<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 22, 1998
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
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 S. FAIRVIEW STREET, SANTA ANA, CA 92704
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (714) 957-8500
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 December 30, 1998, there were 11,193,952 shares of the registrant's Common
Stock outstanding.
<PAGE> 2
ALPHA MICROSYSTEMS
TABLE OF CONTENTS
PAGE NUMBER
-----------
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at November 22, 1998 (Unaudited) and
February 22, 1998 3
Condensed Consolidated Statements of
Operations (Unaudited) for the Three
and Nine Months Ended November 22, 1998 and
November 23, 1997 4
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Nine Months Ended November 22, 1998
and November 23, 1997 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 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security-Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
EXHIBIT INDEX 20
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALPHA MICROSYSTEMS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
November 22, February 22,
1998 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,680 $ 5,003
Accounts receivable, net of allowance for
doubtful accounts of $728 and $294 at
November 22, 1998 and February 22, 1998,
respectively 6,599 3,781
Inventories 1,090 580
Prepaid expenses and other current assets 637 390
-------- --------
Total current assets 14,006 9,754
Property and equipment, net of accumulated
depreciation of $9,103 and $9,479 at
November 22, 1998 and February 22, 1998,
respectively 3,422 3,186
Goodwill, net 7,676 --
IT Service contracts, net 484 1,192
Software costs, net 521 1,067
Other assets, net 435 589
-------- --------
$ 26,544 $ 15,788
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,654 $ 1,699
Deferred revenue 3,277 1,888
Bank borrowings 250 1,000
Accrued compensation 866 386
Other current liabilities 1,097 356
Current portion of long-term debt 116 92
-------- --------
Total current liabilities 9,260 5,421
Long-term debt 724 60
Commitments and contingencies
Redeemable preferred stock, no par
value; 5,000,000 shares authorized;
15,001 issued and outstanding
at November 22, 1998;
liquidation value $15,159 12,920 --
Common stock, no par value; 40,000,000
shares authorized; 11,193,952 and
10,914,112 shares issued and
outstanding at November 22, 1998 and
February 22, 1998, respectively 31,315 31,011
Warrants 1,704 --
Accumulated deficit (29,389) (20,761)
Foreign currency translation adjustment 10 57
-------- --------
$ 26,544 $ 15,788
======== ========
</TABLE>
See accompanying notes.
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<PAGE> 4
ALPHA MICROSYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ---------------------------
November 22, November 23, November 22, November 23,
1998 1997 1998 1997
-------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Net sales:
IT Services $ 7,883 $ 3,370 $16,574 $ 9,609
Product 1,200 1,748 3,644 4,659
------- ------- ------- -------
Total net sales 9,083 5,118 20,218 14,268
------- ------- ------- -------
Cost of sales:
IT Services 6,689 2,456 14,363 6,914
Product 1,702 1,161 3,398 3,183
------- ------- ------- -------
Total cost of sales 8,391 3,617 17,761 10,097
------- ------- ------- -------
Gross margin 692 1,501 2,457 4,171
Operating expenses:
Selling, general and administrative 3,640 1,897 6,950 5,895
Engineering, research and development 375 357 1,011 1,101
Impairment of long-lived assets 2,438 -- 2,438 --
------- ------- ------- -------
Total operating expenses 6,453 2,254 10,399 6,996
------- ------- ------- -------
Loss from operations (5,761) (753) (7,942) (2,825)
Other (income) expense:
Interest income (17) (61) (61) (241)
Interest expense 43 1 95 6
Other expense, net 382 13 413 25
Foreign exchange (gain) loss (3) (19) (39) (2)
------- ------- ------- -------
Total other (income) expense 405 (66) 408 (212)
------- ------- ------- -------
Loss before taxes (6,166) (687) (8,350) (2,613)
Provision for income taxes 1 1 14 10
------- ------- ------- -------
Net loss $(6,167) $ (688) $(8,364) $(2,623)
======= ======= ======= =======
Basic and diluted net loss per share $ (0.57) $ (0.06) $ (0.78) $ (0.24)
======= ======= ======= =======
Number of shares used in the computation
of basic and diluted per share amounts 11,188 10,887 11,011 10,848
======= ======= ======= =======
</TABLE>
See accompanying notes
-4-
<PAGE> 5
ALPHA MICROSYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
November 22, November 23,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8,364) $ (2,623)
Adjustments to reconcile net loss to cash
used in operating activities:
Impairment of long-lived assets 2,438 --
Software obsolescence 666 --
Depreciation and amortization 1,721 1,238
Loss on sale of subsidiary 379 --
Provision for losses on accounts receivable 548 35
Provision for slow-moving inventory 72 55
Other changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable (1,219) (733)
Inventories 159 (150)
Prepaid expenses and current assets 53 145
Accrued compensation 115 (168)
Accounts payable and accrued liabilities (91) (12)
Deferred revenue (52) (62)
Other, net (34) 32
-------- --------
Net cash used in operating activities (3,609) (2,243)
Cash flows from investing activities:
Acquisition of DCI, net of cash acquired (3,667) --
Acquisition of other IT Service assets (478) (70)
Purchases of equipment (1,428) (488)
Capitalization of software costs (233) (586)
Purchase of intangible assets -- (65)
Purchase of short-term investments -- (7,405)
Proceeds from sale of short-term investments -- 10,387
-------- --------
Net cash (used in) provided by
investing activities (5,806) 1,773
Cash flows from financing activities:
Issuance of preferred stock, net 12,872 --
Payment of preferred stock dividends (58) --
Issuance of warrants to purchase common stock, net 1,704 --
Issuance of common stock 277 53
Issuance of debt 1,000 --
Principal repayments on debt (1,080) (10)
Repayments on debt assumed in acquisition of DCI (4,612) --
-------- --------
Net cash provided by financing activities 10,103 43
Effect of exchange rate changes on cash (11) (4)
-------- --------
Net increase (decrease) in cash and cash equivalents 677 (431)
Cash and cash equivalents at beginning of period 5,003 1,768
-------- --------
Cash and cash equivalents at end of period $ 5,680 $ 1,337
======== ========
</TABLE>
See accompanying notes.
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<PAGE> 6
ALPHA MICROSYSTEMS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 (which, except for the operating charges
discussed in Note 6, consist only of normal recurring adjustments) to fairly
present the consolidated financial position of the Company at November 22, 1998,
and the consolidated results of its operations for the three- and nine-month
periods ended November 22, 1998 and November 23, 1997, and its cash flows for
the nine-month periods ended November 22, 1998 and November 23, 1997. 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 22, 1998. Certain prior period amounts
have been reclassified to conform to the current period presentation. The
results of operations for the periods ended November 22, 1998 are not
necessarily indicative of the results to be expected for any future period.
FISCAL YEAR
Historically, the Company's fiscal year ended in the month of February. On
December 17, 1998, the Company's Board of Directors approved a change in the
Company's fiscal year to a calendar year-end. The Company intends to file a
Transition Report on Form 10-K on or before March 31, 1999.
REVENUE RECOGNITION
The Company recognizes revenue on its product sales on shipment, and recognizes
revenue on its IT 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.
PER SHARE INFORMATION
Basic and diluted earnings per share is based on the weighted average common
shares outstanding during the periods presented and excludes the anti-dilutive
effects of options and warrants. The net loss has also been adjusted to reflect
dividends earned and accretion related to redeemable preferred shares
outstanding, as shown below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ----------------------------
November 22, November 23, November 22, November 23,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss $(6,167) $ (688) $(8,364) $(2,623)
Accretion on redeemable preferred stock (48) -- (48) --
Dividends on redeemable preferred stock (217) -- (217) --
------- ------ ------- -------
Net loss to common shareholders $(6,432) $ (688) $(8,629) $(2,623)
======= ====== ======= =======
</TABLE>
-6-
<PAGE> 7
COMPREHENSIVE INCOME
As of February 22, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's results of operations or shareholders' equity. SFAS 130 requires
foreign currency translation adjustments, which prior to adoption were reported
separately in shareholders' equity, to be included in other comprehensive
income. For the nine months ended November 22, 1998 and November 23, 1997, total
comprehensive loss amounted to $8,411,000 and $2,636,000, respectively.
2. INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined on the
first-in, first-out method, or weighted average cost, which approximates FIFO.
Inventories, net of reserves for excess and obsolete inventories of $138,000 and
$98,000 at November 22, 1998 and February 22, 1998, respectively, comprise the
following:
(In thousands)
November 22, February 22,
1998 1998
------------ -----------
Raw materials $ 378 $ 568
Work in process 3 4
Finished goods 709 8
------ -----
$1,090 $ 580
====== =====
3. ACQUISITION OF DELTA COMPUTEC INC.
On September 1, 1998, the Company completed the acquisition of Delta CompuTec
Inc ("DCI"). DCI provides management and consulting services, as well as
services that include network design, installation and maintenance. The
Agreement and Plan of Merger ("Merger Agreement") provided for the payment of
$3.4 million in exchange for all of the outstanding shares of DCI at the time of
closing, and a net payment of DCI's then outstanding debt in the amount of $4.6
million. Under the Merger Agreement, DCI became a wholly-owned subsidiary of
Alpha Micro. The acquisition was accounted for as a purchase and is reflected in
the pro forma information below based upon available information and upon
certain assumptions that the Company believes are reasonable in the
circumstances. The Company's initial purchase price allocation is preliminary
and subject to change as the Company obtains all the information necessary to
complete the allocation process.
-7-
<PAGE> 8
The pro forma financial information below reflects the acquisition of DCI and
the related purchase price financing through the sale of redeemable preferred
stock, warrants and term loan borrowings as if the acquisition occurred at the
beginning of the period presented below.
<TABLE>
<CAPTION>
Nine-month Nine-month
period ended period ended
November 22, 1998 November 23, 1997
----------------- -----------------
<S> <C> <C>
Revenue $27,586 $23,948
======= =======
Net loss $(8,002) $(1,847)
======= =======
Basic and diluted net loss
per common share $ (0.79) $ (0.23)
======= =======
</TABLE>
4. ACQUISITION TERM LOAN
A portion of the DCI acquisition was financed with $1.0 million of cash proceeds
under a four-year term loan provided by its bank. The term loan facility
provides for interest to be payable at the bank prime rate plus 2.5% (11% as of
the acquisition date) and is subject to certain financial covenants including
tangible net worth, debt to tangible net worth and quick ratio minimum
requirements.
5. SALE OF PREFERRED STOCK AND WARRANTS
In addition to the $1.0 million of cash proceeds provided under a four year bank
term-loan (see above), the acquisition of DCI was financed with $8.0 million
obtained under a Securities Purchase Agreement (the "Purchase Agreement"). Under
the Purchase Agreement, ING Equity Partners II, L.P. ("ING") agreed, subject to
certain conditions, to invest up to $20 million in redeemable exchangeable
preferred stock (the "Redeemable Preferred Stock") of the Company. The Purchase
Agreement provides for the purchase of Redeemable Preferred Stock, Voting
Preferred Stock, and Warrants by ING in three tranches of $8 million, $7
million, and up to $5 million, respectively. The first tranche was completed
concurrent with the acquisition of DCI and the second tranche was funded on
October 20, 1998 after shareholder approval. The Redeemable Preferred Stock was
initially recorded net of $1,754,000, which is the estimated fair value of the
warrants issued, determined through independent appraisal, and direct costs
associated with issuance aggregating approximately $374,000. The difference
between the initial carrying value of the Redeemable Preferred Stock of
$12,872,000 and $15,000,000 is being accreted through periodic charges to
accumulated deficit. Such accretion aggregated $48,000 during the periods ended
November 22, 1998.
Dividends are payable on the Redeemable Preferred Stock purchased by ING at an
initial 9% cumulative annual dividend rate, which increases to 11% on July 1,
2000 and thereafter increases an additional 1% annually. Dividends aggregating
$217,000 were charged, of which $58,000 was paid, to accumulated deficit for the
periods ended November 22, 1998.
In connection with ING's $15 million investment in Redeemable Preferred Stock,
ING was granted warrants to purchase 5,833,188 shares of the Company's common
stock for $2.50 per share. If the Company elects to close the third tranche,
subject to certain conditions, ING will invest up to an additional $5 million,
the proceeds from which must be used for certain acquisitions. In such event,
ING will be granted warrants to purchase for $2.50 per share additional shares
of common stock which, together with previously issued warrants will total up to
8,753,626 shares. The third closing must occur, if at all, on or before June 30,
1999.
-8-
<PAGE> 9
There is no assurance that the third tranche of the ING transaction will be
consummated. If the Company elects to redeem the Redeemable Preferred Stock
prior to June 30, 2000, the shares purchasable pursuant to the Warrants will be
reduced by approximately 600,000 shares, assuming all three tranches are closed.
6. OPERATING CHARGES
Significant to the comparative results of operations are charges totaling
$4,615,000 in the most recent quarter. These charges are comprised of the
following: (i) $2,230,000 to write-down impaired tangible and intangible assets
from non-core business acquired prior to 1998 to their estimated fair values
based on estimated cash flows, and write-down of accounts receivable related to
non-core operations, (ii) $910,000 to write-down impaired fixed assets and
inventory related to end-of-life proprietary product lines to their estimated
fair values, (iii) $749,000 related to software products obsolesced by the
introduction of new products, (iv) $379,000 resulting from the write-off of
notes receivable from previously sold assets and subsidiaries, (v) $256,000 of
indirect financing costs related to the sale of redeemable preferred stock and
warrants and the expensing of previously capitalized costs associated with
abandoned acquisitions, and (vi) $91,000 in write-offs of costs related to Year
2000 issues and adjustments of warranty and other liabilities. The table below
summarizes where these charges have been recognized on the statement of
operations for the periods ended November 22, 1998 (in thousands):
<TABLE>
<CAPTION>
Cost of Operating Impairment
Sales Expenses Charge Other Total
------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Impairment of tangible and
intangible assets $ 147 $ 495 $ 1,588 $ -- $2,230
Write-down of fixed assets and
inventory 60 -- 850 -- 910
Software obsolescence 666 83 -- -- 749
Loss on sale of assets and
subsidiaries -- -- -- 379 379
Indirect financing costs -- 256 -- -- 256
Year 2000 issues and operating
expenses 25 66 -- -- 91
----- ----- ------- ---- ------
Total $ 898 $ 900 $ 2,438 $379 $4,615
===== ===== ======= ==== ======
</TABLE>
7. CONTINGENCIES
The Company's current involvement with litigation is as follows:
In December 1995, Phoenix Marketing, Inc. d.b.a. 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. The case
was consensually settled, with the settlement funded entirely by the Company's
insurance carrier.
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.
-9-
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains certain forward-looking statements
(as such term is defined in the private Securities Litigation Reform Act of 1995
(the "Reform Act")) and information relating to Alpha Microsystems (the
"Company" or "Alpha Micro") that are based on the beliefs of the management of
the Company as well as assumptions made by and information currently available
to the management of Alpha Micro, and the Company intends that such
forward-looking statements be subject to the safe harbors created by the Reform
Act. These forward looking statements include (i) revenues to be recognized from
contracts with Ingram Micro, Tech Data Corporation and ATS Money Systems; (ii)
the Company's ability to fund its acquisition strategy; and (iii) the discussion
of the Company's efforts, and management's expectations, relating to Year 2000
compliance.
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. The forward-looking statements are dependent on a
number of factors, including (i) the economic and competitive environment of the
computer maintenance and information technology ("IT") support services industry
in general, and in the Company's specific market areas, (ii) its ability to
identify acquisition candidates, (iii) the Company's ability to successfully
integrate acquired operations with its existing operations, (iv) the Company's
ability to develop, produce, and market products and services that incorporate
new technology, are priced competitively, and achieve significant market
acceptance, (v) whether the Company's products and IT Services will be
commercially successful or technically advanced due to the rapid improvements in
computer technology and resulting product obsolescence, (vi) changes in the cost
of IT Services (vii) the Company's ability to deliver commercial quantities of
new products in a timely manner, (viii) the Company's ability to manage risks
associated with its operating strategies, (ix) changes in the Company's
operating strategy and capital expenditure plans, (x) the Company's ability to
manage its expenses commensurate to its revenues, and (xi) the Company's ability
to achieve Year 2000 compliance and the level of incremental costs associated
therewith, that could be adversely impacted by, among other things, the
availability and cost of programming and testing resources, vendors' ability to
modify proprietary software, and unanticipated problems identified in the
ongoing compliance review and (xii) other factors. In addition, the business and
operations of the Company are subject to substantial risks that increase the
uncertainty 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.
-10-
<PAGE> 11
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 22, 1998 and November 23, 1997:
<TABLE>
<CAPTION>
RELATIONSHIP TO NET SALES
--------------------------------------------------------------
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
November 22, November 23, November 22, November 23,
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net sales:
IT Service 86.8% 65.8% 82.0% 67.3%
Product 13.2 34.2 18.0 32.7
----- ----- ----- -----
Total net sales 100.0 100.0 100.0 100.0
Cost of sales 92.4 70.7 87.8 70.8
----- ----- ----- -----
Gross margin 7.6 29.3 12.2 29.2
----- ----- ----- -----
Selling, general and
administrative expense 40.1 37.0 34.4 41.3
Engineering, research and
development expense 4.1 7.0 5.0 7.7
Impairment of long-lived assets 26.8 -- 12.1 --
Interest (income) expense, net 0.3 (1.2) 0.2 (1.7)
Other (income) expense, net 4.2 (0.1) 1.8 0.2
----- ----- ----- -----
Loss before taxes (67.9) (13.4) (41.3) (18.3)
Provision for income taxes -- -- .1 0.1
===== ===== ===== =====
Net loss (67.9)% (13.4)% (41.4)% (18.4)%
===== ===== ===== =====
</TABLE>
GENERAL
During the most recent quarter, the Company substantially expanded its
information technology ("IT") operations with the acquisition of Delta CompuTec
(DCI), which was financed by a bank term loan and the sale of redeemable
preferred stock and warrants. Additionally, the Company's IT Service organic
growth continued with the addition of a new distributor warranty service
agreement with Tech Data Corporation. Revenues from the Tech Data agreement, as
well as from agreements signed earlier this year with Ingram Micro and ATS Money
Systems, are expected to be realized in future operating periods. However, the
current period results of operations were negatively impacted as additional IT
Service costs of sales were incurred without significant related revenues. Also
during the current quarter, the Company resolved to focus on its core business
competencies within IT Services while pursuing strategic options surrounding its
AlphaCONNECT technology, including a strategic partnership, a spin-off from the
parent company, or the sale of the technology.
The Company had negative earnings before interest, taxes, depreciation and
amortization ("EBITDA") of $5,446,000, during the third quarter ended November
22, 1998, compared to a negative EBITDA of $266,000 during the same period of
the prior fiscal year. The Company had negative EBITDA of $6,595,000, for the
nine-month period ended November 22, 1998, compared to a negative EBITDA of
$1,610,000 during the same period of the prior fiscal year.
-11-
<PAGE> 12
Significant to the comparative results of operations are charges totaling
$4,615,000 in the most recent quarter. These charges are comprised of the
following: (i) $2,230,000 to write-down impaired tangible and intangible assets
from non-core business acquired prior to 1998 to their estimated fair values
based on estimated cash flows, and write-down of accounts receivable related to
non-core operations, (ii) $910,000 to write-down impaired fixed assets and
inventory related to end-of-life proprietary product lines to their estimated
fair values, (iii) $749,000 related to software products obsolesced by the
introduction of new products, (iv) $379,000 resulting from the write-off of
notes receivable from previously sold assets and subsidiaries, (v) $256,000 of
indirect financing costs related to the sale of redeemable preferred stock and
warrants and the expensing of previously capitalized costs associated with
abandoned acquisitions, and (vi) $91,000 in write-offs of costs related to Year
2000 issues and adjustments of warranty and other liabilities. The table below
summarizes where these charges have been recognized on the statement of
operations for the periods ended November 22, 1998 (in thousands):
<TABLE>
<CAPTION>
Cost of Operating Impairment
Sales Expenses Charge Other Total
------- --------- ---------- ----- -------
<S> <C> <C> <C> <C> <C>
Impairment of tangible and
intangible assets $ 147 $ 495 $ 1,588 $ -- $ 2,230
Write-down of fixed assets and
inventory 60 -- 850 -- 910
Software obsolescence 666 83 -- -- 749
Loss on sale of assets and
subsidiaries -- -- -- 379 379
Indirect financing costs -- 256 -- -- 256
Year 2000 issues and operating
expenses 25 66 -- -- 91
----- ----- ------- ----- -------
Total $ 898 $ 900 $ 2,438 $ 379 $ 4,615
===== ===== ======= ===== =======
</TABLE>
Also significant to the comparative results of operations is net interest
expense. During the three- and nine-month periods ended November 22, 1998, the
Company incurred net interest expense of $26,000 and $34,000 in each of the
periods, as compared to net interest income during the three and nine months
ended November 23, 1997 of $60,000 and $235,000, respectively. Accordingly, the
change in net interest expense during the most recent three- and nine-month
periods increased net loss by $86,000 and $269,000, respectively.
RESULTS OF OPERATIONS
Net Sales
Total net sales increased $5,950,000, or 41.7 percent, to $20,218,000 for the
nine-month period ended November 22, 1998 from $14,268,000 for the nine-month
period ended November 23, 1997. Net sales increased $3,965,000, or 77.5 percent,
to $9,083,000 for the three-month period ended November 22, 1998 from $5,118,000
for the three-month period ended November 23, 1997. The increase in total net
sales is due to increases in IT Service revenues, offset by declines in product
sales.
IT Services Sales
IT Service revenue increased $6,965,000, or 72.5 percent, to $16,574,000 during
the most recent nine-month period over the respective prior fiscal period, and
increased $4,513,000 or 133.9 percent, to $7,883,000 during the most recent
three-month period over the respective prior fiscal period. The nine- and
three-month revenue increases include $3,568,000 from the DCI acquired
operations and $2,202,000 and $654,000, respectively, attributable to non-core
businesses, not included in the prior periods. The balance of the revenue
increase during the nine- and three-month periods of $1,195,000 and $291,000,
respectively, is attributable to organic growth.
-12-
<PAGE> 13
Product Sales
Total product revenues during the comparable nine-month periods declined
$1,015,000, or 21.8 percent, to approximately $3,644,000 from approximately
$4,659,000. Total product revenues during the comparable three-month periods
declined $548,000, or 31.4 percent, to approximately $1,200,000 from
approximately $1,748,000. While both domestic and European product sales
declined, a majority of the decline was due to the loss of sales to a large
European customer, which represented in the past a significant portion of the
Company's product revenues. No assurances can be made as to future product sales
levels whether domestic or international.
Gross Margin
Total gross margin for the Company for the first nine months of fiscal 1999
decreased to 12.2 percent compared to 29.2 percent during the same period last
year, and for the most recent three months of fiscal 1999 decreased to 7.6
percent compared to 29.3 percent during the same period last year.
