<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the fiscal year ended February 22, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
------------- -------------
COMMISSION FILE NUMBER 0-10558
ALPHA MICROSYSTEMS
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3108178
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2722 SOUTH FAIRVIEW STREET, SANTA ANA, CA 92704
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (714) 957-8500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing sale price of its common stock on May 14, 1998
on the Nasdaq National Market, a date within 60 days prior to the date of
filing, was $33,757,348.
As of May 14, 1998, there were 10,914,112 shares of the registrant's common
stock outstanding.
The purpose of this amendment is to amend Items 10, 11, 12 and 13 to read as set
forth herein.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the executive
officers and directors of the Company as of June 15, 1998:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Clarke E. Reynolds 77 Chairman of the Board of Directors
Douglas J. Tullio 55 President, Chief Executive Officer
and Director
Jeffrey J. Dunnigan 39 Vice President and Chief Financial
Officer
John F. Glade 55 Vice President, Engineering and
Manufacturing, Secretary and Director
Dennis E. Michael 40 Vice President of Marketing
Randall S. Parks 37 Vice President of Service Operations
Rockell N. Hankin 51 Director
Richard E. Mahmarian 61 Director
</TABLE>
CLARKE E. REYNOLDS, 77, has served as a director of the Company since
1989 and Chairman of the Board of Directors since May, 1991. Mr. Reynolds served
as Chief Executive Officer of the Company from January 1991 to August 1991, as
President from November 1990 to May 1991, as Vice Chairman of the Board from
October 1990 to May 1991, and as Chief Operating Officer of the Company from
November 1990 to May 1991. Mr. Reynolds provided independent consulting services
to the Company from 1984 through 1990, was an employee of the Company from
November 1990 through May 1993, and provided independent consulting services to
the Company from 1993 to 1997. Mr. Reynolds was previously employed by NCR
Corporation for over 47 years, during which time Mr. Reynolds held a variety of
sales and marketing and general management positions including Vice President
Pacific Region, Managing Director and Chairman of the Board NCR United Kingdom,
Vice President NCR Europe and Vice President Executive Office. Mr. Reynolds
serves as a Director of Sparta, Inc., which provides a wide range of scientific,
engineering and technical assistance services, primarily for the U.S. military
services and the Department of Defense.
DOUGLAS J. TULLIO, 55, has served as President and Chief Executive
Officer and as a director of the Company since May 1991. Mr. Tullio also served
as Chief Operating Officer from May 1991 to March 1994. Mr. Tullio joined the
Company in January 1990 and served as Executive Vice President of the Company
and President of the Company's subsidiaries, Rexon Business Machines and AMS
Computers. (In April 1990, these subsidiaries were merged into the Company.)
From 1984 to 1989, he worked for General Automation, Inc., in the positions of
President and member of the Board of Directors, Executive Vice President, Vice
President, General Manager and Vice President of Sales and Marketing.
JEFFREY J. DUNNIGAN, 39, was appointed Vice President and Chief
Financial Officer of the Company in December 1997. Prior to joining the Company,
Mr. Dunnigan headed a financial consulting practice in Irvine, California. From
October 1995 to September 1996, he was Vice President, Finance of Urohealth
Systems, Inc., a publicly traded medical device company. Prior to October 1995
he was Audit Senior Manager with Ernst & Young LLP, specializing in high
technology manufacturing and software and consulting on SEC matters.
DENNIS E. MICHAEL, 40, was named Vice President of Marketing of the
Company in May 1996 and previously held the position of Director of Marketing of
the Company. He served in various marketing management capacities at the Company
between 1983 and 1990 and with AST from 1990 to 1995.
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RANDALL S. PARKS, 37, has served as Vice President of Services of the
Company since 1995. Prior to his position as Vice President of Services, Mr.
Parks served as Director of Service Operations, Eastern Regional Manager and
Branch Field Engineering Manager of the Company. His previous experience was as
field service engineer with several companies, including Uni Dynamics, Mettler
Instruments and Consultant Field Engineering.
JOHN F. GLADE, 55, has served as Secretary of the Company since January
1987, Vice President, Engineering and Manufacturing since May 1988 and as a
director of the Company since 1996. Mr. Glade joined the Company as Director of
Engineering in September 1978, served as Vice President, Engineering from
February 1979 until June 1985 and served as Vice President, Advanced Products
Development from June 1985 until May 1988. He also served as Secretary of the
Company from February 1983 to August 1985 and a Director of the Company from
1979 through 1994.
