<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
ALPHA MICROSYSTEMS
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
ALPHA MICROSYSTEMS
3511 WEST SUNFLOWER AVENUE
SANTA ANA, CALIFORNIA 92704
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------
Dear Fellow Shareholder:
The annual meeting of shareholders (the "Annual Meeting") of Alpha
Microsystems (the "Company") will be held at 2722 S. Fairview Street, Santa Ana,
California 92704 on Friday, July 14, 1995, at 10:00 a.m., local time, for the
following purposes:
1. To elect directors of the Company;
2. To ratify the appointment of Ernst & Young as independent auditors of
the Company and its subsidiaries for the year ending February 25, 1996;
and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on May 19, 1995 as
the record date for the determination of shareholders who are entitled to notice
of and to vote at the Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND AND TO VOTE AT THIS MEETING IN PERSON.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND. IN THE EVENT A
SHAREHOLDER WHO HAS RETURNED A SIGNED PROXY CARD ELECTS TO ATTEND THE MEETING
AND VOTE IN PERSON, THE SHAREHOLDER WILL BE ENTITLED TO VOTE.
By Order of the Board of Directors,
/s/ John F. Glade
------------------------
John F. Glade, Secretary
Santa Ana, California
June 9, 1995
<PAGE> 3
ALPHA MICROSYSTEMS
3511 WEST SUNFLOWER AVENUE
SANTA ANA, CALIFORNIA 92704
------------------------
PROXY STATEMENT
------------------------
This proxy statement and the enclosed proxy card are being mailed on or
about June 9, 1995 to shareholders of record on May 19, 1995 of Alpha
Microsystems (the "Company") in connection with the solicitation by its Board of
Directors of proxies for use at the 1995 Annual Meeting of Shareholders, and at
any and all adjournments or postponements thereof (the "Annual Meeting"), notice
of which appears on the preceding page.
If a proxy card in the accompanying form is duly executed and returned, the
shares represented thereby will be voted in accordance with the instructions
contained on it. If no contrary instructions are given, the shares represented
by the proxy card will be voted FOR the Board's nominees for directors and FOR
the other proposals described herein. A shareholder giving a proxy has the power
to revoke it at any time before it is exercised. A proxy may be revoked (i) by
delivering to the Company an instrument revoking the proxy; (ii) by delivering
to the Company a duly executed proxy bearing a later date; or (iii) if the
shareholder executing the proxy is present at the Annual Meeting and votes in
person. If the proxy is not revoked it will be voted by one or more of those
named thereon.
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on May 19, 1995 are
eligible to receive notice of and to vote at the Annual Meeting in person or by
proxy. The only class of voting stock of the Company is its common stock, no par
value (the "Common Stock"), and at May 19, 1995, 6,572,953 shares were issued
and outstanding. Each share is entitled to one vote.
A majority of the outstanding shares of common stock is necessary to
provide a quorum for the meeting. Abstentions and "broker non-votes" are counted
for purposes of determining whether the quorum requirement is satisfied. With
respect to Item 1, directors are elected by a plurality of the affirmative votes
cast. Thus abstentions and "broker non-votes" have no effect on the election of
directors. If one or more shareholders gives notice at the Annual Meeting prior
to the voting of their intention to cumulate their votes in the election of
directors, all shareholders entitled to vote shall have the right to so cumulate
their votes and to give one candidate, who has been nominated prior to voting, a
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which his or her shares are entitled, or to distribute such
votes among two or more such candidates on the same principle in such
proportions as each shareholder may determine. The enclosed form of proxy
includes authority to cumulate votes, in the discretion of the proxies named
thereon, and each of them, for the election of directors and thereby to
distribute, in such proportion as the proxies see fit, the votes represented by
the proxy card among the five nominees named herein or any substitute person or
persons nominated by the Board of Directors for election to the Board.
In accordance with California law, the approval of the auditors (Proposal
2) requires the vote of a majority of the shares represented and voting; thus
neither abstentions nor "broker non-votes" are counted in determining whether
this proposal has been approved.
