
CLASS B-1 PREFERRED STOCK
OF
EVANS & SUTHERLAND
COMPUTER CORPORATION
Pursuant to Section 16-10a-1002 of the
Utah Revised Business Corporations Act
Evans & Sutherland Computer Corporation, a corporation organized
and existing under the laws of the State of Utah (the
"Corporation"), hereby certifies that, pursuant to the authority
conferred upon the Board of Directors of the Corporation (the
"Board of Directors") by the Articles of Incorporation of the
Corporation, as amended (the "Articles of Incorporation"), and in
accordance with Section 16-10a-1002 of the Utah Revised Business
Corporations Act, the Board of Directors on July 19, 1998 duly
adopted the following resolution, which resolution remains in
full force and effect as of the date hereof:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors and in accordance with the provisions of
the Articles of Incorporation, there is hereby created and
authorized a series of Preferred Stock, no par value, of the
Corporation, and the designation and amount thereof and the
powers, preferences and rights of the shares of such series, and
the qualifications, limitations or restrictions thereof are as
follows:
CLASS B-1 PREFERRED STOCK
Section 1. Designation. The series of Preferred Stock hereby
created shall be designated and known as the "Class B-1 Preferred
Stock." The number of shares constituting such series shall be
one million five hundred thousand (1,500,000).
Section 2. Liquidation Rights. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, each holder of shares of Class B-1
Preferred Stock shall be entitled to receive on the date of
payment of any liquidation amount to the holders of the
Corporation's common stock, $.20 par value ("Common Stock"), the
same cash or other property which the holder of shares of Class B-
1 Preferred Stock would have received if on such date such holder
was the holder of record of the number (including, for purposes
of this Section 2, any fraction) of shares of Common Stock into
which the shares of Class B-1 Preferred Stock then held by such
holder are then convertible.
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CUSIP No. 299096107 13D Page 67 of 86
Section 3. Conversion.
3.1. Voluntary Conversion. At any time and from time to time
after the issuance of the Class B-1 Preferred Stock, any holder
of Class B-1 Preferred Stock may convert any or all of the shares
of Class B-1 Preferred Stock held by such holder into shares of
Common Stock at the then effective conversion ratio. The
conversion ratio at which shares of Common Stock shall be
deliverable upon conversion of shares of Class B-1 Preferred
Stock (the "Conversion Ratio") shall initially be one-for-one.
Such initial Conversion Ratio shall be subject to adjustment, in
order to adjust the number of shares of Common Stock into which
the Class B-1 Preferred Stock is convertible, as hereinafter
provided.
3.2. Automatic Conversion. Each share of Class B-1 Preferred
Stock shall automatically be converted into shares of Common
Stock at the then effective Conversion Ratio upon (a) a
consolidation or merger of this Corporation with or into any
other individual, corporation, partnership, limited liability
company, trust or other entity or organization, including a
governmental agency or political subdivision thereof (each a
"Person"), in which the holders of the Corporation's voting
securities, immediately prior to such consolidation or merger,
fail to own, immediately after such consolidation or merger, more
than 50% of the surviving Person's voting securities; (b) a sale,
conveyance or disposition of all or substantially all of the
assets of the Corporation or (c) the effectuation by the
Corporation of a transaction or series of related transactions in
which more than 50% of the voting power of the Corporation is
disposed of.
3.3. Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of Class B-1 Preferred
Stock. In lieu of any fractional shares to which the holder
would otherwise be entitled, the Corporation shall pay cash equal
to such fraction multiplied by the then fair market value of one
share of Common Stock, as reasonably determined in good faith by
the Board of Directors. Before any holder of Class B-1 Preferred
Stock shall be entitled to receive certificates for the shares of
Common Stock issued upon conversion, such holder shall surrender
the certificate or certificates for the shares of Class B-1
Preferred Stock being converted, duly endorsed, at the principal
office of the Corporation and shall state therein its name or the
name, or names, of its nominees in which it wishes the
certificate or certificates for shares of Common Stock to be
issued. No voluntary conversion shall be permitted unless and
until the holder shall submit to the Corporation either (a)
evidence of compliance with the filing and waiting period
requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), or (b) an opinion of the
holder's legal counsel that the conversion does not require any
filing under the HSR Act, in a form reasonably satisfactory to
the Corporation (collectively, the "HSR Provisions"). The
Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Class B-1 Preferred
Stock or to such holder's nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which
such holder or such holder's nominee shall be entitled as
aforesaid, together with cash in lieu of any fraction of a share
of Common Stock. Subject to the foregoing, in the case of
automatic conversion under Section 3.2, such conversion shall be
deemed to have been made immediately prior to the close of
business on the date of such automatic conversion and upon
surrender of the certificate representing the shares of Class B-1
Preferred Stock to be converted in the case of a voluntary
conversion pursuant to Section 3.1. The Person or Persons
entitled to receive the shares of Common Stock issuable upon
conversion
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CUSIP No. 299096107 13D Page 68 of 86
shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on such date.
