<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 24, 1996
-----------------
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 0-10558
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ALPHA MICROSYSTEMS
------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3108178
- - ---------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2722 S. FAIRVIEW STREET, SANTA ANA, CA 92704
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(Address of principal executive offices)
Registrant's telephone number, including area code: (714) 957-8500
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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 that 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
--- ---
As of January 3, 1997, there were 10,762,192 shares of the registrant's Common
Stock outstanding.
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ALPHA MICROSYSTEMS
INDEX
Page
Number
------
PART I-- FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at November 24, 1996 (Unaudited) and
February 25, 1996 3
Condensed Consolidated Statements of
Operations (Unaudited) for the Three
and Nine Months Ended November 24, 1996 and
November 26, 1995 4
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Nine Months Ended November 24,
1996 and November 26, 1995 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II-- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
EXHIBIT INDEX 16
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALPHA MICROSYSTEMS
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
November 24, February 25,
1996 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,688 $ 505
Accounts receivable, net of
allowance for doubtful
accounts of $195 and $927 at
November 24, 1996
and February 25, 1996,
respectively 3,263 5,241
Inventories 444 943
Notes receivable 247 159
Prepaid expenses and other current assets 583 351
-------- -----------
Total current assets 13,225 7,199
-------- -----------
Property and equipment at cost 16,289 16,710
Less accumulated depreciation and
amortization 12,932 12,435
-------- -----------
Net property and equipment 3,357 4,275
Service contracts, net 420 793
Software costs, net 802 535
Goodwill, net 15 170
Other assets, net 56 89
-------- -----------
$ 17,875 $ 13,061
======== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank borrowings $ -- $ 500
Accounts payable 1,114 1,694
Deferred revenue 1,661 2,678
Other accrued liabilities 428 837
Accrued salaries and wages 126 476
Current portion of long-term debt 161 192
-------- -----------
Total current liabilities 3,490 6,377
Long-term debt 89 201
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; 5,000,000
shares authorized; none issued -- --
Common stock, no par value; 20,000,000 shares
authorized; 10,752,192 and 6,595,453 shares
issued and outstanding at November 24, 1996
and February 25, 1996, respectively 30,813 21,242
Accumulated deficit (16,579) (14,694)
Unamortized restricted stock plan expense (13) (18)
Foreign currency translation adjustment 75 (47)
-------- -----------
Total shareholders' equity 14,296 6,483
-------- -----------
$ 17,875 $ 13,061
======== ===========
</TABLE>
See accompanying notes.
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ALPHA MICROSYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
November 24, November 26, November 24, November 26,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales:
Product $ 2,007 $ 3,666 $ 6,940 $ 11,490
Service 3,434 4,602 11,725 13,928
-------- ------- -------- --------
Total net sales 5,441 8,268 18,665 25,418
-------- ------- -------- --------
Cost of sales:
Product 1,110 2,401 3,716 6,962
Service 2,779 3,289 8,955 9,448
-------- ------- -------- --------
Total cost of sales 3,889 5,690 12,671 16,410
-------- ------- -------- --------
Gross Margin 1,552 2,578 5,994 9,008
Selling, general and administrative expense 2,189 2,716 6,730 8,277
Research and development expense 443 489 1,511 1,559
-------- ------- -------- --------
Total operating expenses 2,632 3,205 8,241 9,836
-------- ------- -------- --------
Loss from operations (1,080) (627) (2,247) (828)
Interest income (95) (22) (163) (72)
Interest expense 3 5 29 26
Other (income) expense, net (123) 4 (230) (221)
Foreign exchange (gain) loss 2 (17) (24) (57)
-------- ------- -------- --------
Total other income (213) (30) (388) (324)
-------- ------- -------- --------
Loss before taxes (867) (597) (1,859) (504)
Provision for income taxes 23 -- 28 --
-------- ------- -------- --------
Net Loss $ (890) $ (597) $ (1,887) $ (504)
======== ======= ======== ========
Net loss per share $ (0.08) $ (0.09) $ (0.19) $ (0.08)
======== ======= ======== ========
Number of shares used in the
computation of per share amounts 10,804 6,565 9,929 6,561
======== ======= ======== ========
</TABLE>
See accompanying notes.
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ALPHA MICROSYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
November 24, November 26,
1996 1995
------------ ------------
<S> <C> <C>
Cash flow from operating activities:
Net loss $(1,887) $ (504)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Gain (loss) on sale of fixed assets 1 (211)
Depreciation and amortization 1,689 1,612
Provision for losses on accounts receivable 62 (25)
Provision for inventories (44) 143
Other changes in operating assets and liabilities:
Accounts receivable 182 (802)
Inventories (147) 541
Prepaid expenses and current assets (367) (160)
Accounts payable and other
accrued liabilities 124 434
Accrued salaries and wages (240) (694)
Deferred revenue (515) (494)
Other, net (375) 46
------- -------
Net cash used in operating activities (1,517) (114)
------- -------
Cash flow from investing activities:
Proceeds from sale of fixed assets 10 280
Sale of subsidiary 1,489 --
Acquisition of businesses -- (80)
Acquisition of service assets -- (96)
Purchases of equipment (382) (1,552)
Capitalization of software costs (379) (745)
Other, net -- 3
------- -------
Net cash provided by (used in) investing activities 738 (2,190)
------- -------
Cash flows from financing activities:
Proceeds from borrowings -- 500
Issuance of common stock 9,486 19
Stock options exercised 90 --
Principal debt repayments (608) (343)
------- -------
Net cash provided by financing activities 8,968 176
------- -------
Effect of exchange rate changes on cash (6) (6)
------- -------
Increase (decrease) in cash and cash equivalents 8,183 (2,134)
Cash and cash equivalents at beginning of period 505 3,289
------- -------
Cash and cash equivalents at end of period $ 8,688 $ 1,155
======= =======
</TABLE>
See accompanying notes.
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ALPHA MICROSYSTEMS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTORY NOTE
This Quarterly Report on Form 10-Q contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act") and the
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. These forward-looking statements include (i) the
ability of the Company to continue to meet its financial obligations and the
continued availability of financing, (ii) the market acceptance of the Company's
hardware and software products and services, including the recently announced
AlphaCONNECT (TM) family of products, (iii) the continued development of the
Company's technical, manufacturing, sales, marketing and management
capabilities, and (iv) anticipated competition.
Assumptions relating to the foregoing involve judgments with respect to,
among other things, future economic, competitive and market conditions, all of
which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. In addition, the business and operations of
the Company are subject to substantial risks which increase the uncertainty
inherent in the forward-looking statements. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by the
Company, or any other person, that the objectives or plans of the Company will
be achieved.
1. INTERIM ACCOUNTING POLICY
In the opinion of management of Alpha Microsystems (the "Company" or
"Alpha Micro"), the accompanying unaudited condensed consolidated financial
statements contain all adjustments necessary to fairly present the consolidated
financial position of the Company at November 24, 1996, the consolidated results
of its operations for the three and nine month periods ended November 24, 1996
and November 26, 1995 and its cash flows for the nine month periods ended
November 24, 1996 and November 26, 1995. These condensed consolidated financial
statements do not include all disclosures normally presented annually under
generally accepted accounting principles and, therefore, they should be read in
conjunction with the Company's annual report on Form 10-K for the year ended
February 25, 1996.