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
The directors of the Company are elected annually and serve until the next
Annual Meeting of Shareholders or until their successors are elected and
qualified. The Bylaws of the Company provide that the authorized number of
directors of the Company shall be not less than five nor more than nine, with
the exact number as determined by resolution of the Board of Directors. The
Board of Directors has established the number of directors as five. The Board of
Directors has nominated the individuals named in the table below to serve as
members of the Board of Directors of the Company, and, if the enclosed proxy
card is duly executed and returned, it will be voted in favor of those
individuals, unless otherwise specified. Management has been informed that all
nominees are willing to serve as directors, but if any of them should be unable
to serve, or for good cause will not serve, as a director, the proxy holders
will vote for the election of such other person or persons as they, in the
exercise of their discretionary authority, may choose. The Board of Directors
has no reason to believe that any nominee will be unable or unwilling to serve.
There are no family relationships between any director, director nominee or
executive officer and any other director, director nominee or executive officer
of the Company. There are no arrangements or understandings between any
director, director nominee or executive officer and any other person pursuant to
which he has been or will be selected as a director and/or executive officer of
the Company.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
DIRECTOR
SINCE
--------
<S> <C>
Rockell N. Hankin, 48, is a senior partner of Hankin & Co., which was 1987
established in June 1986 and provides consulting services. Mr. Hankin is also
a Director of Semtech Corporation (ASE), which manufactures electronic
components, and a Director of Sparta, Inc., which provides a wide range of
scientific, engineering and technical assistance services, primarily for the
U.S. military services and the Department of Defense.
Harry L. Hathaway, 58, is a partner in the law firm of Fulbright & Jaworski, 1987
where he specializes in business and commercial law. Mr. Hathaway was a
partner in the law firm of Hill, Farrer & Burrill from 1972 to 1989. Mr.
Hathaway is a Director of Prudential Overall Supply, a privately-held company
which provides uniform cleaning service and manufacturing of uniform garments.
Richard E. Mahmarian, 58, is Vice Chairman of the Board and Executive Vice 1995
President of RJS, Inc., a manufacturer of bar code printers, verification
scanners, software, and consumable products. Mr. Mahmarian has been a
principal of RJS, Inc. since 1987, when it was purchased in a leveraged
buyout. Prior to joining RJS, Inc., he held various management positions for
Manx Engineering Corporation, Bell & Howell Company, Northrop Corporation and
NCR Corporation.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
DIRECTOR
SINCE
--------
<S> <C>
Clarke E. Reynolds, 74, has served as Chairman of the Board of Directors of the 1989
Company since May, 1991. Mr. Reynolds served as Chief Executive Officer of the
Company from January 1991 to August 1991, as President from November 1990 to
May 1991, as Vice Chairman of the Board from October 1990 to May 1991, and as
Chief Operating Officer of the Company from November 1990 to May 1991. Mr.
Reynolds provided independent consulting services to the Company from 1984
through 1990, was an employee of the Company from November 1990 through May
1993, and presently provides independent consulting services to the Company.
Mr. Reynolds was previously employed by NCR Corporation for over 47 years,
during which time Mr. Reynolds held a variety of sales and marketing and
general management positions including Vice President Pacific Region, Managing
Director and Chairman of the Board NCR United Kingdom, Vice President NCR
Europe and Vice President Executive Office. Mr. Reynolds serves as a Director
of Sparta, Inc., which provides a wide range of scientific, engineering and
technical assistance services, primarily for the U.S. military services and
the Department of Defense.
Douglas J. Tullio, 52, has served as President of the Company since May 1991 and 1991
was appointed Chief Executive Officer in August 1991. Mr. Tullio also served
as Chief Operating Officer from May 1991 to March 1994. Mr. Tullio joined the
Company in January 1990 and served as Executive Vice President of Alpha
Microsystems and President of the Company's subsidiaries, Rexon Business
Machines and AMS Computers. (In April 1990, these subsidiaries were merged
into the Company.) From 1984 to 1989, he worked for General Automation, Inc.,
in the positions of President and member of the Board of Directors, Executive
Vice President, Vice President, General Manager and Vice President of Sales
and Marketing.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE FIVE
DIRECTORS TO THE BOARD.