IT Service Gross Margin
IT Services gross margin declined to 13.3 percent for the nine-month period
ended November 22, 1998, from 28.0 percent during the same period in the prior
year and declined to 15.1 percent for the three-month period ended November 22,
1998, from 27.1 percent during the same period in the prior year. The principal
factor contributing to the margin decline during the periods is the inclusion of
negative gross margins from non-core operations acquired prior to 1998 resulting
in approximately a 7.0 percent decrease during the nine-month period and a 5.0
percent decrease during the three-month period. Additionally, the gross margin
was negatively impacted during the nine- and three-month periods due to
increased depreciation related to other IT Service business acquisitions and
increased operating costs related to new IT Service contracts, for which no
significant service revenue was recognized. Due to the continuing shift from
proprietary to third-party IT Services, the Company does not expect gross
margins to return to historic levels.
Product Gross Margin
Product gross margin during the nine- and three-month periods declined to 6.8%
and (41.8)%, respectively, compared to 31.7% and 33.6% for the comparable prior
fiscal year periods. The decline is primarily due to a software obsolescence
charge of $666,000. The product margin decline is also due to both a reduction
in sales volume and increases in inventory reserves.
Selling, General and Administrative
Selling, general and administrative expenses increased $1,055,000 to $6,950,000
for the nine-month period ended November 22, 1998, compared to $5,895,000 for
the nine-month period ended November 23, 1997, and increased $1,743,000 to
$3,640,000 from $1,897,000 for the comparable three-month periods. The increase
in costs for both of these periods is primarily due to (i) additional general
and administrative costs and goodwill amortization associated with the DCI
acquisition; and (ii) increased accounts receivable reserves related to non-core
businesses. These increases were partially off-set by reduced spending related
to the AlphaCONNECT internet technology. The third quarter of the current year
also includes expenditures made in support of the Company's organic IT Service
growth plan and the development of the Company's new website.
Research and Development
Research and development expenses (which include engineering support and
services) incurred for the nine-month period ended November 22, 1998, decreased
by $90,000 to $1,011,000 from $1,101,000 during the same period in
-13-
<PAGE> 14
the prior fiscal year. Research and development expenses as a percentage of
product sales increased to 27.7 percent for the nine months just ended from 23.6
percent during the comparable period in the prior fiscal year.
Other Expense
Other expense for the quarter and nine months ended November 22, 1998 includes
$379,000 of expense related to the write-down of notes receivable arising from
previously sold assets and subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended November 22, 1998, the Company's working capital
increased $413,000 from $4,333,000 at February 22, 1998 to $4,746,000. This
increase reflects $10,103,000 of net cash generated from financing activities,
offset by: $4,145,000 of cash used to acquired IT Service companies; $233,000 of
cash used for software capitalized, including the further development of the
Company's AlphaCONNECT technology; $1,428,000 of working capital to acquire
equipment, including the further implementation of the Company's new integrated
information system, and equipment purchases to support new service capabilities;
and the remaining decrease due primarily to cash used by operations of which
$1.2 million is attributable to an increase in accounts receivable.
The Company believes that its current cash position, augmented by future
operating activities, and working capital available through its Imperial Bank
revolving credit facility, will provide sufficient resources to finance its
working capital requirements through at least December 31, 1999. Advances under
the bank facility are subject to availability based on eligible accounts
receivable and certain financial covenants, including tangible net worth, debt
to tangible net worth and quick ratio minimum requirements. In order to fund its
acquisition strategy, the Company expects that additional capital will be
necessary. The Company's agreement with ING Equity Partners II, L.P. provides up
to an additional $5 million as an equity investment, subject to certain
conditions. The Company is also pursuing additional financing from other sources
to support its acquisition strategy, although there can be no assurances that
any financing will be available on acceptable terms. The Company's future
capital requirements depend on a variety of factors, including, but not limited
to, the rate of decline in the traditional proprietary business; the success,
timing, and amount of investment required to penetrate the Internet/intranet
markets; service revenue growth or decline; and potential acquisitions.
YEAR 2000 COMPLIANCE
Background
Most pre-1998 computers, software, and other equipment which utilizes
programming code contains calendar year data that is abbreviated to only two
digits. As a result of these design decisions, many of these systems could fail
to operate or fail to produce correct results if "00" is not interpreted to mean
2000. These problems may not be fully recognized, either as to frequency or
severity until the year 2000 arrives. These problems are commonly referred to as
the "Millennium Bug" or "Year 2000 Problem".
Assessment
The Year 2000 Problem affects certain of the computers, software, and other
equipment used, operated, or maintained by the Company. Accordingly, the Company
has undertaken a review of its internal computer programs and systems so that
its programs and systems will be Year 2000 compliant. The Company presently
believes that its
-14-
<PAGE> 15
necessary and essential computer systems, software and equipment will be Year
2000 compliant in a timely manner. However, while the estimated cost of these
efforts are not expected to be material to the Company's financial position or
any year's results of operations, there can be no assurance to this effect.
Software Sold to Customers
The Company has been engaged for some time in the process of identifying and
resolving potential Year 2000 Problems with the software products which it has
developed and currently markets. However, management believes that it is not
possible to determine with complete certainty that all Year 2000 Problems
affecting the Company's software products will be identified or corrected due to
the complexity of these products and the fact that these products interact with
other third party vendor products and operate on computer systems which are not
under the Company's control.
Internal Infrastructure
The Company is engaged in reviewing its major computers, software applications,
and related equipment used in connection with its internal operations for Year
2000 Problems; however, the majority of the computer programs used by the
Company are off-the-shelf, recently developed programs from third-party vendors.
The Company is in the process of obtaining assurances from such vendors as to
the Year 2000 compliance of their products. Although some vendors make verbal
assurances of Year 2000 compliance, there can be no certainty that the systems
utilized by the Company will not be affected. The Company intends to continue
confirming with vendors, testing, replacing or enhancing its internal
applications to ensure that risks related to such software are minimized. This
process is expected to be completed in mid-1999.
Systems Other than Information Technology Systems
In addition to computers and related systems, the operation of office and
facilities equipment, such as fax machines, photocopiers, telephone switches,
security systems, elevators, and other common devices may be affected by the
Year 2000 Problem. The Company is currently assessing the potential effect of,
and costs of remediating, the Year 2000 Problem on its office and facilities
equipment. The Company estimates the total cost to the Company of completing any
required modifications, upgrades, or replacements of these internal systems will
not have a material adverse effect on the Company's business or results of
operations and anticipates that this process will be completed by mid-1999.
These estimates are being monitored and will be revised as additional
information becomes available.
Suppliers
The Company has initiated communications with third party suppliers of products
or services used, operated, or maintained by the Company to identify and, to the
extent possible, to resolve issues involving any Year 2000 Problems. However,
the Company has limited or no control over the actions of these third party
suppliers. Thus, while the Company expects that it will not be impacted by any
significant Year 2000 Problems experienced by its suppliers, there can be no
assurance that their suppliers will resolve any or all Year 2000 Problems with
these systems before the occurrence of a material disruption to the business of
the Company or any of its customers. Any failure of these third parties to
resolve Year 2000 problems with their systems in a timely manner could have a
material adverse effect on the Company's business, financial condition, and
results of operation.
Most Likely Consequences of Year 2000 Problems
The Company expects to identify and resolve the Year 2000 Problems that could
materially adversely affect its business operations. However, management
believes that it is not possible to determine with complete certainty that
-15-
<PAGE> 16
all Year 2000 Problems affecting the Company have been or will be identified or
corrected. The number of devices that are affected and the interactions among
these devices are simply too numerous. In addition, accurate predictions of Year
2000 Problem-related failures will occur or the severity, duration, or financial
consequences of such failures cannot be made. As a result, management expects
that the Company could likely suffer the following consequences:
1. a number of operational inconveniences and inefficiencies for the Company
and its clients that may consume management's time and attention as well as
financial and human resources normally devoted to its ordinary business
activities; and
2. a lesser number of serious system failures that may require significant
efforts by the Company or its customers to prevent or alleviate material
business disruptions.
Costs
The Company has thus far performed the analysis described above using existing
personnel. The Company does not separately track internal costs incurred in
connection with analysis, investigation and implementation of Year 2000
compliance plans.
Contingency Plans
The Company is currently in the process of developing contingency plans to be
implemented as part of its efforts to identify and correct Year 2000 Problems
affecting its internal systems. The Company expects to complete its contingency
plans by the end of the second quarter of 1999. Depending on the systems
affected, these plans could include accelerated replacement of affected
equipment or software, short to medium-term use of backup equipment and
software, increased work hours for Company personnel or use of contract
personnel to correct on an accelerated schedule any Year 2000 Problems that
arise, development of manual workarounds for information systems, and similar
approaches. If the Company is required to implement any of these contingency
plans, it could have a material adverse effect on the Company's financial
condition and results of operations.
Based on the activities described above, the Company does not believe that the
Year 2000 Problem will have a material adverse effect on the Company's business
or results of operations.
-16-
<PAGE> 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In December 1995, Phoenix Marketing, Inc. d.b.a. 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. The case
was consensually settled, with the settlement funded entirely by the Company's
insurance carrier.
Item 4. Submission of Matters to a Vote of Security-Holders
The Annual Meeting of Shareholders of Alpha Microsystems was held on October 15,
1998. At the Annual Meeting, all of management's nominees for directors listed
in the Proxy Statement were elected and there was no solicitation in opposition
to such nominees. Voting was as follows:
<TABLE>
<CAPTION>
WITHHOLD
DIRECTORS FOR AUTHORITY ABSTAIN
--------- ---------- --------- -------
<S> <C> <C> <C>
Clarke E. Reynolds 12,437,772 91,921 N/A
Douglas J. Tullio 12,432,672 97,021 N/A
Rockell N. Hankin 12,453,622 76,071 N/A
Carlos D. De Mottos 12,451,872 77,821 N/A
Benjamin P. Giess 12,450,272 79,421 N/A
Richard E. Mahmarian 12,450,722 78,971 N/A
</TABLE>
The proposal to ratify the appointment of Ernst & Young LLP, as independent
auditors of the Company and its subsidiaries for the year ending February 28,
1999 was approved, receiving 12,428,210 votes for approval and 52,965 votes
against approval, with 48,518 abstentions. The proposal to approve the issuance
of certain warrants to purchase Common Stock which, upon exercise thereof, would
represent twenty percent (20%) or more of the outstanding shares of Common
Stock, together with the issuance of certain voting preferred stock granting the
holder thereof voting rights equivalent to the voting rights of the shares
issuable upon exercise of the warrants, which approval is necessary in order to
meet the continued listing requirements for the Common Stock on Nasdaq, was
approved, receiving 4,165,979 votes for approval, 347,460 votes against approval
and 96,409 abstentions. The proposal to amend the Articles of Incorporation to
increase the authorized number of shares of Common Stock was approved, receiving
12,019,682 votes for approval, 422,966 votes against approval and 87,045
abstentions. The proposal to approve the 1998 Stock Option and Award Plan was
approved, receiving 6,191,218 votes for approval, 499,026 votes against approval
and 101,052 abstentions.
-17-
<PAGE> 18
Item 6. Exhibits and Reports on Form 8-K.
(a) See Exhibit Index.
(b) A Current Report on Form 8-K was filed by the Company on September 15,
1998 regarding the acquisition of Delta CompuTec Inc. and the funding of
an equity investment by ING Equity Partners II, L.P.
A Current Report on Form 8-K/A was filed by the Company on October 5,
1998 presenting the financial statements and pro forma financial
information applicable to the acquisition of Delta CompuTec Inc.
A Current Report on Form 8-K/A-2 was filed by the Company on October 6,
1998.
A Current Report on Form 8-K was filed by the Company on October 26,
1998 regarding a security sales transaction with ING Equity Partners II,
L.P.
A Current Report on Form 8-K was filed by the Company on December 29,
1998 regarding the adoption of a new fiscal year based on a calendar
year-end.
-18-
<PAGE> 19
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 6, 1999 By: /s/ Douglas J. Tullio
-----------------------------
President and
Chief Executive Officer
Date: January 6, 1999 By: /s/ Jeffrey J. Dunnigan
-----------------------------
Vice President and
Chief Financial Officer
-19-
<PAGE> 20
EXHIBIT INDEX
Number Description of Documents
- ------ ------------------------
3.5 Amendments to Restated Bylaws of Registrant dated August 3, 1998
3.6 Certificate of Amendment to Articles of Incorporation of Registrant dated
October 15, 1998
4.7 Warrant to Purchase Common Stock issued to Princeton Securities dated
October 20, 1998
10.69 Alpha Microsystems 1998 Stock Option and Award Plan
10.70 Form of Incentive Stock Option Agreement for use in connection with 1998
Stock Option and Award Plan
10.71 Form of Nonemployee Director Non-Qualified Stock Option Agreement to be
used in connection with 1998 Stock Option and Award Plan
10.72 Form of Nonemployee Director Non-Qualified Stock Option Agreement in Lieu
of Cash Compensation for Prior Services for use in connection with 1998
Stock Option and Award Plan
10.73 Form of Non-Qualified Stock Option Agreement for use in connection with
1998 Stock Option and Award Plan
10.74 Form of Non-Qualified Stock Option Agreement issued in connection with
the acquisition of Delta Computec, Inc.
10.75 Indemnification Agreement by and between Registrant and Carlos D. De
Mattos dated December 17, 1998
10.76 Indemnification Agreement by and between Registrant and John T. DeVito
dated December 17, 1998
10.77 Indemnification Agreement by and between Registrant and Benjamin P. Giess
dated December 17, 1998
10.78 Indemnification Agreement by and between Registrant and Sam Yau dated
December 17, 1998
27. Financial Data Schedule
-20-
<PAGE> 1
EXHIBIT 3.5
AMENDMENTS TO RESTATED BYLAWS
DULY ADOPTED
BY THE
BOARD OF DIRECTORS
AT A SPECIAL MEETING OF AUGUST 3, 1998
1. Article III, Section 2 of the Bylaws of the Corporation is
amended and restated in its entirety to read as follows:
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of the directors of the corporation shall not be less than
five (5) nor more than nine (9). The exact number of directors
within these limits shall be specified by approval of the Board
of Directors or by approval of the shareholders, as that term is
defined in California Corporations Code Section 153; provided,
however, than an amended reducing the number of directors to a
number less than five (5) cannot be adopted if the votes cast
against its adoption at a meeting, or the shares not consenting
in the case of action by written consent, are equal to more than
16-2/3% of the outstanding shares entitled to vote; provided
further, however, that so long as the Investor is entitled to
designate directors ("Preferred Directors") pursuant to the
Certificate of Designation, the number of directors of the
corporation shall be seven (7), three (3) of whom shall be
Preferred Directors (except that only two (2) Preferred Directors
may be directors prior to the Second Closing of the Securities
Purchase Agreement between the Corporation and ING Equity
Partners II, L.P., as that term is defined therein.
2. Article III, Section 3 of the Bylaws of the Corporation is
amended and restated in its entirety to read as follows:
Section 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors
shall be elected at each annual meeting of the shareholders to
hold office until the next annual meeting, provided, that
Preferred Directors may be elected at a special meeting called
for such purpose, at any annual or other special meeting of
stockholders. Each director, including a director elected to fill
a vacancy, shall hold office until the expiration of the
<PAGE> 2
term for which elected and until a successor has been elected
and qualified.
3. Article III, Section 4 of the Bylaws of the Corporation is
amended by adding the following paragraph after the first paragraph of that
Section:
Subject to the provisions of the Certificate of
Determination, ING Equity Partners II, L.P. (the "Investor")
shall be entitled to (A) remove from the Board any Preferred
Director, (b) designate each successor to any such Preferred
Director removed in accordance herewith or who otherwise vacates
such office, and (C) remove any other director necessary to
create sufficient vacancies on the Board to permit the election
of the number of Preferred Directors required under Section 2
hereof. The affirmative vote of the Investor shall be required to
remove any Preferred Director.
4. Paragraph 1 of Article IV, Section 1 of the Bylaws of the
Corporation is amended as follows:
Section 1. COMMITTEES OF DIRECTORS. The board of directors
may, by resolution adopted by a majority of the authorized number
of directors, designate one or more committees, each consisting
of two or more directors, to serve at the pleasure of the board.
The board may designate one or more directors as alternate
members of any committee, who may replace any absent member
(other than a Preferred Director) at any meeting of the
committee. Each Preferred Director shall be entitled to be a
member of any committee or subcommittee of the Board and the
Preferred Directors shall constitute at least 50% of the members
of any such committee or subcommittee. Any committee, to the
extent provided in the resolution of the board, shall have all
the authority of the board, expect with respect to:
The remainder of the Corporation's Bylaws remain in full force
and effect as of the date hereof.
-2-
<PAGE> 1
EXHIBIT 3.6
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
DOUGLAS J. TULLIO and JEFFREY J. DUNNIGAN certify that:
1. They are the President and the Secretary, respectively, of ALPHA
MICROSYSTEMS, a California corporation.
2. First Paragraph of Article IV 1 of the Articles of Incorporation of
this corporation is amended to read as follows:
"This corporation is authorized to issue two classes of
shares to be designated Common Stock and Preferred Stock,
respectively. This corporation is authorized to issue
Forty Million (40,000,000) shares of Common Stock and Five
Million (5,000,000) shares of Preferred Stock.
3. The foregoing amendment of Articles of Incorporation has been duly
approved by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation of this
corporation has been duly approved by the required vote of shareholders in
accordance with Section 902 of the California Corporations Code. The total
number of outstanding voting shares of the corporation is 10,941,321 shares of
Common Stock and one share of Voting Preferred Stock entitled to cast votes
equal to 2,181,448 shares of Common Stock. The number of shares voting in favor
of this Amendment equaled or exceeded the vote required. The percentage vote
required was more than fifty (50%) of the Common Stock and voting Preferred
Stock voting together..
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Executed at Santa Ana, California on October 15, 1998.
------------------------------
DOUGLAS J. TULLIO, President
------------------------------
JEFFREY J. DUNNIGAN, Secretary
<PAGE> 1
EXHIBIT 4.7
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR QUALIFIED UNDER ANY STATE SECURITIES LAW,
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS THEY HAVE BEEN
REGISTERED UNDER SUCH LAWS OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
WARRANT TO PURCHASE COMMON STOCK
DATE: Effective as of October 20, 1998 200,000 Shares
ALPHA MICROSYSTEMS
------------------
ALPHA MICROSYSTEMS, a California corporation (the "Company"),
grants to PRINCETON SECURITIES or permitted transferees or assigns (the
"Holder"), for good and valuable consideration the receipt and sufficiency are
hereby acknowledged, the right, subject to the terms of this Warrant, to
purchase, at any time and from time to time during the period commencing as of
the date of issue and ending at 5:00 p.m. New York City Time on August 7, 2003,
unless extended or terminated as provided herein (the "Expiration Date"), up to
Two Hundred Thousand (200,000) shares of the Company's Common Stock (the
"Shares") at $3.23 per share (the "Exercise Price").
SECTION 1
---------
DEFINITIONS
-----------
As used in this Warrant, unless the context otherwise requires:
1.1 "Blue Sky Application" means an application or other document
filed pursuant to a Blue Sky Law to register, qualify or obtain an exemption for
any offer or sale by or for the account of the Holder of all or part of this
Warrant or any of the Shares.
1.2 "Blue Sky Law" means the laws and regulations of any state or
other jurisdiction applicable to any sale by or for the account of the Holder of
all or part of this Warrant or any of the Shares.
1.3 "Common Stock" means the Common Stock of the Company existing
on the Grant Date.
<PAGE> 2
1.4 "Exercise Date" means the date on which this Warrant is
exercised, in whole or in part, in the manner indicated in Sections 2.1 and 2.2.
1.5 "Exercise Price" means $3.23, the price at which each share
of Common Stock may be purchased upon exercise of this Warrant.
1.6 "Expiration Date" means the Expiration Date indicated on the
first page of this Warrant.
1.7 "Grant Date" means September 1, 1998, the date this Warrant
was first granted.
1.8 "Purchase Agreement" means the Securities Purchase Agreement
dated as of August 7, 1998, by and between the Company and ING Equity Partners
II, L.P.
1.9 "Prospectus" means a preliminary prospectus or final
prospectus (including any supplement) or any offering circular or similar
offering document, included in a Registration Statement.
1.10 "Registrable Securities" means Shares of Common Stock issued
upon the exercise of the Warrant.
1.11 "Registration Statement" means a Registration or Offering
Statement, a pre-effective or post-effective amendment to a Registration
Statement or other document proposed for filing or filed by the Company under
the Securities Act which is or would be available under applicable laws, rules
and regulations to register for a public offering or sale any shares of Common
Stock. The term "Registration Statement" shall not apply to any registration
statement relating to the sale of securities to participants in a Company stock
or option plan or a registration on any form 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 (as defined
in Section 1.10 above).
1.12 "Securities Act" means the Securities Act of 1933, as
amended from time to time, and all rules and regulations promulgated thereunder,
or any act, rules or regulations which replace the Securities Act or any such
rules and regulations.
1.13 "Warrant" means this Warrant.
SECTION 2
---------
DURATION AND EXERCISE OF WARRANT
--------------------------------
2.1 Exercise Period. The Warrants may be exercised at any time
after the Grant Date and on or before the Expiration Date. After the Expiration
Date this Warrant shall become void, and all rights to purchase Shares hereunder
shall thereupon cease.
-2-
<PAGE> 3
2.2 Method of Exercise. This Warrant may be exercised by the
Holder, in whole or in part, by (i) surrendering this Warrant to the Company,
and (ii) tendering to the Company payment of the Exercise Price for the Shares
for which exercise is made. Upon proper exercise, the Holder shall be deemed to
be the holder of record of the Shares for which exercise is made, even though
the transfer or register books of the Company may then be closed or certificates
representing such Shares may not then be actually delivered to the Holder.
2.3 Certificates. Within a reasonable time but no more than five
(5) business days after exercise, certificates for the shares of Common Stock
comprising such Shares shall be delivered to the Holder.
SECTION 3
---------
VALIDITY SHARES
---------------
The Company covenants that all shares of Common Stock issued upon
exercise of this Warrant will be validly issued, fully paid, nonassessable and
free of pre-emptive rights.
SECTION 4
---------
FRACTIONAL SHARES
-----------------
No fractional Shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a Share otherwise issuable upon any
such exercise, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the Exercise Price.
SECTION 5
---------
LIMITED RIGHTS OF THE WARRANT HOLDER
------------------------------------
The Holder shall not, solely by virtue of being the Holder of
this Warrant, have any of the rights of a holder of Common Stock of the Company,
either at law or equity, until such Warrant shall have been exercised and the
Holder shall be deemed to be the holder of record of Shares as provided in this
Warrant.
SECTION 6
---------
EXCHANGE, TRANSFER OR LOSS OF WARRANT
-------------------------------------
6.1 Exchange. This Warrant is exchangeable, without expense to
the Holder and upon surrender hereof to the Company, for Warrants of different
denominations entitling the Holder to purchase Shares equal in total number and
identical in type to the Shares covered by this Warrant.
6.2 Transfer. Subject to the provisions of Section 7, upon
surrender of this Warrant to the Company with assignment duly executed and the
tender of funds sufficient to pay
-3-
<PAGE> 4
any transfer tax, the Company shall, without charge, execute and deliver a new
Warrant to the assignee named in such Assignment Form, and this Warrant shall be
canceled concurrent with such issuance.