ROCKELL N. HANKIN, 51, has served as a director of the Company since
1987. Mr. Hankin is the Chief Executive Officer of Hankin & Co., which was
established in June 1986 and provides consulting services. Mr. Hankin is also a
Director of Semtech Corporation (NMS), which manufactures electronic components,
and a Director of Sparta, Inc., which provides a wide range of scientific,
engineering and technical assistance services, primarily for the U.S. military
services and the Department of Defense. Until April 1998 Mr. Hankin was Chairman
of the Board of House of Fabrics, a national retail chain which markets sewing
supplies and crafts, and until May 1998 was a Director of Quidel (NMS), which
manufactures and distributes rapid diagnostic tests for medical applications.
RICHARD E. MAHMARIAN, 61, has served as a director of the Company since
1995. In 1997, Mr. Mahmarian became and is currently Chairman of the Board,
President, and Chief Executive Officer of Verification Systems International,
Incorporated, which designs, engineers and manufactures bar code and
two-dimensional symbology quality assurance instruments. Prior to its sale in
1996, Mr. Mahmarian was Vice Chairman of the Board and Executive Vice President
of RJS, Inc., a manufacturer of bar code printers, verification scanners,
software, and consumable products. Mr. Mahmarian had been a principal of RJS,
Inc. since 1987, when it was purchased in a leveraged buyout. Prior to joining
RJS, Inc., he held various management positions for Manx Engineering
Corporation, Bell & Howell Company, Northrop Corporation and NCR Corporation.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Section 16(a)"), requires the Company's directors and executive officers, and
persons who own more than ten percent of the Company's common stock, to file
with the Securities and Exchange Commission and the national Association of
Securities Dealers, Inc. initial reports of ownership and reports of changes in
ownership of Common Stock. Officers, directors and greater than ten-percent
shareholders are required to SEC regulations to furnish the Company with copies
of all Section 15(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended February 22, 1998, all such
reports required pursuant to Section 16(a) by the Company's officers, directors
and greater than ten-percent beneficial owners were timely filed.
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ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth for each of the Company's executive
officers earning in excess of $100,000 during the fiscal year ended February 22,
1998, compensation allocated or paid on or before June 15, 1998, for services in
all capacities with the Company and its subsidiaries during the fiscal year
ended February 22, 1998.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------- Awards
Other ---------------------
Annual Securities
Name and Compen- Underlying All Other
Principal Position Year Salary($) Bonus($) sation($) Options/SARs (#)(1) Compensation
- ------------------ ---- --------- -------- --------- --------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Douglas J. Tullio 1998 267,310 100,000 * 100,000 --
President and CEO 1997 225,004 90,000 * 180,000 --
1996 217,713 28,894 * 15,000 --
John F. Glade 1998 120,016 5,000 * -- --
Vice President, 1997 120,016 12,500 * 20,000 --
Engineering and 1996 131,211 7,500 * 7,500 --
Manufacturing,
and Secretary
Randy S. Parks 1998 85,932 23,678 * 40,000 --
Vice President,
Service Operations
Dennis E. Michael 1998 92,092 20,000 * 50,000 --
Vice President of
Marketing
</TABLE>
- --------------------------
* Aggregate amount does not exceed 10% of the total of annual salary and bonus
reported for the named executive officer.
(1) All options were granted under the 1993 Alpha Microsystems Employee Stock
Option Plan.
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Stock Option Grants
The following table provides information on stock options granted under
the 1993 Alpha Microsystems Employee Stock Option Plan to the executive officers
named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
Potential Realizable
Percent Individual Grants Value at Assumed
Number of of Total ---------------------- Annual Rates of Stock
Securities Options/SARs Market Price Appreciation for
Underlying Granted to Exercise of Price on Option Term
Options/SARs Employees in Base Price Date of Expiration ----------------------
Name Granted(#) Fiscal Year ($/Share) Grant Date 5%($) 10%($)
---- ------------ ------------ ----------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas J. Tullio 100,000 30% $1.38 $1.38 09/25/2002 $38,000 $84,000
President and CEO
John F. Glade -- -- -- -- -- -- --
Randy S. Parks 20,000 6% $1.44 $1.44 08/12/2002 $ 8,000 $17,600
20,000 6% $1.03 $1.03 12/18/2002 5,600 12,600
Dennis E. Michael 20,000 6% $1.44 $1.44 08/12/2002 $ 8,000 $17,600
30,000 9% $1.03 $1.03 12/18/2002 8,400 18,900
</TABLE>
- --------------------------------
(1) All options were granted under the 1993 Alpha Microsystems Employee
Stock Option Plan. Options granted to Mr. Tullio become exercisable as
follows: 25% on September 26, 1998, 25% on September 26, 1999, and 50%
on September 25, 2000. Options granted to Mr. Parks and Mr. Michael
become exercisable as follows: 25% on each anniversary date of the grant
beginning August 13, 1998 and December 19, 1998, respectively. In the
event that the employment of optionee shall be terminated, otherwise
than by reason of death or permanent disability or misconduct, the
option and all rights terminate on the 30th day after termination of
employment.