BOARD COMMITTEES
The Company has Audit, Compensation, Executive and Stock Option Committees,
as well as a Nominating Committee. The Audit Committee is currently composed of
Messrs. Rockell N. Hankin and Harry L. Hathaway, and its functions include
recommending to the Board of Directors the engagement and discharge of the
independent auditors, reviewing the performance of the independent auditors,
reviewing the independent auditors' fees and reviewing the adequacy of the
Company's system of internal accounting controls. The Compensation Committee is
currently composed of Messrs. Rockell N. Hankin, Harry L. Hathaway and Clarke E.
Reynolds, and its functions include making recommendations with respect to
compensation of officers and employees of the Company and reviewing annually the
compensation structure of the Company. The Executive Committee is currently
composed of Messrs. Rockell N. Hankin, Harry L. Hathaway, Clarke E. Reynolds and
Douglas J. Tullio, and it is vested with the authority and responsibility to
exercise all the authority of the Board subject to the limitations imposed by
California law and the Company's Bylaws. The Stock Option Committee is currently
composed of Messrs. Rockell N. Hankin and Harry L. Hathaway, and administers the
Company's stock incentive award plan and the Company's incentive and non-
qualified stock option plans. The Nominating Committee is currently composed of
Messrs. Rockell N. Hankin, Harry L. Hathaway, Douglas J. Tullio and Clarke E.
Reynolds, and considers nominees for Director recommended by the shareholders.
MEETINGS OF BOARD
During the fiscal year ended February 26, 1995, there were eleven meetings
of the Board of Directors of the Company. The Audit Committee met once, the
Compensation Committee met once, and the Executive Committee met once.
3
<PAGE> 6
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT
The following table contains certain information as of May 19, 1995 as to
each director, each individual included in the Summary Compensation Table who
continued to be an employee of the Company as of May 19, 1995, all officers and
directors as a group and each person who, to the knowledge of the Company, was
the beneficial owner of 5% or more of the outstanding shares of Common Stock.
Persons named in the following table have sole voting and investment powers with
respect to all shares shown as beneficially owned by them, subject to community
property laws where applicable, and other information contained in the footnotes
to the table. Information with respect to beneficial ownership is based on the
Company's Common Stock records and data supplied to the Company by its
shareholders.
<TABLE>
<CAPTION>
NAME OR IDENTITY NUMBER OF SHARES PERCENT OF
OF GROUP BENEFICIALLY OWNED(1) CLASS
---------------- --------------------- ----------
<S> <C> <C>
ISC International Systems Corporation.......... 586,000(2) 8.3
Brinson Partners, Inc.......................... 937,000(3) 13.2
Rockell N. Hankin.............................. 16,000 *
Harry L. Hathaway.............................. 17,000 *
Clarke E. Reynolds............................. 39,500 *
Douglas J. Tullio.............................. 214,970 3.2
John F. Glade.................................. 192,700(4) 2.9
Philip D. Smith................................ 2,000 *
All directors and officers as a group
(8 persons).................................. 506,220 7.4
</TABLE>
- - ---------------
* Does not exceed 1% of the outstanding shares of Common Stock of the Company.
(1) Includes shares issuable upon exercise of options and warrants which are
presently exercisable or will become exercisable on or before July 1, 1995.
Options and warrants representing the right to acquire a total of 259,020
shares are presently exercisable or will become exercisable on or before
July 1, 1995, by all officers and directors, as a group. Also includes
shares escrowed under the Company's Stock Award Plan.
(2) Based upon information provided by such shareholder in a Schedule 13D dated
March 31, 1994. The business address of such shareholder is 5170 Colorado
Street, Long Beach, California 90803. ISC International Systems Corporation
is wholly owned by ISC Holding GMBH, whose address is c/o Mader GmBH
DeimlerstraBe 6, 70771, Leinfelden-Echterdingen, Germany.
(3) Based upon information provided to the Company by such shareholder in a
Schedule 13D dated February 9, 1995, indicating that a portion of such
shares was owned as of the date of such filing directly by Brinson Partners,
Inc., and a portion was owned by its wholly owned subsidiary, Brinson Trust
Company. The shares beneficially owned include 598,000 actually owned and
339,000 which could be acquired through exercise of warrants. The business
address of Brinson Partners, Inc., and Brinson Trust Company is 209 South
LaSalle, Chicago, Illinois 60604-1295.