6.3 Loss, Theft, Destruction or Mutilation. Upon receipt by the
Company of satisfactory evidence of the loss, theft, destruction or mutilation
of this Warrant and either (in the case of loss, theft or destruction)
reasonable indemnification or (in the case of mutilation) the surrender of this
Warrant for cancellation, the Company will execute and deliver to the Holder,
without charge, a new Warrant of like denomination.
SECTION 7
---------
SECURITIES LAW COMPLIANCE
-------------------------
Except pursuant to the requirements of Rule 144 of the Securities
Act, neither this Warrant nor the Shares issuable under this Warrant may be
sold, transferred, assigned or otherwise disposed except as follows:
(a) to a person who, in the opinion of counsel reasonably
satisfactory to the Company, is a person to whom this Warrants or the Shares may
legally be transferred without registration and without the delivery of a
current prospectus or offering circular with respect thereto; or
(b) to any person upon delivery of a prospectus or
offering circular then meeting the requirements of the Securities Act relating
to such securities (as to which a registration statement or notification under
the Securities Act shall then be in effect) and the offering thereof for such
sale or disposition.
SECTION 8
---------
REGISTRATION OF THE SHARES
--------------------------
8.1 Registration Rights.
(a) Piggy-back Registration. The Company shall advise each
Holder of Registrable Securities by written notice at least five days prior to
the filing of any Registration Statement pertaining to securities to be offered
to the public solely for cash, and will, upon the request of any such Holders,
and without any charge to them, include in any such Registration Statement such
information as may be required to permit a public offering of their Registrable
Securities. If any such Registration Statement or notification is being filed by
the Company in connection with an underwritten public offering of securities of
the Company, the Company shall have the right to require such Holders (provided
that Rule 415 applies to the sale of the Registrable Securities) to postpone the
offering of their securities for a period of ninety (90) days following the
effective date of such Registration Statement or notification. If any such
Registration Statement or notification is being filed by the Company solely for
the benefit of selling security holders, the Company will permit such Holders of
the Registrable Securities to
-4-
<PAGE> 5
include for sale with such shareholders in such Registration Statement or
notification at least a pro rata portion (based upon the ratio of the number of
shares of Common Stock which such selling security holders desire to sell to the
number of Registrable Securities which such Holders of the Registrable
Securities desire to sell) of the total Registrable Securities being registered,
and the offering of the balance of the Registrable Securities owned by holders
of the Registrable Securities may then be postponed by the Company for a period
of ninety (90) days following effectiveness of the Registration Statement or
notification.
(b) General Provisions. The following provisions shall
also be applicable to any such Registration:
(i) The Holders whose Registrable Securities are
to be included therein (each a "Seller and collectively the "Sellers") shall
furnish the Company with such appropriate information (relating to the
intentions of such Holders) in connection therewith as the Company shall
reasonably request in writing. Following the effective date of such Registration
Statement or notification, the Company shall, upon the request of the Seller,
forthwith supply such number of Prospectuses or offering circulars meeting the
requirements of the Securities Act as shall be reasonably requested by such
Seller to permit such Seller to make a public offering of all such securities of
such Seller included therein. The Company shall, at the expense of the Holders,
file such Blue Sky Applications and use its best efforts to qualify such
securities included therein for sale in such states as the Sellers shall
reasonably designate.
(ii) Excepting as specifically set forth herein,
the Company shall bear the cost and expense directly relating to any
registration securities pursuant to this Section 8.1. The Company shall not be
required to pay any selling commissions, but shall pay all applicable listing
fees.
(iii) The Company shall indemnify and hold
harmless each Seller who may purchase from or sell for any Seller any
Registrable Securities from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any Prospectus included
therein, required to be filed or furnished by reason of this Section 8.1, or
caused by any omission or alleged omissions to state therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or alleged untrue statement
or omission or alleged omission which was based upon information furnished or
required to be furnished in writing to the Company by and about such Seller
expressly for use therein, which indemnification shall include each person, if
any, who controls any such Seller within the meaning of the Securities Act;
provided, however, that the Company shall not be obliged so to indemnify any
such Seller or controlling persons unless such Seller shall at the same time
indemnify the Company, its directors, each officer signing a Registration
Statement or notification and each person, if any who controls the Company
within the meaning of the Securities Act from and against any and all losses,
claims, damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
notification or any Prospectus or offering circular required to be filed or
furnished
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by reason of this Section 8.1, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement therein, in light of the circumstances under which they were made,
not misleading, insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or alleged untrue statement or omission or
alleged omission which was based upon information furnished in writing to the
Company by and about such Seller expressly for use therein.
(iv) Notwithstanding anything herein, the Company
shall not be required to keep the Registration Statement or notification
effective, or to prepare and file any amendments or supplements, later than nine
months after the date on which the Registration Statement or notification
becomes effective under the Securities Act.
(v) The Company shall, in case of a registration
or notification, furnish to the Holders of the Registrable Securities for whom
such Registrable Securities are registered or are to be registered or are filed
for notification, at the time such Registration Statement becomes effective, an
opinion of counsel, dated such date, for the Company reasonably acceptable to
the Holders to the effect that a Registration Statement or notification covering
the Registrable Securities has been filed with the commission under the
Securities Act and has become effective, that a prospectus or offering circular
complying in form with the requirements of the Securities Act is available for
delivery, that to the best of such counsel's knowledge, no stop order has been
issued by the Commission suspending the effectiveness of the Registration
Statement or suspending the availability of the offering exemption and that, to
the best of the counsel's knowledge, no proceedings for the issuance of a stop
order are threatened or contemplated, and that the Registrable Securities have
been registered or qualified under the securities or Blue Sky Laws of each state
in which the Company is required, pursuant to subsection (b)(i) of this Section
8.1 to register or qualify the Registrable Securities.
(vi) It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 8.1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be reasonably required to effect the Registration of such Holder's
Registrable Securities.
8.2 Exchange Listing. In connection with the issuance of any
Shares upon the exercise of this Warrant, the Company shall secure the listing
of the underlying shares of Common Stock upon any securities exchange upon which
shares of the Company's Common Stock are listed.
8.3 No Obligations to Sell. Neither the giving of any notice nor
the making of any request hereunder shall impose any obligation on the selling
Holder to sell any Registrable Securities.
8.4 Registration Rights Survive Exercise. The Company's
obligations under this Section 8 shall continue in effect, regardless of the
exercise or surrender of this Warrant. The Company's obligations under this
Section 8 shall expire, however, with respect to a Warrant
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or Shares which have been sold by a broker or dealer or in a public offering
registered under the Securities Act or a public offering exempt from such
registration.
SECTION 9
---------
MISCELLANEOUS
-------------
9.1 Successors and Assigns. All the covenants and provisions of
this Warrant which are by or for the benefit of the Company or the Holder shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
9.2 Notice. Notice or demand pursuant to this Warrant to be given
or made by the Holder to or on the Company shall be sufficiently given or made
if sent by registered mail, postage prepaid, receipt requested, addressed, until
another address is designated in writing by the Company, as follows:
Alpha Microsystems
2722 South Fairview Street
Santa Ana, California 92704
Any notice or demand authorized by this Warrant to be given or made by the
Company to or on the Holder shall be given to the Holder by registered mail,
postage prepaid, receipt requested, addressed at his last known address as it
shall appear on the books of the Company, until another address is designated in
writing by like mail.
9.3 Applicable Law. The validity, interpretation and performance
of this Warrant shall be governed by the laws of the State of California.
9.4 Headings. The Article headings herein are for convenience
only and are not part of this Warrant and shall not affect the interpretation
thereof.
9.5 Vesting of Warrant. The Company acknowledges that it agreed
to grant to the Holder the right, pursuant to the terms of this Warrant, to
purchase upon the closing of the first and second tranches of the investment as
contemplated by that certain Securities Purchase Agreement dated as of August 7,
1998, (the "Purchase Agreement") by and between ALPHA MICROSYSTEMS, a California
corporation (the "Company"), and ING Equity Partners II, L.P. 50,000 and 150,000
shares, respectively, of the Company's Common Stock. As of this date, both the
first tranche and the second tranche of investment pursuant to the Purchase
Agreement have been completed, and accordingly, this Warrant reflects the
Company's agreement to grant to the Holder and the Holder's right to purchase
200,000 shares in the aggregate.
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<PAGE> 8
Dated as of October 20, 1998 ALPHA MICROSYSTEMS
By: _____________________________
Douglas J. Tullio, President
ATTEST:
_______________________________
Secretary
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<PAGE> 9
EXERCISE FORM
-------------
(To be Executed by the Warrant Holder if It, He, or She
Desires to Exercise the Warrant in Whole or in Part)
To: Alpha Microsystems
The undersigned (______________________________________________________________)
Please insert name and Social Security or number
E.I.N. of Holder
hereby irrevocably elects to exercise the rights of purchase represented by the
within Warrant for, and to purchase thereunder, ___________ Shares provided for
therein and tenders payment herewith to the order of Alpha Microsystems in the
amount of $________.
The undersigned requests that certificates for such Shares be issued as follows:
Name:___________________________________________________________________________
Address:________________________________________________________________________
Deliver to:_____________________________________________________________________
Address:________________________________________________________________________
and, if said number of Shares shall not be all the Shares purchasable hereunder,
that a new Warrant for the balance remaining of the Shares purchasable under the
within Warrant be registered in the name of, and delivered to, the undersigned
at the address stated below.
Address:________________________________________________________________________
Dated:________________,19_____
Signature:___________________________________
Note: Signature must correspond with the name
as written upon the face of this Warrant in
every particular, without alteration or
enlargement or any change whatsoever.
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<PAGE> 10
FORM OF ASSIGNMENT
------------------
(To be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
_______________ the right to purchase _______ Shares evidenced by the within
Warrant, and appoints ____________________ to transfer the same on the books of
Alpha Microsystems with the full power of substitution in the premises.
Dated:________________,19_____
Signature:___________________________________
Note: Signature must correspond with the name
as written upon the face of this Warrant in
every particular, without alteration or
enlargement or any change whatsoever, and the
signature must be guaranteed in the usual
manner.
Signature Guaranteed:
_________________________________________
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<PAGE> 1
EXHIBIT 10.69
ALPHA MICROSYSTEMS
1998 STOCK OPTION AND AWARD PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
(a) This plan is intended to implement and govern the 1998 Stock
Option and Award Plan (the "Plan") of Alpha Microsystems, a California
corporation (the "Company"). The Plan was adopted by the Board of Directors of
the Company (the "Board") as of August 11, 1998, subject to the approval of the
Company's stockholders. The purpose of the Plan is (i) to enable the Company and
its Subsidiaries to obtain and retain competent personnel who will contribute to
the Company's success by their ability, ingenuity and industry and to provide
incentives to the directors, officers and other key employees, and agents and
consultants that are linked directly to increases in stockholder value and will
therefore inure to the benefit of all stockholders of the Company, and (ii) to
align Nonemployee Directors' personal interests more closely with those of
stockholders of the company by providing Nonemployee Directors with stock
options in lieu of cash compensation for service on the Board of Directors.
(b) Definitions.
For purposes of the Plan, the following terms shall be defined as
set forth below:
(1) "Administrator" means the Board, or if the Board does
not administer the Plan, the Committee in accordance with Section 2.
(2) "Act" means the Securities Exchange Act of 1934, as
amended (the "Act.
(3) "Board" means the Board of Directors of the Company.
(4) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor thereto.
(5) "Commission" means the Securities and Exchange
Commission.
(6) "Committee" means the committee appointed to
administer the Plan by the Board consisting of not less than two members of the
Board. If at any time the Board shall not administer the Plan, then the
functions of the Board specified in the Plan shall be exercised by the
Committee.
(7) "Company" means Alpha Microsystems, a corporation
organized under the laws of the State of California (or any successor
corporation).
(8) "Deferred Stock" means an award granted pursuant to
Section 7 of the right to receive Stock at the end of a specified deferral
period.
(9) "Director" means a member of the Board.
(10) "Disability" means permanent and total disability as
determined within the meaning of Section 22(e)(3) of the Code.
(11) "Effective Date" shall mean the date provided
pursuant to Section 15.
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(12) "Eligible Employee" means an employee of the Company
or any Subsidiary eligible to participate in the Plan pursuant to Section 4.
(13) "Employee" means any officer or other regular
full-time employee (as defined in accordance with Section 3401(c) of the Code)
of the Company, or of any corporation which is a Subsidiary.
(14) "Exchange Act" means the Securities Exchange Act of
1934, as amended. References to any provision of the Exchange Act include the
rules and regulations thereunder and successor provisions and rules and
regulations thereto.
(15) "Fair Market Value" means, as of any given date, with
respect to any award granted hereunder, (A) the closing sale price of the Stock
on such date as reported in the Western Edition of the Wall Street Journal, or
(B) if the Stock is not publicly traded, the fair market value of the Stock as
otherwise determined by the Administrator in the good faith exercise of its
discretion.
(16) "Incentive Stock Option" means any Stock Option
intended to be designated as an "incentive stock option" within the meaning of
Section 422 of the Code.
(17) "Limited Stock Appreciation Right" means a Stock
Appreciation Right that can be exercised only in the event of a "Change of
Control" (as defined in Section 10 below).
(18) "Nonemployee Director" means any member of the Board
who is not an Employee of the Company or a Subsidiary.
(19) "Non-Qualified Stock Option" means any Stock Option
that is not an Incentive Stock Option, including any Stock Option that provides
(as of the time such option is granted) that it will not be treated as an
Incentive Stock Option.
(20) "Participant" means any Eligible Employee of the
Company or any Subsidiary or any director, consultant or advisor of the Company
or any subsidiary selected by the Committee, pursuant to the Administrator's
authority in Section 2, to receive grants of Stock Options, Stock Appreciation
Rights, Limited Stock Appreciation Rights, Restricted Stock awards, Deferred
Stock awards, Performance Shares or any combination of the foregoing and any
Nonemployee Director or who elects to participate in the Plan in accordance with
the terms of the Plan.
(21) "Performance Share" means an award of shares of Stock
granted pursuant to Section 7 that is subject to restrictions based upon the
attainment of specified performance objectives.
(22) "Plan" means this 1998 Stock and Awards Plan.
(23) "Restricted Period" means the period set by the
Administrator as it pertains to Deferred Stock or Restricted Stock awards
pursuant to Section 7.
(24) "Restricted Stock" means an award granted pursuant to
Section 7 of shares of Stock subject to restrictions that will lapse with the
passage of time.
(25) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act, as such Rule may be amended or superseded from time to time, or
any successor definition adopted by the Commission,
(26) "Stock" means the common stock of the Company.
(27) "Stock Appreciation Right" means the right pursuant
to an award granted under Section 6 to receive an amount equal to the difference
between (A) the Fair Market Value, as of the date such Stock
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Appreciation Right or portion thereof is surrendered, of the shares of Stock
covered by such right or such portion thereof, and (B) the aggregate exercise
price of such right or such portion thereof.
(28) "Stock Option" means an option to purchase shares of
Stock granted pursuant to Section 5.
(29) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company, if
each of the corporations (other than the last corporation) in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
(30) "Termination of Board Service" means the time when a
Director ceases to be a member of the Board for any reason, including, but not
by way of limitation, a termination by resignation, expiration of term, removal
(with or without cause), retirement or death.
SECTION 2. ADMINISTRATION.
(a) The Plan shall be administered by the Board or by a Committee
appointed by the Board, which shall serve at the pleasure of the Board.
(b) The Administrator shall have the power and authority to grant
to Eligible Employees, directors, and consultants and advisors (who render bona
fide services other than in connection with the offer and sale of securities in
capital-raising transactions for the Company), of the Company or any Subsidiary,
pursuant to the terms of the Plan: (A) Stock Options, (B) Stock Appreciation
Rights or Limited Stock Appreciation Rights, (C) Restricted Stock, (D) Deferred
Stock, (E) Performance Shares or (F) any combination of the foregoing.
In particular, the Administrator shall have the authority:
(1) except as set forth in paragraph (c) of this Section
2, to select those employees of the Company or any Subsidiary who shall be
Eligible Employees;
(2) to determine whether and to what extent Stock Options,
Stock Appreciation Rights, Limited Stock Appreciation Rights, Restricted Stock,
Deferred Stock, Performance Shares or a combination of the foregoing, are to be
granted to Eligible Employees or any director, consultant or adviser of the
Company or any Subsidiary hereunder;
(3) to determine the number of shares to be covered by
each such award granted hereunder;
(4) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
including, but not limited to, (x) the restricted period applicable to
Restricted or Deferred Stock awards and the date or dates on which restrictions
applicable to such Restricted or Deferred Stock shall lapse during such period,
and (y) the performance goals and periods applicable to the award of Performance
Shares; and
(5) to determine the terms and conditions, not
inconsistent with the terms of the Plan, which shall govern all written
instruments evidencing the Stock Options, Stock Appreciation Rights, Limited
Stock Appreciation Rights, Restricted Stock, Deferred Stock, Performance Shares
or any combination of the foregoing.
(c) The Administrator shall have the authority, in its
discretion, to adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall from time to time deem advisable; to
interpret the terms and provisions of the Plan and any award issued under the
Plan (and any agreements relating thereto); and to otherwise supervise the
administration of the Plan; provided, however, in no event shall the
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Committee have the power to determine the amount, price, or timing of Stock
Options to be issued under the Plan to Nonemployee Directors pursuant to Section
8 below, all such determinations being automatic pursuant to Plan provisions.
(d) All decisions made by the Administrator pursuant to the
provisions of the Plan shall be final and binding on all persons, including the
Company, any Subsidiaries and the Participants.
(e) In the case where the Administrator is the Committee, a
majority of the Committee shall constitute a quorum, and the acts of a majority
of the members of the Committee present at any meeting at which a quorum is
present, or acts approved in writing by a majority of the members of the
Committee, shall be deemed the acts of the Committee
SECTION 3. STOCK SUBJECT TO PLAN.
(a) The total number of shares of Stock reserved and available
for issuance under the Plan shall be Two Million shares. Such shares may be
authorized but unissued shares, or shares acquired in the market for the account
of the Participant, or a combination thereof. At all times, the number of shares
reserved and available for issuance hereunder as so determined from time to time
shall be decreased by virtue of awards granted and outstanding or exercised
hereunder.
(b) To the extent that (i) a Stock Option or expires or is
otherwise terminated without being exercised, or (ii) any shares of Stock
subject to any Restricted Stock, Deferred Stock or Performance Share award
granted hereunder are forfeited, such shares shall again be available for
issuance in connection with future awards under the Plan. If any shares of Stock
have been pledged as collateral for indebtedness incurred by a Participant in
connection with the exercise of a Stock Option and such shares are returned to
the Company in satisfaction of such indebtedness, such shares shall again be
available for issuance in connection with future awards under the Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, spin-off, combination, repurchase, exchange of
shares or other securities of the Company, stock split or reverse split, stock
dividend, liquidation, dissolution, or other similar corporate transaction or
event affecting the Stock such that an adjustment is appropriate in order to
prevent dilution or enlargement of each Participant's rights under the Plan, a
substitution or adjustment shall be made in (i) the aggregate number of shares
reserved for issuance under the Plan, and (ii) the kind, number and option price
of shares in a manner that is proportionate to the change to the Stock and
otherwise equitable subject to outstanding Stock Options granted under the Plan,
provided that the number of shares subject to any award shall always be a whole
number. With respect to Incentive Stock Options, such adjustment shall be made
in accordance with Section 424 of the Code. An adjusted option price shall also
be used to determine the amount payable by the Company upon the exercise of any
Stock Appreciation Right or Limited Stock Appreciation Right associated with any
Stock Option.
SECTION 4. ELIGIBILITY.
(a) Officers and other key employees of the Company or any
Subsidiaries who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company or its Subsidiaries and
directors of the Company and any Subsidiary and consultants and advisers of the
Company and its Subsidiaries (who render bona fide services other than in
connection with the offer and sale of securities in capital-raising transactions
for the Company) shall be eligible to be granted Non-Qualified Stock Options,
Stock Appreciation Rights, Limited Stock Appreciation Rights, Restricted Stock
awards, Deferred Stock awards and Performance Shares hereunder. Officers and
other key employees of the Company and its Subsidiaries shall also be eligible
to be granted Incentive Stock Options hereunder. The Participants under the Plan
shall be selected from time to time by the Administrator, in its sole
discretion, from among the Eligible Employees and consultants and advisers
recommended by the senior management of the Company, and the Administrator shall
determine, in its sole discretion, the number of shares covered by each award.
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(B) EACH DIRECTOR OF THE COMPANY WHO IS NOT AN EMPLOYEE OF THE COMPANY, WILL BE
ELIGIBLE TO BE GRANTED (AND SHALL BE GRANTED) STOCK OPTIONS UNDER SECTION 8. A
NONEMPLOYEE DIRECTOR'S ELIGIBILITY UNDER THE PLAN AUTOMATICALLY TERMINATES ON
THE DATE OF TERMINATION OF BOARD SERVICE.
SECTION 5. STOCK OPTIONS.
(a) Stock Options may be granted alone or in addition to other
awards granted under the Plan. Any Stock Option granted under the Plan shall be
in such form as the Administrator may from time to time approve, and the
provisions of Stock Option awards need not be the same with respect to each
optionee. Recipients of Stock Options shall enter into a stock option agreement
with the Company, in such form as the Administrator shall determine consistent
with the terms of the Plan, which agreement shall set forth, among other things,
the exercise price of the option, the term of the option and provisions
regarding exercisability of the option granted thereunder.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options.
(b) The Administrator shall have the authority under this Section
5 to grant any optionee Incentive Stock Options, Non-Qualified Stock Options, or
both types of Stock Options (in each case with or without Stock Appreciation
Rights or Limited Stock Appreciation Rights), provided, however, that Incentive
Stock Options may not be granted to any individual who is not an employee of the
Company or its Subsidiaries. To the extent that any Stock Option does not
qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option. More than one option may be granted to the same
optionee and be outstanding concurrently hereunder.
(c) Stock Options granted under the Plan (other than Stock
Options granted pursuant to Section 8 which shall be on the terms and conditions
set forth in Section 8) shall be subject to the following terms and conditions
and shall contain such additional terms and conditions, not inconsistent with
the terms of the Plan, as the Administrator shall deem desirable:
(i) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Administrator in its
sole discretion at the time of grant but shall not, in the case of Incentive
Stock Options, be less than 100% of the Fair Market Value of the Stock on such
date, and shall not, in any event. The option price per share of Stock
purchasable under a Non-Qualified Stock Option may be less than 100% of such
Fair Market Value. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or any Parent
Corporation or Subsidiary and an Incentive Stock Option is granted to such
employee, the option price of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no less than 110% of the
Fair Market Value of the Stock on the date such Incentive Stock Option is
granted.
(ii) Option Term. The term of each Stock Option shall be
fixed by the Administrator, but no Stock Option shall be exercisable more than
ten years after the date such Stock Option is granted; provided, however, that
if an employee owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company or a Parent Corporation or Subsidiary and an
Incentive Stock Option is granted to such employee, the term of such Incentive
Stock Option (to the extent required by the Code at the time of grant) shall be
no more than five years from the date of grant.