3.4. Adjustments to Conversion Ratio. If the Corporation shall
issue shares of Common Stock to the holders of Common Stock as a
dividend or stock split, or in the event that the Corporation
reduces the number of outstanding shares of Common Stock in a
reverse stock split or stock combination, then the Conversion
Ratio shall be adjusted such that the holders of shares of Class
B-1 Preferred Stock shall receive, upon conversion of the Class B-
1 Preferred Stock, that number of shares of Common Stock that
such holder would have owned following such dividend, stock
split, reverse stock split or stock combination if such
conversion had occurred immediately prior to the record date for
such stock split, stock dividend, reverse stock split or stock
combination of the Common Stock, as the case may be. If the
Corporation shall issue shares of Class B-1 Preferred Stock to
the holders of Class B-1 Preferred Stock as a stock dividend or
stock split, or in the event that the Corporation reduces the
number of outstanding shares of Class B-1 Preferred Stock in a
reverse stock split or stock combination, then the Conversion
Ratio shall be adjusted such that the holder of shares of Class B-
1 Preferred Stock shall receive, upon conversion of the Class B-1
Preferred Stock, the number of shares of Common Stock that such
holder would have owned if such conversion had occurred
immediately prior to the record date for such stock split, stock
dividend, reverse stock split or stock combination of the Class B-
1 Preferred Stock, as the case may be. In the event of a
reclassification or other similar transaction as a result of
which shares of Common Stock are converted into another security,
then the Conversion Ratio shall be determined such that the
holders of shares of Class B-1 Preferred Stock shall receive,
upon conversion of such Class B-1 Preferred Stock, the number of
such securities that such holder would have owned following such
conversion of the Common Stock into another security if such
conversion had occurred immediately prior to the record date of
such reclassification or other similar transaction. No
adjustments with respect to dividends (other than stock
dividends) shall be made upon conversion of any share of Class B-
1 Preferred Stock; provided, however, that if a share of Class B-
1 Preferred Stock shall be converted subsequent to the record
date for the payment of a dividend (other than a stock dividend)
or other distribution on shares of Class B-1 Preferred Stock but
prior to such payment, then the registered holder of such share
at the close of business on such record date shall be entitled to
receive the dividend (other than a stock dividend) or other
distribution payable on such share on such date notwithstanding
the conversion thereof or the Corporation's default in payment of
the dividend (other than a stock dividend) due on such date.
3.5. Common Stock Reserved. The Corporation shall reserve and
keep available out of its authorized but unissued Common Stock
such number of shares of Common Stock as shall, from time to
time, be sufficient for conversion of all outstanding Class B-1
Preferred Stock.
Section 4. No Redemption. The shares of Class B-1 Preferred
Stock shall not be redeemable. Notwithstanding the foregoing,
the Corporation may acquire shares of Class B-1 Preferred Stock
in any other manner permitted by law, contract, the Articles of
Incorporation or herein.
<PAGE>
CUSIP No. 299096107 13D Page 69 of 86
Section 5. Voting Rights.
5.1. The holders of shares of Class B-1 Preferred Stock shall
have no voting rights except as provided in Section 5.2, the
Articles of Incorporation or by law.
5.2. In addition to any other rights provided by law or in the
Articles of Incorporation, so long as any shares of Class B-1
Preferred Stock shall be outstanding, the Corporation shall not,
without first obtaining the affirmative vote or written consent
of the holders of not less than a majority of the outstanding
shares of the Class B-1 Preferred Stock, take any action
(including, without limitation, any repeal, amendment or
modification to the Articles of Incorporation or the Bylaws of
the Corporation) that alters or changes any of the rights,
privileges and preferences of the Class B-1 Preferred Stock.
Section 6. Dividend Rights. If any dividend or other
distribution payable in cash or other property is declared on the
Common Stock (excluding any dividend or other distribution for
which adjustment to the Conversion Ratio is provided by Section
3.4), each holder of Class B-1 Preferred Stock on the record date
for such dividend or distribution shall be entitled to receive on
the date of payment or distribution of such dividend or other
distribution the same cash or other property which such holder
would have received if on such record date such holder was the
holder of record of the number (including for purposes of this
Section 6 any fraction) of shares of Common Stock into which the
shares of Class B-1 Preferred Stock then held by such holder are
convertible.
Section 7. Notices. In addition to any other notices to
which the holders of Class B-1 Preferred Stock may be entitled
pursuant to the Articles of Incorporation, the Bylaws of the
Corporation, law, contract or otherwise, the Corporation shall
cause to be sent to each holder all written communications sent
generally to the holders of Common Stock. The Corporation shall
cause such communications to be sent to holders of Class B-1
Preferred Stock concurrently with the sending of such
communications to the holders of Common Stock.
[The remainder of this page is intentionally left blank.]
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CUSIP No. 299096107 13D Page 70 of 86
IN WITNESS WHEREOF, the corporation has caused this Certificate
of Designation, Preferences and Other Rights to be executed by a
duly authorized officer on July 20, 1998.
