<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 2, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _________
COMMISSION FILE NUMBER: 000-221199
ACCELGRAPHICS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0450627
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1873 BARBER LANE
MILPITAS, CA 95035
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: 408-546-2100
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period than the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $22,578,000 as of March 9, 1998 based upon the
closing sale price on the Nasdaq National Market reported for such date. Shares
of Common Stock held by each officer and director and by each person who owns 5%
of more of the outstanding Common Stock have been excluded in that such persons
may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
There were 8,446,537 shares of the registrant's Common Stock issued and
outstanding as of March 9, 1998.
<PAGE> 2
ACCELGRAPHICS, INC.
<TABLE>
<S> <C>
PART III
Item 10. Directors and Executive Officers of the Registrant.................... Page 1
Item 11. Executive Compensation................................................ Page 4
Item 12. Security Ownership of Certain Beneficial Owners and Management........ Page 10
Item 13. Certain Relationships and Related Transactions........................ Page 12
Signatures...................................................................... Page 14
</TABLE>
<PAGE> 3
The Registrant hereby amends the following items of Part III of its Form 10-K
for the fiscal year ended January 2, 1998 ("Fiscal 1997") filed with the
Securities and Exchange Commission on March 30, 1998:
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT
OFFICERS AND DIRECTORS
The names of officers and directors and their ages, as of April 1, 1998,
and certain other information about them are set forth below:
<TABLE>
<CAPTION>
NAME OF OFFICER OR DIRECTOR AGE PRINCIPAL OCCUPATION
- --------------------------- --- --------------------
<S> <C> <C>
Jeffrey W. Dunn (1)(2)(3) 43 President, Chief Executive Officer and
Chairman of the Board of the Company
Nancy E. Bush (3) 40 Vice President, Finance and Administration,
Chief Financial Officer, Assistant Secretary
and Director of the Company
Stephen L. Bartlett (4) 57 Vice President, Operations
Lew S. Epstein 50 Vice President, Sales
Gregory C. Milliken 36 Vice President, Business Development
Niraj Swarup 37 Vice President, Marketing
David E. Gold (1) 54 General Partner of IndoSuez Ventures and
Director of the Company
Jos C. Henkens (1)(2) 45 Principal of Advanced Technology Ventures and
Director of the Company
David W. Pidwell (2) 50 Private Investor and Director of the Company
Peter L. Wolken (1)(2) 63 General Partner of AVI Management Partners and
Director of the Company
</TABLE>
- ----------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Pricing Committee
(4) Mr. Bartlett will retire from the Company on April 2, 1998.
Except as indicated below, each officer and/or director has been engaged in the
principal occupation set forth above during the past five years. There are no
family relationships between any of the directors or executive officers of the
Company.
<PAGE> 4
Mr. Dunn co-founded the Company in November 1994 and serves as Chairman,
President and Chief Executive Officer. From February 1993 to December 1994, Mr.
Dunn was Vice President of Marketing at Kubota Graphics. From October 1988 to
January 1993, Mr. Dunn was Vice President of Worldwide Sales and Support for
Cygnet Systems, Inc., a manufacturer of robotic mass storage devices. Mr. Dunn
has also held sales and/or sales management positions at Xerox Corporation,
Avnet Computer Technologies, Inc. and Microcon Software Centers, Inc.
Ms. Bush co-founded the Company in November 1994 and serves as Chief
Financial Officer and Director and has been Vice President, Finance and
Administration and Assistant Secretary since December 1996. From January 1991 to
November 1994, Ms. Bush was employed with ATG Cygnet Inc., formerly Cygnet
Systems, Inc. Her positions at ATG Cygnet, Inc. included MIS Manager from
January 1991 to February 1992, Controller from February 1992 to October 1992,
Director of Finance from October 1992 to October 1993, Chief Financial Officer
and Vice President of Operations from October 1993 to September 1994 and Chief
Executive Officer from September 1994 to November 1994. In June 1993, Cygnet
Systems, Inc. declared Chapter 11 bankruptcy and became ATG Cygnet Inc. Prior to
1991, she held finance and manufacturing positions at Spectra Physics Inc. and
Corning Incorporated.