(iii) Exercisability. Stock Options shall be exercisable
at such time or times and subject to such terms and conditions as shall be
determined by the Administrator at or after grant; provided, however, that,
except as provided herein or unless otherwise determined by the Administrator at
or after grant, Stock Options shall be exercisable one year following the date
of grant of the option. The Administrator may provide, in its discretion, that
any Stock Option shall be exercisable only in installments, and the
Administrator may waive such installment exercise provisions at any time in
whole or in part based on such factors as the Administrator
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may determine, in its sole discretion. To the extent not exercised, installments
shall accumulate and be exercisable in whole or in part at any time after
becoming exercisable but not later than the date the Stock Option expires.
(iv) Method of Exercise. Subject to Section 5(c)(iii),
Stock Options may be exercised in whole or in part at any time during the option
period, by giving written notice of exercise to the Company specifying the
number of shares to be purchased, accompanied by payment in full of the purchase
price in cash or its equivalent as determined by the Administrator. As
determined by the Administrator, in its sole discretion, payment in whole or in
part may also be made (i) by cancellation of any indebtedness owed by the
Company to the optionee, (ii) by a promissory note executed by the optionee,
(iii) in the form of unrestricted Stock already owned by the optionee, or, in
the case of the exercise of a Non-Qualified Stock Option, Restricted Stock or
Performance Shares subject to an award hereunder (based, in each case, on the
Fair Market Value of the Stock on the date the option is exercised); provided,
however, that in the case of an Incentive Stock Option, the right to make
payment in the form of already owned shares may be authorized only at the time
of grant, or (iv) by having shares withheld to pay the exercise price, or (v) by
any combination of the foregoing. Any payment in the form of stock already owned
by the optionee may be effected by use of an attestation form approved by the
Administrator. If payment of the option exercise price of a Non-Qualified Stock
Option is made in whole or in part in the form of Restricted Stock or
Performance Shares, the shares received upon the exercise of such Stock Option
(to the extent of the number of shares of Restricted Stock or Performance Shares
surrendered upon exercise of such Stock Option) shall be restricted in
accordance with the original terms of the Restricted Stock or Performance Share
award in question, except that the Administrator may direct that such
restrictions shall apply only to that number of shares equal to the number of
shares surrendered upon the exercise of such option. An optionee shall generally
have the rights to dividends and other rights of a stockholder with respect to
shares subject to the option only after the optionee has given written notice of
exercise, has paid in full for such shares, and, if requested, has given the
representation described in paragraph (a) of Section 11.
(d) Voluntary Surrender. The Administrator may require the
voluntary surrender of all or a portion of any Stock Option granted under the
Plan as a condition precedent to a grant of a new Stock Option. Subject to the
provisions of the Plan, such new Stock Option shall be exercisable at the price,
during such period and on such other terms and conditions as are specified by
the Administrator at the time the new Stock Option is granted; provided,
however, that should the Administrator so require, the number of shares subject
to such new Stock Option shall not be greater than the number of shares subject
to the surrendered Stock Option. Upon their surrender, Stock Options shall be
canceled and the shares previously subject to such canceled Stock Options shall
again be available for grants of Stock Options and other awards hereunder.
(e) Loans. The Company may make loans available to Stock Option
holders in connection with the exercise of outstanding options granted under the
Plan, as the Administrator, in its discretion, may determine. Such loans shall
(i) be evidenced by promissory notes entered into by the Stock Option holders in
favor of the Company, (ii) be subject to the terms and conditions set forth in
this Section 5(e) and such other terms and conditions, not inconsistent with the
Plan, as the Administrator shall determine, (iii) bear interest, if any, at such
rate as the Administrator shall determine and (iv) be subject to Board approval.
In no event may the principal amount of any such loan exceed the sum of (x) the
exercise price of the shares of Stock covered by the option, or portion thereof,
exercised by the holder, and (y) any federal, state, and local income tax
attributable to such exercise. The initial term of the loan, the schedule of
payments of principal and interest under the loan, the extent to which the loan
is to be with or without recourse against the holder with respect to principal
or interest and the conditions upon which the loan will become payable in the
event of the holder's termination of employment shall be determined by the
Administrator; provided, however, that the term of the loan, including
extensions, shall not exceed seven years. Unless the Administrator determines
otherwise, when a loan is made, shares of Stock having a Fair Market Value at
least equal to the principal amount of the loan shall be pledged by the holder
to the Company as security for payment of the unpaid balance of the loan, and
such pledge shall be evidenced by a pledge agreement, the terms of which shall
be determined by the Administrator, in its discretion; provided, however, that
each loan shall comply with all applicable laws, regulations and rules of the
Board of Governors of the Federal Reserve System and any other governmental
agency having jurisdiction.
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(f) Limits on Transferability of Options.
(i) Subject to Section 5(f)(ii), no Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution or, with respect to Non-Qualified Stock Options, pursuant to a
"qualified domestic relations order," as such term is defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Incentive Stock
Options shall be exercisable, during the optionee's lifetime, only by the
optionee or, with respect to Non-Qualified Stock Options, in accordance with the
terms of a qualified domestic relations order.
(ii) The Administrator may, in its discretion, authorize
all or a portion of the options (other than Incentive Stock Options) to be
granted to an optionee to be on terms which permit transfer by such optionee to
(A) the spouse, qualified domestic partner, children or grandchildren of the
optionee and any other persons related to the optionee as may be approved by the
Administrator ("Immediate Family Members"), (B) a trust or trusts for the
exclusive benefit of such Immediate Family Members, (C) a partnership or
partnerships in which such Immediate Family Members are the only partners, or
(D) any other persons or entities as may be approved by the Administrator,
provided that (x) there may be no consideration for any transfer unless approved
by the Administrator, (y) the stock option agreement pursuant to which such
options are granted must be approved by the Administrator, and must expressly
provide for transferability in a manner consistent with this Section 5(f)(ii),
and (z) subsequent transfers of transferred options shall be prohibited except
those in accordance with Section 5(f)(i) or expressly approved by the
Administrator. Following transfer, any such options shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer, provided that, except for purposes of Sections 5(g), (h) and (i) and
11(c) hereof, the terms "optionee," "Stock Option holder" and "Participant"
shall be deemed to refer to the transferee. The events of termination of
employment under Sections 5(g), (h) and (i) hereof shall continue to be applied
with respect to the original optionee, following which the options shall be
exercisable by the transferee only to the extent, and for the periods specified
under such sections unless the option agreement governing such options otherwise
provides. Notwithstanding the transfer, the original optionee will continue to
be subject to the provisions of Section 11(c) regarding payment of taxes,
including the provisions entitling the Company to deduct such taxes from amounts
otherwise due to such optionee. "Qualified domestic partner" for the purpose of
this Section 5(f)(ii) shall mean a domestic partner living in the same household
as the optionee and registered with, certified by or otherwise acknowledged by
the county or other applicable governmental body as a domestic partner or
otherwise establishing such status in any manner satisfactory to the
Administrator.
(g) Termination by Death. If an optionee's employment with the
Company or any Subsidiary terminates by reason of death, the Stock Option may
thereafter be immediately exercised, to the extent then exercisable (or on such
accelerated basis as the Administrator shall determine at or after grant), by
the legal representative of the estate or by the legatee of the optionee under
the will of the optionee, for a period of one year (or such shorter period as
the Administrator shall specify at grant) from the date of such death or until
the expiration of the stated term of such Stock Option, whichever period is
shorter.
(h) Termination by Reason of Disability. If an optionee's
employment with the Company or any Subsidiary terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of such termination (or on such
accelerated basis as the Administrator shall determine at the time of grant),
for a period of one year (or such shorter period as the Administrator shall
specify at grant) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is shorter;
provided, however, that, if the optionee dies within such one-year period (or
such shorter period as the Administrator shall specify at grant) and prior to
the expiration of the stated term of such Stock Option, any unexercised Stock
Option held by such optionee shall thereafter be exercisable to the extent to
which it was exercisable at the time of termination for a period of one year (or
such shorter period as the Administrator shall specify at grant) from the time
of death or until the expiration of the stated term of such Stock Option,
whichever period is shorter. In the event of a termination of employment by
reason of Disability, if an Incentive Stock Option is exercised after the
expiration of the applicable exercise periods under Section 422 of the Code,
such Stock Option shall thereafter be treated as a Non-Qualified Stock Option.
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(i) Other Termination. Except as otherwise determined by the
Administrator, if an optionee's employment with the Company or any Subsidiary
terminates for any reason other than death or Disability, the Stock Option may
be exercised until the earlier to occur of (i) three months from the date of
such termination, or (ii) the expiration of the stated term of such Stock Option
,or (iii) such shorter period as the Administrator may specify at grant.
(j) Annual Limit on Incentive Stock Options. To the extent that
the aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of shares of Stock with respect to which Incentive Stock
Options granted to an Optionee under this Plan and all other option plans of the
Company, a Parent Corporation or any Subsidiary become exercisable for the first
time by the Optionee during any calendar year exceeds $100,000, such Stock
Options shall be treated as Non-Qualified Stock Options.
SECTION 6. STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights and Limited
Stock Appreciation Rights may be granted either alone ("Free Standing Rights")
or in conjunction with all or part of any Stock Option granted under the Plan
("Related Rights"). In the case of a Non-Qualified Stock Option, Related Rights
may be granted either at or after the time of the grant of such Stock Option. In
the case of an Incentive Stock Option, Related Rights may be granted only at the
time of the grant of the Incentive Stock Option.
A Related Right or applicable portion thereof granted in
conjunction with a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option, except
that, unless otherwise provided by the Administrator at the time of grant, a
Related Right granted with respect to less than the full number of shares
covered by a related Stock Option shall only be reduced if and to the extent
that the number of shares covered by the exercise or termination of the related
Stock Option exceeds the number of shares not covered by the Stock Appreciation
Right.
A Related Right may be exercised by an optionee, in accordance
with paragraph (b) of this Section 6, by surrendering the applicable portion of
the related Stock Option. Upon such exercise and surrender, the optionee shall
be entitled to receive an amount determined in the manner prescribed in
paragraph (b) of this Section 6. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the Related
Rights have been so exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the provisions of
the Plan, as shall be determined from time to time by the Administrator,
including the following:
(i) Stock Appreciation Rights that are Related Rights
("Related Stock Appreciation Rights") shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate shall be
exercisable in accordance with the provisions of Section 5 and this Section 6;
provided, however, that no Related Stock Appreciation Right shall be exercisable
during the first six months of its term, except that this additional limitation
shall not apply in the event of death or Disability of the optionee prior to the
expiration of such six-month period.
(ii) Upon the exercise of a Related Stock Appreciation
Right, an optionee shall be entitled to receive up to, but not more than, an
amount in cash or that number of shares of Stock (or in some combination of cash
and shares of Stock) equal in value to the excess of the Fair Market Value of
one share of Stock as of the date of exercise over the option price per share
specified in the related Stock Option multiplied by the number of shares of
Stock in respect of which the Related Stock Appreciation Right is being
exercised, with the Administrator having the right to determine the form of
payment.
(iii) Related Stock Appreciation Rights shall be
transferable or exercisable only when and to the extent that the underlying
Stock Option would be transferable or exercisable under paragraph (f) of Section
5.
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(iv) Upon the exercise of a Related Stock Appreciation
Right, the Stock Option or part thereof to which such Related Stock Appreciation
Right is related shall be deemed to have been exercised for the purpose of the
limitation set forth in Section 3 on the number of shares of Stock to be issued
under the Plan.
(v) A Related Stock Appreciation Right granted in
connection with an Incentive Stock Option may be exercised only if and when the
Fair Market Value of the Stock subject to the Incentive Stock Option exceeds the
exercise price of such Stock Option.
(vi) Stock Appreciation Rights that are Free Standing
Rights ("Free Standing Stock Appreciation Rights") shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Administrator at or after grant; provided, however, that no Free Standing
Stock Appreciation Right shall be exercisable during the first six months of its
term, except that this limitation shall not apply in the event of death or
Disability of the recipient of the Free Standing Stock Appreciation Right prior
to the expiration of such six-month period.
(vii) The term of each Free Standing Stock Appreciation
Right shall be fixed by the Administrator, but no Free Standing Stock
Appreciation Right shall be exercisable more than ten years after the date such
right is granted.
(viii) Upon the exercise of a Free Standing Stock
Appreciation Right, a recipient shall be entitled to receive up to, but not more
than, an amount in cash or that number of shares of Stock (or any combination of
cash or shares of Stock) equal in value to the excess of the Fair Market Value
of one share of Stock as of the date of exercise over the price per share
specified in the Free Standing Stock Appreciation Right (which price shall be no
less than 100% of the Fair Market Value of the Stock on the date of grant)
multiplied by the number of shares of Stock with respect to which the right is
being exercised, with the Administrator having the right to determine the form
of payment.
(ix) Free Standing Stock Appreciation Rights shall be
transferable or exercisable subject to the provisions governing the
transferability and exercisability of Stock Options set forth in paragraph (f)
of Section 5.
(x) In the event of the termination of an employee who has
been granted one or more Free Standing Stock Appreciation Rights, such rights
shall be exercisable to the same extent that a Stock Option would have been
exercisable in the event of the termination of the optionee.
(xi) Limited Stock Appreciation Rights may only be
exercised within the 30-day period following a "Change of Control" (as defined
in Section 10 below), and, with respect to Limited Stock Appreciation Rights
that are Related Rights ("Related Limited Stock Appreciation Rights"), only to
the extent that the Stock Options to which they relate shall be exercisable in
accordance with the provisions of Section 5 and this Section 6; provided,
however, that no Related Limited Stock Appreciation Right shall be exercisable
during the first six months of its term, except that this additional limitation
shall not apply in the event of death or Disability of the optionee prior to the
expiration of such six-month period.
(xii) Upon the exercise of a Limited Stock Appreciation
Right, the recipient shall be entitled to receive an amount in cash equal in
value to the excess of the "Change of Control Price" (as defined in Section 10)
of one share of Stock as of the date of exercise over (A) the option price per
share specified in the related Stock Option, or (B) in the case of a Limited
Stock Appreciation Right which is a Free Standing Stock Appreciation Right, the
price per share specified in the Free Standing Stock Appreciation Right, such
excess to be multiplied by the number of shares in respect of which the Limited
Stock Appreciation Right shall have been exercised.
(xiii) For the purpose of the limitation set forth in
Section 3 on the number of shares to be issued under the Plan, the grant or
exercise of Free Standing Stock Appreciation Rights shall be deemed to
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constitute the grant or exercise, respectively, of Stock Options with respect to
the number of shares of Stock with respect to which such Free Standing Stock
Appreciation Rights were so granted or exercised.
SECTION 7. RESTRICTED STOCK, DEFERRED STOCK AND PERFORMANCE SHARES.
(a) General. Restricted Stock, Deferred Stock and Performance
Share awards may be issued either alone or in addition to other awards granted
under the Plan. The Administrator shall determine the Eligible Employees to
whom, and the time or times at which, grants of Restricted Stock, Deferred Stock
or Performance Share awards shall be made; the number of shares to be awarded;
the price, if any, to be paid by the recipient of Restricted Stock, Deferred
Stock or Performance Share awards; the Restricted Period (as defined in Section
7(c)) applicable to Restricted Stock or Deferred Stock awards; the performance
objectives applicable to Performance Share or Deferred Stock awards; the date or
dates on which restrictions applicable to such Restricted Stock or Deferred
Stock awards shall lapse during such Restricted Period; and all other conditions
of the Restricted Stock, Deferred Stock and Performance Share awards. The
Administrator may also condition the grant of Restricted Stock, Deferred Stock
and Performance Share awards upon the exercise of Stock Options, or upon such
other criteria as the Administrator may determine, in its sole discretion. The
provisions of Restricted Stock, Deferred Stock and Performance Share awards need
not be the same with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of a
Restricted Stock, Deferred Stock or Performance Share award shall not have any
rights with respect to such award, unless and until such recipient has executed
an agreement evidencing the award (a "Restricted Stock Award Agreement,"
"Deferred Stock Award Agreement," or "Performance Share Award Agreement," as
appropriate) and delivered a fully executed copy thereof to the Company, within
a period of sixty days (or such other period as the Administrator may specify)
after the award date.
Except as otherwise provided below in this Section 7(b), (i) each
Participant who is awarded Restricted Stock or Performance Shares shall be
issued a stock certificate in respect of such shares of Restricted Stock or
Performance Shares; and (ii) such certificate shall be registered in the name of
the Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially in the
following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) of the Alpha Microsystems 1998 Stock
Option and Awards Plan and a Restricted Stock Award Agreement or
Performance Share Award Agreement entered into between the
registered owner and Alpha Microsystems. Copies of such Plan and
Agreement are on file in the offices of Alpha Microsystems."
The Company shall require that the stock certificates evidencing
such shares be held in the custody of the Company until the restrictions thereon
shall have lapsed, and that, as a condition of any Restricted Stock award or
Performance Share award, the Participant shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such award.
With respect to Deferred Stock awards, at the expiration of the
Restricted Period, stock certificates in respect of such shares of Deferred
Stock shall be delivered to the Participant, or his legal representative, in a
number equal to the shares of Stock covered by the Deferred Stock award.
(c) Restrictions and Conditions. The Restricted Stock, Deferred
Stock and Performance Share awards granted pursuant to this Section 7 shall be
subject to the following restrictions and conditions:
(i) Subject to the provisions of the Plan and the
Restricted Stock, Deferred Stock or Performance Share award agreement, during
such period as may be set by the Administrator commencing on the grant date (the
"Restricted Period"), the Participant shall not be permitted to sell, transfer,
pledge or assign shares of Restricted Stock, Performance Shares or Deferred
Stock awarded under the Plan; provided, however, that the
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Administrator may, in its sole discretion, provide for the lapse of such
restrictions in installments and may accelerate or waive such restrictions in
whole or in part based on such factors and such circumstances as the
Administrator may determine, in its sole discretion, including, but not limited
to, the attainment of certain performance related goals, the Participant's
termination, death or Disability or the occurrence of a "Change of Control" as
defined in Section 11.
(ii) Except as provided in paragraph (c)(i) of this
Section 7, the Participant shall have, with respect to the shares of Restricted
Stock or Performance Shares, all of the rights of a stockholder of the Company,
including the right to vote the shares, and the right to receive any dividends
thereon during the Restricted Period. With respect to Deferred Stock awards, the
Participant shall generally not have the rights of a stockholder of the Company,
including the right to vote the shares during the Restricted Period; provided,
however, that dividends declared during the Restricted Period with respect to
the number of shares covered by a Deferred Stock award shall be paid to the
Participant. Certificates for shares of unrestricted Stock shall be delivered to
the Participant promptly after, and only after, the Restricted Period shall
expire without forfeiture in respect of such shares covered by the award of
Restricted Stock, Performance Shares or Deferred Stock, except as the
Administrator, in its sole discretion, shall otherwise determine.
(iii) Subject to the provisions of the Restricted Stock,
Deferred Stock or Performance Share award agreement and this Section 7, upon
termination of employment for any reason during the Restricted Period, all
shares subject to any restriction as of the date of such termination shall be
forfeited by the Participant, and the Participant shall only receive the amount,
if any, paid by the Participant for such Restricted Stock or Performance Shares,
plus simple interest on such amount at the rate of 8% per year.
SECTION 8 NONEMPLOYEE DIRECTOR STOCK OPTIONS.
Each Nonemployee Director shall, in his or her capacity as a
Nonemployee Director, receive in lieu of in cash compensation for service on the
Board of Directors, automatic grants of Stock Options as set forth in this
Section 8.
(a) Stock Option Grant in Lieu of Other Compensation for
Past Services. Effective upon the date this Plan is approved by the
Shareholders, each person who was a Nonemployee Director for the period
commencing December 1, 1997 through September 1, 1998, provided such Nonemployee
Director agrees to accept such Non-Qualified Stock Option in lieu of any other
compensation for service on the Board of Directors (excluding reimbursement of
travel expense) for such period, shall automatically be granted on such date a
Non-Qualified Stock Option to purchase a number of shares calculated as follows:
(i) 9,465 (the number of shares such Director would otherwise have been entitled
to receive for his services during such period) shall be multiplied by the Fair
Market Value of a share on the grant date of the Option; (ii) the product of (i)
shall be multiplied by 3 (a multiplier chosen to reflect that the Director will
have to purchase such shares); (iii) the product of (ii) shall be divided by the
Fair Market Value of a share of Common Stock on August 11, the date the
Directors approved this Plan ($2.72), which quotient shall be the number of
shares for which the Option is granted. The exercise price per share under such
Non-Qualified Stock Option shall be equal to the Fair Market Value of a share of
Common Stock on the date of such grant. Such Non-Qualified Stock Option shall be
exercisable immediately and shall continue to be exercisable for ten (10) years
after the date of grant.
(b) Stock Options to be Granted in Lieu of Future Director
Compensation.
(i) Initial Grants. Each Nonemployee Director serving as
of the date this Plan is approved by the Shareholders will be automatically
granted on such date as compensation for his services as a Director a
Non-Qualified Stock Option (the "Initial Grant") to purchase a number of shares
calculated as follows: (i) $30,000, (the amount such Director would otherwise
have been paid for his services during such period) shall be multiplied by 3,
since the Option will be in lieu of compensation for three years service; (ii)
the product of (i) shall be multiplied by 3 (a multiplier chosen to reflect that
the Director will have to purchase such shares); (iii) the product of (ii) shall
be divided by the Fair Market Value of a share of Common Stock on the date of
grant, which quotient shall be the number of shares for which the Option is
granted. The exercise price per share under such
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Non-Qualified Stock Option shall be equal to the Fair Market Value of a share of
Common Stock on the date of such grant. Such Non-Qualified Stock Option shall be
exercisable one third immediately, and additional one third on each of the first
and second anniversaries of the grant (provided the Director continues to serve
as a Director), and shall continue to be exercisable for ten (10) years after
the date of grant, provided that the Director continues to serve as a Director
of the Company, or as set forth in Paragraph (c) of this Section 8 should the
Director cease to be a Director. New Nonemployee Directors shall receive Initial
Grants upon their first election or appointment to the Board unless there are
any changes in accounting requirements which would result in such grants having
a material adverse impact on the Company's results of operations, in which case
their Initial Grants shall be on the terms set forth in Subparagraph (ii) below
for Subsequent Grants.
(ii) Subsequent Grants. On the third anniversary of the
date of a Nonemployee Director's Initial Grant (or on the first anniversary of
the date of a Nonemployee Director's Initial Grant if the Initial Grant was on
the terms set forth in this Subparagraph (ii)), and on each anniversary
thereafter, such Nonemployee Director if then serving on the Board shall be
granted automatically a Non-Qualified Stock Option to purchase a number of
shares calculated as follows: (i) $30,000 (the amount such Director would
otherwise have been paid for his services during such period) shall be
multiplied by 3 (a multiplier chosen to reflect that the Director will have to
purchase such shares); (ii) the product of (i) shall be divided by the Fair
Market Value of a share of Common Stock on the date of grant, which quotient
shall be the number of shares for which the Option is granted. The purchase
price of each share under such Non-Qualified Stock Option shall equal the Fair
Market Value of a share of Common Stock on the date of such grant. Such Option
shall be exercisable immediately, and shall continue to be exercisable for ten
(10) years after the date of grant, provided that the Director continues to
serve as a Director of the Company, or as set forth in Paragraph (c) of this
Section 8 should such Director cease to be a Director.