(4) Includes 21,000 shares owned directly by Mr. Glade individually and 160,200
shares held in a revocable trust of which Mr. Glade and his wife, Alana L.
Glade, are sole trustees. Mr. and Mrs. Glade, acting jointly, have the power
to vote and dispose of such shares.
4
<PAGE> 7
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for each of the Company's five most highly
compensated key executive officers, compensation allocated or paid on or before
May 5, 1995, for services in all capacities with the Company and its
subsidiaries during the fiscal year ended February 26, 1995.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------
AWARDS
ANNUAL COMPENSATION ---------------------------
------------------------------------ SECURITIES
OTHER UNDERLYING
ANNUAL RESTRICTED OPTIONS/ ALL OTHER
NAME AND COMPEN- STOCK SARS COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($) AWARD(S)($)(1) (#)(2) SATION(3)
------------------ ---- --------- -------- --------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas J. Tullio 1995 206,400 28,359(6) * 7,500 0 514
President and CEO 1994 199,125 80,000 * 0 251,939 2,332
1993 209,989 4,375(6) * 13,125 40,000 4,364
John D. Murray(4) 1995 162,445 15,000 * 0 0 740
Chief Financial Officer 1994 141,440 50,000 * 0 166,763 920
Chief Operating Officer 1993 70,345 0 * 0 30,000 0
John F. Glade 1995 133,262 17,430(6) * 3,750 0 365
Vice President, Engineering and 1994 119,187 40,000 * 0 10,000 1,391
Manufacturing, and Secretary 1993 120,366 2,813(6) * 8,437 0 2,903
Gerald Knight(5) 1995 109,246 0 * 0 0 422
Vice President, Service 1994 134,831(7) 0 * 0 5,000 981
1993 110,234 2,500(6) * 7,500 0 2,556
Philip D. Smith 1995 114,821 0 * 0 0 321
Vice President, Sales 1994 126,037 0 * 0 0 0
and Marketing 1993 135,915 31,720(6) * 0 0 0
</TABLE>
- - ---------------
* Aggregate amount does not exceed 10% of the total of annual salary and bonus
reported for the named executive officer.
(1) The number of aggregate restricted unvested stock holdings outstanding as of
February 26, 1995, was 12,000 and the aggregate value of such restricted
stock was $9,375. Subsequent to February 26, 1995, 7,500 shares of
restricted stock were awarded to Mr. Tullio and 3,750 shares of restricted
stock were awarded to Mr. Glade as additional compensation for fiscal 1995.
Such shares vest 50% on May 5, 1996 and 50% on May 5, 1997. All other stock
awards were granted on August 11, 1992 and vest in 25 percent increments on
the date of grant, and on the first, second and third anniversary of the
grant date. Aggregate restricted stock holdings as of February 26, 1995 were
as follows: Douglas J. Tullio: 3,500 having a value of $3,281, all of which
vest on August 11, 1995; John F. Glade: 2,250 having a value of $2,109, all
of which vest on August 11, 1995; and Gerald Knight: 2,000 shares having a
value of $1,875, all of which would have vested on August 11, 1995 if he had
remained in the employment of the Company. Although the Company has not paid
and does not anticipate paying dividends, any dividends paid would accrue to
the benefit of the grantees.
(2) All options were granted under the Company's Nonqualified Stock Option Plan,
excepting options granted to Mr. Tullio representing 191,939 shares and
options granted to Mr. Murray representing 136,763 shares which were granted
under the 1993 Alpha Microsystems Employee Stock Option Plan.
(3) Consists solely of Company contributions to the Employee Profit Sharing and
Savings Plan.
(4) Mr. Murray resigned as Chief Financial Officer and Chief Operating Officer
effective January 15, 1995.
(5) Mr. Knight resigned as Vice President, Service effective February 14, 1995.