The results of operations for the nine month period ended November 24,
1996, are not necessarily indicative of the results to be expected for the full
fiscal year.
REVENUE RECOGNITION
The Company recognizes revenue on its hardware and software sales on
delivery, and recognizes revenue on its service sales and post contract customer
support on a straight line basis over the contract period. When significant
obligations remain after a software product has been delivered, revenue is not
recognized until obligations have been completed or are no longer significant.
The costs of any insignificant obligations are accrued when the related revenue
is recognized. Revenue is recognized only when collection of the resulting
receivable is probable.
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PER SHARE INFORMATION
Per share information is based upon the weighted average common shares
outstanding during the periods ended November 24, 1996 and November 26, 1995.
TRANSLATION OF FOREIGN CURRENCIES
The Company's foreign entities use the local currency as the functional
currency. The Company translates all foreign entity assets and liabilities at
quarter-end exchange rates, all income and expense accounts at average rates,
and records adjustments resulting from translation in a separate component of
shareholders' equity.
2. SALE OF SUBSIDIARY
On August 19, 1996, the Company sold its UK subsidiary, Alpha Microsystems
Great Britain ("AMGB"), to Sanderson Electronics PLC ("Sanderson"), for 907,792
ordinary shares of Sanderson. In conjunction with this sale, the Company and
Sanderson signed a three year hardware distribution agreement allowing Sanderson
to sell Alpha Microsystems hardware products in the United Kingdom and Eire. In
addition, as part of the sale agreement, the Company has agreed to negotiate in
good faith toward developing a strategic alliance with Sanderson, whereby
Sanderson would distribute and market the Company's AlphaCONNECT family of
products in the United Kingdom and potentially in Southeast Asia. The Company
recognized a gain of approximately $37,000 from this sale. On September 17,
1996, the Company sold the Sanderson shares for approximately (pound)1,350,000
or $2,100,000.
3. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method)
or market. Inventories net of reserves for excess and obsolete inventories of
$83,000 and $1,726,000 at November 24, 1996 and February 25, 1996, respectively,
are comprised of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------------
NOVEMBER 24, 1996 FEBRUARY 25, 1996
(UNAUDITED) (AUDITED)
----------------- -----------------
<S> <C> <C>
Raw materials $ 276 $ 116
Work in process 14 --
Finished goods 154 827
-------- --------
$ 444 $ 943
======== ========
</TABLE>
The reserve for excess and obsolete inventory of the Company's UK subsidiary
AMGB at February 25, 1996 was $1,580,000.
4. DEBT
On October 11, 1996, the Company and its bank signed an amendment to the
Company's existing loan agreement extending its credit line to October 10, 1997.
Pursuant to the terms of the
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<PAGE> 8
amendment, the Company has a revolving line of credit up to a maximum limit of
$2,000,000, based upon 50 percent of the eligible accounts receivable and under
which letters of credit and the foreign exchange portion shall not exceed in the
aggregate at any one time $500,000. Borrowings under the line of credit bear
interest at prime plus two and one half percent (2.5%). In addition, the Company
agreed to issue 25,000 warrants to the lender. The price of the new warrants is
at the market value of the Company's common stock as of the date of the loan.
The line of credit is secured by substantially all of the Company's
assets. Its availability is subject to financial covenants requiring that the
Company maintain a quick ratio not less than 3.0 to 1, a tangible net worth not
less than $12,750,000 and a ratio of total liabilities to tangible net worth no
more than 0.50 to 1. The covenants also require the Company's net losses for the
current fiscal year ending February 23, 1997 not exceed $2,200,000, and
thereafter the Company cannot incur any losses (after taxes) in any fiscal
quarter, other than for a loss (after taxes) in a single fiscal quarter during
any fiscal year if the amount of such loss does not exceed $250,000. At November
24, 1996, the Company had no outstanding bank borrowings.
5. NOTE RECEIVABLE
In April 1995, as part of the consideration for selling the Belgian
subsidiary to a member of local management, the Company received a note for
15,000,000 Belgian francs, payable over a two year period from the date of the
note, of which 7,000,000 Belgian francs has been paid.
6. COMMON STOCK
On May 14, 1996, the Company filed a Registration Statement to register
4,442,069 shares of Common Stock issuable upon the exercise of warrants issued
by the Company, of which 4,082,069 were issued in connection with its November
29, 1993 Shareholder Rights Offering and subsequent Public Offering, and the
remainder were issued in consideration of services rendered to the Company. The
Company's Redeemable Public Warrants were traded on the Nasdaq National Market
under the symbol "ALMIW."
The Company redeemed its Redeemable Public Warrants on June 17, 1996,
pursuant to its notice of redemption issued on May 14, 1996. Prior to the
redemption date, approximately 3,411,000 or 98.5 percent of the outstanding
Redeemable Public Warrants were exercised, resulting in gross proceeds to the
Company of approximately $8,528,000. Certain other warrants were also exercised
during the period, resulting in the additional issuance of 692,969 shares, and
approximately $1,574,000 of additional gross proceeds. Total shares issued from
the exercise of all warrants were 4,103,969 (including 50,000 shares redeemed by
the Company's bank), resulting in total gross proceeds of approximately
$10,102,000. The proceeds from the exercise of all warrants, net of underwriting
expense of $300,000, legal expenses of $119,000, and other expenses of $197,000
were $9,486,000.
The Redeemable Public Warrants traded on Nasdaq National Market under the
symbol "ALMIW" ceased trading at the close of the market on June 17, 1996.
7. INCOME TAXES
The Company is currently evaluating the effect from the redemption of
warrants on the change in the Company's ownership and therefore on the potential
utilization of the federal and state net operating loss carryforwards. Section
382 of the Internal Revenue Code restricts the utilization of net loss
carryforwards if the ownership change is greater than 50 percent during any
three year
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<PAGE> 9
period. The Company had federal net operating loss carryforwards totaling
approximately $17,500,000 at February 25, 1996, which begin to expire in fiscal
year 2007.
8. GOODWILL AND INTANGIBLES
Management routinely evaluates events or conditions that might diminish
the fair market value of intangible assets. Intangible assets include acquired
service contracts, capitalized computer software costs and goodwill. The book
value of goodwill and acquired service contracts is associated with the
acquisition of companies or assets. Software cost is the accumulation of
capitalized development costs or the assigned value of software associated with
an acquisition.
9. CONTINGENCIES
LITIGATION
The Company's current involvement with litigation is as follows:
Carlos Garralda and Andre Warnier, employees of the Company's former
subsidiary, Alpha Microsystems Belgium, S.A. ("AMB"), filed an action in
November 1995 against AMB and the Company in Orange County Superior Court
alleging that AMB is in breach of its obligations under Belgium employment law
to pay salaries for a notice period of up to two years following termination of
employment. The Plaintiffs allege, among other things, that the Company has
alter ego liability for these obligations. The plaintiffs are claiming
compensatory damages in excess of $780,000 and unspecified punitive damages. The
Court has continued its temporary stay of this lawsuit in its entirety until
January 16, 1997 in order to await the outcome of virtually identical litigation
instituted by the plaintiffs against AMB in Belgium. A settlement of the case
between AMB and Andre Warnier in the Belgium action was effected on October 18,
1996. Five hundred thousand ($500,000) dollars of the compensatory damages in
the Orange County lawsuit were related to the claims by Mr. Warnier. This
settlement should result in a dismissial of the Warnier portion of the Orange
County lawsuit. Although no assurances as to the outcome of the litigation can
be given, management believes that its defenses to the litigation are
meritorious.