Mr. Bartlett joined the Company in July 1996 and was elected Vice
President, Operations in August 1996. From May 1993 to July 1995, Mr. Bartlett
was Director of Operations for Sigma Designs, Inc. From March 1991 to April
1993, Mr. Bartlett served as Vice President of Operations at Radius, Inc. and
from January 1988 to March 1991, he was Director of Operations for Radius, Inc.
Mr. Epstein joined the Company in August 1995 as Vice President, Sales.
From January 1994 to September 1995, Mr. Epstein was Vice President of Sales and
Support for Los Altos Technologies. From January 1993 to June 1994, he was Vice
President of Sales for Centric Engineering. From May 1990 to December 1992, Mr.
Epstein was Vice President of Sales and Support for Intergraph Corporation.
Mr. Milliken co-founded the Company and has been Vice President,
Business Development since December 1996. Mr. Milliken served as Vice President,
Marketing of the Company from 1994 to 1996. From March 1994 to July 1994, Mr.
Milliken served as Mechanical Industry Marketing Manager at Kubota Graphics and
from July 1994 to November 1994, Mr. Milliken was a Director of Product
Marketing at Kubota Graphics. From January 1991 to February 1994, Mr. Milliken
was a Marketing Manager for Autodesk.
Mr. Swarup joined the Company in April 1996 as Director, Marketing and
was elected Vice President, Marketing in December 1996. Prior to joining
AccelGraphics, Mr. Swarup held various project manager and group marketing
manager positions at Sun from May 1990 to April 1996.
Mr. Gold has served as a director of the Company since June 1995. Since
February 1985, he has been a General Partner at IndoSuez Ventures, a venture
capital firm. Mr. Gold is also a director of several private companies.
Mr. Henkens has served as a director of the Company since June 1995.
Since January 1983, Mr. Henkens has been associated with Advanced Technology
Ventures, a venture capital firm. Mr. Henkens is also a director of Actel
Corporation, Credence Systems Corporation and ObjectShare, Inc. as well as, a
number of private technology companies.
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<PAGE> 5
Mr. Pidwell has served as a director of the Company since February 1996.
Since March 1996, Mr. Pidwell has been a private investor in the Company. From
December 1987 to January 1996, Mr. Pidwell founded and was President and Chief
Executive Officer of Rasna Corporation, a mechanical design automation software
company. Mr. Pidwell is also a director of several private technology companies.
Mr. Wolken has been a director of the company since June 1995. Mr.
Wolken is a General Partner of AVI Management Partners I, II and III which
managed various private venture capital limited partnerships, having co-founded
AVI in 1981. He serves as a director of a number of private technology companies
in Silicon Valley and has served as a director of Qualix Group, Inc. since 1990.
Mr. Wolken received a B.S. in Mechanical Engineering from the University of
California, Berkeley in 1959 and a B.F.T. in International Marketing from the
American Graduate School for International Management in 1960.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and holders of
more than ten percent of the Company's Common Stock are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely upon review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended January 2, 1998 all Section
16(a) filing requirements applicable to the Company's officers, directors and
holders of more than ten percent of the Company's Common Stock were complied
with.
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ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table shows the compensation received in the fiscal years
ended December 31, 1996 ("1996") and January 2, 1998 ("1997") by (a) the
Company's Chief Executive Officer and (b) the other most highly compensated
executive officers of the Company who earned in excess of $100,000 during the
fiscal year ended January 2, 1998 (the "Named
Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------- ------------
SECURITIES
BONUS AND UNDERLYING ALL
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) COMMISSION($) OPTIONS (#) OTHER($)(2)
- --------------------------------------- -------- ---------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Jeffrey W. Dunn ....................... 1997 $193,269 $ 76,250 46,091 $ 511
Chairman of the 1996 181,192 27,599 22,000 --
Board, President and
Chief Executive Officer
Stephen L. Bartlett ................... 1997 109,135 39,535 17,333 511
Vice President, Operations 1996(3) 45,384 3,370 85,000 --
Nancy E. Bush ......................... 1997 116,796 46,875 20,333 511
Vice President, Finance and 1996 102,692 22,999 22,000 --
Administration and Chief
Financial Officer
Lew E. Epstein ........................ 1997 120,000 77,365 17,333 511
Vice President, Sales 1996 126,006 61,049 23,500 --
Niraj Swarup .......................... 1997 106,700 64,470 17,333 511
Director, Marketing 1996(4) 63,461 7,926 85,580 --
</TABLE>
(1) In accordance with the rules of the Securities and Exchange Commission, no
information is provided for fiscal years prior to fiscal year 1996 because
the Company became a reporting company pursuant to Section 13(a) or 15(d)
of the Exchange Act of 1934, as amended, in 1997 and the Company was not
required to provide such information in response to a Commission filing
requirement prior to that time.