EVANS & SUTHERLAND COMPUTER CORPORATION
By: /s/JAMES R. OYLER
Name: James R. Oyler
Title: President & Chief Executive Officer
<PAGE>
CUSIP No. 299096107 13D Page 71 of 86
EVANS & SUTHERLAND
COMPUTER CORPORATION
WARRANT TO PURCHASE
SERIES B PREFERRED STOCK
JULY 22, 1998
<PAGE>
CUSIP No. 299096107 13D Page 72 of 86
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF
SERIES B PREFERRED STOCK OR COMMON STOCK ISSUABLE HEREUNDER, HAVE
BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED ("THE ACT"). SUCH SECURITIES MAY NOT BE
SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED
WITHOUT REGISTRATION UNDER THE ACT UNLESS EITHER (A) THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION
OR (B) THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES
AND EXCHANGE COMMISSION RULE 144.
EVANS & SUTHERLAND
COMPUTER CORPORATION
WARRANT TO PURCHASE
SERIES B PREFERRED STOCK
(Subject to Adjustment)
NO. 1
THIS CERTIFIES THAT, for value received, Intel Corporation, or
its permitted registered assigns ("Holder"), is entitled, subject
to the terms and conditions of this Warrant, at any time or from
time to time after July 22, 1998 (the "Effective Date"), and
before 5:00 p.m. Pacific Time on July 22, 2001 (the "Expiration
Date"), to purchase from Evans & Sutherland Computer Corporation,
a Utah corporation (the "Company"), three hundred seventy-eight
thousand four hundred sixty-two (378,462) shares of Warrant Stock
(as defined in Section 1 below) of the Company at a price per
share of thirty-three and twenty-eight thousand one hundred
twenty-five hundred-thousandths dollars ($33.28125) (the
"Purchase Price"). Both the number of shares of Warrant Stock
purchasable upon exercise of this Warrant and the Purchase Price
are subject to adjustment and change as provided herein. This
Warrant is issued pursuant to that certain Series B Preferred
Stock and Warrant Purchase Agreement, dated July 20, 1998,
between the Company and Holder (the "Purchase Agreement").
1. CERTAIN DEFINITIONS. As used in this Warrant, the following
terms shall have their respective meanings set forth below:
"Common Stock" shall mean the Company's Common Stock, $.20 par
value.
"Fair Market Value" of a share of Common Stock as of a particular
date shall mean:
(a) If the Common Stock is traded on a securities
exchange or the Nasdaq National Market, the Fair Market Value
shall be deemed to be the average of the closing prices of the
Common Stock on such exchange or market over the five (5)
business days ending immediately prior to the applicable date of
valuation;
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CUSIP No. 299096107 13D Page 73 of 86
(b) If the Common Stock is actively traded over-the-
counter, the Fair Market Value shall be deemed to be the average
of the closing bid prices of the Common Stock over the 30-day
period ending immediately prior to the applicable date of
valuation; and
(c) If there is no active public market for the Common
Stock, the Fair Market Value shall be the value thereof, as
agreed upon by the Company and the Holder; provided, however,
that if the Company and the Holder cannot agree on such value,
such value shall be determined by an independent valuation firm
experienced in valuing businesses such as the Company and jointly
selected in good faith by the Company and the Holder. Fees and
expenses of the valuation firm shall be paid solely by the
Company.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
"Person" shall mean any individual, corporation, partnership,
limited liability company, trust or other entity or organization,
including any governmental authority or political subdivision
thereof.
"Registered Holder" shall mean any Holder in whose name this
Warrant is registered upon the books and records maintained by
the Company.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Warrant" shall mean this Warrant and any warrant delivered in
substitution or exchange therefor as provided herein.
"Warrant Stock" shall mean the Class B-1 Preferred Stock, no par
value, of the Company and any other securities at any time
receivable or issuable upon exercise of this Warrant.
2. EXERCISE OF WARRANT.
2.1. Payment. Subject to compliance with the terms and
conditions of this Warrant and applicable securities laws, this
Warrant may be exercised, in whole or in part at any time or from
time to time, on or before the Expiration Date by delivery
(including, without limitation, delivery by facsimile) of the
form of Notice of Exercise attached hereto as Exhibit 1 (the
"Notice of Exercise"), duly executed by the Holder, at the
principal office of the Company, and as soon as practicable after
such date, surrendering:
(a) this Warrant at the principal office of the
Company; and
(b) payment (i) in cash, by check or by wire transfer,
(ii) by cancellation by the Holder of any indebtedness of the
Company to the Holder or (iii) by any combination of (i) and
(ii), of an amount equal to the product obtained by multiplying
the number of shares of Warrant Stock being purchased upon such
exercise by the then effective Purchase Price (the "Exercise
Amount"), except that if the Holder is subject to HSR Act
Restrictions (as defined in Section 2.5 below), the Exercise
Amount shall be paid to the Company within five (5) business days
after the termination of all HSR Act Restrictions.
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CUSIP No. 299096107 13D Page 74 of 86
2.2. Net Issue Exercise. In lieu of the payment methods set
forth in Section 2.1(b), the Holder may elect to exchange all or
some of the Warrant for shares of Warrant Stock equal to the
value of the amount of the Warrant being exchanged on the date of
exchange. If the Holder elects to exchange this Warrant as
provided in this Section 2.2, the Holder shall tender to the
Company the Warrant for the amount being exchanged, along with
written notice of the Holder's election to exchange some or all
of the Warrant, and the Company shall issue to the Holder the
number of shares of Warrant Stock computed using the following
formula:
X = Y (A-B)
-------
A
Where:
X = the number of shares of Warrant Stock to be issued to
the Holder;
Y = the number of shares of Warrant Stock purchasable under
the amount of the Warrant being exchanged (as adjusted to
the date of such calculation);
A = the Fair Market Value of one share of Common Stock; and
B = the Purchase Price (as adjusted to the date of such
calculation).