(c) Option Terms.
(i) Method of Exercise. Each Non-Qualified Stock
Option granted pursuant to this Section 8 may be exercised in whole or
in part at any time during the option period, by giving written notice
of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment in full of the purchase price in cash
or its equivalent as determined by the Administrator. As determined by
the Administrator, in its sole discretion, payment in whole or in part
may also be made (i) by cancellation of any indebtedness owed by the
Company to the optionee, (ii) by a promissory note executed by the
optionee, (iii) in the form of unrestricted Stock already owned by the
optionee, (iv) by having shares withheld to pay the exercise price, or
(v) by any combination of the foregoing. Any payment in the form of
stock already owned by the optionee may be effected by use of an
attestation form approved by the Administrator. An optionee shall
generally have the rights to dividends and other rights of a stockholder
with respect to shares subject to the option only after the optionee has
given written notice of exercise, has paid in full for such shares, and,
if requested, has given the representation described in paragraph (a) of
Section 11.
(ii) Cessation of Directorship. After a Nonemployee
Director granted Non-Qualified Stock Options ceases to be a Director,
his or her rights to exercise any unexercised Non-Qualified Stock
Options shall be as follows:
(A) If a Nonemployee Director ceases to be a
Director by reason of death, the portion of such
Director's Non-Qualified Stock Option exercisable at the
time of such Director's death may thereafter be
immediately exercised by the legal representative of the
estate or by the legatee of the optionee under the will of
the optionee, for a period of one year (or such shorter
period as the Administrator shall specify at grant) from
the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is
shorter.
(B) If a Nonemployee Director ceases to be a
Director by reason of Disability, that portion of the
Non-Qualified Stock Option which was exercisable at the
time such Director ceased to be a Director may thereafter
be exercised for a period of
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one year (or such shorter period as the Administrator
shall specify at grant) from the date of such cessation
or until the expiration of the stated term of such
Non-Qualified Stock Option, whichever period is shorter.
(C) If a Nonemployee Director ceases to be a
Director for any reason other than death or Disability,
that portion of the Non-Qualified Stock Option which was
exercisable at the Time such Director ceased to be a
Director may be exercised until the earlier to occur of
(i) three months from the date of such cessation, or three
years if the Non-Employee Director had served as a
Director for ten years or more or had reached the age of
70 at the date he ceased to be a Director; or (ii) the
expiration of the stated term of such Non-Qualified Stock
Option.
(iv) Limits on Transferability of Options. No
Non-Qualified Stock Option granted hereunder shall be transferable by
the optionee otherwise than by will or by the laws of descent and
distribution or pursuant to a "qualified domestic relations order," as
such term is defined in ERISA, provided that to the extent the Company
generally permits other optionees under the Plan to do so and more than
three years have elapsed since the Non-Qualified Option was granted, all
or a portion of the Non-Qualified Stock Options granted hereunder be
transferred to (A) the spouse, qualified domestic partner, children or
grandchildren of the optionee and any other persons related to the
optionee as may be approved by the Administrator ("Immediate Family
Members"), (B) a trust or trusts for the exclusive benefit of such
Immediate Family Members, (C) a partnership or partnerships in which
such Immediate Family Members are the only partners, or (D) any other
persons or entities as may be approved by the Administrator, provided
that (x) there may be no consideration for any transfer unless approved
by the Administrator, and (y) subsequent transfers of transferred
options shall be prohibited except those expressly approved by the
Administrator. Following transfer, any such options shall continue to be
subject to the same terms and conditions as were applicable immediately
prior to transfer, provided that, except the terms "optionee," "Stock
Option holder" and "Participant" shall be deemed to refer to the
transferee. The events of cessation of directorship as set forth in this
Section 8 hereof shall continue to be applied with respect to the
original optionee, following which the options shall be exercisable by
the transferee only to the extent, and for the periods specified under
this Section 8. Notwithstanding the transfer, the original optionee will
continue to be subject to the provisions of Section 11(c) regarding
payment of taxes, including the provisions entitling the Company to
deduct such taxes from amounts otherwise due to such optionee.
"Qualified domestic partner" for the purpose of this paragraph (iv)
shall mean a domestic partner living in the same household as the
optionee and registered with, certified by or otherwise acknowledged by
the county or other applicable governmental body as a domestic partner
or otherwise establishing such status in any manner satisfactory to the
Administrator.
SECTION 9. AMENDMENT AND TERMINATION.
(a) Except as set forth in paragraph (b) of this Section 9, the
Board may amend, alter or discontinue the Plan, but no amendment, alteration or
discontinuation shall be made that would impair the rights of a Participant
under any award theretofore granted without such Participant's consent, or that
without the approval of the stockholders (as described below) would:
(i) except as provided in Section 3, increase the total
number of shares of Stock reserved for the purpose of the Plan;
(ii) change the employees or class of employees eligible
to participate in the Plan; or
(iii) extend the maximum option period under paragraph (c)
of Section 5 of the Plan.
(b) With respect to the amount, price and timing of issuance of
Stock hereunder to the persons eligible under Section 4(b), the provisions
hereof shall not be amended more than once every six months
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other than to comport with changes in the Code, the Employee Retirement Income
Security Act or the rules thereunder. The Board of Directors may, in its
discretion, submit any proposed amendment to the Plan to the stockholders of the
Company for approval and shall submit proposed amendments to the Plan to the
stockholders of the Company for approval if such approval is required in order
for the Plan to comply with Rule 16b-3 of the Exchange Act (or any successor
rule).
(c) The Administrator may amend the terms of any award
theretofore granted, prospectively or retroactively, but, subject to Section 3,
no such amendment shall impair the rights of any holder without his or her
consent.
SECTION 10. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for
incentive compensation. With respect to any payments not yet made to a
Participant or optionee by the Company, nothing contained herein shall give any
such Participant or optionee any rights that are greater than those of a general
creditor of the Company.
SECTION 11. CHANGE OF CONTROL.
The following acceleration and valuation provisions shall apply
in the event of a "Change of Control" as defined in paragraph (b) of this
Section 11:
(a) In the event of a "Change of Control," unless otherwise set
forth in writing under any individual agreement,:
(i) any Stock Appreciation Rights outstanding for at least
six months and any Stock Options awarded under the Plan not previously
exercisable and vested shall become fully exercisable and vested;
(ii) the restrictions applicable to any Restricted Stock,
Deferred Stock and Performance Share awards under the Plan shall lapse, and such
shares and awards shall be deemed fully vested;
(iii) each Stock Option and Stock Appreciation Right
outstanding hereunder shall terminate within a specified number of days after
notice to the holder, and such holder shall receive, with respect to each share
of Common Stock subject to such Stock Option or Stock Appreciation Right, an
amount equal to the excess of the Fair Market Value of such shares of Common
Stock immediately prior to the occurrence of such Change in Control over the
exercise price per share of such Stock Option or Stock Appreciation Right; such
amount to be payable in cash, in one or more kinds of property (including the
property, if any, payable in the transaction) or in a combination thereof.
(b) For purposes of paragraph (a) of this Section 11, a "Change
of Control" shall be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d)
and 14(d) of the Act (other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, or any company
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of Stock of the Company)
is or becomes after the Effective Date the "beneficial owner" (as defined in
Rule 13d-3 under the Act), directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such person any
securities acquired directly from the Company or its affiliates) representing
50% or more of the combined voting power of the Company's then outstanding
securities; or
(ii) during any period of two consecutive years (not
including any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (iii) or (iv) of this
Section 11(b)) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still
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<PAGE> 15
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
(c) For purposes of this Section 11, "Change of Control Price"
means the higher of (i) the highest price per share paid or offered in any
transaction related to a Change of Control of the Company or (ii) the highest
price per share paid in any transaction reported on the exchange or national
market system on which the Stock is listed, at any time during the preceding
sixty-day period as determined by the Administrator.
SECTION 12. GENERAL PROVISIONS.
(a) Investment Representation; Legend. The Administrator may
require each person purchasing shares pursuant to a Stock Option to represent to
and agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend which the Administrator deems appropriate to reflect any
restrictions on transfer.
All certificates for shares of Stock delivered under the Plan
shall be subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.
(b) Nonexclusivity of Plan. Nothing contained in the Plan shall
prevent the Board from adopting other or additional compensation arrangements,
subject to stockholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only in specific
cases.
(c) Income Taxes. Each Participant shall, no later than the date
as of which the value of an award first becomes includable in the gross income
of the Participant for federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on the making of such payments or arrangements, and the Company
(and, where applicable, its Subsidiaries) shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to the Participant.
(d) No Liability. No member of the Board or the Administrator,
nor any officer or employee of the Company acting on behalf of the Board or the
Administrator, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Administrator and each and any officer or employee
of the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.
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<PAGE> 16
(e) No Enlargement of Employee Rights. This Plan is purely
voluntary on the part of the Company, and while the Company hopes to continue it
indefinitely, the continuance of the Plan shall not be deemed to constitute a
contract between the Company and any employee, or to be consideration for or a
condition of the employment of any employee. Nothing contained in the Plan shall
be deemed to give any employee the right to be retained in the employ of the
Company or its Subsidiaries, or to interfere with the right of the Company or it
Subsidiaries to discharge or retire any employee thereof at any time. No
employee shall have any right to or interest in Stock Options, Stock
Appreciation Rights or Limited Stock Appreciation Rights, Restricted Stock,
Deferred Stock, or Performance Shares authorized hereunder prior to the grant of
such a Stock Option or other award described herein to such employee, and upon
such grant he or she shall have only such rights and interests as are expressly
provided herein, subject, however, to all applicable provisions of the Company's
Articles of Incorporation, as the same may be amended from time to time.
(f) Compliance with Governmental Regulations. Notwithstanding any
provision of the Plan or the terms of any agreement entered into pursuant to the
Plan, the Company shall not be required to issue any shares hereunder prior to
registration of the shares subject to the Plan under the Securities Act of 1933,
as amended, or the Exchange Act, if such registration shall be necessary, or
before compliance by the Company or any Participant with any other provisions of
either of those acts or of regulations or rulings of the Securities and Exchange
Commission thereunder, or before compliance with other federal and state laws
and regulations and rulings thereunder, including the rules of the National
Association of Securities Dealers, Inc. The Company shall use its best efforts
to effect such registrations and to comply with such laws, regulations and
rulings forthwith upon advice by its counsel that any such registration or
compliance is necessary.
(g) No Right to Continue as a Director. Nothing contained in the
Plan or any agreement hereunder will confer upon any Participant who is a
Nonemployee Director any right to continue to serve as a Nonemployee Director of
the Company.
(h) No Stockholder Rights Conferred. Nothing contained in the
Plan or any agreement hereunder will confer upon any Participant (or any person
or entity claiming rights by or through a Participant) any rights of a
stockholder of the Company unless and until shares of Stock are in fact issued
to such Participant (or person).
(i) Governing Law. To the extent not preempted by Federal law,
the Plan and any agreement pursuant to the Plan shall be construed in accordance
with and governed by the internal laws of the State of California.
(j) Notices. Any notice or other communication required or
permitted to be given pursuant to the Plan or under any agreement hereunder must
be in writing and may be given by registered or certified mail, and if given by
registered or certified mail, shall be determined to have been given and
received on the date three days after a registered or certified letter
containing such notice, properly addressed with postage prepaid, is deposited in
the United States mails; and if given other than by registered or certified
mail, it shall be deemed to have been given when delivered to and received by
the party to whom addressed. Notice shall be given to Participants at their most
recent addresses shown in the Company's records. Notice to the Company shall be
addressed to the Company at the address of the Company's principal executive
offices, to the attention of the Secretary of the Company.
(k) Titles and Headings. Titles and headings of sections and
articles of this Plan are for convenience of reference only and shall not affect
the construction of any provision of this Plan.
SECTION 13. INVALID PROVISION.
(a) Severability. In the event that any provision of this Plan is
found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be
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<PAGE> 17
given full force and effect to the same extent as though the invalid
unenforceable provision was not contained herein.
(b) Compliance with Rule 16b-3. It is the intent of the Company
that this Plan and all transactions under this Plan comply in all respects with
applicable provisions of Rule 16b-3 under the Exchange Act (or any successor
rule). Accordingly, if any provision of this Plan, any agreement hereunder, or
any transaction pursuant to the Plan does not comply with the requirements of
Rule 16b-3 as then applicable to a Participant, such provisions will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements with respect to such Participant. To the extent that any provision
of the Plan, any agreement hereunder, or any action by the Board or the
Committee fails to so comply, it shall be deemed null and void to the extent
permitted by law and to the extent deemed advisable by the Board or the
Committee.
SECTION 14. SUCCESSORS AND ASSIGNS.
This Plan shall be binding on the inure to the benefit of the
Company and the employees to whom an Option is granted hereunder, and such
employees' heirs, executors, administrators, legatees, personal representatives,
assignees and transferees.
SECTION 15. EFFECTIVE DATE OF PLAN.
The Plan will be effective if, and at such time as, the
stockholders of the Company have approved it by the affirmative vote of the
holders of a majority of the securities of the Company present, or represented,
and entitled to vote on the subject matter at a duly held meeting of
stockholders (the "Effective Date").
SECTION 16. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Limited Stock
Appreciation Right, Restricted Stock, Deferred Stock or Performance Share award
shall be granted pursuant to the Plan on or after the tenth anniversary of the
Effective Date, but awards theretofore granted may extend beyond that date.
SECTION 17. STOCKHOLDER APPROVAL.
Stockholder approval of the Plan must be obtained not later than
the final adjournment of the first annual meeting of stockholders of the Company
held after the date the Board has adopted the Plan.
I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of ALPHA MICROSYSTEMS on August 11, 1998.
Executed on this 11th day of August, 1998.
/s/ John F. Glade
------------------------------------
Secretary
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<PAGE> 1
EXHIBIT 10.70
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
THIS AGREEMENT is dated as of the ___ day of ____________,1998,
and is between ALPHA MICROSYSTEMS, a California corporation (the "Corporation"),
and ___________________________ (the "Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Alpha Microsystems 1998 Stock Option and
Award Plan (the "Plan"), the Corporation has granted to the Employee, effective
as of ______________, 19__ (the "Award Date"), an option to purchase all or any
part of __________ authorized but unissued shares of Common Stock of the
Corporation upon the terms and conditions set forth herein and in the Plan.
NOW, THEREFORE, in consideration of the mutual promises and
covenants made herein and the mutual benefits to be derived herefrom, the
parties agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned to such terms in the Plan.
2. Grant of Option. This Agreement evidences the Corporation's
grant to the Employee of the right and option to purchase, on the terms and
conditions set forth herein and in the Plan, all or any part of an aggregate of
______ shares of the Common Stock at the price of $_________ per share (the
"Option"), exercisable from time to time, subject to the provisions of this
Agreement and the Plan, prior to the close of business on the day before the
tenth anniversary of the Award Date (the "Expiration Date"). Such price equals
the Fair Market Value of the Corporation's Common Stock as of the Award Date. It
is the intent of the Corporation that this Option constitute an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
3. Exercisability of Option. Except as earlier permitted by or
pursuant to the Plan or by resolution of the Committee adopted after the date
hereof, no shares may be purchased by exercise of the Option until the
expiration of twelve months after the Award Date. The Option may be exercised in
installments as to ___% of the aggregate number of shares set forth in Section 2
hereof on and after the _______ anniversary of the Award Date and as to an
additional ___% of such aggregate number of such shares on each of the
___________ and ______________ anniversaries of the Award Date.
<PAGE> 2
To the extent the Employee does not in any year purchase all or
any part of the shares to which the Employee is entitled, the Employee has the
right cumulatively thereafter to purchase any shares not so purchased and such
right shall continue until the Option terminates or expires. Fractional share
interests shall be disregarded, but may be cumulated.
4. Limitation on Exercise of Option. In the event the Employee is
granted incentive stock options (whether under this Agreement or any other
incentive stock option agreement) and the aggregate fair market value
(determined as of the respective dates of grant of such options) of the Common
Stock with respect to which such options are first exercisable in any calendar
year exceeds $100,000, the most recently granted options shall be treated as
nonqualified stock options to the extent of the excess. In addition, in the case
of simultaneously granted options, the Corporation may, in the manner and to the
extent permitted by law, designate which shares are to be treated as stock
acquired pursuant to the exercise of an incentive stock option.
5. Method of Exercise of Option.
(a) The Option shall be exercisable by the delivery to the
Corporation of a written notice stating the number of shares to be
purchased pursuant to the Option and accompanied by payment made in
accordance with and in a form permitted in Section 5(c)(iv) of the Plan
for the full purchase price of the shares to be purchased, subject to
such further limitations and rules or procedures as the Administrator
may from time to time establish as to any non-cash payment. Shares
delivered in payment of the exercise price must have been owned by
Employee for at least six months prior to the exercise. In addition, the
Employee shall furnish any written statements required pursuant to
Section 12(a) of the Plan.
(b) The Corporation may require that the Employee enter
into an arrangement providing for the payment by the Employee to the
Corporation of any tax withholding obligation of the Corporation arising
by reason of (1) the exercise of the Option; (2) the lapse of any
substantial risk of forfeiture to which the shares are subject at the
time of exercise; or (3) the disposition of shares acquired upon such
exercise.
6. Conditions to Exercise. Notwithstanding anything to the
contrary contained herein, the Option may not be exercised unless the shares
issuable upon exercise of the Option are then registered under the Securities
Act of 1933, as amended (the "Securities Act") or, if such shares are not then
so registered, the Corporation has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act. If the
Corporation, in its sole discretion, shall determine that it is necessary to
comply with applicable securities laws, the certificate or certificates
representing the shares issuable upon exercise of the Option shall bear an
appropriate legend in form and substance, as determined by the Corporation,
giving notice of applicable restrictions on transfer under or in respect of such
laws.
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<PAGE> 3
7. Effect of Termination of Employment or Death: Change in
Subsidiary Status. The Option and all other rights hereunder, to the extent not
exercised, shall terminate and become null and void at such time as the Employee
ceases to be employed by either the Corporation or any Subsidiary, except that:
(a) if the Employee voluntarily terminates or resigns, the
Employee may at any time within a period of three months after such
termination exercise the Option to the extent the Option was exercisable
at the date of such termination;
(b) if the Employee terminates by reason of becoming
permanently and totally disabled (within the meaning of Code Section
22(e)(3)), then the Option shall, to the extent not theretofore
exercised, fully vest and may be exercised within a period of one year
after the Employee's termination from employment;
(c) if the Employee dies prior to a termination of
employment, or within three months after a termination of employment
under subsection (a) or (b) above, then the Option may be exercised
within a period of one year after the Employee's termination from
employment pursuant to the provisions of Section 5(g) of the Plan;
provided, however, that in no event may the Option be exercised by anyone under
this Section 7 or otherwise after the Expiration Date. If Employee is employed
by an entity which ceases to be a Subsidiary, such event shall be deemed for
purposes of this Section 7 to be a termination of employment described in
subsection (a) in respect of Employee. Absence from work caused by military
service or authorized sick leave shall not be considered as a termination of
employment for purposes of this Section 7 if the period of such absence does not
exceed 90 (ninety) days, or if longer, so long as the Employee's right to
reemployment with the Corporation or a Subsidiary is guaranteed either by
statute or by contract. Where the period of such absence exceeds 90 days and
where the individual's right to reemployment is not guaranteed either by statute
or by contract, the Employee's employment shall be deemed to have terminated
pursuant to subsection (a) of this Section 7 on the 91st day of such absence.
8. Investment Representation. You hereby covenant and agree with
the Corporation that if, at the time of exercise of the Option, there does not
exist a Registration Statement on an appropriate form under the Securities Act,
which Registration Statement shall have become effective and shall include a
prospectus which is current with respect to the shares subject to the Option,
(i) that you are purchasing the shares for your own account and not with a view
to the resale or distribution thereof, (ii) that any subsequent offer for sale
or sale of any such shares shall be made either pursuant to (x) a Registration
Statement on an appropriate form under the Act, which Registration Statement
shall have become effective and shall be current with respect to the shares
being offered and sold, or (y) a specific exemption from the registration
requirements of the Act, but in claiming such exemption, you shall, prior to any
offer for sale of sale of such shares, obtain a favorable written opinion from
counsel for or approved by the Corporation as to the applicability of such
exemption, and (iii) that you agree that the certificates evidencing such shares
shall bear a legend to the effect of the foregoing.
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<PAGE> 4
9. Non-Transferability of Option. The Option and any other rights
of the Employee under this Agreement or the Plan are nontransferable except as
provided in Section 5(f) of the Plan.
10. Notices. Any notice to be given under the terms of this
Agreement shall be in writing and addressed to the Corporation at its principal
office located at 2722 South Fairview Street, Santa Ana, California 92704, to
the attention of the Chief Financial Officer and to the Employee at the address
given beneath the Employee's signature hereto, or at such other address as
either party may hereafter designate in writing to the other.
11. Plan. The Option and all rights of Employee thereunder are
subject to, and the Employee agrees to be bound by, all of the terms and
conditions of the provisions of the Plan, incorporated herein by this reference,
to the extent such provisions are applicable to options granted to Eligible
Employees. The Employee acknowledges receipt of a copy of the Plan, which is
made a part hereof by this reference, and agrees to be bound by the terms
thereof. Unless otherwise expressly provided in other Sections of this
Agreement, provisions of the Plan that confer discretionary authority on the
Administrator do not (and shall not be deemed to) create any rights in the
Employee unless such rights are expressly set forth herein or are otherwise in
the sole discretion of the Administrator so conferred by appropriate action of
the Administrator under the Plan after the date hereof.
12. Notice of Disposition. The Employee agrees to notify the
Corporation of any sale or other disposition of any shares of Common Stock
received upon exercise of the Option, if such sale or disposition occurs within
two years after the Award Date or within one year after the date of such
exercise.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to
be executed on its behalf by a duly authorized officer and the Employee has
hereunto set his or her hand.
ALPHA MICROSYSTEMS,
a California corporation
By:__________________________________________
Name:_____________________________________
Title:____________________________________
EMPLOYEE
_____________________________________________
(Signature)
_____________________________________________
(Print Name)
_____________________________________________
(Address)
_____________________________________________
(City, State, Zip Code)
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<PAGE> 1
EXHIBIT 10.71
NONEMPLOYEE DIRECTOR
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is dated as of the ___ day of ____________, 1998
(the "Award Date"), and is between ALPHA MICROSYSTEMS, a California corporation
(the "Corporation"), and ____________ (the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Optionee is a director of the Company; and
WHEREAS, as a director of the Company, Optionee is entitled
pursuant to Section 8(b)(i) of the Alpha Microsystems 1998 Stock Option and
Award Plan (the "Plan"), in lieu of cash compensation for service on the Board
of Directors, a non-qualified stock option to purchase all or any part of
_____________ authorized but unissued shares of Common Stock of the Corporation
upon the terms and conditions set forth herein and in the Plan.