In December 1995, Phoenix Marketing, Inc. dba Electronic Business Systems,
Inc., in response to the Company's collection efforts for a past due account,
filed an amended cross-complaint alleging damages of $3,200,000 for defective
merchandise, loss of business reputation and loss of future business. In an
order dated November 14, 1996, the court referred this case to arbitration,
which arbitration must be completed on or before October 31, 1997. Although no
assurances as to the outcome of the litigation can be given, management believes
that the plaintiff's claims are without merit.
The Company is currently involved in certain other claims and litigation.
The Company does not consider any of these other claims or litigation to be
material. Management has made provisions in the Company's financial statements
for the settlement of lawsuits for which unfavorable outcomes are both probable
and estimable. In the opinion of management, results of known existing claims
and litigation will not have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
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<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SUMMARY
The following table was derived from the Condensed Consolidated Statements
of Operations as a percentage of net sales for the three and nine month periods
ended November 24, 1996, and November 26, 1995:
<TABLE>
<CAPTION>
RELATIONSHIP TO NET SALES
-----------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ ------------------------------
NOVEMBER 24, NOVEMBER 26, NOVEMBER 24, NOVEMBER 26,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 71.5 68.8 67.9 64.6
-------- -------- -------- --------
Gross margin 28.5 31.2 32.1 35.4
Selling general and 40.2 32.8 36.1 32.6
administrative expense
Research and development expense 8.1 5.9 8.1 6.1
Interest income (1.7) (0.3) (0.9) (0.3)
Interest expense 0.1 0.1 0.1 0.1
Other (income) expense, net (2.3) 0.1 (1.2) (0.9)
Foreign exchange (gain) loss 0.1 (0.2) (0.1) (0.2)
-------- -------- -------- --------
Loss from operations before taxes (16.0) (7.2) (10.0) (2.0)
Provision for income taxes 0.4 -- 0.1 --
-------- -------- -------- --------
Net loss (16.4)% (7.2)% (10.1)% (2.0)%
======== ======== ======== ========
</TABLE>
GENERAL
On April 3, 1996, the Company released its new Internet and Intranet
software, AlphaCONNECT. AlphaCONNECT is a software and communications tool for
selectively mining and harvesting data from Internet sites and legacy
applications running on corporate Intranets. Harvested data can be used to
create dynamic self-updating Web pages, or converted and delivered to popular
applications that run under Microsoft Windows, Windows 95 or Windows NT.
AlphaCONNECT Messenger, an add-on E-Mail software system for use with
AlphaCONNECT, was introduced on May 15, 1996. On October 1, 1996, the Company
announced a new AlphaCONNECT based product called "StockVUE", which provides
automated stock quote, stock price, and trading volume line and alerts,
retrieval of company news and SEC filings. On November 13, 1996, the Company
announced the limited beta availability of its new Internet software
application, code-named AlphaCONNECT Advantage, an intelligent agent for online
research and analysis.
The Company has significantly expanded the level of its sales and
marketing resources for Internet and Intranet products. While it is unlikely
that revenues for these products will increase sufficiently in the short-term to
offset the additional investment, management believes that these products will
enhance the long-term outlook of the Company.
The Company had a net loss of $1,887,000 or $0.19 per share, during the
nine months ended November 24, 1996, compared to a net loss of $504,000, or
$0.08 per share, during the same period in the prior fiscal year. The results of
the two periods differed primarily due to investment in the Internet/Intranet
family of products, the absence of the UK subsidiary in comparison to the same
period in the previous year, increased losses incurred at AlphaHealthCare, and
decline in the Company's revenue from traditional products.
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<PAGE> 11
RESULTS OF OPERATIONS
Nine Months Ended November 24, 1996 and November 26, 1995
Net sales decreased $6,753,000, or 26.6%, to $18,665,000 for the nine
month period ended November 24, 1996, from $25,418,000 for the nine month period
ended November 26, 1995.
Total product revenues declined $4,550,000, or 39.6% to $6,940,000 from
approximately $11,490,000 for the comparable period. Approximately 50% of the
decline in product revenues was attributable to the European market (including
$1,604,000 attributable to the absence of the UK subsidiary sold on August 19,
1996). The remaining decline was due to a decrease in the Company's domestic
traditional product revenues and the product revenues at its AlphaHealthCare
subsidiary.
Total service revenue for the nine months ended November 24, 1996,
declined $2,203,000, or 15.8%, to $11,725,000 from $13,928,000 for the same
period in the prior year. Approximately 64% of this decline was due to the
European market (including $836,000 attributable to the absence of the Company's
UK subsidiary). The remaining decline was due to a decrease in the Company's
traditional Alpha Micro Operating System ("AMOS") based service contracts, and a
decrease in support revenues from the Company's AlphaHealthCare subsidiary. The
Company has expanded its base of support services, including field maintenance
and networking, and intends to invest additional resources in this area. In
addition, the Company is expanding its domestic service sales and marketing
efforts to capitalize on its current base and further expand revenues from the
open systems generation market.
Total gross margin for the Company for the nine months ended November 24,
1996, decreased to 32.1% compared to 35.4% during the same period last year.
Product gross margin for the first nine months of fiscal 1997 increased to 46.5%
compared to 39.4% during the same period in the prior year. The increase in
product gross margin was primarily due to a relatively greater proportion of
higher margin AMOS products sold both in the domestic and European markets. In
addition, the move to a smaller corporate headquarters where most of the
manufacturing is housed, a reduction in headcount in the manufacturing area, and
a continued effort to control costs, also contributed to the improvement in
product gross margin.
Service business gross margin declined to 23.6% during the nine months
ended November 24, 1996 from 32.2% during the same period in the prior year. The
decline in gross margin was primarily due to lower service margins due to the
absence of the Company's UK subsidiary, reductions in cost of goods sold,
primarily labor costs, not fully offsetting the revenue decline in the domestic
service operations, and reduced support margins at the Company's AlphaHealthCare
subsidiary associated with lower revenues and severance expense. The domestic
service organization reduced selling, general and administrative expenses which
assisted in partially offsetting the overall impact of the service revenue
decline. To improve revenues, the service organization is focusing on obtaining
new contracts for its networking support services, supporting vertical markets
with services, and increasing third-party services. Revenues from these new
areas of focus generally produce lower margins than the Company's traditional
service business. The Company continues to evaluate potential service
acquisitions which meet its financial and marketing criteria.
Selling, general and administrative expenses decreased $1,547,000 to
$6,730,000 for the nine months ended November 24, 1996, from $8,277,000 for the
comparable period in the prior fiscal year. The absence of the UK subsidiary
during the last four months of the current period resulted in a decrease of
approximately $997,000 in selling, general and administrative expenses.
Additionally, a reduction in headcount and a more vigilant approach to expense
control in areas relating to the
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<PAGE> 12
traditional business resulted in a reduction of $1,322,000 in selling, general
and administrative expenses. This was partially offset by increases in the
Company's investment in resources for the Internet and Intranet markets.