All references herein to an "exercise" of the Warrant shall
include an exchange pursuant to this Section 2.2.
2.3. "Easy Sale" Exercise. In lieu of the payment methods
set forth in Section 2.1(b), when permitted by law and applicable
regulations (including Nasdaq and NASD rules), the Holder may pay
the Purchase Price through a "same day sale" commitment from the
Holder (and, if applicable, a broker-dealer that is a member of
the National Association of Securities Dealers (an "NASD
Dealer")), whereby the Holder irrevocably elects to exercise this
Warrant (and immediately converts the Warrant Shares receivable
into shares of Common Stock) and to sell a portion of the shares
of Common Stock so purchased to pay for the Purchase Price and
the Holder (or, if applicable, the NASD Dealer) commits upon sale
(or, in the case of the NASD Dealer, upon receipt) of such shares
to forward the Purchase Price directly to the Company.
2.4. Stock Certificates; Fractional Shares. As soon as
practicable on or after any date of exercise of this Warrant
pursuant to this Section 2, the Company shall issue and deliver
to the Person or Persons entitled to receive the same a
certificate or certificates for the number of whole shares of
Warrant Stock issuable upon such exercise, together with cash in
lieu of any fraction of a share equal to such fraction of the
current Fair Market Value of one whole share of Common Stock as
of the date of exercise of this Warrant. No fractional shares or
scrip representing fractional shares shall be issued upon an
exercise of this Warrant.
2.5. HSR Act. The Company hereby acknowledges that exercise
of this Warrant by the Holder may subject the Company or the
Holder to the filing requirements of the HSR Act and that the
Holder may be prevented from exercising this Warrant until the
expiration or early termination of all waiting periods imposed by
the HSR Act ("HSR Act Restrictions"). If on or before the
Expiration Date the Holder has sent a Notice of Exercise to the
Company and the
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CUSIP No. 299096107 13D Page 75 of 86
Holder has not been able to complete the exercise of this Warrant
prior to the Expiration Date because of HSR Act Restrictions, the
Holder shall be entitled to complete the process of exercising
this Warrant in accordance with the procedures contained herein
notwithstanding the fact that completion of the exercise of this
Warrant would take place after the Expiration Date.
2.6. Partial Exercise; Effective Date of Exercise. In case
of any partial exercise of this Warrant, the Company shall cancel
this Warrant upon surrender hereof and shall execute and deliver
a new Warrant of like tenor and date for the balance of the
shares of Warrant Stock purchasable hereunder. This Warrant
shall be deemed to have been exercised immediately prior to the
close of business on the date of its surrender for exercise as
provided above. However, if the Holder is subject to HSR Act
filing requirements, this Warrant shall be deemed to have been
exercised on the date immediately following the date of the
expiration of all HSR Act Restrictions. The Person entitled to
receive the shares of Warrant Stock issuable upon exercise of
this Warrant shall be treated for all purposes as the holder of
record of such shares as of the close of business on the date the
Holder is deemed to have exercised this Warrant.
3. VALID ISSUANCE; TAXES. All shares of Warrant Stock issued
upon the exercise of this Warrant shall be validly issued, fully
paid and non-assessable, and the Company shall pay all taxes and
other governmental charges that may be imposed in respect of the
issue or delivery thereof; provided, however, that the Company
shall not be required to pay any tax or other charge imposed in
connection with any transfer involved in the issuance of any
certificate for shares of Warrant Stock in any name other than
that of the Registered Holder of this Warrant, and in such case
the Company shall not be required to issue or deliver any stock
certificate or security until such tax or other charge has been
paid, or it has been established to the Company's reasonable
satisfaction that no tax or other charge is due.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The
number of shares of Warrant Stock issuable upon exercise of this
Warrant (or any shares of stock or other securities or property
receivable or issuable upon exercise of this Warrant) and the
Purchase Price are subject to adjustment upon occurrence of any
of the following events:
4.1. Adjustment for Stock Splits, Stock Subdivisions or
Combinations of Shares. The Purchase Price shall be
proportionally decreased and the number of shares of Warrant
Stock issuable upon exercise of this Warrant (or any shares of
stock or other securities at the time issuable upon exercise of
this Warrant) shall be proportionally increased to reflect any
stock split or subdivision of the Warrant Stock or Common Stock.
The Purchase Price of this Warrant shall be proportionally
increased and the number of shares of Warrant Stock issuable upon
exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant)
shall be proportionally decreased to reflect any combination of
the Warrant Stock or Common Stock.