NOW, THEREFORE, in consideration of the mutual promises and
covenants made herein and the mutual benefits to be derived herefrom, the
parties agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned to such terms in the Plan.
2. Grant of Option. This Agreement evidences the Corporation's
grant to the Optionee of the right and option to purchase, on the terms and
conditions set forth herein and in the Plan, all or any part of an aggregate of
______ shares of the Common Stock at the price of $_________ per share (the
"Option"), exercisable from time to time, subject to the provisions of this
Agreement and the Plan, prior to the close of business on the day before the
tenth anniversary of the Award Date (the "Expiration Date"). This Option is not
intended to constitute an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
3. Exercisability of Option. The Option may be exercised in
installments as to one-third of the aggregate number of shares set forth in
Section 2 hereof immediately, as to an additional one-third of such aggregate
number on and after the first anniversary of the Award Date and as to an
additional one third of such aggregate number of such shares on the second
anniversary of the Award Date, provided in each case that the Optionee continues
to serve as a Director of the Corporation.
<PAGE> 2
To the extent the Optionee does not in any year purchase all or
any part of the shares to which the Optionee is entitled, the Optionee has the
right cumulatively thereafter to purchase any shares not so purchased and such
right shall continue until the Option terminates or expires. Fractional share
interests shall be disregarded, but may be cumulated.
4. Method of Exercise of Option.
(a) The Option shall be exercisable by the delivery to the
Corporation of a written notice stating the number of shares to be
purchased pursuant to the Option and accompanied by payment made in
accordance with and in a form permitted by Section 8(c)(i) of the Plan
for the full purchase price of the shares to be purchased, subject to
such further limitations and rules or procedures as the Administrator
may from time to time establish as to any non-cash payment. Shares
delivered in payment of the exercise price must have been owned by
Optionee for at least six months prior to the exercise. In addition, the
Optionee shall furnish any written statements required pursuant to
Section 12(a) of the Plan.
(b) The Corporation may require that the Optionee enter
into an arrangement providing for the payment by the Optionee to the
Corporation of any tax withholding obligation of the Corporation arising
by reason of (1) the exercise of the Option; or (2) the lapse of any
substantial risk of forfeiture to which the shares are subject at the
time of exercise.
5. Conditions to Exercise. Notwithstanding anything to the
contrary contained herein, the Option may not be exercised unless the shares
issuable upon exercise of the Option are then registered under the Securities
Act of 1933, as amended (the "Securities Act") or, if such shares are not then
so registered, the Corporation has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act. If the
Corporation, in its sole discretion, shall determine that it is necessary to
comply with applicable securities laws, the certificate or certificates
representing the shares issuable upon exercise of the Option shall bear an
appropriate legend in form and substance, as determined by the Corporation,
giving notice of applicable restrictions on transfer under or in respect of such
laws.
6. Effect of Cessation of Optionee's Directorship. After the
Optionee ceases to be a Director of the Corporation, the Optionee's rights to
exercise any unexercised portion of this Option shall be as follows:
(a) If the Optionee ceases to be a Director by
reason of death, the portion of such Optionee's Option
exercisable at the time of such Optionee's death may thereafter
be immediately exercised by the legal representative of the
estate or by the legatee of the Optionee under the will of the
Optionee, for a period of one year from the date of such death or
until the expiration of the Option, whichever period is shorter.
-2-
<PAGE> 3
(b) If the Optionee ceases to be a Director by
reason of Disability, that portion of the Option which was
exercisable at the time such Optionee ceased to be a Director may
thereafter be exercised for a period of one year from the date of
such cessation or until the expiration of the Option, whichever
period is shorter.
(c) If the Optionee ceases to be a Director for any
reason other than death or Disability, that portion of the Option
which was exercisable at the time such Optionee ceased to be a
Director may be exercised until the earlier to occur of (i) three
months from the date of such cessation, or three years if the
Optionee had served as a Director for ten years or more or had
reached the age of 70 at the date the Optionee ceased to be a
Director; or (ii) the expiration of the stated term of such
Non-Qualified Stock Option.
7. Investment Representation. The Optionee hereby covenants and
agrees with the Corporation that if, at the time of exercise of the Option,
there does not exist a Registration Statement on an appropriate form under the
Securities Act, which Registration Statement shall have become effective and
shall include a prospectus which is current with respect to the shares subject
to the Option, (i) that the Optionee is purchasing the shares for the Optionee's
own account and not with a view to the resale or distribution thereof, (ii) that
any subsequent offer for sale or sale of any such shares shall be made either
pursuant to (x) a Registration Statement on an appropriate form under the Act,
which Registration Statement shall have become effective and shall be current
with respect to the shares being offered and sold, or (y) a specific exemption
from the registration requirements of the Act, but in claiming such exemption,
the Optionee shall, prior to any offer for sale of sale of such shares, obtain a
favorable written opinion from counsel for or approved by the Corporation as to
the applicability of such exemption, and (iii) that the Optionee agrees that the
certificates evidencing such shares shall bear a legend to the effect of the
foregoing.
8. Non-Transferability of Option. The Option and any other rights
of the Optionee under this Agreement or the Plan are nontransferable except as
provided in Section 8(c)(4) of the Plan.
9. Notices. Any notice to be given under the terms of this
Agreement shall be in writing and addressed to the Corporation at its principal
office located at 2722 South Fairview Street, Santa Ana, California 92704, to
the attention of the Chief Financial Officer and to the Optionee at the address
given beneath the Optionee's signature hereto, or at such other address as
either party may hereafter designate in writing to the other.
10. Plan. The Option and all rights of Optionee thereunder are
subject to, and the Optionee agrees to be bound by, all of the terms and
conditions of the provisions of the Plan, incorporated herein by this reference,
to the extent such provisions are applicable to options granted to Optionee. The
Optionee acknowledges receipt of a copy of the Plan, which is made a part hereof
by this reference, and agrees to be bound by the terms thereof. Unless otherwise
expressly provided in other Sections of this Agreement, provisions of the Plan
that confer
-3-
<PAGE> 4
discretionary authority on the Administrator do not (and shall not be deemed to)
create any rights in the Optionee unless such rights are expressly set forth
herein or are otherwise in the sole discretion of the Administrator so conferred
by appropriate action of the Administrator under the Plan after the date hereof.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to
be executed on its behalf by a duly authorized officer and the Optionee has
hereunto set his or her hand.
ALPHA MICROSYSTEMS,
a California corporation
By:___________________________________________
Name:______________________________________
Title:_____________________________________
OPTIONEE
______________________________________________
(Signature)
______________________________________________
(Print Name)
______________________________________________
(Address)
______________________________________________
(City, State, Zip Code)
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<PAGE> 1
EXHIBIT 10.72
NONEMPLOYEE DIRECTOR
NON-QUALIFIED STOCK OPTION AGREEMENT
IN LIEU OF CASH COMPENSATION FOR PRIOR SERVICES
THIS AGREEMENT is dated as of the ___ day of ____________, 1998
(the "Award Date"), and is between ALPHA MICROSYSTEMS, a California corporation
(the "Corporation"), and ____________ (the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Optionee has elected in lieu of cash compensation for
his services as a Director of the Corporation during the period commencing
December 1, 1997 through September 1, 1998 to accept a non-qualified stock
option to purchase all or any part of _____________ authorized but unissued
shares of Common Stock of the Corporation in accordance with Section 8(a) of the
Alpha Microsystems 1998 Stock Option and Award Plan (the "Plan"), on the terms
and conditions set forth herein and in the Plan.
NOW, THEREFORE, in consideration of the mutual promises and
covenants made herein and the mutual benefits to be derived herefrom, the
parties agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned to such terms in the Plan.
2. Grant of Option. This Agreement evidences the Corporation's
grant to the Optionee of the right and option to purchase, on the terms and
conditions set forth herein and in the Plan, all or any part of an aggregate of
____________ shares of the Common Stock at the price of $_________ per share
(the "Option"), exercisable from time to time, subject to the provisions of this
Agreement and the Plan, prior to the close of business on the day before the
tenth anniversary of the Award Date (the "Expiration Date"). This Option is not
intended to constitute an incentive stock option within the meaning of Section
422 of the the Internal Revenue Code of 1986, as amended (the "Code").
3. Exercisability of Option. All or any portion of the Option may
be exercised immediately.
4. Method of Exercise of Option.
(a) The Option shall be exercisable by the delivery to the
Corporation of a written notice stating the number of shares to be
purchased pursuant to the Option and accompanied by payment made in
accordance with and in a form permitted by
<PAGE> 2
Section 8(c)(i) of the Plan for the full purchase price of the shares to
be purchased, subject to such further limitations and rules or
procedures as the Administrator may from time to time establish as to
any non-cash payment. Shares delivered in payment of the exercise price
must have been owned by Optionee for at least six months prior to the
exercise. In addition, the Optionee shall furnish any written statements
required pursuant to Section 12(a) of the Plan.
(b) The Corporation may require that the Optionee enter
into an arrangement providing for the payment by the Optionee to the
Corporation of any tax withholding obligation of the Corporation arising
by reason of the exercise of the Option.
5. Conditions to Exercise. Notwithstanding anything to the
contrary contained herein, the Option may not be exercised unless the shares
issuable upon exercise of the Option are then registered under the Securities
Act of 1933, as amended (the "Securities Act") or, if such shares are not then
so registered, the Corporation has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act. If the
Corporation, in its sole discretion, shall determine that it is necessary to
comply with applicable securities laws, the certificate or certificates
representing the shares issuable upon exercise of the Option shall bear an
appropriate legend in form and substance, as determined by the Corporation,
giving notice of applicable restrictions on transfer under or in respect of such
laws.
6. Effect of Cessation of Optionee's Directorship. After the
Optionee ceases to be a Director of the Corporation, the Optionee's rights to
exercise any unexercised portion of this Option shall be as follows:
(a) If the Optionee ceases to be a Director by
reason of death, the portion of such Optionee's Option
exercisable at the time of such Optionee's death may thereafter
be immediately exercised by the legal representative of the
estate or by the legatee of the Optionee under the will of the
Optionee, for a period of one year from the date of such death or
until the expiration of the Option, whichever period is shorter.
(b) If the Optionee ceases to be a Director by
reason of Disability, that portion of the Option which was
exercisable at the time such Optionee ceased to be a Director may
thereafter be exercised for a period of one year from the date of
such cessation or until the expiration of the Option, whichever
period is shorter.
(c) If the Optionee ceases to be a Director for any
reason other than death or Disability, that portion of the Option
which was exercisable at the time such Optionee ceased to be a
Director may be exercised until the earlier to occur of (i) three
months from the date of such cessation, or three years if the
Optionee had served as a Director for ten years or more or had
reached the age of
-2-
<PAGE> 3
70 at the date the Optionee ceased to be a Director; or (ii) the
expiration of the stated term of such Non-Qualified Stock
Option.
7. Investment Representation. The Optionee hereby covenants and
agrees with the Corporation that if, at the time of exercise of the Option,
there does not exist a Registration Statement on an appropriate form under the
Securities Act, which Registration Statement shall have become effective and
shall include a prospectus which is current with respect to the shares subject
to the Option, (i) that the Optionee is purchasing the shares for the Optionee's
own account and not with a view to the resale or distribution thereof, (ii) that
any subsequent offer for sale or sale of any such shares shall be made either
pursuant to (x) a Registration Statement on an appropriate form under the Act,
which Registration Statement shall have become effective and shall be current
with respect to the shares being offered and sold, or (y) a specific exemption
from the registration requirements of the Act, but in claiming such exemption,
the Optionee shall, prior to any offer for sale of sale of such shares, obtain a
favorable written opinion from counsel for or approved by the Corporation as to
the applicability of such exemption and (iii) that the Optionee agrees that the
certificates evidencing such shares shall bear a legend to the effect of the
foregoing.
8. Non-Transferability of Option. The Option and any other rights
of the Optionee under this Agreement or the Plan are nontransferable except as
provided in Section 8(c)(4) of the Plan.
9. Notices. Any notice to be given under the terms of this
Agreement shall be in writing and addressed to the Corporation at its principal
office located at 2722 South Fairview Street, Santa Ana, California 92704, to
the attention of the Chief Financial Officer and to the Optionee at the address
given beneath the Optionee's signature hereto, or at such other address as
either party may hereafter designate in writing to the other.
10. Plan. The Option and all rights of Optionee thereunder are
subject to, and the Optionee agrees to be bound by, all of the terms and
conditions of the provisions of the Plan, incorporated herein by this reference,
to the extent such provisions are applicable to options granted to Optionee. The
Optionee acknowledges receipt of a copy of the Plan, which is made a part hereof
by this reference, and agrees to be bound by the terms thereof. Unless otherwise
expressly provided in other Sections of this Agreement, provisions of the Plan
that confer discretionary authority on the Administrator do not (and shall not
be deemed to) create any rights in the Optionee unless such rights are expressly
set forth herein or are otherwise in the sole discretion of the Administrator so
conferred by appropriate action of the Administrator under the Plan after the
date hereof.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Corporation has caused this Agreement to
be executed on its behalf by a duly authorized officer and the Optionee has
hereunto set his or her hand.
ALPHA MICROSYSTEMS,
a California corporation
By:_________________________________________
Name:____________________________________
Title:___________________________________
OPTIONEE
____________________________________________
(Signature)
____________________________________________
(Print Name)
____________________________________________
(Address)
____________________________________________
(City, State, Zip Code)
-4-
<PAGE> 1
EXHIBIT 10.73
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
THIS AGREEMENT is dated as of the ___ day of ____________, 1998,
and is between ALPHA MICROSYSTEMS, a California corporation (the "Corporation"),
and ____________ (the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Alpha Microsystems 1998 Stock Option and
Award Plan (the "Plan"), the Corporation has granted to the Optionee, effective
as of _______________, 19__ (the "Award Date"), a non-qualified stock option to
purchase all or any part of _____________ authorized but unissued shares of
Common Stock of the Corporation upon the terms and conditions set forth herein
and in the Plan.
NOW, THEREFORE, in consideration of the mutual promises and
covenants made herein and the mutual benefits to be derived herefrom, the
parties agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned to such terms in the Plan.
2. Grant of Option. This Agreement evidences the Corporation's
grant to the Optionee of the right and option to purchase, on the terms and
conditions set forth herein and in the Plan, all or any part of an aggregate of
______ shares of the Common Stock at the price of $_________ per share (the
"Option"), exercisable from time to time, subject to the provisions of this
Agreement and the Plan, prior to the close of business on the day before the
tenth anniversary of the Award Date (the "Expiration Date"). This Option is not
intended to constitute an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
3. Exercisability of Option. Except as earlier permitted by or
pursuant to the Plan or by resolution of the Administrator adopted after the
date hereof, no shares may be purchased by exercise of the Option until the
expiration of six months after the Award Date. The Option may be exercised in
installments as to ___% of the aggregate number of shares set forth in Section 2
hereof on and after the _______ anniversary of the Award Date and as to an
additional ___% of such aggregate number of such shares on each of the
___________ and ______________ anniversaries of the Award Date.
To the extent the Optionee does not in any year purchase all or
any part of the shares to which the Optionee is entitled, the Optionee has the
right cumulatively thereafter to
-1-
<PAGE> 2
purchase any shares not so purchased and such right shall continue until the
Option terminates or expires. Fractional share interests shall be disregarded,
but may be cumulated.
4. Method of Exercise of Option.
(a) The Option shall be exercisable by the delivery to the
Corporation of a written notice stating the number of shares to be
purchased pursuant to the Option and accompanied by payment made in
accordance with and in a form permitted by Section 5(c)(iv) of the Plan
for the full purchase price of the shares to be purchased, subject to
such further limitations and rules or procedures as the Administrator
may from time to time establish as to any non-cash payment. Shares
delivered in payment of the exercise price must have been owned by
Optionee for at least six moths prior to the exercise. In addition, the
Optionee shall furnish any written statements required pursuant to
Section 12(a) of the Plan.
(b) The Corporation may require that the Optionee enter
into an arrangement providing for the payment by the Optionee to the
Corporation of any tax withholding obligation of the Corporation arising
by reason of (1) the exercise of the Option; or (2) the lapse of any
substantial risk of forfeiture to which the shares are subject at the
time of exercise.
5. Conditions to Exercise. Notwithstanding anything to the
contrary contained herein, the Option may not be exercised unless the shares
issuable upon exercise of the Option are then registered under the Securities
Act of 1933, as amended (the "Securities Act") or, if such shares are not then
so registered, the Corporation has determined that such exercise and issuance
would be exempt from the registration requirements of the Securities Act. If the
Corporation, in its sole discretion, shall determine that it is necessary to
comply with applicable securities laws, the certificate or certificates
representing the shares issuable upon exercise of the Option shall bear an
appropriate legend in form and substance, as determined by the Corporation,
giving notice of applicable restrictions on transfer under or in respect of such
laws.
6. Effect of Termination of Employment or Death; Change in
Subsidiary Status. The Option and all other rights hereunder, to the extent not
exercised, shall terminate and become null and void at such time as the Optionee
ceases to be employed or engaged by either the Corporation or any Subsidiary,
except that:
(a) if the Optionee voluntarily terminates or resigns, the
Optionee may at any time within a period of three months after such
termination exercise the Option to the extent the Option was exercisable
at the date of such termination;
(b) if the Optionee terminates by reason of becoming
permanently and totally disabled (within the meaning of Code Section
22(e)(3)), then the Option shall, to the extent not theretofore
exercised, fully vest and may be exercised within a period of one year
after the Optionee's termination from employment;
-2-
<PAGE> 3
(c) if the Optionee dies prior to a termination of
employment, or within three months after a termination of employment
under subsection (a) or (b) above, then the Option may be exercised
within a period of one year after the Optionee's termination from
employment pursuant to the provisions of Section 5(g) of the Plan;
provided, however, that in no event may the Option be exercised by anyone under
this Section or otherwise after the Expiration Date. If Optionee is employed or
engaged by an entity which ceases to be a Subsidiary, such event shall be deemed
for purposes of this Section 6 to be a termination described in subsection (a)
in respect of Optionee.
7. Investment Representation. The Optionee hereby covenants and
agrees with the Corporation that if, at the time of exercise of the Option,
there does not exist a Registration Statement on an appropriate form under the
Securities Act, which Registration Statement shall have become effective and
shall include a prospectus which is current with respect to the shares subject
to the Option, (i) that the Optionee is purchasing the shares for the Optionee's
own account and not with a view to the resale or distribution thereof, (ii) that
any subsequent offer for sale or sale of any such shares shall be made either
pursuant to (x) a Registration Statement on an appropriate form under the Act,
which Registration Statement shall have become effective and shall be current
with respect to the shares being offered and sold, or (y) a specific exemption
from the registration requirements of the Act, but in claiming such exemption,
the Optionee shall, prior to any offer for sale of sale of such shares, obtain a
favorable written opinion from counsel for or approved by the Corporation as to
the applicability of such exemption and (iii) that the Optionee agrees that the
certificates evidencing such shares shall bear a legend to the effect of the
foregoing.
8. Non-Transferability of Option. The Option and any other rights
of the Optionee under this Agreement or the Plan are nontransferable except as
provided in Section 5(f) of the Plan.
9. Notices. Any notice to be given under the terms of this
Agreement shall be in writing and addressed to the Corporation at its principal
office located at 2722 South Fairview Street, Santa Ana, California 92704, to
the attention of the Chief Financial Officer and to the Optionee at the address
given beneath the Optionee's signature hereto, or at such other address as
either party may hereafter designate in writing to the other.
10. Plan. The Option and all rights of Optionee thereunder are
subject to, and the Optionee agrees to be bound by, all of the terms and
conditions of the provisions of the Plan, incorporated herein by this reference,
to the extent such provisions are applicable to options granted to Optionee. The
Optionee acknowledges receipt of a copy of the Plan, which is made a part hereof
by this reference, and agrees to be bound by the terms thereof. Unless otherwise
expressly provided in other Sections of this Agreement, provisions of the Plan
that confer discretionary authority on the Administrator do not (and shall not
be deemed to) create any rights in the Optionee unless such rights are expressly
set forth herein or are otherwise in the sole discretion of the Administrator so
conferred by appropriate action of the Administrator under the Plan after the
date hereof.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Corporation has caused this Agreement to
be executed on its behalf by a duly authorized officer and the Optionee has
hereunto set his or her hand.
ALPHA MICROSYSTEMS,
a California corporation
By:___________________________________
Name:______________________________
Title:_____________________________
OPTIONEE
______________________________________
(Signature)
______________________________________
(Print Name)
______________________________________
(Address)
______________________________________
(City, State, Zip Code)
-4-
<PAGE> 1
EXHIBIT 10.74
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
THIS AGREEMENT is dated as of the ___ day of ____________, 1998,
and is between ALPHA MICROSYSTEMS, a California corporation ("Alpha Micro"), and
____________ (the "Optionee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Alpha Micro has acquired all of the stock of Delta
Computec Inc. ("DCI") and DCI is now a wholly owned subsidiary of Alpha Micro;
WHEREAS, Optionee was a key employee of DCI prior to its
acquisition by Alpha Micro; and
WHEREAS, as an inducement to Optionee to agree to be an employee
of DCI as Alpha Micro's subsidiary, Alpha Micro agreed to grant to Optionee a
non-qualified stock option to purchase all or any part of _____________
authorized but unissued shares of Common Stock of Alpha Micro upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and
covenants made herein and the mutual benefits to be derived herefrom, the
parties agree as follows:
1. Grant of Option. This Agreement evidences Alpha Micro's grant
to the Optionee, pursuant to action of the Board of Directors of Alpha Micro on
August 27, 1998 to be effective on September 1, 1998 (the "Award Date") of the
right and option to purchase, on the terms and conditions set forth herein, all
or any part of an aggregate of ______ shares of the Common Stock at the price of
$_________ per share (the "Option"), exercisable from time to time, subject to
the provisions of this Agreement, prior to the close of business on the day
before the tenth anniversary of the Award Date (the "Expiration Date"). This
Option is not intended to constitute an incentive stock option within the
meaning of Section 422 of the Code.
2. Exercisability of Option. The Option may be exercised in
installments as to 25% of the aggregate number of shares set forth in Section 1
hereof on and after the first anniversary of the Award Date and as to an
additional 25% of such aggregate number of such shares on each of the second,
third and fourth anniversaries of the Award Date.
To the extent the Optionee does not in any year purchase all or
any part of the shares to which the Optionee is entitled, the Optionee has the
right cumulatively thereafter to purchase any shares not so purchased and such
right shall continue until the Option terminates or expires. Fractional share
interests shall be disregarded, but may be cumulated.
-1-
<PAGE> 2
3. Method of Exercise of Option.
(a) The Option shall be exercisable by the delivery to Alpha
Micro of a written notice stating the number of shares to be purchased pursuant
to the Option and accompanied by payment for the full purchase price of the
shares to be purchased. Such payment shall be in readily available funds,
provided that Alpha Micro may, in its sole discretion, accept payment in whole
or in part (i) by cancellation of any indebtedness owed by Alpha Micro to the
Optionee, (ii) by a promissory note executed by the Optionee, (iii) in the form
of unrestricted Stock already owned by the Optionee , provided that shares
delivered in payment of the exercise price must have been owned by Optionee for
at least six moths prior to the exercise; (iv) by having shares withheld to pay
the exercise price, or (v) by any combination of the foregoing. In addition,
Alpha Micro may as a condition to exercise require Optionee to represent to and
agree with Alpha Micro in writing that such person is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend which Alpha Micro deems appropriate to reflect any
restrictions on transfer.