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Fiscal Year-end Values of Outstanding Stock Options
The following table provides information with respect to the executive
officers named in the Summary Compensation Table concerning unexercised stock
options held as of the end of the Company's 1998 fiscal year.
FISCAL YEAR-END OPTION/VALUES
<TABLE>
<CAPTION>
Number of Securities
Number Underlying Unexercised Value of Unexercised In-The-
of Shares Options at FY-End(#) Money Options at FY-End($)
Acquired on Value -------------------------- ----------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas J. Tullio 40,000 $22,812 356,939 190,000 $13,601 $31,300
John F. Glade -- -- 27,500 10,000 $ 6,801 --
Randy S. Parks -- -- 15,000 82,500 $ 158 $18,460
Dennis E. Michael -- -- 12,500 87,500 $ -- $24,713
</TABLE>
Compensation of Directors
Directors who are employees of the Company do not receive additional
compensation for acting as a member of the Board of Directors or any committee
thereof. Outside directors receive a monthly retainer of $2,000, and a fee of
$1,000 for each Board meeting and committee meeting (excluding telephonic
meetings) attended in excess of 12 each year, with all Board and committee
meetings held in a single day to be deemed as one meeting. In addition,
directors are reimbursed for their reasonable travel expenses incurred for
attendance at such meetings. Under the 1996 Nonemployee Director Stock
Compensation Plan, directors may accept directors' fees in stock in lieu of
cash. In accordance with the terms of the 1996 Nonemployee Director Stock
Compensation Plan, the number of shares of Common Stock received by the
nonemployee directors is based upon the fair market value of a share of Common
Stock at the date on which the cash compensation was otherwise payable to the
nonemployee director. Each of the Company's outside directors elected to receive
his director fees in fiscal year 1998 in the form of Company stock, to the
extent available under the 1996 Nonemployee Director Stock Compensation Plan. No
stock remained available under the 1996 Nonemployee Director Stock Compensation
Plan for the month commencing December 1, 1997 and the directors elected to
accrue stock to be delivered upon shareholder approval of an increase in the
number of shares available for such purpose.
In June 1993, the Company entered into a Consulting Agreement with Mr.
Reynolds whereby Mr. Reynolds agreed to provide consulting services to the
Company. Under the agreement, the Company paid to Mr. Reynolds a retainer of
$2,000 per month until August 1997 when the agreement was terminated.
Employment Agreements and Guaranteed Severance Payments
The Company has entered into employment agreements with Messrs. Tullio
and Glade. The agreements establish each employee's base salary and entitle each
employee to receive benefits, vacation and sick leave in accordance with the
Company's policies. The agreements are not for any specified term as either
party may terminate the employment relationship at any time in accordance with
the terms of the agreements. The agreements also contain provisions concerning
the non-disclosure by the employee of Company proprietary information and the
ownership of inventions conceived or made by the employee during the period of
employment with the Company. Pursuant to such employment agreements, under
certain circumstances, if an officer is terminated, voluntarily or
involuntarily, as a result of a "change in control" of the Company during the
term of his employment, the officer shall be entitled to monthly severance
payments for a period ranging under the individual agreements from 90 days to as
much as eighteen (18) months (the "Severance Period") following the effective
date of such termination. The term "change in control" means any of the
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following: (a) merger or consolidation of the Company; (b) sale of all or
substantially all of the assets of the Company; (c) sale of more than 50% of the
outstanding common stock of the Company by any person or persons; or (d) change
of identity of at least a majority of the Board of Directors within a
twelve-month period. The severance payments are based upon the average total
compensation paid to such officer during the previous fiscal year (excluding any
non-cash compensation). The severance payments shall be reduced by any
compensation, fees or remuneration received by such officer during the Severance
Period. The Company is also obligated to continue to provide medical and dental
benefits to the officer during the Severance Period. Additionally, any rights
the officer may have in connection with Company's stock options and stock awards
and the Company's profit sharing plan shall continue uninterrupted during the
Severance Period, to the extent permitted by applicable tax law, other laws and
the Company plans. The severance payments to the executive officers are
required, under certain circumstances, to be placed in a trust to ensure
payment.
In addition to the foregoing, Mr. Tullio is entitled to receive
severance payments and a continuation of employee benefits following termination
if termination is for any reason other than for causes arising out of breach of
Company policy or illegal acts. Such severance payments and benefits are for up
to six (6) months for Mr. Tullio.