4.2. Adjustment for Dividends or Distributions of Stock or
Other Securities or Property. If the Company shall make or
issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other
distribution with respect to the Warrant Stock (or any shares of
stock or other securities at the time issuable upon exercise of
the Warrant) or Common Stock payable in (a) securities of the
Company or (b) assets (excluding cash dividends paid or payable
solely out of retained earnings), then, in each such case, the
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CUSIP No. 299096107 13D Page 76 of 86
Holder of this Warrant on exercise hereof at any time after the
consummation, effective date or record date of such dividend or
other distribution, shall receive, in addition to the shares of
Warrant Stock (or such other stock or securities) issuable on
such exercise prior to such date, and without the payment of
additional consideration therefor, the securities or such other
assets of the Company to which such Holder would have been
entitled upon such date if such Holder had exercised this Warrant
on the date hereof and had thereafter, during the period from the
date hereof to and including the date of such exercise, retained
such shares or all other additional stock available by it as
aforesaid during such period giving effect to all adjustments
called for by this Section 4.
4.3. Reclassification. If the Company, by reclassification
of securities or otherwise, shall change any of the securities as
to which purchase rights under this Warrant exist into the same
or a different number of securities of any other class or
classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this
Warrant immediately prior to such reclassification or other
change and the Purchase Price therefor shall be appropriately
adjusted, all subject to further adjustment as provided in this
Section 4. No adjustment shall be made pursuant to this Section
4.3 upon any conversion or redemption of the Warrant Stock which
is the subject of Section 4.5.
4.4. Adjustment for Capital Reorganization, Merger or
Consolidation. In case of any reorganization of the capital
stock of the Company (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein),
or any merger or consolidation of the Company with or into
another Person, or the sale of all or substantially all the
assets of the Company, then, and in each such case, as a part of
such reorganization, merger, consolidation, sale or transfer,
lawful provision shall be made so that the Holder of this Warrant
shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified herein and upon payment of
the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor Person resulting
from such reorganization, merger, consolidation, sale or transfer
that a holder of the shares deliverable upon exercise of this
Warrant (assuming conversion of all Warrant Stock to Common
Stock) would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this
Warrant (and the Warrant Stock receivable had been converted to
Common Stock) had been exercised immediately before such
reorganization, merger, consolidation, sale or transfer, all
subject to further adjustment as provided in this Section 4. The
foregoing provisions of this Section 4.4 shall similarly apply to
successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other Person that
are at the time receivable upon the exercise of this Warrant. If
the per-share consideration payable to the Holder hereof for
shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such
consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as
determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this
Warrant with respect to the rights and interests of the Holder
after the transaction, to the end that the provisions of this
Warrant shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant
(assuming conversion of all Warrant Stock receivable into Common
Stock).
<PAGE>
CUSIP No. 299096107 13D Page 77 of 86
4.5. Conversion of Warrant Stock. If all or any portion of
the authorized and outstanding shares of Warrant Stock are
redeemed or converted or reclassified into other securities or
property, pursuant to the Company's Articles of Incorporation or
otherwise, or the Warrant Stock otherwise ceases to exist, then,
in such case, the Holder, upon exercise hereof at any time after
the date on which the Warrant Stock is so redeemed or converted,
reclassified or ceases to exist (the "Termination Date"), shall
receive, in lieu of the number of shares of Warrant Stock that
would have been issuable upon such exercise immediately prior to
the Termination Date, the shares of Common Stock that would have
been received if this Warrant had been exercised in full and the
Warrant Stock received thereupon had been simultaneously
converted immediately prior to the Termination Date, all subject
to further adjustment as provided in this Warrant. Additionally,
the Purchase Price shall be immediately adjusted to equal the
quotient obtained by dividing (a) the aggregate Purchase Price of
the maximum number of shares of Warrant Stock for which this
Warrant was exercisable immediately prior to the Termination Date
by (b) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the Termination Date,
all subject to further adjustment as provided herein.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any
adjustment in the Purchase Price, or number or type of shares
issuable upon exercise of this Warrant, the Chief Financial
Officer or Controller of the Company shall compute such
adjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment and showing
in detail the facts upon which such adjustment is based,
including a statement of the adjusted Purchase Price. The
Company shall promptly send (by facsimile and by either first
class mail, postage prepaid or overnight delivery) a copy of each
such certificate to the Holder.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably
satisfactory to the Company of the ownership of and the loss,
theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to it, and (in the case of
mutilation) upon surrender and cancellation of this Warrant, the
Company shall execute and deliver in lieu thereof a new Warrant
of like tenor as the lost, stolen, destroyed or mutilated
Warrant.
7. RESERVATION OF WARRANT STOCK. The Company hereby covenants
that at all times there shall be reserved for issuance and
delivery upon exercise of this Warrant such number of shares of
Warrant Stock, Common Stock or other shares of capital stock of
the Company as are from time to time issuable upon exercise of
this Warrant, and, from time to time, will take all steps
necessary to amend its Articles of Incorporation to provide
sufficient reserves of shares of Warrant Stock issuable upon
exercise of this Warrant and Common Stock issuable upon
conversion of the Warrant Stock. All such shares shall be duly
authorized and, when issued upon such exercise, shall be validly
issued, fully paid and non-assessable, free and clear of all
liens, security interests, charges and other encum-brances or
restrictions on sale and free and clear of all preemptive rights,
except encumbrances or restrictions arising under federal or
state securities laws. Issuance of this Warrant shall constitute
full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the
necessary certificates for shares of Warrant Stock upon the
exercise of this Warrant and for shares of Common Stock upon
conversion of Warrant Stock.