(b) Alpha Micro may require that the Optionee enter into an
arrangement providing for the payment by the Optionee to Alpha Micro of any tax
withholding obligation of Alpha Micro arising by reason of (1) the exercise of
the Option; or (2) the lapse of any substantial risk of forfeiture to which the
shares are subject at the time of exercise.
4. Conditions to Exercise. Notwithstanding anything to the
contrary contained herein, this Option may not be exercised unless the shares
issuable upon exercise of the Option are then registered under the Securities
Act of 1933, as amended (the "Securities Act") or, if such shares are not then
so registered, Alpha Micro has determined that such exercise and issuance would
be exempt from the registration requirements of the Securities Act. If Alpha
Micro, in its sole discretion, shall determine that it is necessary to comply
with applicable securities laws, the certificate or certificates representing
the shares issuable upon exercise of the Option shall bear an appropriate legend
in form and substance, as determined by Alpha Micro, giving notice of applicable
restrictions on transfer under or in respect of such laws.
5. Effect of Termination of Employment or Death; Change in
Subsidiary Status. The Option and all other rights hereunder, to the extent not
exercised, shall terminate and become null and void at such time as the Optionee
ceases to be employed by either Alpha Micro or any subsidiary of Alpha Micro,
except that:
(a) if the Optionee voluntarily terminates or resigns, the
Optionee may at any time within a period of three months after such
termination exercise the Option to the extent the Option was exercisable
at the date of such termination;
(b) if the Optionee terminates by reason of becoming
permanently and totally disabled, then the Option shall, to the extent
not theretofore exercised, fully vest and may be exercised within a
period of one year after the Optionee's termination from employment;
-2-
<PAGE> 3
(c) if the Optionee dies prior to a termination of
employment, or within three months after a termination of employment
under subsection (a) or (b) above, then the Option may be exercised
within a period of one year after the Optionee's termination from
employment;
provided, however, that in no event may the Option be exercised by anyone under
this Section or otherwise after the Expiration Date. If Optionee is employed or
engaged by an entity which ceases to be a Subsidiary, such event shall be deemed
for purposes of this Section 6 to be a termination described in subsection (a)
in respect of Optionee.
6. Investment Representation. The Optionee hereby covenants and
agrees with Alpha Micro that if, at the time of exercise of the Option, there
does not exist a Registration Statement on an appropriate form under the
Securities Act, which Registration Statement shall have become effective and
shall include a prospectus which is current with respect to the shares subject
to the Option, (i) that the Optionee is purchasing the shares for the Optionee's
own account and not with a view to the resale or distribution thereof, (ii) that
any subsequent offer for sale or sale of any such shares shall be made either
pursuant to (x) a Registration Statement on an appropriate form under the Act,
which Registration Statement shall have become effective and shall be current
with respect to the shares being offered and sold, or (y) a specific exemption
from the registration requirements of the Act, but in claiming such exemption,
the Optionee shall, prior to any offer for sale of sale of such shares, obtain a
favorable written opinion from counsel for or approved by Alpha Micro as to the
applicability of such exemption and (iii) that the Optionee agrees that the
certificates evidencing such shares shall bear a legend to the effect of the
foregoing.
7. Non-Transferability of Option. The Option and any other rights
of the Optionee under this Agreement or the Plan are nontransferable.
8. Income Taxes. Optionee shall, no later than the date as of
which the value of an award first becomes includable in the gross income of
Optionee for federal income tax purposes, pay to Alpha Micro, or make
arrangements satisfactory to Alpha Micro regarding payment of, any federal,
state, or local taxes of any kind required by law to be withheld with respect to
the award. The obligations of Alpha Micro under this Agreement shall be
conditional on the making of such payments or arrangements, and Alpha Micro
(and, where applicable, its Subsidiaries) shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to Optionee.
9. No Enlargement of Employee Rights. While Alpha Micro has
granted the Option hereunder as an inducement to Optionee to be an employee of
DCI as a subsidiary of Alpha Micro, employee's employment is at will and nothing
contained herein shall be deemed to give any employee the right to be retained
in the employ of DCI or Alpha Micro, or to interfere with the right of DCI or
Alpha Micro to discharge or retire any employee thereof at any time.
-3-
<PAGE> 4
10. No Stockholder Rights Conferred. Nothing contained in the
Plan or any agreement hereunder will confer upon any rights of a stockholder of
Alpha Micro unless and until shares of Stock are in fact issued to Optionee.
11. Changes in Capital Structure. If all or any portion of this
Option shall be exercised subsequent to any stock dividend, split-up,
recapitalization merger, consolidation, combination or exchange of shares,
separation, reorganization or liquidation occurring after the date hereof, as a
result of which shares of any class shall be issued in respect of outstanding
shares of Common Stock, or shares of Common Stock shall be changed into the same
or another class or classes, the person or persons so exercising the Option
shall receive, for the aggregate price paid upon such exercise, the aggregate
number and class of shares which, if shares of Common Stock as authorized at the
date hereof had been purchased at the date hereof for the same aggregate price,
on the basis of the price per share set forth in Paragraph 1 hereof, and had not
been disposed of, such person or persons would be holding at the time of such
exercise, as a result of such purchase and all such stock dividends, split-ups,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, reoranizations or liquidations; provided however, that no
fractional shares shall be issued upon any such exercise, and the aggregate
price paid shall be appropriately reduced on account of any fractional share not
issued. Notwithstanding anything contained hereinabove to the contrary, it is
expressly understood and agreed that no adjustment in the price and/or number of
shares of Common Stock covered by this Option shall be made in the event the
outstanding shares of Common Stock of Alpha Micro are hereafter increased by
reason of a public or private offering of additional securities by Alpha Micro.
12. Titles and Headings. Titles and headings of sections and
articles of this Plan are for convenience of reference only and shall not affect
the construction of any provision of this Plan.
13. Notices. Any notice to be given under the terms of this
Agreement shall be in writing and addressed to Alpha Micro at its principal
office located at 2722 South Fairview Street, Santa Ana, California 92704, to
the attention of the Chief Financial Officer and to the Optionee at the address
given beneath the Optionee's signature hereto, or at such other address as
either party may hereafter designate in writing to the other.
-4-
<PAGE> 5
IN WITNESS WHEREOF, Alpha Micro has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Optionee has
hereunto set his or her hand.
ALPHA MICROSYSTEMS,
a California corporation
By:_________________________________________
Name: Douglas J. Tullio
Title: President
OPTIONEE
____________________________________________
(Signature)
____________________________________________
(Print Name)
____________________________________________
(Address)
____________________________________________
(City, State, Zip Code)
-5-
<PAGE> 1
EXHIBIT 10.75
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this
_____ day of ___________, 1998, by and between ALPHA MICROSYSTEMS, a California
corporation (the "Company"), and Carlos D. De Mattos ("Indemnitee"), a director
of the Company.
WHEREAS, the Company and Indemnitee recognize the increasing
difficulty in obtaining directors' and officers' liability insurance, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the
substantial increase in corporate litigation subjecting officers and directors
to expensive litigation risks at the same time that liability insurance has been
severely limited;
WHEREAS, Indemnitee does not regard the current protection
available as adequate given the present circumstances, and Indemnitee and other
officers and directors of the Company may not be willing to serve as officers
and directors without adequate protection;
WHEREAS, the Company desires to attract and retain the services
of highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as to
provide them with the maximum protection permitted by law;
NOW, THEREFORE, the Company and Indemnitee hereby agree as
follows:
I.
INDEMNIFICATION
---------------
1.01 Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or complete action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a director
and/or officer of the Company or any subsidiary of the Company, by reason of any
action or inaction on the part of Indemnitee while a director and/or officer or
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all expense,
liability and loss (including attorneys' fees), judgments, fines and amounts
paid in settlement (if such settlement is approved in advance by the Company,
which approval
<PAGE> 2
shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in the
best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe Indemnitee's conduct was
unlawful.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in
the best interests of the Company, and with respect to any criminal action or
proceeding, had reasonable cause to believe that Indemnitee's conduct was
unlawful.
1.02 Proceedings by or in the Right of the Company. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of fact that Indemnitee is or was a director and/or
officer of the Company or any subsidiary of the Company, by reason of any action
or inaction on the part of Indemnitee while a director and/or officer or by
reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all expense,
liability and loss (including attorneys' fees) and amounts paid in settlement
(if such settlement is court-approved) actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of such action or suit
if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed
to be in the best interests of the Company and its shareholders. No
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been adjudged to be liable to the Company in the
performance of Indemnitee's duties to the Company and its shareholders, unless
and only to the extent that the Court in which such proceeding is or was pending
shall determine upon application that, in view of all the circumstances of the
case, Indemnitee is fairly and reasonably entitled to indemnity for expenses and
then only to the extent that the court shall determine.
1.03 Mandatory Payment of Expenses. To the extent that Indemnitee
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1.01 or 1.02 or the defense of any claim,
issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
II.
EXPENSES; INDEMNIFICATION PROCEDURE
-----------------------------------
2.01 Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referenced in Section 1.01 or 1.02 hereof. Indemnitee hereby undertakes to repay
such amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advance to be made hereunder shall be paid by the Company
to
<PAGE> 3
Indemnitee within thirty (30) days following delivery of a written request
therefor by Indemnitee to the Company.
2.02 Determination of Conduct. Any indemnification (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of Indemnitee is proper
under the circumstances because Indemnitee has met the applicable standard of
conduct set forth in Section 1.01 or 1.02 of this Agreement. Such determination
shall be made by any of the following: (1) the Board of Directors (or by an
executive committee thereof) by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, (2) if such a
quorum is not obtainable, or, even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, (3) by
the shareholders, with the shares owned by Indemnitee not being entitled to vote
thereon, or (4) the court in which such proceeding is or was pending upon
application made by the Company or Indemnitee or the attorney or other person
rendering service in connection with the defense, whether or not such
application by Indemnitee, the attorney or the other person is opposed by the
Company.
2.03 Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to Alpha Microsystems, 2722
South Fairview Street, Santa Ana, California 92704, or such other address as the
Company shall designate in writing to Indemnitee. Notice shall be deemed
received on the third business day after the date postmarked if sent by domestic
certified or registered mail, properly addressed; otherwise, notice shall be
deemed received when such notice shall actually be received by the Company. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
2.04 Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 2.03 hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable actions to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
2.05 Selection of Counsel. In the event the Company shall be
obligated under Section 2.01 hereof to pay the expenses of any proceeding
against Indemnitee, the Company, shall be entitled to assume the defense of such
proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee
of written notice of its election so to do. After delivery of such notice,
approval of such counsel by Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to Indemnitee under this Agreement for
any fees of counsel subsequently incurred by Indemnitee with respect to the same
proceeding, provided that (a) Indemnitee shall have the right to employ his or
her counsel in any such proceeding at Indemnitee's expense; and (b) if (i) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
<PAGE> 4
such defense, or (iii) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
III.
ADDITIONAL INDEMNIFICATION RIGHTS; NON-EXCLUSIVITY
--------------------------------------------------
3.01 Application. The provisions of this Agreement shall be
deemed applicable to all actual or alleged actions or omissions by Indemnitee
during any and all periods of time that Indemnitee was, is, or shall be serving
as a director and/or officer of the Company.
3.02 Scope. The Company hereby agrees to indemnify Indemnitee to
the fullest extent permitted by law (except as set forth in Article VIII
hereof), notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute. In the event of any changes,
after the date of this Agreement, in any applicable law, statute, or rule which
expands the right of a California corporation to indemnify a member of its board
of directors or an officer, such changes shall be, ipso facto, within the
purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute, or rule
which narrows the right of a California corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
3.03 Non-Exclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which an Indemnitee may
be entitled under the Company's Articles of Incorporation, its Bylaws, any
agreement, any vote of shareholders or disinterested directors, the California
General Corporation Law, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. The indemnification provided under this Agreement shall continue as to
Indemnitee for an action taken or not taken while serving in an indemnified
capacity even though he or she may have ceased to serve in such capacity at the
time of any action, suit or other covered proceeding.
IV.
PARTIAL INDEMNIFICATION
-----------------------
4.01 If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by him
in the investigation, defense, appeal or settlement of any civil or criminal
action, suit or proceeding, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.
<PAGE> 5
V.
MUTUAL ACKNOWLEDGMENT
---------------------
5.01 Both the Company and Indemnitee acknowledge that in certain
instances, federal law or public policy may override applicable state law and
prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. For example, the Company and Indemnitee acknowledge that
the Securities and Exchange Commission (the "SEC") has taken the position that
indemnification is not permissible for liabilities arising under certain federal
securities laws, and federal legislation prohibits indemnification for certain
ERISA violations. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the SEC to submit
the question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
VI.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
--------------------------------------------
6.01 The Company shall, from time to time, make the good faith
determination whether or not it is practicable for the company to obtain and
maintain a policy or policies of insurance with reputable insurance companies
providing the directors and officers with coverage for losses from wrongful
acts, or to ensure the Company's performance of its indemnification obligations
under this Agreement. Among other considerations, the Company will weigh the
costs of obtaining such insurance coverage against the protection afforded by
such coverage. In all policies of directors' and officers' liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer. Notwithstanding the foregoing, the Company shall have no obligation to
obtain or maintain such insurance if the Company determines in good faith that
such insurance is not reasonably available, if the premium costs for such
insurance are disproportionate to the amount of coverage provided, if the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance
maintained by a parent or subsidiary of the Company.
VII.
SEVERABILITY
------------
7.01 Nothing in this Agreement is intended to require or shall be
construed as requiring the Company to do or fail to do any act in violation of
applicable law. The Company's inability, pursuant to court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Article VII. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not
<PAGE> 6
have been invalidated, and the balance of this Agreement not so invalidated
shall be enforceable in accordance with its terms.
VIII.
EXCEPTIONS
----------
8.01 Any other provision to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement for the
following:
(a) Claims Initiated by Indemnitee. To indemnify or
advance expenses to Indemnitee with respect to proceedings or claims initiated
or brought voluntarily by Indemnitee and not by way of defense, unless said
proceedings or claims were authorized by the board of directors of the Company.
(b) Improper Personal Benefit. To indemnify Indemnitee
against liability for any transactions from which Indemnitee derived an improper
personal benefit, including, but not limited to, self-dealing or usurpation of a
corporate opportunity.
(c) Dishonesty. To indemnify Indemnitee if a judgment or
other final adjudication adverse to Indemnitee established that Indemnitee
committed acts of active and deliberate dishonesty, with actual dishonest
purpose and intent, which acts were material to the cause of action so
adjudicated.
(d) Insured Claims. To indemnify Indemnitee for expenses
or liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
(e) Claims Under Section 16(b). To indemnify Indemnitee
for expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
IX.
MISCELLANEOUS
-------------
9.01 Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the
"Company" shall include any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger so that if Indemnitee is
or was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, Indemnitee shall stand in the same position
under the provisions of this
<PAGE> 7
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which impose duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner "reasonably believed to be in the best interests of the
Company and its shareholders" as referred to in this Agreement.
9.02 Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns, and shall insure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
9.03 Notice. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed duly
given (i) if delivered by hand and receipted for by the party addressed, on the
date of such receipt, or (ii) if mailed by domestic certified or registered mail
with postage prepaid, on the third business day after the date postmarked:
If to Indemnitee: Carlos D. De Mattos
Matthews Studios Equipment
3111 North Kenwood Street
Burbank, CA 91504
If to Company: Alpha Microsystems
2722 South Fairview Street
Santa Ana, California 92704
or to such other address as may be furnished to Indemnitee by the Company or to
the Company by Indemnitee, as the case may be.
9.04 Consent to Jurisdiction. The Company and Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts of the State of
California for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action instituted
under this Agreement shall be brought only in the state courts of the State of
California.
9.05 Choice of Law. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of California, as
applied to contracts between California residents entered into and to be
performed entirely within California.
9.06 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereby have executed this
Agreement as of the date first above written.
"Company" ALPHA MICROSYSTEMS,
a California corporation
By:______________________________________
Its:_____________________________________
"Indemnitee" _________________________________________
CARLOS D. DE MATTOS
<PAGE> 1
EXHIBIT 10.76
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this
_____ day of ___________, 1998, by and between ALPHA MICROSYSTEMS, a California
corporation (the "Company"), and John T. DeVito ("Indemnitee"), a director of
the Company.
WHEREAS, the Company and Indemnitee recognize the increasing
difficulty in obtaining directors' and officers' liability insurance, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the
substantial increase in corporate litigation subjecting officers and directors
to expensive litigation risks at the same time that liability insurance has been
severely limited;
WHEREAS, Indemnitee does not regard the current protection
available as adequate given the present circumstances, and Indemnitee and other
officers and directors of the Company may not be willing to serve as officers
and directors without adequate protection;
WHEREAS, the Company desires to attract and retain the services
of highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as to
provide them with the maximum protection permitted by law;
NOW, THEREFORE, the Company and Indemnitee hereby agree as
follows:
I.
INDEMNIFICATION
---------------
1.01 Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or complete action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a director
and/or officer of the Company or any subsidiary of the Company, by reason of any
action or inaction on the part of Indemnitee while a director and/or officer or
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all expense,
liability and loss (including attorneys' fees), judgments, fines and amounts
paid in settlement (if such settlement is approved in advance by the Company,
which approval shall not be unreasonably withheld) actually and reasonably
incurred by Indemnitee in
<PAGE> 2
connection with such action, suit or proceeding if Indemnitee acted in good
faith and in a manner Indemnitee reasonably believed to be in the best interests
of the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in
the best interests of the Company, and with respect to any criminal action or
proceeding, had reasonable cause to believe that Indemnitee's conduct was
unlawful.
1.02 Proceedings by or in the Right of the Company. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of fact that Indemnitee is or was a director and/or
officer of the Company or any subsidiary of the Company, by reason of any action
or inaction on the part of Indemnitee while a director and/or officer or by
reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all expense,
liability and loss (including attorneys' fees) and amounts paid in settlement
(if such settlement is court-approved) actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of such action or suit
if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed
to be in the best interests of the Company and its shareholders. No
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been adjudged to be liable to the Company in the
performance of Indemnitee's duties to the Company and its shareholders, unless
and only to the extent that the Court in which such proceeding is or was pending
shall determine upon application that, in view of all the circumstances of the
case, Indemnitee is fairly and reasonably entitled to indemnity for expenses and
then only to the extent that the court shall determine.
1.03 Mandatory Payment of Expenses. To the extent that Indemnitee
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1.01 or 1.02 or the defense of any claim,
issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
II.
EXPENSES; INDEMNIFICATION PROCEDURE
-----------------------------------
2.01 Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referenced in Section 1.01 or 1.02 hereof. Indemnitee hereby undertakes to repay
such amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advance to be made hereunder shall be paid by the Company
to
<PAGE> 3
Indemnitee within thirty (30) days following delivery of a written request
therefor by Indemnitee to the Company.
2.02 Determination of Conduct. Any indemnification (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of Indemnitee is proper
under the circumstances because Indemnitee has met the applicable standard of
conduct set forth in Section 1.01 or 1.02 of this Agreement. Such determination
shall be made by any of the following: (1) the Board of Directors (or by an
executive committee thereof) by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, (2) if such a
quorum is not obtainable, or, even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, (3) by
the shareholders, with the shares owned by Indemnitee not being entitled to vote
thereon, or (4) the court in which such proceeding is or was pending upon
application made by the Company or Indemnitee or the attorney or other person
rendering service in connection with the defense, whether or not such
application by Indemnitee, the attorney or the other person is opposed by the
Company.
2.03 Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to Alpha Microsystems, 2722
South Fairview Street, Santa Ana, California 92704, or such other address as the
Company shall designate in writing to Indemnitee. Notice shall be deemed
received on the third business day after the date postmarked if sent by domestic
certified or registered mail, properly addressed; otherwise, notice shall be
deemed received when such notice shall actually be received by the Company. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
2.04 Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 2.03 hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable actions to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
2.05 Selection of Counsel. In the event the Company shall be
obligated under Section 2.01 hereof to pay the expenses of any proceeding
against Indemnitee, the Company, shall be entitled to assume the defense of such
proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee
of written notice of its election so to do. After delivery of such notice,
approval of such counsel by Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to Indemnitee under this Agreement for
any fees of counsel subsequently incurred by Indemnitee with respect to the same
proceeding, provided that (a) Indemnitee shall have the right to employ his or
her counsel in any such proceeding at Indemnitee's expense; and (b) if (i) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
<PAGE> 4
such defense, or (iii) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
III.
ADDITIONAL INDEMNIFICATION RIGHTS; NON-EXCLUSIVITY
--------------------------------------------------
3.01 Application. The provisions of this Agreement shall be
deemed applicable to all actual or alleged actions or omissions by Indemnitee
during any and all periods of time that Indemnitee was, is, or shall be serving
as a director and/or officer of the Company.
3.02 Scope. The Company hereby agrees to indemnify Indemnitee to
the fullest extent permitted by law (except as set forth in Article VIII
hereof), notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute. In the event of any changes,
after the date of this Agreement, in any applicable law, statute, or rule which
expands the right of a California corporation to indemnify a member of its board
of directors or an officer, such changes shall be, ipso facto, within the
purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute, or rule
which narrows the right of a California corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
3.03 Non-Exclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which an Indemnitee may
be entitled under the Company's Articles of Incorporation, its Bylaws, any
agreement, any vote of shareholders or disinterested directors, the California
General Corporation Law, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. The indemnification provided under this Agreement shall continue as to
Indemnitee for an action taken or not taken while serving in an indemnified
capacity even though he or she may have ceased to serve in such capacity at the
time of any action, suit or other covered proceeding.
IV.
PARTIAL INDEMNIFICATION
-----------------------
4.01 If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by him
in the investigation, defense, appeal or settlement of any civil or criminal
action, suit or proceeding, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.
<PAGE> 5
V.
MUTUAL ACKNOWLEDGMENT
---------------------
5.01 Both the Company and Indemnitee acknowledge that in certain
instances, federal law or public policy may override applicable state law and
prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. For example, the Company and Indemnitee acknowledge that
the Securities and Exchange Commission (the "SEC") has taken the position that
indemnification is not permissible for liabilities arising under certain federal
securities laws, and federal legislation prohibits indemnification for certain
ERISA violations. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the SEC to submit
the question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
VI.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
--------------------------------------------
6.01 The Company shall, from time to time, make the good faith
determination whether or not it is practicable for the company to obtain and
maintain a policy or policies of insurance with reputable insurance companies
providing the directors and officers with coverage for losses from wrongful
acts, or to ensure the Company's performance of its indemnification obligations
under this Agreement. Among other considerations, the Company will weigh the
costs of obtaining such insurance coverage against the protection afforded by
such coverage. In all policies of directors' and officers' liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer. Notwithstanding the foregoing, the Company shall have no obligation to
obtain or maintain such insurance if the Company determines in good faith that
such insurance is not reasonably available, if the premium costs for such
insurance are disproportionate to the amount of coverage provided, if the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance
maintained by a parent or subsidiary of the Company.