(2) Except as otherwise set forth, represents premiums paid by the Company for
group term life insurance in fiscal 1997.
(3) Represents salary and bonus for a partial fiscal year. Mr. Bartlett joined
the Company on July 10, 1996.
(4) Represents salary and bonus for a partial fiscal year. Mr. Swarup joined
the Company on May 6, 1996.
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<PAGE> 7
EMPLOYEE BENEFIT PLANS
OPTION GRANTS DURING YEAR ENDED JANUARY 2, 1998
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in the last fiscal year. In
addition, as required by Securities and Exchange Commission rules, the table
sets forth the hypothetical gains that would exist for the options based on
assumed rates of annual compound stock price appreciation during the option
term. These amounts are based on certain assumed rates of appreciation and do
not represent the Company's estimate of future stock price. Actual gains, if
any, on stock option exercises will be dependent on the future performance of
the Company's Common Stock.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS(1) FOR OPTION TERM(2)
---------------------------------------------------------- -------------------------
PERCENT
OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS GRANTED EXERCISE
UNDERLYING TO EMPLOYEES OR BASE
OPTIONS/SARS IN FISCAL PRICE EXPIRATION
NAME GRANTED (#) YEAR(%)(3) ($/SH)(4) DATE 5% ($) 10% ($)
- --------------------- ------------- ----------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
JEFFREY W. DUNN 46,091 6.16% $ 9.50 4/11/07 $275,371 $697,843
STEPHEN L. BARTLETT 17,333 2.31% $ 9.50 4/11/07 103,556 262,431
NANCY E. BUSH 20,333 2.72% $ 9.50 4/11/07 121,479 307,853
LEW S. EPSTEIN 17,333 2.31% $ 9.50 4/11/07 103,556 262,431
NIRAJ SWARUP 17,333 2.31% $ 9.50 4/11/07 103,556 262,431
</TABLE>
- ----------
(1) No stock appreciation rights were granted to the Named Executive Officers
in the last fiscal year. Consists of stock options granted pursuant to the
Company's 1995 Stock Plan. The Company's options generally become
exercisable at a rate of 12.5% after six months following the date of
grant and approximately 2% per month thereafter, as long as the optionee
remains an employee of or consultant to the Company. The maximum term of
each option granted is ten years from the date of grant. The exercise
price is equal to the fair market value of the stock on the grant date as
determined by the Board of Directors. The grants include a grant in the
amount of 25,000 shares for Mr. Dunn and 8,333 shares for each of the
other named officers which vest on the sixth anniversary of the date of
grant. Such options also include a provision for accelerated vesting upon
the attainment of certain performance goals.
(2) The 5% and 10% assumed compounded annual rates of stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance that the actual stock price appreciation over the ten-year
option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the Common Stock appreciates
over the option term, no value will be realized from the option grants
made to the persons named in the Summary Compensation Table.
(3) The Company granted stock options representing 747,139 to employees
during the fiscal year ended January 2, 1998.
(4) The exercise price may be paid in cash, in shares of Common Stock valued
at fair market value on the exercise date or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company
may also finance the option exercise by loaning the optionee sufficient
funds to pay the exercise price for the purchased shares and the federal
and state income tax liability incurred by the optionee in connection with
such exercise.
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<PAGE> 8
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED
JANUARY 2, 1998 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information for the executive officers named
in the Summary Compensation Table with respect to exercises in fiscal year 1997
of options to purchase Common Stock of the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES JANUARY 2, 1998 (#) JANUARY 2, 1998 ($)(1)
ACQUIRED ON VALUE ---------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- -------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey W. Dunn ........... -- $ -- 34,901 76,690 $131,817 $143,283
Stephen L. Bartlett ....... 19,479 128,827 12,125 70,729 44,625 230,563
Nancy E. Bush ............. -- -- 12,542 29,791 44,276 48,097
Lew S. Epstein ............ 5,622 50,992 52,878 62,958 220,757 201,956
Niraj Swarup .............. 20,016 172,044 15,359 67,538 58,208 217,161
</TABLE>
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(1) Calculated by determining the difference between the estimated fair market
value of the Company's Common Stock as of January 2, 1998 ($4.50 per
share) and the exercise price of the securities underlying the options.
