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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) August 7, 1998
ALPHA MICROSYSTEMS
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 0-10558 95-3108178
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification incorporation) No.)
2722 SOUTH FAIRVIEW STREET, SANTA ANA, CALIFORNIA 92704
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code) (714) 957-8500
NOT APPLICABLE
(Former Name or Former Address, If Changed Since Last Report.)
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ITEM 5. OTHER EVENTS.
On August 7, 1998 Alpha Microsystems (the "Company") and ING
Equity Partners II, L.P. ("ING") signed a Securities Purchase Agreement (the
"Purchase Agreement") whereby 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. The terms and conditions of ING's investments are subject to the
certain conditions, including the Company's completion of the acquisition of
Delta CompuTec Inc. on or before the closing (the "First Closing") of the first
tranche, which must occur on or before September 4, 1998. The second and third
tranches of $7 million and up to $5 million, respectively, are also subject to
approval of the Company's shareholders.
Dividends will be payable on the Redeemable Preferred Stock to
be 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. The Redeemable Preferred Stock is subject to mandatory redemption upon
the earlier of (i) June 30, 2000 (extended to June 30, 2005 upon the closing of
the second tranche), (ii) a change in control of the Company, or (iii) a
material default in the Company's obligations under the ING transaction
documents or the terms of any indebtedness for borrowed money in excess of
$1,000,000. In addition, ING has the option to require the Company to exchange
the Redeemable Preferred Stock for subordinated debentures with interest,
maturities, and other terms substantially similar to the Redeemable Preferred
Stock at any time after October 30, 1998 (December 31, 1999 if the second
tranche is closed).
In connection with ING's initial $8 million investment in
Redeemable Preferred Stock, ING will be granted warrants (the "Initial
Warrants") to purchase 2,181,448 shares, or approximately 19.9% of the currently
outstanding shares of common stock of the Company, for an initial price $1.50
per share. In the event shareholder approval is obtained and the closing (the
"Second Closing") of the second tranche of $7 million occurs, the price at which
ING will be permitted to purchase such stock will be increased to $2.50 per
share, and ING will be granted warrants (the "Second Closing Warrants") to
purchase for $2.50 per share additional shares of common stock which, together
with the shares purchasable pursuant to the Initial Warrants, will total
5,833,188 shares, or approximately 33% percent of the outstanding shares of the
common stock of the Company on a fully diluted, post-issuance basis. The Second
Closing must occur on or before October 30, 1998. If the Company elects to close
(the "Third Closing") 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 (the "Third
Closing Warrants") to purchase for $2.50 per share additional shares of common
stock which, together with the shares purchasable pursuant to the Initial
Warrants and the Second Closing Warrants will total up to 8,753,626 shares, or
approximately 42% of the outstanding shares of common stock of the Company on a
fully diluted, post-issuance basis. The Third Closing must occur, if at all, on
or before June 30, 1999. If the Company elects to redeem the Redeemable
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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.
The Warrants expire on August 6, 2008 and contain certain
provisions, including provisions providing for an optional cashless exercise and
anti-dilution provisions in the event of certain future dilutive issuances of
common stock or convertible securities. These adjustments vary depending on the
type of action taken by the Company.
In general, except as required by law or as set forth in the
Certificate of Determination, holders of Redeemable Preferred Stock will not be
entitled to vote. However, the holders of the Redeemable Preferred Stock have
the right to approve certain significant corporate actions, including the
issuance of securities, acquisitions, dispositions, and other material
transactions other than in the ordinary course of business and consistent with
past practice. In addition, the holders of the Voting Preferred Stock are
entitled to vote together with the holders of the common stock on all matters
submitted to the shareholders for consideration, vote or approval, and to cast
the number of same number of votes as a holder of the shares of common stock
issuable upon exercise of the then unexercised portion of the Warrants held by
such holder of Voting Preferred Stock would be entitled to cast. The Voting
Preferred Stock is not entitled to dividends, and in the event of a liquidation
of the Company, is entitled to be paid the original cost of the Voting Preferred
Stock before payment is made upon any shares of any other class of capital stock
of the Company other than the Redeemable Preferred Stock.
Pursuant to the Purchase Agreement, the Company has agreed to
expand its board of directors to six members as of the First Closing, and elect
two members designated by ING to the Company's board of directors at the First
Closing. At the Second Closing, the number of members of the Company's board of
directors will be increased to seven and ING will have the right to designate a
total of three nominees to serve on the board of directors. In addition, the
Purchase Agreement grants ING certain rights to purchase its pro rata share of
certain issuances of new securities offered by the Company.
There is no assurance that any of the three tranches of the
ING Transaction will be consummated.
A copy of the Securities Purchase Agreement, the Certificate
of Determination of Rights and Preferences of Class A Cumulative, Redeemable and
Exchangeable Preferred Stock, Class B Cumulative, Redeemable and Exchangeable
Preferred Stock, Class C Cumulative, Redeemable and Exchangeable Preferred Stock
and Voting Preferred Stock, and the Form of Warrant Certificate are attached to
this Form 8-K as exhibits and are incorporated herein by reference.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Item Exhibit No.
Certificate of Determination of Rights and Preferences of 4
Class A Cumulative, Redeemable and Exchangeable Preferred
Stock, Class B Cumulative, Redeemable and Exchangeable
Preferred Stock, Class C Cumulative, Redeemable and
Exchangeable Preferred Stock, and Voting Preferred Stock
Securities Purchase Agreement 10.1
Form of Warrant Certificate 10.2
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 hereunto duly authorized.
Date: August 10, 1998 ALPHA MICROSYSTEMS
By: /s/ Douglas J. Tullio
Douglas J. Tullio
President and Chief Executive
Officer
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