VII.
SEVERABILITY
------------
7.01 Nothing in this Agreement is intended to require or shall be
construed as requiring the Company to do or fail to do any act in violation of
applicable law. The Company's inability, pursuant to court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Article VII. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not
<PAGE> 6
have been invalidated, and the balance of this Agreement not so invalidated
shall be enforceable in accordance with its terms.
VIII.
EXCEPTIONS
----------
8.01 Any other provision to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement for the
following:
(a) Claims Initiated by Indemnitee. To indemnify or
advance expenses to Indemnitee with respect to proceedings or claims initiated
or brought voluntarily by Indemnitee and not by way of defense, unless said
proceedings or claims were authorized by the board of directors of the Company.
(b) Improper Personal Benefit. To indemnify Indemnitee
against liability for any transactions from which Indemnitee derived an improper
personal benefit, including, but not limited to, self-dealing or usurpation of a
corporate opportunity.
(c) Dishonesty. To indemnify Indemnitee if a judgment or
other final adjudication adverse to Indemnitee established that Indemnitee
committed acts of active and deliberate dishonesty, with actual dishonest
purpose and intent, which acts were material to the cause of action so
adjudicated.
(d) Insured Claims. To indemnify Indemnitee for expenses
or liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
(e) Claims Under Section 16(b). To indemnify Indemnitee
for expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
IX.
MISCELLANEOUS
-------------
9.01 Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the
"Company" shall include any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger so that if Indemnitee is
or was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, Indemnitee shall stand in the same position
under the provisions of this
<PAGE> 7
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which impose duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner "reasonably believed to be in the best interests of the
Company and its shareholders" as referred to in this Agreement.
9.02 Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns, and shall insure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
9.03 Notice. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed duly
given (i) if delivered by hand and receipted for by the party addressed, on the
date of such receipt, or (ii) if mailed by domestic certified or registered mail
with postage prepaid, on the third business day after the date postmarked:
If to Indemnitee: John T. DeVito
Delta Computec inc.
900 Huyler Street
Teterboro, NJ 07608
If to Company: Alpha Microsystems
2722 South Fairview Street
Santa Ana, California 92704
or to such other address as may be furnished to Indemnitee by the Company or to
the Company by Indemnitee, as the case may be.
9.04 Consent to Jurisdiction. The Company and Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts of the State of
California for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action instituted
under this Agreement shall be brought only in the state courts of the State of
California.
9.05 Choice of Law. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of California, as
applied to contracts between California residents entered into and to be
performed entirely within California.
9.06 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereby have executed this
Agreement as of the date first above written.
"Company" ALPHA MICROSYSTEMS,
a California corporation
By:______________________________________
Its:_____________________________________
"Indemnitee" _________________________________________
JOHN T. DEVITO
<PAGE> 1
EXHIBIT 10.77
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this
_____ day of ___________, 1998, by and between ALPHA MICROSYSTEMS, a California
corporation (the "Company"), and Benjamin P. Giess ("Indemnitee"), a director
and/or officer of the Company.
WHEREAS, the Company and Indemnitee recognize the increasing
difficulty in obtaining directors' and officers' liability insurance, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the
substantial increase in corporate litigation subjecting officers and directors
to expensive litigation risks at the same time that liability insurance has been
severely limited;
WHEREAS, Indemnitee does not regard the current protection
available as adequate given the present circumstances, and Indemnitee and other
officers and directors of the Company may not be willing to serve as officers
and directors without adequate protection;
WHEREAS, the Company desires to attract and retain the services
of highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as to
provide them with the maximum protection permitted by law;
NOW, THEREFORE, the Company and Indemnitee hereby agree as
follows:
I.
INDEMNIFICATION
---------------
1.01 Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or complete action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a director
and/or officer of the Company or any subsidiary of the Company, by reason of any
action or inaction on the part of Indemnitee while a director and/or officer or
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all expense,
liability and loss (including attorneys' fees), judgments, fines and amounts
<PAGE> 2
paid in settlement (if such settlement is approved in advance by the Company,
which approval shall not be unreasonably withheld) actually and reasonably
incurred by Indemnitee in connection with such action, suit or proceeding if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe Indemnitee's conduct
was unlawful.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in
the best interests of the Company, and with respect to any criminal action or
proceeding, had reasonable cause to believe that Indemnitee's conduct was
unlawful.
1.02 Proceedings by or in the Right of the Company. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of fact that Indemnitee is or was a director and/or
officer of the Company or any subsidiary of the Company, by reason of any action
or inaction on the part of Indemnitee while a director and/or officer or by
reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all expense,
liability and loss (including attorneys' fees) and amounts paid in settlement
(if such settlement is court-approved) actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of such action or suit
if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed
to be in the best interests of the Company and its shareholders. No
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been adjudged to be liable to the Company in the
performance of Indemnitee's duties to the Company and its shareholders, unless
and only to the extent that the Court in which such proceeding is or was pending
shall determine upon application that, in view of all the circumstances of the
case, Indemnitee is fairly and reasonably entitled to indemnity for expenses and
then only to the extent that the court shall determine.
1.03 Mandatory Payment of Expenses. To the extent that Indemnitee
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1.01 or 1.02 or the defense of any claim,
issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
II.
EXPENSES; INDEMNIFICATION PROCEDURE
-----------------------------------
2.01 Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referenced in Section 1.01 or 1.02 hereof. Indemnitee
-2-
<PAGE> 3
hereby undertakes to repay such amounts advanced only if, and to the extent
that, it shall ultimately be determined that Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advance to be made
hereunder shall be paid by the Company to Indemnitee within thirty (30) days
following delivery of a written request therefor by Indemnitee to the Company.
2.02 Determination of Conduct. Any indemnification (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of Indemnitee is proper
under the circumstances because Indemnitee has met the applicable standard of
conduct set forth in Section 1.01 or 1.02 of this Agreement. Such determination
shall be made by any of the following: (1) the Board of Directors (or by an
executive committee thereof) by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, (2) if such a
quorum is not obtainable, or, even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, (3) by
the shareholders, with the shares owned by Indemnitee not being entitled to vote
thereon, or (4) the court in which such proceeding is or was pending upon
application made by the Company or Indemnitee or the attorney or other person
rendering service in connection with the defense, whether or not such
application by Indemnitee, the attorney or the other person is opposed by the
Company.
2.03 Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to Alpha Microsystems, 2722
South Fairview Street, Santa Ana, California 92704, or such other address as the
Company shall designate in writing to Indemnitee. Notice shall be deemed
received on the third business day after the date postmarked if sent by domestic
certified or registered mail, properly addressed; otherwise, notice shall be
deemed received when such notice shall actually be received by the Company. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
2.04 Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 2.03 hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable actions to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
2.05 Selection of Counsel. In the event the Company shall be
obligated under Section 2.01 hereof to pay the expenses of any proceeding
against Indemnitee, the Company, shall be entitled to assume the defense of such
proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee
of written notice of its election so to do. After delivery of such notice,
approval of such counsel by Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to Indemnitee under this Agreement for
any fees of
-3-
<PAGE> 4
counsel subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (a) Indemnitee shall have the right to employ his or her counsel
in any such proceeding at Indemnitee's expense; and (b) if (i) the employment of
counsel by Indemnitee has been previously authorized by the Company, (ii)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (iii) the Company shall not, in fact, have employed counsel to assume the
defense of such proceeding, then the fees and expenses of Indemnitee's counsel
shall be at the expense of the Company.
III.
ADDITIONAL INDEMNIFICATION RIGHTS; NON-EXCLUSIVITY
--------------------------------------------------
3.01 Application. The provisions of this Agreement shall be
deemed applicable to all actual or alleged actions or omissions by Indemnitee
during any and all periods of time that Indemnitee was, is, or shall be serving
as a director and/or officer of the Company.
3.02 Scope. The Company hereby agrees to indemnify Indemnitee to
the fullest extent permitted by law (except as set forth in Article VIII
hereof), notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute. In the event of any changes,
after the date of this Agreement, in any applicable law, statute, or rule which
expands the right of a California corporation to indemnify a member of its board
of directors or an officer, such changes shall be, ipso facto, within the
purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute, or rule
which narrows the right of a California corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
3.03 Non-Exclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which an Indemnitee may
be entitled under the Company's Articles of Incorporation, its Bylaws, any
agreement, any vote of shareholders or disinterested directors, the California
General Corporation Law, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. The indemnification provided under this Agreement shall continue as to
Indemnitee for an action taken or not taken while serving in an indemnified
capacity even though he or she may have ceased to serve in such capacity at the
time of any action, suit or other covered proceeding.
IV.
PARTIAL INDEMNIFICATION
-----------------------
4.01 If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by him
in the investigation, defense, appeal or
-4-
<PAGE> 5
settlement of any civil or criminal action, suit or proceeding, but not,
however, for the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such expenses, judgments, fines or penalties to
which Indemnitee is entitled.
V.
MUTUAL ACKNOWLEDGMENT
---------------------
5.01 Both the Company and Indemnitee acknowledge that in certain
instances, federal law or public policy may override applicable state law and
prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. For example, the Company and Indemnitee acknowledge that
the Securities and Exchange Commission (the "SEC") has taken the position that
indemnification is not permissible for liabilities arising under certain federal
securities laws, and federal legislation prohibits indemnification for certain
ERISA violations. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the SEC to submit
the question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
VI.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
--------------------------------------------
6.01 The Company shall, from time to time, make the good faith
determination whether or not it is practicable for the company to obtain and
maintain a policy or policies of insurance with reputable insurance companies
providing the directors and officers with coverage for losses from wrongful
acts, or to ensure the Company's performance of its indemnification obligations
under this Agreement. Among other considerations, the Company will weigh the
costs of obtaining such insurance coverage against the protection afforded by
such coverage. In all policies of directors' and officers' liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer. Notwithstanding the foregoing, the Company shall have no obligation to
obtain or maintain such insurance if the Company determines in good faith that
such insurance is not reasonably available, if the premium costs for such
insurance are disproportionate to the amount of coverage provided, if the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance
maintained by a parent or subsidiary of the Company.
VII.
SEVERABILITY
------------
7.01 Nothing in this Agreement is intended to require or shall be
construed as requiring the Company to do or fail to do any act in violation of
applicable law. The Company's
-5-
<PAGE> 6
inability, pursuant to court order, to perform its obligations under this
Agreement shall not constitute a breach of this Agreement. The provisions of
this Agreement shall be severable as provided in this Article VII. If this
Agreement or any portion hereof shall be invalidated on any ground by any court
of competent jurisdiction, then the Company shall nevertheless indemnify
Indemnitee to the full extent permitted by any applicable portion of this
Agreement that shall not have been invalidated, and the balance of this
Agreement not so invalidated shall be enforceable in accordance with its terms.
VIII.
EXCEPTIONS
----------
8.01 Any other provision to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement for the
following:
(a) Claims Initiated by Indemnitee. To indemnify or
advance expenses to Indemnitee with respect to proceedings or claims initiated
or brought voluntarily by Indemnitee and not by way of defense, unless said
proceedings or claims were authorized by the board of directors of the Company.
(b) Improper Personal Benefit. To indemnify Indemnitee
against liability for any transactions from which Indemnitee derived an improper
personal benefit, including, but not limited to, self-dealing or usurpation of a
corporate opportunity.
(c) Dishonesty. To indemnify Indemnitee if a judgment or
other final adjudication adverse to Indemnitee established that Indemnitee
committed acts of active and deliberate dishonesty, with actual dishonest
purpose and intent, which acts were material to the cause of action so
adjudicated.
(d) Insured Claims. To indemnify Indemnitee for expenses
or liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
(e) Claims Under Section 16(b). To indemnify Indemnitee
for expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
-6-
<PAGE> 7
IX.
MISCELLANEOUS
-------------
9.01 Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the
"Company" shall include any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger so that if Indemnitee is
or was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, Indemnitee shall stand in the same position
under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which impose duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner "reasonably believed to be in the best interests of the
Company and its shareholders" as referred to in this Agreement.
9.02 Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns, and shall insure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
9.03 Notice. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed duly
given (i) if delivered by hand and receipted for by the party addressed, on the
date of such receipt, or (ii) if mailed by domestic certified or registered mail
with postage prepaid, on the third business day after the date postmarked:
If to Indemnitee: Benjamin P. Giess
ING Equity Partners
520 Madison Avenue, 33rd Floor
New York, NY 10022
If to Company: Alpha Microsystems
2722 South Fairview Street
Santa Ana, California 92704
or to such other address as may be furnished to Indemnitee by the Company or to
the Company by Indemnitee, as the case may be.
-7-
<PAGE> 8
9.04 Consent to Jurisdiction. The Company and Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts of the State of
California for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action instituted
under this Agreement shall be brought only in the state courts of the State of
California.
9.05 Choice of Law. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of California, as
applied to contracts between California residents entered into and to be
performed entirely within California.
9.06 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereby have executed this
Agreement as of the date first above written.
"Company" ALPHA MICROSYSTEMS,
a California corporation
By:______________________________________
Its:_____________________________________
"Indemnitee" _________________________________________
BENJAMIN P. GIESS
-8-
<PAGE> 1
EXHIBIT 10.78
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this
_____ day of ___________, 1998, by and between ALPHA MICROSYSTEMS, a California
corporation (the "Company"), and Sam Yau ("Indemnitee"), a director of the
Company.
WHEREAS, the Company and Indemnitee recognize the increasing
difficulty in obtaining directors' and officers' liability insurance, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the
substantial increase in corporate litigation subjecting officers and directors
to expensive litigation risks at the same time that liability insurance has been
severely limited;
WHEREAS, Indemnitee does not regard the current protection
available as adequate given the present circumstances, and Indemnitee and other
officers and directors of the Company may not be willing to serve as officers
and directors without adequate protection;
WHEREAS, the Company desires to attract and retain the services
of highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as to
provide them with the maximum protection permitted by law;
NOW, THEREFORE, the Company and Indemnitee hereby agree as
follows:
I.
INDEMNIFICATION
---------------
1.01 Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or complete action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a director
and/or officer of the Company or any subsidiary of the Company, by reason of any
action or inaction on the part of Indemnitee while a director and/or officer or
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all expense,
liability and loss (including attorneys' fees), judgments, fines and amounts
paid in settlement (if such settlement is approved in advance by the Company,
which approval shall not be unreasonably withheld) actually and reasonably
incurred by Indemnitee in
<PAGE> 2
connection with such action, suit or proceeding if Indemnitee acted in good
faith and in a manner Indemnitee reasonably believed to be in the best interests
of the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in
the best interests of the Company, and with respect to any criminal action or
proceeding, had reasonable cause to believe that Indemnitee's conduct was
unlawful.
1.02 Proceedings by or in the Right of the Company. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of fact that Indemnitee is or was a director and/or
officer of the Company or any subsidiary of the Company, by reason of any action
or inaction on the part of Indemnitee while a director and/or officer or by
reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all expense,
liability and loss (including attorneys' fees) and amounts paid in settlement
(if such settlement is court-approved) actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of such action or suit
if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed
to be in the best interests of the Company and its shareholders. No
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been adjudged to be liable to the Company in the
performance of Indemnitee's duties to the Company and its shareholders, unless
and only to the extent that the Court in which such proceeding is or was pending
shall determine upon application that, in view of all the circumstances of the
case, Indemnitee is fairly and reasonably entitled to indemnity for expenses and
then only to the extent that the court shall determine.
1.03 Mandatory Payment of Expenses. To the extent that Indemnitee
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1.01 or 1.02 or the defense of any claim,
issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
II.
EXPENSES; INDEMNIFICATION PROCEDURE
-----------------------------------
2.01 Advancement of Expenses. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referenced in Section 1.01 or 1.02 hereof. Indemnitee hereby undertakes to repay
such amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advance to be made hereunder shall be paid by the Company
to
<PAGE> 3
Indemnitee within thirty (30) days following delivery of a written request
therefor by Indemnitee to the Company.
2.02 Determination of Conduct. Any indemnification (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of Indemnitee is proper
under the circumstances because Indemnitee has met the applicable standard of
conduct set forth in Section 1.01 or 1.02 of this Agreement. Such determination
shall be made by any of the following: (1) the Board of Directors (or by an
executive committee thereof) by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, (2) if such a
quorum is not obtainable, or, even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, (3) by
the shareholders, with the shares owned by Indemnitee not being entitled to vote
thereon, or (4) the court in which such proceeding is or was pending upon
application made by the Company or Indemnitee or the attorney or other person
rendering service in connection with the defense, whether or not such
application by Indemnitee, the attorney or the other person is opposed by the
Company.
2.03 Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to Alpha Microsystems, 2722
South Fairview Street, Santa Ana, California 92704, or such other address as the
Company shall designate in writing to Indemnitee. Notice shall be deemed
received on the third business day after the date postmarked if sent by domestic
certified or registered mail, properly addressed; otherwise, notice shall be
deemed received when such notice shall actually be received by the Company. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
2.04 Notice to Insurers. If, at the time of the receipt of a
notice of a claim pursuant to Section 2.03 hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable actions to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
2.05 Selection of Counsel. In the event the Company shall be
obligated under Section 2.01 hereof to pay the expenses of any proceeding
against Indemnitee, the Company, shall be entitled to assume the defense of such
proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee
of written notice of its election so to do. After delivery of such notice,
approval of such counsel by Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to Indemnitee under this Agreement for
any fees of counsel subsequently incurred by Indemnitee with respect to the same
proceeding, provided that (a) Indemnitee shall have the right to employ his or
her counsel in any such proceeding at Indemnitee's expense; and (b) if (i) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
<PAGE> 4
such defense, or (iii) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
III.
ADDITIONAL INDEMNIFICATION RIGHTS; NON-EXCLUSIVITY
--------------------------------------------------
3.01 Application. The provisions of this Agreement shall be
deemed applicable to all actual or alleged actions or omissions by Indemnitee
during any and all periods of time that Indemnitee was, is, or shall be serving
as a director and/or officer of the Company.
3.02 Scope. The Company hereby agrees to indemnify Indemnitee to
the fullest extent permitted by law (except as set forth in Article VIII
hereof), notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute. In the event of any changes,
after the date of this Agreement, in any applicable law, statute, or rule which
expands the right of a California corporation to indemnify a member of its board
of directors or an officer, such changes shall be, ipso facto, within the
purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute, or rule
which narrows the right of a California corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
3.03 Non-Exclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which an Indemnitee may
be entitled under the Company's Articles of Incorporation, its Bylaws, any
agreement, any vote of shareholders or disinterested directors, the California
General Corporation Law, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office. The indemnification provided under this Agreement shall continue as to
Indemnitee for an action taken or not taken while serving in an indemnified
capacity even though he or she may have ceased to serve in such capacity at the
time of any action, suit or other covered proceeding.
IV.
PARTIAL INDEMNIFICATION
-----------------------
4.01 If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by him
in the investigation, defense, appeal or settlement of any civil or criminal
action, suit or proceeding, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.
<PAGE> 5
V.
MUTUAL ACKNOWLEDGMENT
---------------------
5.01 Both the Company and Indemnitee acknowledge that in certain
instances, federal law or public policy may override applicable state law and
prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. For example, the Company and Indemnitee acknowledge that
the Securities and Exchange Commission (the "SEC") has taken the position that
indemnification is not permissible for liabilities arising under certain federal
securities laws, and federal legislation prohibits indemnification for certain
ERISA violations. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the SEC to submit
the question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
VI.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
--------------------------------------------
6.01 The Company shall, from time to time, make the good faith
determination whether or not it is practicable for the company to obtain and
maintain a policy or policies of insurance with reputable insurance companies
providing the directors and officers with coverage for losses from wrongful
acts, or to ensure the Company's performance of its indemnification obligations
under this Agreement. Among other considerations, the Company will weigh the
costs of obtaining such insurance coverage against the protection afforded by
such coverage. In all policies of directors' and officers' liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer. Notwithstanding the foregoing, the Company shall have no obligation to
obtain or maintain such insurance if the Company determines in good faith that
such insurance is not reasonably available, if the premium costs for such
insurance are disproportionate to the amount of coverage provided, if the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance
maintained by a parent or subsidiary of the Company.
VII.
SEVERABILITY
------------
7.01 Nothing in this Agreement is intended to require or shall be
construed as requiring the Company to do or fail to do any act in violation of
applicable law. The Company's inability, pursuant to court order, to perform its
obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Article VII. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not
<PAGE> 6
have been invalidated, and the balance of this Agreement not so invalidated
shall be enforceable in accordance with its terms.
VIII.
EXCEPTIONS
----------
8.01 Any other provision to the contrary notwithstanding, the
Company shall not be obligated pursuant to the terms of this Agreement for the
following:
(a) Claims Initiated by Indemnitee. To indemnify or
advance expenses to Indemnitee with respect to proceedings or claims initiated
or brought voluntarily by Indemnitee and not by way of defense, unless said
proceedings or claims were authorized by the board of directors of the Company.
(b) Improper Personal Benefit. To indemnify Indemnitee
against liability for any transactions from which Indemnitee derived an improper
personal benefit, including, but not limited to, self-dealing or usurpation of a
corporate opportunity.
(c) Dishonesty. To indemnify Indemnitee if a judgment or
other final adjudication adverse to Indemnitee established that Indemnitee
committed acts of active and deliberate dishonesty, with actual dishonest
purpose and intent, which acts were material to the cause of action so
adjudicated.
(d) Insured Claims. To indemnify Indemnitee for expenses
or liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
(e) Claims Under Section 16(b). To indemnify Indemnitee
for expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
IX.
MISCELLANEOUS
-------------
9.01 Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the
"Company" shall include any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger so that if Indemnitee is
or was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, Indemnitee shall stand in the same position
under the provisions of this
<PAGE> 7
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which impose duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner "reasonably believed to be in the best interests of the
Company and its shareholders" as referred to in this Agreement.
9.02 Successors and Assigns. This Agreement shall be binding upon
the Company and its successors and assigns, and shall insure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
9.03 Notice. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed duly
given (i) if delivered by hand and receipted for by the party addressed, on the
date of such receipt, or (ii) if mailed by domestic certified or registered mail
with postage prepaid, on the third business day after the date postmarked:
If to Indemnitee: Sam Yau
17 Cipriani
Irvine, CA 92606
If to Company: Alpha Microsystems
2722 South Fairview Street
Santa Ana, California 92704
or to such other address as may be furnished to Indemnitee by the Company or to
the Company by Indemnitee, as the case may be.
9.04 Consent to Jurisdiction. The Company and Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts of the State of
California for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action instituted
under this Agreement shall be brought only in the state courts of the State of
California.
9.05 Choice of Law. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of California, as
applied to contracts between California residents entered into and to be
performed entirely within California.
9.06 Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereby have executed this
Agreement as of the date first above written.
"Company" ALPHA MICROSYSTEMS,
a California corporation
By:______________________________________
Its:_____________________________________
"Indemnitee" _________________________________________
SAM YAU
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