(6) Includes awards of stock in the following amounts: for fiscal 1995: Tullio:
$5,859, and Glade: $2,930; for fiscal 1993: Tullio: $4,375, Glade: $2,813,
and Knight: $2,500.
(7) Includes commissions of $33,844 paid to Mr. Knight.
5
<PAGE> 8
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for acting as a member of the Board of Directors or any committee
thereof. Outside directors receive a monthly retainer of $2,000, and a fee of
$1,000 for each Board meeting and committee meeting (excluding telephonic
meetings) attended in excess of 12 each year, with all Board and committee
meetings held in a single day to be deemed as one meeting. In addition,
directors are reimbursed for their reasonable travel expenses incurred for
attendance at such meetings.
In June 1993, the Company entered into a Consulting Agreement with Mr.
Reynolds whereby Mr. Reynolds agrees to provide consulting services to the
Company. Under the agreement, the Company pays to Mr. Reynolds a retainer of
$2,000 per month. The agreement may be terminated by either party upon 30 days'
written notice.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is composed of Messrs. Hankin,
Hathaway and Reynolds and its functions include making recommendations with
respect to the compensation of officers and employees of the Company and
reviewing annually the compensation structure of the Company. Mr. Reynolds is
Chairman of the Board and has served the Company in the past in numerous
executive positions, including Chief Executive Officer.
FISCAL YEAR-END VALUES OF OUTSTANDING STOCK OPTIONS
The following table provides information, with respect to the named
executive officers concerning unexercised stock options held as of the end of
the Company's 1995 fiscal year.
FISCAL YEAR-END OPTION/VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES VALUE OPTIONS AT FY-END(#) FY-END(#)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas J. Tullio............. 0 0 155,970 146,149 0 0
John D. Murray................ 6,000 0 92,382 98,381 0 0
John F. Glade................. 0 0 5,000 5,000 0 0
Gerald Knight................. 0 0 3,750 1,250 0 0
Philip D. Smith............... 0 0 0 0 0 0
</TABLE>
EMPLOYMENT AGREEMENTS AND GUARANTEED SEVERANCE PAYMENTS
The Company has entered into employment agreements with Messrs. Tullio and
Glade. The agreements establish each employee's base salary and entitle each
employee to receive benefits, vacation and sick leave in accordance with the
Company's policies. The agreements are not for any specified term as either
party may terminate the employment relationship at any time in accordance with
the terms of the agreements. The agreements also contain provisions concerning
the non-disclosure by the employee of Company proprietary information and the
ownership of inventions conceived or made by the employee during the period of
employment with the Company. Pursuant to such employment agreements, under
certain circumstances, if an officer is terminated, voluntarily or
involuntarily, as a result of a "change in control" of the Company during the
term of his employment, the officer shall be entitled to monthly severance
payments for a period ranging under the individual agreements from 90 days to as
much as eighteen (18) months (the "Severance Period") following the effective
date of such termination. The term "change in control" means any of the
following: (a) merger or consolidation of the Company; (b) sale of all or
substantially all of the assets of the Company; (c) sale of more than 50% of the
outstanding common stock of the Company by any person or persons; or (d) change
of identity of at least a majority of the Board of Directors within a
twelve-month period. The severance payments are based upon the average total
compensation paid to such officer during the previous
6
<PAGE> 9
fiscal year (excluding any non-cash compensation). The severance payments shall
be reduced by any compensation, fees or remuneration received by such officer
during the Severance Period. The Company is also obligated to continue to
provide medical and dental benefits to the officer during the Severance Period.
Additionally, any rights the officer may have in connection with Company's stock
options and stock awards and the Company's profit sharing plan shall continue
uninterrupted during the Severance Period, to the extent permitted by applicable
tax law, other laws and the Company plans. The severance payments to the
executive officers are required, under certain circumstances, to be placed in a
trust to ensure payment.
In addition to the foregoing, Mr. Tullio is entitled to receive severance
payments and a continuation of employee benefits following termination if
termination is for any reason other than for causes arising out of breach of
Company policy or illegal acts. Such severance payments and benefits are for up
to six (6) months for Mr. Tullio.