Research and development expenses (which include engineering support and
services) incurred for the nine months ended November 24, 1996 did not
materially change from the same period in the prior fiscal year. Additionally,
approximately $379,000 of new software development expenses have been
capitalized in the first nine months of the current fiscal year, as compared to
$745,000 in the comparable period of the prior fiscal year. Research and
development expenses as a percentage of product sales increased to 21.8 percent
in the nine months just ended from 13.6 percent during the comparable period in
the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended November 24, 1996, the Company's working
capital increased by $8,913,000 to $9,735,000 from $822,000 at February 25,
1996. Net cash and cash equivalents increased during the nine month period ended
November 24, 1996 by $8,183,000 to $8,688,000, primarily due to the redemption
of warrants. Net cash used in operating activities during the first nine months
of the current fiscal year was $1,517,000 compared to $114,000 during the same
period in the prior fiscal year primarily due to the Company's increased
investment in Internet and Intranet products.
On October 11, 1996, the Company and its bank signed an amendment to the
Company's existing loan agreement extending its credit line to October 10, 1997.
Pursuant to the terms of the amendment, the Company has a revolving line of
credit up to a maximum limit of $2,000,000, based upon 50 percent of the
eligible accounts receivable and under which letters of credit and the foreign
exchange portion shall not exceed in the aggregate at any one time $500,000.
Borrowings under the line of credit bear interest at prime plus two and one half
percent (2.5%). In addition, the Company agreed to issue 25,000 warrants to the
lender. The price of the new warrants is at the market value of the Company's
common stock as of the date of the loan.
The line of credit is secured by substantially all of the Company's
assets. Its availability is subject to financial covenants requiring that the
Company maintain a quick ratio not less than 3.0 to 1, a tangible net worth not
less than $12,750,000 and a ratio of total liabilities to tangible net worth no
more than 0.50 to 1. The covenants also require the Company's net losses for the
current fiscal year ending February 23, 1997 not exceed $2,200,000, and
thereafter the Company cannot incur any losses (after taxes) in any fiscal
quarter, other than for a loss (after taxes) in a single fiscal quarter during
any fiscal year if the amount of such loss does not exceed $250,000. At November
24, 1996, the Company had no outstanding bank borrowings.
The Company redeemed its Redeemable Public Warrants on June 17, 1996,
pursuant to its notice of redemption issued on May 14, 1996. Prior to the
redemption date, approximately 3,411,000 or 98.5 percent of the outstanding
Redeemable Public Warrants were exercised, resulting in gross proceeds to the
Company of approximately $8,528,000. Certain other warrants were also exercised
during the period, resulting in the additional issuance of approximately 692,969
shares and approximately $1,574,000 of additional gross proceeds. Total shares
issued from the exercise of all warrants were 4,103,969 (including 50,000 shares
redeemed by the Company's bank), resulting in total gross proceeds of
approximately $10,102,000. The proceeds from the exercise of all warrants, net
of underwriting expense of $300,000, legal expenses of $119,000, and other
expenses of $197,000 were $9,486,000.
-12-
<PAGE> 13
The Company believes that it has sufficient working capital to finance its
requirements for the next twelve months. The Company's capital requirements
depend on a variety of factors, including, but not limited to, the rate of
decline in the traditional business; the success, timing, and amount of
investment required to penetrate the Internet/Intranet markets; service revenue
growth or decline; and potential acquisitions.
-13-
<PAGE> 14
PART II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K.
(a) See Exhibit Index.
(b) No Form 8K was filed during the quarter ended November 24,
1996.
-14-
<PAGE> 15
SIGNATURES
Pursuant to the requirements 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.
ALPHA MICROSYSTEMS
(Registrant)
Date: January 7, 1997 By:/s/ Douglas J. Tullio
----------------------
President and
Chief Executive Officer
Date: January 7, 1997 By:/s/ James A. Sorensen
----------------------
Vice President and
Chief Financial Officer
-15-
<PAGE> 16
EXHIBIT INDEX
Number Description of Documents
- - ------ ------------------------
10.73 Amendment to Loan Agreement by and between Alpha Microsystems and
Silicon Valley Bank dated October 11, 1996
10.74 Warrant to Purchase Stock issued to Silicon Valley Bank on November
22, 1996
10.75 Registration Rights Agreement by and between Alpha Microsystems and
Silicon Valley Bank dated November 22, 1996
10.76 Antidilution Agreement by and between Alpha Microsystems and
Silicon Valley Bank dated November 22, 1996
10.77 Employment Agreement by and between Alpha Microsystems and James A.
Sorensen dated November 7, 1996
27. Financial Data Schedule
-16-
<PAGE> 1
Exhibit 10.73
SILICON VALLEY BANK
AMENDMENT TO LOAN AGREEMENT
BORROWER: ALPHA MICROSYSTEMS
ADDRESS: 2722 SOUTH FAIRVIEW STREET
SANTA ANA, CALIFORNIA 92704
DATED AS OF: OCTOBER 11, 1996
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above (the "Borrower").
The Parties agree to amend the Loan and Security Agreement between them
(the "Loan Agreement") dated July 10, 1995, as amended from time to time,
effective as of the date hereof. (Capitalized terms used but not defined in
this Amendment, shall have the meanings set forth in the Loan Agreement.)
1. MODIFICATION TO MATURITY DATE. The Maturity Date as set forth in the
Schedule to the Loan Agreement is hereby amended to be "October 10, 1997".
2. MODIFICATION TO FINANCIAL COVENANTS. The section of the Schedule to
the Loan Agreement entitled "Financial Covenants (Section 4.1)" is hereby
amended in its entirety to read as follows:
"FINANCIAL COVENANTS
(Section 4.1): Borrower shall comply with all of the
following covenants. Compliance shall be
determined as of the end of each
month, except as otherwise specifically
provided below:
QUICK ASSET RATIO: Borrower shall maintain a ratio of "Quick
Assets" to current liabilities of not less than
3.00 to 1.
TANGIBLE NET WORTH: Borrower shall maintain a tangible net worth of
not less than $12,750,000.
DEBT TO TANGIBLE
NET WORTH RATIO: Borrower shall maintain a ratio of total
liabilities to tangible net worth of not more
than .50 to 1.
PROFITABILITY Borrower shall not incur a loss (after taxes)
for the fiscal year ending February 28, 1997 in
excess of $2,200,000. Thereafter, Borrower
shall not incur any losses (after taxes) in any
fiscal quarter, other than for a loss (after
taxes) in a single fiscal quarter during any
fiscal year if the amount of such loss does not
exceed
<PAGE> 2
---------------------------------------------------------------
$250,000. For purposes of this financial
covenant, capitalized software is to be
considered an expense of the Borrower.
DEFINITIONS: "Current assets," and "current liabilities"
shall have the meanings ascribed to them in
accordance with generally accepted accounting
principles.
"Tangible net worth" means the excess of total
assets over total liabilities, determined in
accordance with generally accepted accounting
principles, excluding however all assets which
would be classified as intangible assets under
generally accepted accounting principles,
including without limitation goodwill,
licenses, patents, trademarks, trade names,
copyrights, capitalized software and
organizational costs, licences and franchises.