8. TRANSFER AND EXCHANGE. Subject to the terms and conditions
of this Warrant and compliance with all applicable securities
laws, without the prior written consent of the
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CUSIP No. 299096107 13D Page 78 of 86
Company to do otherwise (which consent shall not be unreasonably
withheld) this Warrant and all rights hereunder may be
transferred to any Permitted Transferee (as defined below), in
whole or in part, on the books of the Company maintained for such
purpose at the principal office of the Company referred to above,
by the Registered Holder hereof in person, or by duly authorized
attorney, upon surrender of this Warrant properly endorsed and
upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any permitted partial
transfer, the Company will issue and deliver to the Registered
Holder a new Warrant or Warrants with respect to the shares of
Warrant Stock not so transferred. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that
when this Warrant shall have been so endorsed, the Person in
possession of this Warrant may be treated by the Company, and all
other Persons dealing with this Warrant, as the absolute owner
hereof for any purpose and as the Person entitled to exercise the
rights represented hereby, any notice to the contrary
notwithstanding; provided, however, that until a transfer of this
Warrant is duly registered on the books of the Company, the
Company may treat the Registered Holder hereof as the owner for
all purposes. For purposes of this Section 8, the term
"Permitted Transferee" shall mean: (a) the Company or any of its
subsidiaries, (b) a Person that, directly or indirectly,
controls, is controlled by or is under common control with Intel
Corporation or (c) any other Person, including any professional
financial investor (such as a venture capital firm, investment
bank, investment fund or high net worth individual), provided
that such Person has not expressed to the Holder any present
intent to seek changes in the composition of the Company's Board
of Directors or the Company's management or otherwise to become
actively involved in operating the Company, and provided further
that such Person is not at the time of such sale a direct,
material competitor of the Company.
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof,
agrees that, absent an effective registration statement filed
with the SEC under the Securities Act of 1933, as amended (the
"1933 Act"), covering the disposition or sale of this Warrant or
the Warrant Stock issued or issuable upon exercise hereof or the
Common Stock issuable upon conversion of Warrant Stock, as the
case may be, and registration or qualification under applicable
state securities laws, such Holder will not sell, transfer,
pledge, or hypothecate any or all such Warrants, Warrant Stock or
Common Stock, as the case may be, unless either (a) the Company
has received an opinion of counsel, in form and substance
reasonably satisfactory to the Company, to the effect that such
registration is not required in connection with such disposition
or (b) the sale of such securities is made pursuant to SEC Rule
144.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this
Warrant, the Holder hereby represents, warrants and covenants:
(a) that any shares of stock purchased upon exercise of this
Warrant shall be acquired for investment only and not with a view
to, or for sale in connection with, any distribution thereof; (b)
that the Holder has had such opportunity as such Holder has
deemed adequate to obtain from representatives of the Company
such information as is necessary to permit the Holder to evaluate
the merits and risks of its investment in the Company; (c) that
the Holder is able to bear the economic risk of holding such
shares as may be acquired pursuant to the exercise of this
Warrant for an indefinite period; (d) that the Holder understands
that the shares of stock acquired pursuant to the exercise of
this Warrant will not be registered under the 1933 Act (unless
otherwise required pursuant to exercise by the Holder of the
registration rights, if any, previously granted to the Registered
Holder) and will be "restricted securities" within the meaning of
SEC Rule 144 and that the exemption from registration under
<PAGE>
CUSIP No. 299096107 13D Page 79 of 86
Rule 144 will not be available for at least one year from the
date of exercise of this Warrant, subject to any special
treatment by the SEC for exercise of this Warrant pursuant to
Section 2.2, and even then will not be available unless a public
market then exists for the stock, adequate information concerning
the Company is then available to the public, and other terms and
conditions of Rule 144 are complied with; and (e) that all stock
certificates representing shares of stock issued to the Holder
upon exercise of this Warrant or upon conversion of such shares
may have affixed thereto a legend substantially in the following
form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE
AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS
IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS. This Warrant
shall not entitle the Holder to any voting rights or other rights
as a shareholder of the Company. In the absence of affirmative
action by the Holder to acquire Common Stock by converting
Warrant Stock, no provisions of this Warrant, and no enumeration
herein of the rights or privileges of the Holder shall cause such
Holder to be a shareholder of the Company for any purpose.
12. REGISTRATION RIGHTS. All shares of Common Stock issuable
upon conversion of the shares of Warrant Stock issuable upon
exercise of this Warrant shall be "Registrable Securities" or
such other definition of securities entitled to registration
rights pursuant to the Purchase Agreement and are entitled,
subject to the terms and conditions of that agreement, to all
registration rights granted to holders of Registrable Securities
thereunder.
13. NOTICES. All notices and other communications from the
Company to the Holder shall be given in accordance with the
Purchase Agreement.
14. HEADINGS; SECTION REFERENCES . The headings in this Warrant
are for purposes of convenience in reference only, and shall not
be deemed to constitute a part hereof. All Section references
herein are references to Sections of this Warrant unless
specified otherwise.