(2) Calculated by determining the difference between the fair market value of
the Company's Common Stock as of the date of exercise and the exercise
price of the securities underlying the exercised options.
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<PAGE> 9
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Form 10-K/A, in whole or in part, the following report
and the Performance Graph on page 9 shall not be incorporated by reference into
any such filings.
COMPENSATION COMMITTEE REPORT
The following is a report of the Compensation Committee of the Board of
Directors (the "Committee") describing the compensation policies applicable to
the Company's executive officers during the fiscal year ended January 2, 1998.
The Committee recommends salaries, incentives and other forms of compensation
for directors, officers and other employees of the Company, administers the
Company's various incentive compensation and benefit plans (including stock
plans) and recommends policies relating to such incentive compensation and
benefit plans. Executive officers who are also directors have not participated
in deliberations or decisions involving their own compensation.
COMPENSATION POLICY
The Company's executive officer compensation philosophies are designed
to attract, motivate and retain senior management by providing an opportunity
for competitive, performance-based compensation. Executive officer compensation
consists of competitive base salaries and stock-based incentive opportunities in
the form of options to purchase the Company's Common Stock. The Company's
executive compensation program consists of three main components: (1) base
salary, (2) potential for bonus based on overall Company performance as well as
individual performance, (3) stock options/grants that provide the executive
officers with the opportunity to build a meaningful stake in the Company, with
the objective of aligning executive officers' long-range interests with those of
the stockholders and encouraging the achievement of superior results over time.
The second and third elements of the compensation program constitute the "at
risk" components. The Committee annually evaluates the Company's performance,
actual compensation and stock ownership of executive officers on a comparative
basis with companies in the same industry as well as other companies in the same
geographical area.
BASE SALARIES FOR FISCAL 1997
In establishing compensation guidelines with respect to base salary, the
Company utilized data from various surveys prepared by independent firms to
assist it in setting salary levels competitive with those of other similar
industry companies. While it is the Committee's intent to continue to review
periodically base salary information to monitor competitive ranges within the
applicable market, including consideration of the Company's geographic location
and individual job responsibilities, it is further the intent of the Committee
to maintain a close relationship between the Company's performance and the base
salary component of its executive officers' compensation.
STOCK OPTION AWARDS FOR FISCAL 1997
The Company's 1995 Stock Plan provides for the issuance of stock options
to officers and employees of the Company to purchase shares of the Company's
Common Stock at an exercise price equal to the fair market value of such stock
on the date of grant. The Company's stock options typically vest ratably over a
period of four years. Stock options are granted to the Company's executive
officers and other employees both as a reward for past individual and corporate
performance and as an incentive
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<PAGE> 10
for future performance. The Committee believes that stock-based performance
compensation arrangements are essential in aligning the interests of management
and the stockholders in enhancing the value of the Company's equity.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation for Jeffrey W. Dunn, the Company's Chairman, President
and Chief Executive Officer ("CEO"), is determined based on a number of factors,
including comparative salaries of CEO's of companies in the Company's peer
group, the CEO's individual performance and the Company's performance as
measured against the stated objectives. The CEO's total compensation package
includes stock option grants with the goal of motivating leadership for
long-term Company success and providing significant reward upon achievement of
Company objectives and enhancing stockholder value. As with other executives,
size of option grants is also based on a review of competitive survey data.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee has considered the impact of Section 162(m) of the
Internal Revenue Code adopted under the Omnibus Budget Reconciliation Act of
1993, which section disallows a deduction for any publicly held corporation for
individual compensation exceeding $1 million in any taxable year for the CEO and
four other most highly compensated executive officers, unless such compensation
meets the requirements for the "performance-based" exception to the general
rule. Since the cash compensation paid by the Company to each of its executive
officers is expected to be well below $1 million and the Company believes that
options granted under the Company's 1995 Stock Option Plan will meet the
requirements for qualifying as performance-based, the Committee believes that
this section will not affect the tax deductions available to the Company. It
will be the Committee's policy to qualify, to the extent reasonable, the
executive officers' compensation for deductibility under applicable tax law.