"Quick Assets" means cash on hand or on deposit
in banks, readily marketable securities issued
by the United States, readily marketable
commercial paper rated "A-1" by Standard &
Poor's Corporation (or a similar rating by a
similar rating organization), certificates of
deposit and banker's acceptances, and accounts
receivable (net of allowance for doubtful
accounts).
DEFERRED REVENUES: For purposes of the above quick asset ratio,
deferred revenues shall not be counted as
current liabilities. For purposes of the above
debt to tangible net worth ratio, deferred
revenues shall not be counted in determining
total liabilities but shall be counted in
determining tangible net worth for purposes of
such ratio. For all other purposes deferred
revenues shall be counted as liabilities in
accordance with generally accepted accounting
principles.
SUBORDINATED DEBT: "Liabilities" for purposes of the foregoing
covenants do not include indebtedness which is
subordinated to the indebtedness to Silicon
under a subordination agreement in form
specified by Silicon or by language in the
instrument evidencing the indebtedness which is
acceptable to Silicon."
3. NEW WARRANTS. The Borrower shall provide Silicon with five-year
warrants to purchase 25,000 shares of Common stock of the Borrower, at a price
per share equal to the market price per share as reflected on the date prior to
the Borrower's execution of this Amendment, on the terms and conditions in the
Warrant to Purchase Stock and related documents being executed concurrently with
this Amendment, which Warrant shall be in addition to the Warrant previously
issued by the Borrower in favor of Silicon.
4. FEE. Borrower shall pay to Silicon a facility fee in the amount of
$7,500 in connection with this Amendment, which shall be in addition to all
interest payable under the Loan Agreement and all other amounts due thereunder,
and which shall not be refundable.
5. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon that
all representations and warranties set forth in the Loan Agreement, as amended
hereby, are true and correct.
6. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the
-2-
<PAGE> 3
---------------------------------------------------------------
representations and agreements of the parties with respect to the subject matter
hereof and supersede all prior discussions, representations, agreements and
understandings between the parties with respect to the subject hereof. Except
as herein expressly amended, all of the terms and provisions of the Loan
Agreement, and all other documents and agreements between Silicon and the
Borrower shall continue in full force and effect and the same are hereby
ratified and confirmed.
BORROWER:
ALPHA MICROSYSTEMS
BY
----------------------------------
PRESIDENT OR VICE PRESIDENT
BY
----------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY
----------------------------------
TITLE
-------------------------------
GUARANTOR'S CONSENT
The undersigned guarantor acknowledges that its consent to the
foregoing Amendment is not required, but the undersigned nevertheless does
hereby consent to the foregoing Amendment and to the documents and agreements
referred to therein and to all future modifications and amendments thereto, and
to any and all other present and future documents and agreements between or
among the foregoing parties. Nothing herein shall in any way limit any of the
terms or provisions of the Continuing Guaranty executed by the undersigned in
favor of Silicon, which is hereby ratified and affirmed and shall continue in
full force and effect.
ALPHAHEALTHCARE, INC.
By:
---------------------------------
Title:
------------------------------
-3-
<PAGE> 1
Exhibit 10.74
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
- - ------------------------------------------------------------------------------
WARRANT TO PURCHASE STOCK
Warrant to Purchase 25,000 Issue Date: November 22, 1996
Shares of the Common Expiration Date: November 22, 2001
Stock of Alpha Microsystems Initial Exercise Price: $1.625 per share
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and non-assessable shares
of the class of securities (the "Shares") of the corporation (the
"Company") at the initial exercise price per Share (the "Warrant Price")
all as set forth above and as adjusted pursuant to Article 2 of this
Warrant, subject to the provisions and upon the terms and conditions set
forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 ALTERNATIVE STOCK APPRECIATION RIGHT. At Holder's option, the
Company shall pay Holder the fair market value of the Shares issuable upon
conversion of this Warrant pursuant to Section 1.2 in cash in lieu of such
Shares.
1.4 FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 REPURCHASE ON SALE, MERGER OR CONSOLIDATION OF THE COMPANY.
1.7.1. "ACQUISITION". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2. ASSUMPTION OF WARRANT. If upon the closing of any Acquisition the
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
-1-
<PAGE> 2
WARRANT TO PURCHASE STOCK
---------------------------------------------------------------
1.7.3. NONASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.7.4. PURCHASE RIGHT. Notwithstanding the foregoing, at the election of
Holder, the Company shall purchase the unexercised portion of this Warrant for
cash upon the closing of any Acquisition for an amount equal to (a) the fair
market value of any consideration that would have been received by Holder in
consideration of the Shares had Holder exercised the unexercised portion of this
Warrant immediately before the record date for determining the shareholders
entitled to participate in the proceeds of the Acquisition, less (b) the
aggregate Warrant Price of the Shares, but in no event less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The Warrant Price and the number
of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment, from time to time in the manner set
forth on Exhibit A in the event of Diluting Issuances (as defined on Exhibit A).
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder amount computed
by multiplying the fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than (i) the price per share at which the Shares were
last issued in an arms-
<PAGE> 3
WARRANT TO PURCHASE STOCK
---------------------------------------------------------------
length transaction in which at least $500,000 of the Shares were sold and (ii)
the fair market value of the Shares as of the date of this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. The Company
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
4.1 TERM: NOTICE OF EXPIRATION. This Warrant is exercisable, in whole or
in part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, if reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holders notice of
proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.2, Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
<PAGE> 4
WARRANT TO PURCHASE STOCK
---------------------------------------------------------------
4.5 NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
ALPHA MICROSYSTEMS
BY
-----------------------------------
CHAIRMAN OF THE BOARD, PRESIDENT
OR VICE PRESIDENT
BY
-----------------------------------
SECRETARY OR ASS'T SECRETARY
<PAGE> 5
WARRANT TO PURCHASE STOCK
---------------------------------------------------------------
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase ____________ shares of
the Common/Series ____ Preferred [strike one] Stock of __________ pursuant to
the terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant
into Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to _______ of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.]
3. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below:
--------------------------
(NAME)
--------------------------
--------------------------
(ADDRESS)
4. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
- - --------------------------
(Signature)
- - --------------------------
(Date)
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
--------------------------------------
--------------, ---
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear :
------------
This is to advise you that the Warrant issued to you described below
will expire on , 19 .
-------------- --
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
(Name of Issuer)
By
----------------------------
Its
---------------------------
<PAGE> 6
WARRANT TO PURCHASE STOCK
---------------------------------------------------------------
EXHIBIT A
ANTI-DILUTION PROVISIONS
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
higher of the then conversion price of the Company's Preferred Stock or the
Warrant Price, then the number of shares issuable upon exercise of the Warrant,
shall be adjusted as a result of Diluting Issuances in accordance with the
Holder's standard form of Anti-Dilution Agreement in effect on the Issue Date.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
EXHIBIT B
REGISTRATION RIGHTS
The Shares (if common stock), or the common stock issuable upon conversion
of the Shares, shall be deemed "registrable securities" or otherwise entitled to
"piggy back" registration rights in accordance with the terms of the following
agreement (the "Agreement") between the Company and its investor(s):
--------------------------------------------------- [Identify Agreement by
date, title and parties. If no Agreement exists, indicate by "none".]