The Company has also entered into an agreement with Michael J. Lowell, its
Vice President and Chief Financial Officer, pursuant to which Mr. Lowell is
entitled to receive six months termination pay at his base rate of pay in effect
at the time of termination if his employment is terminated by the Company for
any reason other than misconduct, fraud, or other unlawful acts.
John D. Murray, the Company's former Chief Operating Officer and Chief
Financial Officer, and the Company have executed a Separation Agreement and
Agreement to Provide Consulting Services. Pursuant to the terms of such
agreement, Mr. Murray will provide certain consulting services to the Company
through August 31, 1995, and the Company will pay to Mr. Murray the sum of
Fifteen Thousand Dollars per month for the six months ending August 31, 1995,
and will pay the premiums for continued group health insurance coverage through
June 30, 1996.
Gerald Knight, the Company's former Vice President, Service, and the
Company entered into an agreement pursuant to which Mr. Knight received
guaranteed severance payments equal to his prior salary for a period of twelve
(12) weeks.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with its directors
and certain key officers which provide such individuals with contractual
indemnification rights similar in scope to the applicable sections of the
Company's Bylaws. Such indemnification agreements apply retroactively as well as
prospectively to any actions taken by the indemnified parties while serving as
officers or directors of the Company. Such indemnification agreements also
provide that the Company shall indemnify such persons to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the indemnification agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"),
together with the Stock Option Committee, is responsible for setting the
salaries and administering the policies and programs that govern annual
compensation and employee stock ownership programs. The Committee annually
evaluates the performance and determines the compensation of the Chief Executive
Officer ("CEO") and the Company's other executive officers based upon a mix of
the achievement of the corporate goals, individual performance and comparisons
with other similarly sized companies in the Company's industry segment.
The goal of the Committee with respect to the CEO and other executive
officers is to provide compensation sufficient to attract, motivate and retain
executives of outstanding ability. The Committee has historically established
the base salary of the CEO and other executive officers based primarily upon a
review of readily available salary surveys of similarly sized companies in the
Company's industry segment. The Committee had established base salaries for
fiscal 1994 in approximately the seventy-fifth percentile of the salaries
reported by the American Electronics Association and the Radford Associates
Total Management Compensation Report, which includes the salaries paid by 329
high-tech companies. (Salary surveys of those companies included as comparison
for the stock performance table below were not available.) The Committee
7
<PAGE> 10
established the base salaries of the CEO and other executive officers for fiscal
1995 based upon the 1994 salaries, with adjustments for changes in
responsibility. Such base salaries also reflect voluntary pay cuts accepted by
certain management in recognition of the difficult challenges facing the Company
and the sacrifices of the Company's work force. Fluctuations in base salary of
certain management reflect the impact of commission and bonus programs for
various product and service lines.
At the beginning of fiscal 1995, certain goals for fiscal 1995 were
established for the Company, the CEO and certain executive management. These
goals were based upon the Company's transition strategy and included: (i)
consolidation of European operations; (ii) reduction of expenses and
establishment of new asset management techniques; (iii) continued migration
toward systems assembly and integration; (iv) concentration on vertical
software markets; (v) emphasis on the services operation; and (vi) introduction
of new products. Using these goals as the primary criteria, the Committee
established a bonus incentive program for fiscal 1995 for the CEO and certain
other executive management based upon both individual and company performance,
which based upon prior surveys yielded the opportunity to earn bonuses in the
ninety percentile range of comparable companies. Goals for management with
direct responsibility for sales and service operations, and incentive
compensation to be based upon such goals, were implemented through commission
programs rather than through an incentive bonus program.
Despite the need to write down assets due to obsolescence and the carrying
value of assets being less than market value, the Committee agreed that the
majority of the goals were accomplished, largely as a result of the leadership
exhibited by the CEO: Alpha Microsystems Belgium, S.A. was sold to a member of
its local management; the Company increased its investment in marketing
resources for its services operation and developed a focused business plan; the
Company developed a plan to relocate its Santa Ana, California facility, which
will result in annual savings of approximately $400,000; various new products
were introduced; and certain non-strategic product lines were sold in order to
permit the Company to increase its focus on key new products such as PANDA (food
service administration software) and Alpha 2000 (dental practice administration
software).
