Document:

Exhibit 4.1

 

SECOND AMENDMENT TO RIGHTS AGREEMENT

 

This Second Amendment to Rights Agreement (the “Amendment”) is made and
entered into effective as of the 13 day of August, 2004, by and between Evans
& Sutherland Computer Corporation, a Utah corporation (the “Company”), and
American Stock Transfer & Trust Company, as Rights Agent (the “Rights
Agent”).

 

Recitals

 

A.            Effective
as of November 19, 1998 (the “Record Date”), the Company and the Rights
Agent entered into a Rights Agreement (the “Agreement”), and the Board of
Directors of the Company authorized and declared a dividend of one preferred
share purchase right as described in the Agreement (a “Right”) for each share
of Common Stock of the Company outstanding as of the Record Date.

 

B.            The
Agreement sets forth certain matters with respect to the nature, terms,
exercise, modification and redemption of the Rights.

 

C.            The
rights are currently redeemable, as provided in Section 23 of the
Agreement, because no “Flip-In Event” (as defined in the Agreement) has yet
occurred (meaning that no person has become an “Acquiring Person” as defined in
the Agreement).

 

D.            As
provided in Section 27 of the Agreement, so long as the Rights are
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, amend any provision of the Agreement in
any respect without the approval of any holders of the Rights, so long as no
such amendment changes the Redemption Price (as defined in the Agreement) of
the Rights.

 

E.             The Company previously amended the terms of the Agreement to allow the State of Wisconsin Investment Board (“SWIB”), to become the Beneficial Owner (as such term in defined in the Agreement) of up to 19.9% of the shares of Common Stock of the Company, without becoming an Acquiring Person, such as would trigger various rights and obligations under the Agreement.
 
F.             The Company desires to further amend the terms of the Agreement to allow Peter R. Kelloggg (“KELLOGG”), to become the Beneficial Owner (as such term in defined in the Agreement) of up to 19.9% of the shares of Common Stock of the Company, without becoming an Acquiring Person, such as would trigger various rights and obligations under the Agreement.
 

G.            As
contemplated by Section 30 of the Agreement, the Board of Directors of the
Company has approved the foregoing amendments to the Agreement.

 

 

H.            Pursuant
to the terms of the Agreement, the Rights Agent will implement the amendment to
the Agreement described herein.

 

Agreement

 

NOW THEREFORE, the Company and the Rights Agent agree as follows:

 

1.             Amendment
of Agreement to Modify Definition of “Acquiring Person”.  The Agreement is hereby amended and modified
to provide that KELLOGG will not be deemed to be an Acquiring Person until he
becomes the Beneficial Owner (as defined in the Agreement) of more than 19.9%
of the shares of Common Stock (as defined in the Agreement) then outstanding,
and all inconsistent provisions of the Agreement shall be construed to reflect
such modification.  Unless otherwise
defined herein, all capitalized terms herein shall have the meanings given to
them in the Agreement.

 

2.             Modification
of Section 1(a) of Agreement. 
The definition of “Acquiring Person” as set forth in Section 1(a)
of the Agreement is hereby modified to reflect the modification referenced
above, to read in its entirety as follows:

 

“(a)         “Acquiring Person” shall mean (Y) any Person
(as such term is hereinafter defined) other than State of Wisconsin Investment
Board (“SWIB”) or Peter R. Kellogg (“KELLOGG”) who or which shall be the
Beneficial Owner (as such term is hereinafter defined) of 15% or more of the
shares of Common Stock then outstanding, or (Z) SWIB or KELLOGG on such date as
SWIB or KELLOGG, respectively,  becomes
the Beneficial Owner of more than 19.9% of the shares of Common Stock then
outstanding, but shall not include an Exempt Person (as such term is
hereinafter defined); provided, however, that (i) if the Board of Directors of
the Company determines in good faith that a Person who would otherwise be an
Acquiring Person became such inadvertently (including, without limitation,
because (A) such Person was unaware that it beneficially owned a percentage of
Common Stock that would otherwise cause such Person to be an Acquiring Person
or (B) such Person was aware of the extent of its Beneficial Ownership of
Common Stock but had no actual knowledge of the consequences of such Beneficial
Ownership under this Agreement) and without any intention of changing or
influencing control of the Company, then such person shall not be deemed to be
or to have become an Acquiring Person for any purposes of this Agreement unless
and until such Person shall have failed to divest itself, as soon as
practicable (as determined, in good faith, by the Board of Directors of the Company),
of Beneficial Ownership of a sufficient number of shares of Common Stock so
that such Person would no longer otherwise qualify as an Acquiring Person; (ii)
if, as of the date hereof or prior to the first public announcement of the
adoption of this Agreement, any Person is or becomes the Beneficial Owner of
15% or more of the shares of Common Stock outstanding, such Person shall not be
deemed to be or to become an Acquiring Person unless and until such time as
such Person shall, after the first public announcement of the adoption of this
Agreement, become the Beneficial Owner of additional shares of Common Stock
(other than pursuant to a dividend or distribution paid or made by the Company
on the outstanding Common Stock or pursuant to a split or 