The Company agrees that no amendments will be made to the Agreement which
would have an adverse impact on Holder's registration rights thereunder without
the consent of Holder. By acceptance of the Warrant to which this Exhibit B is
attached, Holder shall be deemed to be a party to the Agreement.
If no Agreement exists, then the Company and the Holder shall enter into
Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
<PAGE> 1
Exhibit 10.75
---------------------------------------------------------------
SILICON VALLEY BANK
REGISTRATION RIGHTS AGREEMENT
ISSUER: ALPHA MICROSYSTEMS
ADDRESS: 2722 SOUTH FAIRVIEW STREET
SANTA ANA, CALIFORNIA 92704
DATE: NOVEMBER 22, 1996
THIS REGISTRATION RIGHTS AGREEMENT is entered into as of the above date by and
between SILICON VALLEY BANK ("Purchaser"), whose address is 3003 Tasman Drive,
Santa Clara, California 95054 and the above Company, whose address is set
forth above.
RECITALS
A. Concurrently with the execution of this Agreement, the Purchaser is
purchasing from the Company a Warrant to Purchase Stock (the "Warrant") pursuant
to which Purchaser has the right to acquire from the Company the Shares (as
defined in the Warrant).
B. By this Agreement, the Purchaser and the Company desire to set forth
the registration rights of the Shares all as provided herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "Registrable Securities" means (i) the Shares (if Common
Stock) or all shares of Common Stock of the Company issuable or issued upon
conversion of the Shares and (ii) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, any stock referred to in (i).
(c) The terms "Holder" or "Holders" means the Purchaser or qualifying
transferees under subsection 1.8 hereof who hold Registrable Securities.
(d) The term "SEC" means the Securities and Exchange Commission.
1.2 COMPANY REGISTRATION.
(a) Registration. If at any time or from time to time, the Company shall
determine to register any of its securities, for its own account or the account
of any of its shareholders, other than a registration on Form S-1 or S- 8
relating solely to employee stock option or purchase plans, or a registration on
Form S-4 relating solely to an SEC Rule 145 transaction, or a registration on
any other form (other than Form S-1, S-2, S-3 or S-18, or their successor forms)
or any successor to such forms, which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other state securities
laws); and
(ii) include in such registration (and compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 30 days after receipt of such written
notice from the Company, by any Holder or Holders, except as set forth in
subsection 1.2(b) below.
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise
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SILICON VALLEY BANK REGISTRATION RIGHTS AGREEMENT
---------------------------------------------------------------
the Holders as a part of the written notice given pursuant to subsection
1.2(a)(i). In such event the right of any Holder to registration pursuant to
this subsection 1.2 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other shareholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company.
1.3 EXPENSES OF REGISTRATION. All expenses incurred in connection with any
registration, qualification or compliance pursuant to this Section 1 including
without limitation, all registration, filing and qualification fees, printing
expenses, fees and disbursements of counsel for the Company and expenses of any
special audits incidental to or required by such registration, shall be borne by
the Company except the Company shall not be required to pay underwriters' fees,
discounts or commissions relating to Registrable Securities. All expenses of
any registered offering not otherwise borne by the Company shall be borne pro
rata among the Holders participating in the offering and the Company.
1.4 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep each Holder participating
therein advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. Except as
otherwise provided in subsection 1.3, at its expense the Company will:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to 120 days.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act or the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
1.5 INDEMNIFICATION.
(a) The Company will indemnify each Holder of Registrable Securities and
each of its officers, directors and partners, and each person controlling such
Holder, with respect to which such registration, qualification or compliance has
been effected pursuant to this Rights Agreement, and each underwriter, if any,
and each person who controls any underwriter of the Registrable Securities held
by or issuable to such Holder, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereto) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, or any violation or
alleged violation by the Company of the Securities Act, the Securities Exchange
Act of 1934, as amended ("Exchange Act"), or any state securities law applicable
to the Company or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any such state law and relating to action or inaction
required of the Company in connection with any such registration, qualification
of compliance, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, within a
reasonable amount of time after incurred for any reasonable legal and any other
expenses incurred in connection with investigating, defending or settling any
such claim, loss, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 1.5(a) shall not apply to
amounts paid in settlement of any such claim, loss, damage, liability, or
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<PAGE> 3
SILICON VALLEY BANK REGISTRATION RIGHTS AGREEMENT
---------------------------------------------------------------
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld); and provided further, that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by an
instrument duly executed by such Holder or underwriter specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by or issuable to such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company within the meaning of the Securities Act, and each other such
Holder, each of its officers, directors and partners and each person controlling
such Holder, against all claims, losses, expenses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, partners, persons or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder
specifically for use therein; provided, however, that the indemnity agreement
contained in this subsection 1.5(b) shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or action if such
settlement is effected without the consent of the Holder (which consent shall
not be unreasonably withheld); and provided further, that the total amount for
which any Holder shall be liable under this subsection 1.5(b) shall not in any
event exceed the aggregate proceeds received by such Holder from the sale of
Registrable Securities held by such Holder in such registration.
(c) Each party entitled to indemnification under this subsection 1.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense; and provided further, that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder, unless such failure resulted in prejudice to the
Indemnifying Party; and provided further, that an Indemnified Party (together
with all other Indemnified Parties which may be represented without conflict by
one counsel) shall have the right to retain one separate counsel, with the fees
and expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
1.6 INFORMATION BY HOLDER. Any Holder or Holders of Registrable Securities
included in any registration shall promptly furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to herein.
1.7 RULE 144 REPORTING. With a view to making available to Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees at all times to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, after 90 days after the effective date
of the first registration filed by the Company for an offering of its securities
to the general public;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements); and
(c) so long as a Holder owns any Registrable Securities, to furnish to such
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
the Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by the
Company as the Holder may reasonably request in complying with any rule or
regulation of the SEC allowing the Holder to sell any such securities without
registration.
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<PAGE> 4
SILICON VALLEY BANK REGISTRATION RIGHTS AGREEMENT
---------------------------------------------------------------
1.8 TRANSFER OF REGISTRATION RIGHTS. Holders' rights to cause the Company
to register their securities and keep information available, granted to them by
the Company under subsections 1.2 and 1.7 may be assigned to a transferee or
assignee of a Holder's Registrable Securities not sold to the public, provided,
that the Company is given written notice by such Holder at the time of or within
a reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned. The Company may prohibit the transfer
of any Holders' rights under this subsection 1.8 to any proposed transferee or
assignee who the Company reasonably believes is a competitor of the Company.
2. GENERAL.
2.1 WAIVERS AND AMENDMENTS. With the written consent of the record or
beneficial holders of at least a majority of the Registrable Securities, the
obligations of the Company and the rights of the Holders of the Registrable
Securities under this agreement may be waived (either generally or in a
particular instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board of Directors, may enter into
a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement;
provided, however, that no such modification, amendment or waiver shall reduce
the aforesaid percentage of Registrable Securities. Upon the effectuation of
each such waiver, consent, agreement of amendment or modification, the Company
shall promptly give written notice thereof to the record holders of the
Registrable Securities who have not previously consented thereto in writing.
This Agreement or any provision hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought, except to
the extent provided in this subsection 2.1.
2.2 GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within
California.