SUBMITTED BY THE COMPENSATION
COMMITTEE OF THE BOARD OF
DIRECTORS
Jos C. Henkens
David W. Pidwell
Peter L. Wolken
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<PAGE> 11
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
data, assuming reinvestment of all dividends, for the Company's Common Stock at
January 2, 1998 since April 10, 1997 (the date on which the Company's stock was
first registered under Section 12 of the Securities Exchange Act of 1934, as
amended) to the cumulative return over such period of (i) the U.S. Index for the
Nasdaq National Market and (ii) the Computer Manufacturers Index for the Nasdaq
National Market. The graph assumes that $100 was invested on April 10, 1997 in
the Common Stock of the Company and each of the comparative indices. The graph
further assumes that such amount was initially invested in the Common Stock of
the Company at a price per share of $9.00, the price at which such stock was
first offered to the public by the Company on that date. The stock price
performance on the following graph is not necessarily indicative of future stock
price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG ACCELGRAPHICS, INC.,
THE NASDAQ STOCK MARKET INDEX AND
NASDAQ COMPUTER MANUFACTURERS INDEX
<TABLE>
<CAPTION>
4/11/97 6/30/97 9/30/97 12/31/97
------- ------- ------- --------
<S> <C> <C> <C> <C>
AccelGraphics $100 $46 $69 $52
NASDAQ $100 $120 $140 $132
Manufacturers $100 $125 $157 $140
</TABLE>
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<PAGE> 12
ITEM 12. SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 2, 1998 as to (i) each person who is known by the
Company to beneficially own more than five percent of the Company's Common
Stock, (ii) each director, (iii) ) each of the executive officers named in the
Summary Compensation Table on page 4, and (iv) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
EXECUTIVE OFFICERS, DIRECTORS ---------
AND 5% STOCKHOLDERS NUMBER PERCENT(2)
--------------------------------- --------- ----------
<S> <C> <C>
Kubota Corporation .............................................. 1,039,286 12.3%
2372-A Qume Drive
San Jose, CA 95131
Advanced Technology Ventures IV, L.P. ........................... 787,337 9.3
485 Ramona Street, Suite 200
Palo Alto, CA 94301
AVI Capital L.P. (and related entities)(3) ...................... 787,337 9.3
One First Street, Suite 12
Los Altos, CA 94022
STF II, L.P. .................................................... 628,772 7.5
c/o IndoSuez Ventures
2180 Sand Hill Road, Suite 450
Menlo Park, CA 94025
Woodside Fund III, L.P. ......................................... 432,652 5.1
850 Woodside Drive
Woodside, CA 94062
Jos C. Henkens(4) ............................................... 792,337 9.4
c/o Advanced Technology Ventures
485 Ramona Street, Suite 200
Palo Alto, CA 94301
Peter L. Wolken(5) .............................................. 792,337 9.4
c/o AVI Capital, L.P.
One First Street, Suite 12
Los Altos, CA 94022
David E. Gold(6) ................................................ 633,772 7.5
c/o IndoSuez Ventures
2180 Sand Hill Road, Suite 450
Menlo Park, CA 94025
David W. Pidwell(7) ............................................. 30,516 *
50628 Vickery Lane
Saratoga, CA 95070
Jeffrey W. Dunn(8) .............................................. 477,361 5.6
Stephen L. Bartlett(9) .......................................... 42,019 *
Nancy E. Bush(10) ............................................... 150,162 1.8
Lew S. Epstein(11) .............................................. 70,637 *
Niraj Swarup(12) ................................................ 39,692 *
All executive officers and directors as a group (10
persons)(13) .................................................... 3,244,248 37.58%
</TABLE>
- ----------
* Less than 1%.
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<PAGE> 13
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of shares, the
Common Stock options held by that person that are currently exercisable,
or become exercisable within 60 days following March 2, 1998, are deemed
outstanding. However, such shares are not deemed outstanding for purposes
of computing the percentage ownership of any other person. Except as
otherwise indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) Percentage of ownership is based on 8,441,537 shares of Common Stock
outstanding on March 2, 1998. The number of shares of Common Stock
beneficially owned includes the shares issuable pursuant to stock options
that are exercisable within 60 days of March 2, 1998. Shares issuable
pursuant to stock options are deemed outstanding for computing the
percentage of the person holding such options but are not outstanding for
computing the percentage of any other person.