Indemnification Agreements
The Company has entered into indemnification agreements with its
directors and certain key officers which provide such individuals with
contractual indemnification rights. Such indemnification agreements apply
retroactively as well as prospectively to any actions taken by the indemnified
parties while serving as officers or directors of the Company. Such
indemnification agreements also provide that the Company shall indemnify such
persons to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the indemnification agreement,
the Company's Articles of Incorporation, the Company's Bylaws or by statute.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee for fiscal 1998 was composed of
Messrs. Hankin, Mahmarian and Reynolds. Mr. Reynolds is Chairman of the Board
and has served the Company in the past in numerous executive positions,
including Chief Executive Officer.
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ITEM 12. SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table contains certain information as of June 15, 1998, as
to each director, each individual included in the Summary Compensation Table,
all officers and directors as a group and each person who, to the knowledge of
the Company, was the beneficial owner of 5% or more of the outstanding shares of
Common Stock. Persons named in the following table have sole voting and
investment powers with respect to all shares shown as beneficially owned by
them, subject to community property laws where applicable, and other information
contained in the footnotes to the table. Information with respect to beneficial
ownership is based on the Company's Common Stock records and data supplied to
the Company by its shareholders.
<TABLE>
<CAPTION>
Number of Shares
Name or Identity of Group Beneficially Owned(1) Percent of Class
------------------------- --------------------- ----------------
<S> <C> <C>
John F. Glade 211,200 (2) 2.0
Rockell N. Hankin 47,458 *
Richard E. Mahmarian 67,083 *
Clarke E. Reynolds 63,458 *
Douglas J. Tullio 397,645 3.6
All directors and officers as 844,814 7.6
a group (8 persons)
</TABLE>
- -------------------------
* Does not exceed 1% of the outstanding shares of Common Stock of the
Company.
(1) Includes shares issuable upon exercise of options and warrants which are
presently exercisable or will become exercisable on or before August 14,
1998, in the following amounts: Glade: 22,500; Hankin: 13,125; Mahmarian:
8,750; Reynolds: 13,125; Tullio: 341,939; and by all officers and directors
as a group: 456,939.
(2) Includes 156,200 shares held in a revocable trust of which Mr. Glade and
his wife, Alana L. Glade, are sole trustees. Mr. and Mrs. Glade, acting
jointly, have the power to vote and dispose of such shares.
Alpha Microsystems (NASDAQ NM: ALMI) today announced that it has signed
a letter of intent with the private equity firm of ING Equity Partners II, L.P.
whereby ING has agreed to invest up to $20 million in Redeemable Exchangeable
Preferred Stock of Alpha Micro. All of the terms and conditions of an initial $8
million investment and two subsequent investments totaling up to an additional
$12 million, are subject to the negotiation, preparation and execution of
definitive agreements, the satisfactory completion of due diligence by ING, and
other conditions including Alpha Microsystems' completion of a mutually
acceptable IT services business acquisition. If completed in accordance with the
terms of the letter of intent, ING's investment will provide Alpha Microsystems
with capital to further grow its IT services business through key acquisitions,
as well as provide the Company with additional working capital. Under the terms
of the letter of intent ING will receive 10-year warrants to purchase common
stock of Alpha Microsystems for $2.50 per share, representing a premium to the
historical 90-day average closing price of the common stock. The warrants will
grant ING the right to acquire approximately 20 percent, in the event of the
minimum $8 million investment, and up to approximately 44 percent, in the event
of a maximum $20 million investment, of the outstanding shares of common stock
of the Company on a fully diluted, post-issuance basis.
As contemplated by the terms of the letter of intent, dividends will be
payable on the Redeemable Exchangeable Preferred Stock to be purchased by ING at
an initial nine percent cumulative annual dividend rate, which increases one
percent annually after the second anniversary. The Preferred Stock must be
redeemed in seven years. The warrants will have customary anti-dilution
protection. Investments by ING under the terms of the letter of intent are to be
made in three tranches. ING's initial tranche, which is $8 million, will be
invested at the initial closing. The second tranche of $7 million and the third
tranche of $5 million are subject to, among other conditions, approval of Alpha
Microsystems' shareholders and, if approved and consummated, will be in exchange
for Preferred Stock and warrants to purchase common stock constituting up to
14.5 percent and 9.5 percent ownership in the Company by ING, respectively. If
Alpha Microsystems elects to redeem the Preferred Stock prior to June 30, 2000,
the shares purchasable pursuant to the Warrants will be reduced. Under the terms
of the letter of intent, Alpha Microsystems will expand its board of directors
to seven members, of which ING will designate three directors.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: June 18, 1998 ALPHA MICROSYSTEMS
By: /s/ DOUGLAS J. TULLIO
-----------------------------------
Douglas J. Tullio
President, Chief Executive Officer
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