2.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
2.4 ENTIRE AGREEMENT. Except as set forth below, this Agreement and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
2.5 NOTICES. ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to Holder, at such Holder's address as set forth in the heading
to this Agreement, or at such other address as such Holder shall have furnished
to the Company in writing, or (b) if to the Company, at the Company's address
set forth in the heading to this Agreement, or at such other address as the
Company shall have furnished to the Holder in writing.
2.6 SEVERABILITY. In case any provision of this Agreement shall be
invalid, illegal, or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement or any provision of the other
Agreements shall not in any way be affected or impaired thereby.
2.7 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
2.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
COMPANY:
ALPHA MICROSYSTEMS
BY
----------------------------
PRESIDENT OR VICE PRESIDENT
BY
----------------------------
SECRETARY OR ASS'T SECRETARY
PURCHASER:
SILICON VALLEY BANK
BY
----------------------------
TITLE
-------------------------
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<PAGE> 1
Exhibit 10.76
---------------------------------------------------------------
SILICON VALLEY BANK
ANTIDILUTION AGREEMENT
ISSUER: ALPHA MICROSYSTEMS
ADDRESS: 2722 SOUTH FAIRVIEW STREET
SANTA ANA, CALIFORNIA 92704
DATE: NOVEMBER 22, 1996
THIS AGREEMENT is entered into as of the above date by and between SILICON
VALLEY BANK ("Purchaser"), whose address is 3003 Tasman Drive, Santa Clara,
California 95054, and the above Company, whose address is set forth above.
RECITALS
A. Concurrently with the execution of this Antidilution Agreement, the
Purchaser is purchasing from the Company a Warrant to Purchase Stock (the
"Warrant") pursuant to which Purchaser has the right to acquire from the Company
the Shares (as defined in the Warrant).
B. By this Antidilution Agreement, the Purchaser and the Company desire to
set forth the adjustment in the number of Shares issuable upon exercise of the
Warrant as a result of a Diluting Issuance (as defined in Exhibit A to the
Warrant).
C. Capitalized terms used herein shall have the same meaning as set forth
in the Warrant.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
1. DEFINITIONS. As used in this Antidilution Agreement, the following
terms have the following respective meanings:
(a) "Option" means any right, option, or warrant to subscribe for,
purchase, or otherwise acquire common stock or Convertible Securities.
(b) "Convertible Securities" means any evidences of indebtedness, shares of
stock, or other securities directly or indirectly convertible into or
exchangeable for common stock.
(c) "Issue" means to grant, issue, sell, assume, or fix a record date for
determining persons entitled to receive, any security (including Options),
whichever of the foregoing is the first to occur.
(d) "Additional Common Shares" means all common stock (including reissued
shares) issued (or deemed to be issued pursuant to Section 2) after the date of
the Warrant. Additional Common Shares does not include, however, any common
stock issued in a transaction described in Sections 2.1 and 2.2 of the Warrant;
any common stock Issued upon conversion of preferred stock outstanding on the
date of the Warrant; the Shares; or common stock Issued as incentive or in a
nonfinancing transaction to employees, officers, directors, or consultants to
the Company.
(e) The shares of common stock ultimately Issuable upon exercise of an
Option (including the shares of common stock ultimately Issuable upon conversion
or exercise of a Convertible Security Issuable pursuant to an Option) are deemed
to be Issued when the Option is Issued. The shares of common stock ultimately
Issuable upon conversion or exercise of a Convertible Security (other than a
Convertible Security Issued pursuant to an Option) shall be deemed Issued upon
Issuance of the Convertible Security.
2. DEEMED ISSUANCE OF ADDITIONAL COMMON SHARES. The shares of common
stock ultimately Issuable upon exercise of an Option (including the shares of
common stock ultimately Issuable upon conversion or exercise of a Convertible
Security Issuable pursuant to an Option) are deemed to be Issued when the Option
is Issued. The shares of common stock ultimately Issuable upon conversion or
exercise of a Convertible Security (other than a Convertible Security Issued
pursuant to an Option) shall be deemed Issued upon Issuance of the Convertible
Security. The maximum amount of common stock Issuable is determined without
regard to any future adjustments permitted under the instrument creating the
Options or Convertible Securities.
3. ADJUSTMENT OF WARRANT PRICE FOR DILUTING ISSUANCES.
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<PAGE> 2
SILICON VALLEY BANK ANTIDILUTION AGREEMENT
---------------------------------------------------------------
3.1 RATCHET ADJUSTMENT. If the Company issues Additional Common
Shares after the date of the Warrant and the consideration per Additional Common
Share (determined pursuant to Section 9) is less than the Warrant Price in
effect immediately before such Issue, the Warrant Price shall be reduced to the
lesser of:
(a) the amount of such consideration per Additional Common Share; or
(b) if the Company's common stock is traded on a national securities
exchange or the National Association of Securities Dealers Automated Quotation
System, the last reported bid or sale price of the Company's common stock on the
first trading day following a public announcement of the Issuance.
3.2 ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price, the number of Shares issuable upon exercise of the Warrant shall be
increased to equal the quotient obtained by dividing (a) the product resulting
from multiplying (i) the number of Shares issuable upon exercise of the Warrant
and (ii) the Warrant Price, in each case as in effect immediately before such
adjustment, by (b) the adjusted Warrant Price.
3.3 SECURITIES DEEMED OUTSTANDING. For the purpose of this Section 3, all
securities issuable upon exercise of any outstanding Convertible Securities or
Options, warrants, or other rights to acquire securities of the Company shall be
deemed to be outstanding.
4. NO ADJUSTMENT FOR ISSUANCES FOLLOWING DEEMED ISSUANCES. No adjustment
to the Warrant Price shall be made upon the exercise of Options or conversion of
Convertible Securities.
5. ADJUSTMENT FOLLOWING CHANGES IN TERMS OF OPTIONS OR CONVERTIBLE
SECURITIES. If the consideration payable to, or the amount of common stock
Issuable by, the Company increases or decreases, respectively, pursuant to the
terms of any outstanding Options or Convertible Securities, the Warrant Price
shall be recomputed to reflect such increase or decrease. The recomputation
shall be made as of the time of the Issuance of the Options or Convertible
Securities. Any changes in the Warrant Price that occurred after such Issuance
because other Additional Common Shares were Issued or deemed Issued shall also
be recomputed.
6. RECOMPUTATION UPON EXPIRATION OF OPTIONS OR CONVERTIBLE SECURITIES.
The Warrant Price computed upon the original Issue of any Options or Convertible
Securities, and any subsequent adjustments based thereon, shall be recomputed
when any Options or rights of conversion under Convertible Securities expire
without having been exercised. In the case of Convertible Securities or Options
for common stock, the Warrant Price shall be recomputed as if the only
Additional Common Shares Issued were the shares of common stock actually Issued
upon the exercise of such securities, if any, and as if the only consideration
received therefor was the consideration actually received upon the Issue,
exercise or conversion of the Options or Convertible Securities. In the case of
Options for Convertible Securities, the Warrant Price shall be recomputed as if
the only Convertible Securities Issued were the Convertible Securities actually
Issued upon the exercise thereof, if any, and as if the only consideration
received therefor was the consideration actually received by the Company
(determined pursuant to Section 9), if any, upon the Issue of the Options for
the Convertible Securities.