(3) Includes 116,548 shares held by Associated Ventures Investors II, L.P.,
22,693 shares held by AVI Partners Growth Fund, L.P. and 8,313 shares held
by AVI Silicon Valley Partners, L.P.
(4) Includes 787,337 shares held by Advanced Technology Ventures IV, L.P.,
which Mr. Henkens may be deemed to beneficially own by virtue of his
status as a General Partner of Advanced Technology Ventures, a General
Partner of Advanced Technology Ventures IV, L.P. Mr. Henkens disclaims
beneficial ownership of the shares held by such entity except to the
extent of his proportionate partnership interest therein. Also includes
5,000 shares issuable upon exercise of options exercisable within 60 days
of March 2, 1998.
(5) Includes 639,783 shares held by AVI Capital, L.P., 116,548 shares held by
Associated Ventures Investors II, L.P., 22,698 shares held by AVI Partners
Growth Fund, L.P. and 8,313 shares held by AVI Silicon Valley Partners,
L.P., which Mr. Wolken may be deemed to beneficially own by virtue of his
status as General Partner of AVI Management Partners, General Partner of
each of the listed AVI funds. Mr. Wolken disclaims beneficial ownership of
the shares held by such entities except to the extent of his proportionate
partnership interests therein. Also includes 5,000 shares issuable upon
exercise of options exercisable within 60 days of March 2, 1998.
(6) Includes 628,772 shares held by STF II, L.P., which Mr. Gold may be deemed
to beneficially own by virtue of his status as a General Partner of STF
II, L.P. Mr. Gold disclaims beneficial ownership of the shares held by
such entity except to the extent of his proportionate partnership interest
therein. Also includes 5,000 shares issuable upon exercise of options
exercisable within 60 days of March 2, 1998.
(7) Includes 16,666 shares held by both the Pidwell Family Living Trust Dated
6/25/87 and 6,875 shares issuable upon exercise of options exercisable
within 60 days of March 2, 1998. Also includes 5,000 shares issuable upon
exercise of options exercisable within 60 days of March 2, 1998.
(8) Includes 398,661 shares held by both Jeffrey W. Dunn and Susan M. Dunn, as
trustees of the Jeffrey W. Dunn and Susan M. Dunn Trust Agreement dated
August 30, 1996. Also includes 11,250 shares held by Mr. Dunn's minor
children and 42,117 shares issuable upon exercise of options exercisable
within 60 days of March 2, 1998. Also includes 25,333 shares held by the
Leo Dunn - Family Share, John J. Yagjian et. al Trustees, Agreement dated
3/28/91 (the "Trust") which Mr. Dunn may be deemed to beneficially own by
way of his interest in the Trust. Mr. Dunn disclaims beneficial ownership
of the shares held by such entity except to the extent of his
proportionate partnership interest therein.
(9) Includes 19,959 shares issuable upon exercise of options exercisable
within 60 days of March 2, 1998.
(10) Includes 15,375 shares issuable upon exercise of options exercisable
within 60 days of March 2, 1998.
(11) Includes 62,304 shares issuable upon exercise of options exercisable
within 60 days of March 2, 1998.
(12) Includes 23,241 shares issuable upon exercise of options exercisable
within 60 days of March 2, 1998.
(13) Includes 2,203,446 shares beneficially owned by entities affiliated with
Messrs. Gold, Henkens, Pidwell and Wolken for which they disclaim
beneficial ownership of the shares held by such entities except to the
extent of their respective proportionate partnership interests therein.
Also includes 191,871 shares issuable upon exercise of options exercisable
within 60 days of March 2, 1998.
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<PAGE> 14
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into an Asset Purchase Agreement dated as of
December 9, 1994 with Kubota Graphics pursuant to which the Company purchased
certain assets of Kubota Graphics (the "Asset Acquisition"). In connection with
the Asset Acquisition, the Company entered into a Convertible Note Purchase
Agreement dated as of December 22, 1994, with Kubota, the parent corporation of
Kubota Graphics, pursuant to which the Company issued Kubota a subordinated
convertible promissory note carrying an initial principal amount of $3.3 million
(the "Convertible Note"). The Company used $1.2 million of the proceeds from the
Convertible Note to purchase certain assets pursuant to the Asset Acquisition
and the remaining proceeds were used for working capital. By its terms, the
original note was due December 22, 1996 and bore interest at a rate of 6%.
