Item 1.01Entry into a Material Definitive Agreement.
Merger Agreement
On February 9, 2020, Elevate Entertainment Inc., a Delaware corporation (“Parent”), Elevate Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Evans & Sutherland Computer Corporation, a Utah corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). The Merger Agreement provides that, subject to the terms of the Merger Agreement, Merger Sub will commence a cash tender offer (the “Offer”) to purchase all of the outstanding shares of common stock, par value $0.20 per share, of the Company (the “Common Stock”), at a price of $1.19 per share (the “Offer Price”), net to the seller in cash, without interest, and subject to applicable withholding taxes.
Consummation of the Offer is subject to various conditions set forth in the Merger Agreement, including (a) a majority of shares of Common Stock, on a fully diluted basis, being tendered in the Offer, (b) the accuracy of the Company’s representations and warranties contained in the Merger Agreement, subject to agreed-upon materiality standards, (c) the Company’s performance in all material respects of its obligations under the Merger Agreement, and (d) the other conditions set forth in Exhibit C to the Merger Agreement. The consummation of the Offer and Merger is not subject to a financing condition.
The Offer will expire on the date that is 20 business days following the commencement date of the Offer, unless extended in accordance with the terms of the Offer and the Merger Agreement and the applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
Following consummation of the Offer, Merger Sub will merge with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). In the Merger, each outstanding share of Common Stock that is not tendered and accepted pursuant to the Offer (other than shares held in the treasury of the Company, any subsidiary of the Company, Parent or Merger Sub, and shares of Common Stock as to which appraisal rights have been perfected in accordance with applicable law) will be cancelled and converted into the right to receive the Offer Price, on the terms and conditions set forth in the Merger Agreement. Immediately prior to the Effective Time (as defined in the Merger Agreement), all unvested stock options will become fully vested, and at the Effective Time, each stock option will be canceled and converted into the right to receive an amount in cash equal to the difference between the Offer Price and the applicable per share exercise price, less any applicable tax withholding.
The board of directors of the Company (the “Board”) has unanimously (a) determined that the Offer, the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement and/or the ancillary agreements and plans to be entered into as contemplated by the Merger Agreement (collectively, the “Transactions”) are advisable and in the best interests of the shareholders of the Company, (b) approved and declared advisable the Merger Agreement and the Transactions, and (c) resolved, subject to the terms and conditions of the Merger Agreement, to recommend acceptance of the Offer by the shareholders of the Company.
If after the Acceptance Time (as defined in the Merger Agreement) the shares of Common Stock owned by Merger Sub represent at least 90% of the then-outstanding shares of Common Stock, the Merger will be governed by Section 16-10a-1104 of the Utah Revised Business Corporation Act (the “URBCA”) and shall be effected by Merger Sub and the Company as soon as practicable following the consummation of the Offer without a shareholders’ meeting pursuant to the URBCA.
The Merger Agreement contains customary representations and warranties by Parent, Merger Sub and the Company. The Merger Agreement also contains customary covenants and agreements, including with respect to the operations of the business of the Company between signing and closing, governmental filings and approvals and other matters.
The Merger Agreement contains customary non-solicitation restrictions prohibiting the solicitation by the Company or its representatives of proposals relating to alternative business combination transactions and restricts the Company’s ability to furnish non-public information to, or participate in any discussions or negotiations with, any third party with respect to any such transaction, subject to customary exceptions in the event of an acquisition proposal that was not solicited in violation of these restrictions and that the Board determines constitutes or could reasonably be expected to lead to a Superior Offer (as defined in the Merger Agreement).
The Merger Agreement contains termination rights for each of Parent, Merger Sub and the Company including by either Parent or the Company if the Acceptance Time (as defined in the Merger Agreement) shall not have occurred on or before
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June 30, 2020, or by the Company to enter into an alternative transaction that constitutes a Superior Offer, and further provides that upon termination of the Merger Agreement under specified circumstances the Company may be required to pay Parent a termination fee.
A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement. The Merger Agreement has been attached to provide investors with information regarding its terms. It is not intended to provide any other factual information about the Company, Merger Sub or Parent. In particular, the assertions embodied in the representations and warranties contained in the Merger Agreement are qualified by information in confidential disclosure schedules provided by the parties thereto in connection with the signing of the Merger Agreement. These disclosure schedules include information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the Merger Agreement. Moreover, certain representations and warranties in the Merger Agreement were used for the purpose of allocating risk between the Company, Merger Sub and Parent, rather than establishing matters of fact. Accordingly, the representations and warranties in the Merger Agreement may not constitute the actual state of facts about the Company, Merger Sub or Parent.