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EXHIBIT 4.10
PREFERRED SHAREHOLDER AGREEMENT
This Preferred Shareholder Agreement, (the "Agreement"), dated as of
January 22, 1999, is by and between Alpha Microsystems, a California corporation
(the "Company") and the sole holder (the "Holder") of shares of the Company's
issued and outstanding Class A Cumulative, Redeemable and Exchangeable Preferred
Stock (the "Class A Preferred Stock") and Class B Cumulative, Redeemable and
Exchangeable Preferred Stock (the "Class B Preferred Stock").
WHEREAS, the Nasdaq Stock Market believes that the Company no longer has
net tangible assets of at least $4,000,000, as required for continued listing on
the Nasdaq National Market;
WHEREAS, the Company has been informed by its independent accountants
that the mandatory redemption feature of its issued and outstanding Class A
Preferred Stock and Class B Preferred Stock has caused $15,000,000 in
Liquidation Value of such Preferred Stock to be treated as redeemable stock and
thereby classified other than as stockholder's equity pursuant to
interpretations of the Securities and Exchange Commission; thereby causing the
Company's net tangible assets to fall below $4,000,000;
WHEREAS, the Company and the Holder have agreed to exchange the
outstanding Preferred Stock for shares of the Company's Class A1 Cumulative,
Redeemable and Exchangeable Preferred Stock (the "Class A1 Preferred Stock"),
Class A2 Cumulative, Redeemable and Exchangeable Preferred Stock (the "Class A2
Preferred Stock") and Class B1 Cumulative, Redeemable and Exchangeable Preferred
Stock (the "Class B1 Preferred Stock"), in each case having the rights,
preferences, privileges and restrictions set forth in the Certificate of
Determination of Rights and Preferences attached hereto as Exhibit A (the
"Certificate of Determination");
WHEREAS, the Company's independent accountants have confirmed that the
foregoing exchange will permit $12,500,000 in Liquidation Value of such Class A1
Preferred Stock, Class A2 Preferred Stock and Class B1 Preferred Stock to be
treated as stockholder's equity, such that the Company's reported net tangible
assets, giving pro forma effect to the Certificate of Determination and the
exchange contemplated hereunder as of November 22, 1998, would be $6,731,000;
and
WHEREAS, the Board of Directors of the Company, in order to establish
the new series of Preferred Stock and designate the terms thereof, will cause
the Certificate of Determination to be filed with the Secretary of State of the
State of California on or about January 25, 1999;
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WHEREAS, the Company and the Holder desire to effect the exchange
contemplated hereunder as of the date the Certificate of Determination becomes
effective with the Secretary of State of the State of California;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, the Company and the Holder hereby agree
as follows:
SECTION 1. Definitions. Capitalized terms used but not otherwise defined
herein shall have the meaning given to them in the Certificate of Determination.
As used in this Agreement, the following terms shall have the following
meanings:
"Dividend Reference Date" means each September 30, December 31, March 31
and June 30.
"Preferred Stock" means preferred stock authorized by the Company.
"Purchase Agreement" means the Securities Purchase Agreement, dated as
of August 7, 1998, between the Company and the Holder (as defined therein).
SECTION 2. Exchange of Outstanding Shares. The Holder and the Company
hereby agree to exchange: (i) 8,000 shares of outstanding Class A Preferred
Stock for 2,500 shares of Class A1 Preferred Stock and 5,500 shares of Class A2
Preferred Stock; and (ii) 7,000 shares of outstanding Class B Preferred Stock
for 7,000 shares of Class B1 Preferred Stock.
SECTION 3. Effectiveness. This Agreement and the exchanges of Preferred
Stock contemplated hereby shall be effective immediately following the
effectiveness of the Certificate of Determination (the "Effective Date").
SECTION 4. Accrued Dividends. The Holder acknowledges that full
cumulative dividends on the Class A Preferred Stock and Class B Preferred Stock
have been paid through the most recent Dividend Reference Date. Notwithstanding
anything to the contrary contained in the Purchase Agreement, full cumulative
dividends on the Class A Preferred Stock and Class B Preferred Stock, pro rata
for the elapsed portion of the current dividend period to the date of exchange,
shall be paid to the Holder on March 31, 1999.
SECTION 5. Stock Certificates. As of the Effective Date, the Company
will deliver to the Holder a certificate or certificates, registered in the
Holder's name or its nominee's name, evidencing the Preferred Stock being
acquired by the Holder hereunder, against receipt by the Company of the
certificates evidencing the Class A Preferred Stock and Class B Preferred Stock
being acquired by the Company hereunder.
SECTION 6. Cancellation of Shares. The shares of Class A Preferred Stock
and Class B Preferred Stock which are acquired by the Company hereunder shall be
canceled and shall not be
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reissued, sold or transferred as Class A Preferred Stock or Class B Preferred
Stock, as the case may be, and the Board of Directors of the Company shall
reduce the number of authorized shares of Class A Preferred Stock and Class B
Preferred Stock to zero.
SECTION 7. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 8. Severability. It is the desire and intent of the parties that
the provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any provision of this Agreement would be
held in any jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 9. Governing Law; Etc. All questions concerning the
construction, interpretation and validity of this Agreement shall be governed by
and construed and enforced in accordance with the domestic laws of the State of
New York, without giving effect to any choice or conflict of law provision or
rule (whether in the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York. In furtherance of the foregoing, the internal law of the State of New
York will control the interpretation and construction of this Agreement, even if
under such jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily apply.
SECTION 10. Counterparts; Validity. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of which
taken together shall constitute one and the same agreement, and telecopied
signatures shall be effective.
SECTION 11. Entire Agreement; Notice. This Agreement and the other
documents, certificates, instruments, writings and agreements referred to herein
or delivered pursuant hereto contain the entire understanding of the parties
with respect to the subject matter hereof and supersede in their entirety any
and all prior agreements and understandings between any of the parties hereto
with respect to the subject matter hereof. The parties hereto hereby waive any
and all calls and notices of meeting in connection with this Agreement and the
transactions contemplated hereby.
SECTION 12. Further Assurances. The parties hereto shall, at any time
and from time to time following the execution of this Agreement, execute and
deliver all such further instruments
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and take all such further actions as may be reasonably necessary or appropriate
in order to carry out the provisions of this Agreement and the Certificate of
Determination.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above-written.
ALPHA MICROSYSTEMS
By: ____________________________________________
Name: Douglas J. Tullio
Title: President and Chief Executive Officer
LEXINGTON EQUITY PARTNERS II, L.P.
By: LEXINGTON EQUITY PARTNERS II, L.P.,
its General Partner
By: LEXINGTON EQUITY PARTNERS, INC.,
Its General Partner
By: ____________________________________________
Name: Benjamin P. Giess
Title: Authorized Signatory