One-half of the Convertible Note was convertible into Preferred Stock upon the
Company achieving a revenue milestone and the entire Convertible Note was
convertible into Preferred Stock at the same rate upon the closing of an equity
offering with proceeds in excess of $2.0 million. Upon the occurrence of the
closing of the Series A Preferred Stock equity offering, Kubota and the Company
renegotiated the Convertible Note such that Kubota converted one-half, or $1.65
million of principal into a new note which is due June 20, 1998, bears interest
at the prime rate and is convertible only in the case of certain dilution
events, and the other one-half of principal, or $1.65 million, was converted
into 90,000 shares of Series A Preferred Stock. Mr. Miyamoto, a former director
of the Company, is an affiliate of Kubota and Mr. Dunn was formerly Vice
President of Marketing at Kubota Graphics.
In June and July 1995, the Company issued an aggregate of 3,446,997
shares of Series A Preferred Stock at a price per share of $1.67 to investors
that included, among others, Advanced Technology Ventures IV (750,000 shares),
AVI Capital, L.P. and its affiliated entities (749,997 shares), STF II, L.P.
(600,000 shares) and Woodside Fund III, L.P. (300,000 shares). In connection
with this financing, Kubota converted $1,650,000 of the outstanding principal on
the Convertible Note into 990,000 shares of Series A Preferred Stock.
In March 1996, the Company issued an aggregate of 1,061,660 shares of
Series B Preferred Stock at a per share price of $3.00 to investors that
included, among others, Asset Management Associates (333,333 shares), Kubota
(162,750 shares), Woodside Fund III, L.P. (132,652 shares), Advanced
Technologies Ventures IV, L.P. (123,295 shares), AVI Capital, L.P. and
affiliated entities (123,295 shares) and STF II, L.P. (98,636 shares).
In November 1997, the Company entered into Key Employee Retention
Agreements with each of its executive officers. Pursuant to the terms of the
agreements, in the event of a change of control of the Company, the executive
officers are entitled to certain severance benefits, including acceleration of
50% of their unvested stock, continuation of salary, bonus and benefits for up
to one year.
In November 1997, the Company entered into a Key Employee Retention
Agreement with its Chief Executive Officer. Pursuant to the terms of the
agreement, in the event of a change of control of the Company, the Chief
Executive Officer is entitled to certain severance benefits, including
acceleration of 100% of his unvested stock, continuation of salary, bonus and
benefits for up to 18 months.
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<PAGE> 15
The Company has entered into separate indemnification agreements with
each of its directors and officers that may require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or services as a director or officer and to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified.
The Company believes that all of the transactions set forth above were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. All future transactions, including loans,
between the Company and its officers, directors, principal stockholders and
affiliates will be approved by a majority of the Board of Directors, including a
majority of the independent and disinterested directors on the Board of
Directors, and will be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
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<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ACCELGRAPHICS, INC.
By: /s/ Nancy E. Bush
------------------------------------
Nancy E. Bush, Chief Financial Officer
Date: April 24, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Jeffrey W. Dunn* Chairman, President and Chief April 24, 1998
- --------------------------------- Executive Officer
Jeffrey W. Dunn (Principal Executive Officer)
/s/ Nancy E. Bush Vice President, Chief Financial April 24, 1998
- --------------------------------- Officer and Director
Nancy E. Bush (Principal Financial and
Accounting Officer)
/s/ David E. Gold* Director April 24, 1998
- ---------------------------------
David E. Gold
/s/ Jos C. Henkens* Director April 24, 1998
- ---------------------------------
Jos C. Henkens
/s/ David W. Pidwell* Director April 24, 1998
- ---------------------------------
David W. Pidwell
/s/ Peter L. Wolken* Director April 24, 1998
- ---------------------------------
Peter L. Wolken
*/s/ Nancy E. Bush
- ---------------------------------
*Nancy E. Bush, Attorney-in-Fact
</TABLE>
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