15. LAW GOVERNING. This Warrant shall be construed and enforced
in accordance with, and governed by, the internal laws of the
State of Delaware, without regard to its conflict of laws rules.
<PAGE>
CUSIP No. 299096107 13D Page 80 of 86
16. NO IMPAIRMENT. The Company will not, by amendment of its
Articles of Incorporation or Bylaws, or through reorganization,
consolidation, merger, dissolution, issue or sale of securities,
sale of assets or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the
rights of the Registered Holder of this Warrant against
impairment. Without limiting the generality of the foregoing,
the Company: (a) will not increase the par value of any shares
of stock issuable upon the exercise of this Warrant above the
amount payable therefor upon such exercise and (b) will take all
such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-
assessable shares of Warrant Stock upon exercise of this Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1. the Company shall take a record of the holders of
its Warrant Stock, Common Stock (or other stock or securities at
the time receivable upon the exercise of this Warrant or
conversion of Warrant Stock), for the purpose of entitling them
to receive any dividend or other distribution, or any right to
subscribe for or purchase any shares of stock of any class or any
other securities or to receive any other right; or
17.2. of any consolidation or merger of the Company with
or into another Person, any capital reorganization of the
Company, any reclassification of the capital stock of the
Company, or any conveyance of all or substantially all of the
assets of the Company to another Person in which holders of the
Company's stock are to receive stock, securities or property of
another Person; or
17.3. of any voluntary dissolution, liquidation or
winding-up of the Company; or
17.4. of any redemption or conversion of all outstanding
Common Stock or Warrant Stock;
then, and in each such case, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice
specifying, as the case may be, (a) the date on which a record is
to be taken for the purpose of such dividend, distribution or
right or (b) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation, winding-up, redemption or conversion is to take
place, and the time, if any is to be fixed, as of which the
holders of record of Warrant Stock, Common Stock (or other stock
or securities as at the time are receivable upon the exercise of
this Warrant or conversion of the Warrant Stock), shall be
entitled to exchange their shares of Warrant Stock, Common Stock
(or such other stock or securities), for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or
winding-up. Such notice shall be delivered at least thirty (30)
days prior to the date therein specified.
18. SEVERABILITY. If any term, provision, covenant or
restriction of this Warrant is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder
of the terms, provisions, covenants and restrictions of this
Warrant shall remain in full force and effect and shall in no way
be affected, impaired or invalidated.
<PAGE>
CUSIP No. 299096107 13D Page 82 of 86
19. COUNTERPARTS. For the convenience of the parties, any
number of counterparts of this Warrant may be executed by the
parties hereto and each such executed counterpart shall be, and
shall be deemed to be, an original instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or
after the date of this Warrant enter into any agreement with
respect to its securities which is inconsistent with the rights
granted to the Holder of this Warrant or otherwise conflicts with
the provisions hereof. The rights granted to the Holder
hereunder do not in any way conflict with and are not
inconsistent with the rights granted to holders of the Company's
securities under any other agreements, except rights that have
been waived.
21. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date
falls on a Saturday, Sunday or legal holiday, the Expiration Date
shall automatically be extended until 5:00 p.m. the next business
day.
[The remainder of this page is intentionally left blank.]
<PAGE>
CUSIP No. 299096107 13D Page 82 of 86
IN WITNESS WHEREOF, the parties hereto have executed this Warrant
as of the Effective Date.
EVANS & SUTHERLAND
COMPUTER CORPORATION INTEL CORPORATION
By: /s/JAMES R. OYLER By: /s/LESLIE L. VADASZ
Name: James R. Oyler Name: Leslie L. Vadasz
President & Chief
Title: Executive Officer Title: Sr. Vice President
SIGNATURE PAGE TO THE WARRANT
OF
EVANS & SUTHERLAND
COMPUTER CORPORATION
<PAGE>
CUSIP No. 299096107 13D Page 83 of 86
EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
EVANS & SUTHERLAND WARRANT NO. ---
COMPUTER CORPORATION
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the within Warrant Certificate for,
and to purchase thereunder, the securities of Evans & Sutherland
Computer Corporation, as provided for therein, and (check the
applicable box):
[] Tenders herewith payment of the exercise price in full in the
form of cash or a certified or official bank check in same-day
funds in the amount of $---------- for --------- such securities.
[] Elects the Net Issue Exercise option pursuant to Section 2.2
of the Warrant, and accordingly requests delivery of a net of ---
- ------- of such securities, according to the following
calculation:
X = Y (A-B) ( ) = ( )[( )-( )]
------- ---------------------
A ( )
------
Where:
X = the number of shares of Warrant Stock to be issued to
the Holder;
Y = the number of shares of Warrant Stock purchasable under
the amount of the Warrant being exchanged (as adjusted to
the date of such calculation);
A = the Fair Market Value of one share of Common Stock; and
B = the Purchase Price (as adjusted to the date of such
calculation).
[] Elects the Easy Sale Exercise option pursuant to Section 2.3
of the Warrant, and accordingly requests delivery of a net of ---
- ------- of such securities.
Please issue a certificate or certificates for such securities in
the name of, and pay any cash for any fractional share to (please
print name, address and social security number):
Name: -----------------
Address: -----------------
Signature: -----------------
Note: The above signature should correspond exactly with the
name on the first page of this Warrant Certificate or with the
name of the assignee appearing in the assignment form below.