 

2

 

subdivision of the outstanding Common Stock), unless, upon becoming the
Beneficial Owner of such additional shares of Common Stock, such Person is not
then the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding; and (iii) no Person shall become an Acquiring Person as the result
of an acquisition of shares of Common Stock by the Company which, by reducing
the number of shares outstanding, increases the proportionate number of shares
of Common Stock beneficially owned by such Person to (i) 15% or more of the
shares of Common Stock then outstanding in the case of any Person other than
SWIB or KELLOGG, or (ii) more than 19.9% of the shares of Common Stock then
outstanding in the case of SWIB or KELLOGG, provided, however, that if a Person
shall become the Beneficial Owner of (i) 15% or more of the shares of Common
Stock then outstanding, in the case of any person other than SWIB or KELLOGG,
or (ii) more than 19.9% of the shares of Common Stock outstanding, in the case
of SWIB or KELLOGG, by reason of such share acquisitions by the Company and
shall thereafter become the Beneficial Owner of any additional shares of Common
Stock (other than pursuant to a dividend or distribution paid or made by the
Company on the outstanding Common Stock or pursuant to a split or subdivision
of the outstanding Common Stock), then such Person shall be deemed to be an
Acquiring Person unless upon becoming the Beneficial Owner of such additional
shares of Common Stock such Person does not beneficially own either (i) 15% or
more (in the case of any Person other than SWIB or KELLOGG), or (ii) more than
19.9% (in the case of SWIB or KELLOGG) of the shares of Common Stock then
outstanding.  For all purposes of this
Agreement, any calculation of the number of shares of Common Stock outstanding
at any particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), as in effect on the date
hereof.”

 

3.             Modification
of Section 3(a) of the Agreement. 
The reference in the first sentence of Section 3(a) of the
Agreement to 15%, representing the threshold Beneficial Ownership of Common
Stock by any Person other than an Exempt Person that would trigger a Distribution
Date on the terms set forth in such Section, is hereby modified to be 15% or
more in the case of any Person other than SWIB or KELLOGG, and more than 19.9%
in the case of  SWIB or KELLOGG.

 

4.             Agreement,
as Modified, to Continue in Full Force and Effect; Application of General
Provisions.  Except as specifically
modified hereby, the Agreement shall continue in full force and effect.  This Amendment shall be considered to be and
construed as a part of the Agreement, and the general provisions of the
Agreement, including those set forth in Sections 26 through 34 of the
Agreement, shall apply equally to this Amendment.

 

3

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed, effective as of the date first set forth above.

 

 

	
   

  	
  EVANS & SUTHERLAND COMPUTER CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ 

  	
  James R. Oyler

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
  James R. Oyler

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
  President & Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AMERICAN STOCK TRANSFER & TRUST COMPANY,

  as Rights Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Herbert J. Lemmer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Herbert J. Lemmer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
     Vice President

  	
   

  
										

 

4Exhibit
10.1

 

[LOGO] IMAGEWARE SYSTEMS, INC.

 

 

March 30, 2004

 

Offer
of Restricted Stock in Exchange for Certain Stock Options Previously Granted

 

Offer
Made to James Miller

 

ImageWare’s Board has authorized management
to offer you the ability to receive restricted stock in consideration under the
2001 Equity Incentive Plan in exchange for certain out of the money options
which had been previously granted to you under various option plans.

 

This proposal will not only provide you with
what can be considered greater equity incentives, it also results in increased
option pools for future grants to all employees.

 

Attached is a spreadsheet which summarizes
the proposed option surrender / restricted stock grant.

 

Based upon an exchange ratio of three shares
of restricted stock for five options, 124,162 shares of restricted stock would
be granted out of the 2001 plan in exchange for the surrender of options
covering 206,936 shares (from the 2001, 1999 and 1994 plans) with a net of
82,774 of those options going back into the option pool for future grants to
employees.

 

The restricted stock will vest over three
years on a quarterly basis (one twelfth per quarter) and will fully vest upon
any of the following:

 

•                  a change in control,

•                  the sale of the company,

•                  termination of employment
unless such termination was for cause.

 

By vesting in small increments on a quarterly
basis, you will be able to plan and time tax implications (ordinary income on
the entire value of vested stock on the date it vests).  Certificates will be issued to you quarterly
as they vest (or upon the occurrence of one of the events listed above).  The shares will be fully registered when
issued.

 

Please indicate your agreement to accept the
offer presented above by signing below where indicated.  Return the signed original along with the original
option grants covering the options being exchanged.

 

 

	
  /s/  Patrick J. Downs

  	
   

  	
   

  
	
  Patrick Downs 

  Member of Board of Directors and

  Compensation Committee Chairman

  Imageware Systems, Inc

  	
   

  	
  James Miller

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