However, while the Committee believed that the CEO and other management for
whom such goals had been set had substantially met their goals, the Committee
recognized that the Company had not met its primary goal of a return to
profitability. Accordingly, the Committee awarded limited bonuses to Mr. Tullio
and Mr. Glade, in recognition of their individual efforts, equal to $22,500 and
$14,500 respectively, as well as token stock awards. Additionally, the Company
as part of its fiscal 1996 compensation package, awarded additional stock
options to such management in order to provide them with the incentive and
opportunity to share in future growth.
Members of the Compensation Committee submitting this Report are Clarke E.
Reynolds, Chairman, Rockell N. Hankin and Harry L. Hathaway. Messrs. Hankin and
Hathaway also constitute the Stock Option Committee.
8
<PAGE> 11
COMMON STOCK PERFORMANCE
The following graph compares the percentage change in the Company's
cumulative total shareholder return on common stock over the last five-year
period with the performances of the Nasdaq Market Index and the Media General
Financial Services Industry Group 071 (Computers, Subsystems and Peripherals)
Index over the same period. The returns were calculated assuming the value of
the investment in the Company's stock and each index were $100 on March 1, 1988,
and that all dividends were reinvested.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ALPHA INDUSTRY
(FISCAL YEAR COVERED) MICROSYSTEMS INDEX BROAD MARKET
<S> <C> <C> <C>
1990 100 100 100
1991 50.00 116.58 104.75
1992 56.25 105.19 115.76
1993 78.13 86.04 115.95
1994 60.16 103.39 147.74
1995 23.44 115.99 141.05
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16(a)"), requires the Company's directors and executive officers, and persons
who own more than ten percent of the Company's common stock, to file with the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. initial reports of ownership and reports of changes in ownership
of Common Stock. Officers, directors and greater than ten-percent shareholders
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 on a 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 February 26, 1995 all such
reports required pursuant to Section 16(a) by the Company's officers, directors
and greater than ten-percent beneficial owners were timely filed.
9
<PAGE> 12
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Ernst & Young,
certified public accountants, as independent auditors of the Company for the
year ending February 25, 1996.
Arthur Young & Company, the predecessor to Ernst & Young, began serving the
Company in 1981. Ernst & Young has no direct financial interest or any material
indirect financial interest in the Company or its subsidiaries, and has had no
connection with the Company or its subsidiaries in the capacity of promoter,
underwriter, voting trustee, director, officer or employee.
The Company anticipates that a representative of Ernst & Young will be
present at the Annual Meeting. Such representative will have an opportunity to
make a statement, if such representative desires to do so, and will be available
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
ERNST & YOUNG AS INDEPENDENT AUDITORS OF THE COMPANY AND ITS SUBSIDIARIES FOR
THE FISCAL YEAR ENDING FEBRUARY 25, 1996.
DEADLINE FOR SUBMITTING PROPOSALS FOR
NEXT YEAR'S ANNUAL MEETING
Any proposal intended to be presented by a shareholder at the 1996 Annual
Meeting of Shareholders must be received by the Secretary of the Company at the
Company's principal office not later than February 9, 1996 in order to be
considered for inclusion in the Company's proxy statement and form of proxy for
that meeting. Pursuant to the Company's By-laws, any shareholder wishing to make
nominations for director, or bring other business to any meeting of the
shareholders of the Company, must give written notice to the Secretary of the
Company not less than 90 days in advance of such meeting or, if later, the tenth
day following the first public announcement of the date of such meeting. The
required content of such notice is set forth in the Company's Bylaws, a copy of
which may be obtained by writing to the Secretary of the Company at the address
set forth below.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by the Company. In
addition to use of the mails, proxies may be solicited by officers, directors
and regular employees of the Company personally by telephone or telegraph. The
Company may reimburse persons holding shares in their own names or in the names
of their nominees for expenses they incur in obtaining instructions from
beneficial owners of such shares.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
meeting, but if other matters are properly presented at the meeting, the persons
named in the proxy will exercise their discretionary authority to vote on such
matters as well as other matters incident to the conduct of the meeting.