If said number of shares shall not be all the shares purchasable
under the within Warrant Certificate, a new Warrant Certificate
is to be issued in the name of said undersigned for the balance
remaining of the shares purchasable thereunder rounded up to the
next higher whole number of shares.
<PAGE>
CUSIP No. 299096107 13D Page 84 of 86
EXHIBIT 2
ASSIGNMENT
(To be executed only upon assignment of WARRANT NO. ---
Warrant or a portion thereof)
For value received, hereby sells, assigns and transfers unto ----
- ------ the within Warrant or a portion thereof, together with all
right, title and interest therein, and does hereby irrevocably
constitute and appoint ---------- attorney, to transfer said
Warrant or such portion thereof on the books of the within-named
Company with respect to the number of shares of Warrant Stock set
forth below, with full power of substitution in the premises:
Name(s) of Assignee(s) Address # of Warrant Shares
- ---------------------- ---------------- -------------------
- ---------------------- ---------------- -------------------
- ---------------------- ---------------- -------------------
And if said number of shares of Warrant Stock shall not be all
the share of Warrant Stock represented by the Warrant, a new
Warrant is to be issued in the name of said undersigned for the
balance remaining of the shares of Warrant Stock represented by
said Warrant.
Dated: ------------------------
Signature: ------------------------
Notice: The signature to the foregoing Assignment must
correspond to the name as written upon the face of this security
in every particular, without alteration or any change whatsoever;
signature(s) must be guaranteed by an eligible guarantor
institution (banks, stock brokers, savings and loan associations
and credit unions with membership in an approved signature
guarantee medallion program) pursuant to SEC Rule 17Ad-15.
<PAGE>
CUSIP No. 299096107 13D Page 85 of 86
Wednesday July 22, 8:59 am Eastern Time
Company Press Release
Intel and Evans & Sutherland to Accelerate Development of High-
End Visual Computing Technology for Intel-Based Workstations
Intel Invests $24 Million in Evans & Sutherland
SANTA CLARA, Calif.--(BUSINESS WIRE)--July 22, 1998--Intel
Corporation and Evans & Sutherland (E&S) (NASDAQ:ESCC - news)
today announced an agreement to accelerate development of high-
end graphics and video subsystems for Intel-based workstations.
The companies also announced that Intel has purchased $24 million
of newly issued, nonvoting shares of E&S (representing an 8.2
percent ownership stake) plus a warrant to purchase additional
shares. If the warrant is fully exercised, Intel's ownership of
Evans and Sutherland would be 11.3 percent.
According to the agreement, Evans & Sutherland will develop
boards and components for Intel(R) Architecture-based
workstations that will deliver high-end graphics with outstanding
high-end video support. The resulting systems will be capable of
running the most advanced visual computing applications,
including high-end special effects for movies and video, 3-D
animation, mechanical computer-aided design (MCAD), medical,
scientific and other visually demanding applications.
The availability of such technology will enable vendors of Intel-
based workstations to offer even more compelling high-end system
capabilities. It should also provide workstation end-users a
broader variety of choices for extremely high-performance
graphics.
"E&S and Intel have been working closely for some time to develop
graphics products for Intel Architecture-based systems," said Jim
Oyler, president and CEO, Evans & Sutherland. "Today's agreement
builds upon that work and deepens the relationship between our
companies as we develop newer generations of visual computing
technology for the workstations of the future."
"Intel's goal is to continue to bring the most powerful visual
computing technologies to the Intel Architecture," said Pat
Gelsinger, vice president and general manager, Business Platforms
Group, Intel Corporation. "The combination of Evans &
Sutherland's technology with Intel's Pentium(R) II Xeon(tm) and
forthcoming Merced(tm) processors will meet the needs of
workstation users running the most graphically intensive
applications, and will further accelerate Intel-based
workstations in the highest end of the workstation market
segment."
Evans & Sutherland's REALimage graphics technology has gained
favor with most major manufacturers of Intel Architecture-based
workstations because it is able to fully exploit the continuous
processor advancements introduced by Intel.
<PAGE>
CUSIP No. 299096107 13D Page 86 of 86
Through two recent acquisitions, E&S has broadened its ability to
design and deliver industry-leading graphics technology to end
users. It recently purchased Accel Graphics, a manufacturer of
graphics subsystems for high-end workstations, and Silicon
Reality, a designer of 3-D graphics chips for Intel-based
workstations.
Evans & Sutherland develops and manufactures highly realistic
visual systems for vivid 3-D graphics and synthetic worlds used
in desktop graphics, simulation, digital studios, and digital
theaters throughout the world. Founded in 1968, E&S is located in
Salt Lake City. Visit E&S's web page at www.es.com.
Intel, the world's largest chip maker, is also a leading
manufacturer of computer, networking and communications products.
Additional information about Intel is available at
www.intel.com/pressroom.
Note to Editors: Third party marks and brands are property of
their respective holders.
Contact:
Intel Corp.
Jane Rauckhorst, 408/765-7026
[email protected]
or
Evans & Sutherland
Ken Donahue, 801/588-1920