7. LIMIT ON READJUSTMENTS. No readjustment of the Warrant Price pursuant
to Sections 5 or 6 shall increase the Warrant Price more than the amount of any
decrease made in respect of the Issue of any Options or Convertible Securities.
8. 30 DAY OPTIONS. In the case of any Options that expire by their terms
not more than 30 days after the date of Issue thereof, no adjustment of the
Warrant Price shall be made until the expiration or exercise of all such
Options.
9. COMPUTATION OF CONSIDERATION. The consideration received by the
Company for the Issue of any Additional Common Shares shall be computed as
follows:
(a) Cash shall be valued at the amount of cash received by the
Corporation, excluding amounts paid or payable for accrued interest or accrued
dividends.
(b) Property. Property other than cash shall be computed at the fair
market value thereof at the time of the Issue as determined in good faith by the
Board of Directors of the Company.
(c) Mixed Consideration. The consideration for Additional common Shares
Issued together with other property of the Company for consideration that covers
both shall be determined in good faith by the Board of Directors.
(d) Options and Convertible Securities. The consideration per Additional
Common Share for Options and Convertible Securities shall be determined by
dividing:
(i) the total amount, if any, received or receivable by the Company for
the Issue of the Options or Convertible Securities, plus the minimum amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Company upon exercise of the Options or
conversion of the Convertible Securities, by
(ii) the maximum amount of common stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such number) ultimately Issuable upon the
exercise of such Options or the conversion of such Convertible Securities.
10. GENERAL.
10.1 GOVERNING LAW. This Antidilution Agreement shall be governed in
all respects by the laws of the State of
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<PAGE> 3
SILICON VALLEY BANK ANTIDILUTION AGREEMENT
---------------------------------------------------------------
California as such laws are applied to agreements between California residents
entered into and to be performed entirely within California.
10.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
10.3 ENTIRE AGREEMENT. Except as set forth below, this Antidilution
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
10.4 NOTICES. ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to Purchaser at Purchaser's address as set forth in the heading
to this Agreement, or at such other address as Purchaser shall have furnished to
the Company in writing, or (b) if to the Company, at the Company's address set
forth in the heading to this Agreement, or at such other address as the Company
shall have furnished to the Purchaser in writing.
10.5 SEVERABILITY. In case any provision of this Antidilution
Agreement shall be invalid, illegal, or unenforceable, the validity, legality
and enforceability of the remaining provisions of this Antidilution Agreement
shall not in any way be affected or impaired thereby.
10.6 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Antidilution Agreement.
10.7 COUNTERPARTS. This Antidilution Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
COMPANY:
ALPHA MICROSYSTEMS
BY
----------------------------------
PRESIDENT OR VICE PRESIDENT
BY
----------------------------------
SECRETARY OR ASS'T SECRETARY
PURCHASER:
SILICON VALLEY BANK
BY
----------------------------------
TITLE
-------------------------------
-3-
<PAGE> 1
EXHIBIT 10.77
November 7, 1996
James A. Sorensen
4873 Topeka Drive
Tarzana, CA 91356
Dear James:
Alpha Microsystems is pleased to offer you the position of Chief Financial
Officer and Vice President of Finance reporting to Doug Tullio, President and
Chief Executive Officer. Your projected start date is Monday, November 11, 1996.
The following sets forth the terms and conditions of your employment:
- Monthly base salary of $10,417 , payable on Alpha Microsystems regular
payroll schedule.
x
- Annual Bonus Incentive of 30 % of your base salary at 100 % of plan
achievement. The 1997 Fiscal Year Bonus Incentive will be prorated. The
measurement factors and basis for payment for this plan will be determined
by the Compensation Committee of Alpha Microsystems' Board of Directors.
x
- You will be permitted to take such unpaid personal days between November
11, 1996 and December 1, 1996 as are necessary to perform prior
obligations.
x
- Contingent upon approval by the Stock Option Committee of the Board of
Directors, you will receive Incentive Stock Options for 100,000 shares
based on the closing price on Monday, November 11, 1996. Vesting and other
terms will be set forth in a separate Incentive Stock Option Agreement to
be signed by you and Alpha Microsystems.
x
- Reasonable relocation expenses to be paid based upon mutually agreeable
terms.
x
- Upon termination of your employment subsequently initiated by Alpha
Microsystems for any reason other than misconduct, fraud or other unlawful
acts, you shall be entitled to six months of termination pay at your base
rate of pay in effect at the time of termination or the base rate of pay as
indicated in this Letter of Offer.
x
- All medical, dental, long term disability and life insurance benefits
applicable to employees generally commence on the first day of the month
following hire. Employee coverage of company paid life insurance equals
twice your annualized base pay plus $10,000. Medical and dental insurance
for you and your eligible dependents is provided. Employee contributions
for medical/dental coverage vary, depending on the type of plan.
x
- You will be eligible to participate in the Alpha Microsystems Profit
Sharing 401(k) Plan beginning July 1, 1997.
x
- This offer is conditional upon successful verification of prior
employment and references.
-
<PAGE> 2
- All employment with Alpha Microsystems is for an unspecified term, is
continued at the mutual consent of the parties, and may be terminated by
either party at any time.
In addition to your base compensation, you will be eligible for vacation,
holidays, sick leave, health insurance, and other employee benefits under the
terms and conditions of the then existing Alpha Microsystems policies,
commensurate with other Alpha Microsystems employees at the same level as you.
Except as required in the performance of your duties, you will not at any time
during or after your employment use, disclose or disseminate any confidential
information, or any other information of a secret, proprietary, confidential or
generally undisclosed nature, relating to Alpha Microsystems, or its products,
services, clients, methods or procedures. You shall deliver to Alpha
Microsystems any and all copies of confidential information, or other Alpha
Microsystems property, upon the termination of the employment relationship, or
at other time upon Alpha Microsystems' request.
To the fullest extent allowed by law, any controversy, claim or dispute between
you and Alpha Microsystems (and/or any of its owners, employees or agents)
relating to or arising out of your employment or the cessation of that
employment will be submitted to final and binding arbitration in Orange County,
California, for determination in accordance with the American Arbitration
Association's National Rules for the Resolution of Employment Disputes as the
exclusive remedy for such controversy, claim or dispute. Possible disputes
covered by the above include (but are not limited to) wage, contract,
discrimination, or other employment-related claims under laws known as Title
VII, Fair Employment and Housing Act, Americans with Disabilities Act, Age
Discrimination in Employment Act, and any other statutes or laws relating to an
employee's relationship with his employer. However, claims for workers'
compensation benefits and unemployment insurance are not covered by this
arbitration agreement, and such claims may be presented by you to the
appropriate court or state agency as provided by California law. Judgment on the
award issued by the arbitrator may be entered in any court having jurisdiction
thereof.
This letter and the terms and conditions of employment contained herein
supersede and replace any prior understandings or discussions between you and
Alpha Microsystems regarding your employment. This letter sets forth the
complete agreement between you and Alpha Microsystems regarding your employment,
and may only be amended by an instrument in writing signed by both parties.
James, all of us at Alpha Microsystems are looking forward to your joining our
organization.
Sincerely,
- - ---------------------------- --------------------------------
Doug Tullio Michelle A. Duggin
President and Chief Human Resources Manager
Executive Officer
Please indicate your acceptance by signing on the line below and
returning a copy to me:
Accepted: ____________________________ Date: _______________________
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