The Company has filed its Annual Report on Form 10-K for the year ended
February 26, 1995, with the Securities and Exchange Commission. This report
contains detailed information concerning the Company and its operations,
supplementary financial information and certain schedules which may not be
included in the Annual Report to Shareholders. A COPY OF THIS REPORT, EXCLUDING
EXHIBITS, WILL BE FURNISHED TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST
TO MICHAEL J. LOWELL, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, 3511 WEST
SUNFLOWER AVENUE, SANTA ANA, CALIFORNIA 92704, IF REQUESTED PRIOR TO JUNE 30,
1995, AND THEREAFTER TO MICHAEL J. LOWELL, VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER, 2722 S. FAIRVIEW STREET, SANTA ANA, CALIFORNIA 92704. A COPY
10
<PAGE> 13
OF ANY EXHIBIT WILL BE FURNISHED TO ANY SHAREHOLDER UPON WRITTEN REQUEST AND
PAYMENT TO THE COMPANY OF A COPYING CHARGE OF 25 CENTS PER PAGE. REQUESTS FOR
COPIES OF EXHIBITS SHOULD ALSO BE DIRECTED TO INVESTOR RELATIONS AT THE ABOVE
ADDRESS.
By Order of the Board of Directors,
/s/ John F. Glade
------------------------
John F. Glade, Secretary
June 9, 1995
11
<PAGE> 14
ALPHA MICROSYSTEMS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ALPHA MICROSYSTEMS FOR THE 1995 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder(s) of Alpha Microsystems (the "Company")
hereby appoints Clarke E. Reynolds, John F. Glade, or either of them, proxies,
each with full power of substitution, for and in the name of the undersigned at
the Annual Meeting of Shareholders of the Company to be held on Friday, July
14, 1995, at 2722 S. Fairview Street, Santa Ana, California at 10:00 a.m. and
at any and all adjournments or postponements thereof (the "Annual Meeting"), to
vote all shares of the capital stock of the Company held by the undersigned as
if the undersigned were present and voting such shares.
Such proxies are directed to vote as specified on the reverse side or,
if no specification is made, FOR election of the directors named in the
Company's proxy statement (a copy of which the undersigned hereby acknowledges
receiving), FOR the ratification of Ernst & Young as independent auditors of
the Company and its subsidiaries for the fiscal year ending February 25, 1996,
and to vote in accordance with their discretion on such other matters that may
properly come before the Annual Meeting. Such authority includes the right, in
the discretion of the proxies, and each of them, to cumulate votes for the
election of directors and thereby to distribute, in such proportion as the
proxies see fit, the votes represented by the proxy among the five nominees
named on the reverse side or any substitute person or persons nominated by the
Board of Directors for election to the Board. To vote in accordance with the
Board of Directors' recommendations, merely sign on the reverse side; no boxes
need to be checked.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
CONTINUED AND TO BE VOTED, SIGNED AND DATED ON THE REVERSE SIDE
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS NOMINEES: Rockell N. Hankin, Harry L. Hathaway, Richard E. Mahmarian, Clarke E.
Reynolds and Douglas J. Tullio
FOR all nominees WITHHOLD
listed to the right AUTHORITY (INSTRUCTION: To withhold authority to vote for any individual nominee, write that
(except as marked to vote for all nominees nominee's name in the space provided below.)
to the contrary) listed to the right
----------------------------------------------------------------------------------
2. Ratification of Ernst & Young as 3. To transact such other business as may properly come before the
independent auditors of the meeting or any adjournment thereof.
Company and its subsidiaries for the
fiscal year ending February 25, 1996.
FOR AGAINST ABSTAIN
PLEASE MARK BOXES [-] or [X]
Dated: , 1995
------------------------------------------------------
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SIGNATURE(S) OF SHAREHOLDER(S)
Please sign exactly as your name appears on this Proxy. If signing
as executor, administrator, trustee, guardian, attorney or for a
corporation, please give full title as such. For joint accounts or
co-fiduciaries, all joint owners or co-fiduciaries should sign.
------------------------------------------------
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
------------------------------------------------
</TABLE>
