SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant XX
Filed by a Party other than the Registrant ___
Check the appropriate box:
___ Preliminary Proxy
___ Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
XXX Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
SEQUENT COMPUTER SYSTEMS, INC.
(Name of Registrant as Specified in its Charter)
SEQUENT COMPUTER SYSTEMS, INC.
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
XXX $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A
___ $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
___ Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
_____________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_____________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_____________________________________________________________
(5) Total fee paid:
_____________________________________________________________
___ Fee paid previously with preliminary materials.
* Set forth the amount on which the filing fee is calculated and
state how it was determined.
___ Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
_____________________________________________________________
(2) Form, Schedule or Registration No.:
_____________________________________________________________
(3) Filing Party:
_____________________________________________________________
(4) Date Filed:
_____________________________________________________________
SEQUENT COMPUTER SYSTEMS, INC.
Notice of Annual Meeting of Shareholders to be Held
May 18, 1995
To the Shareholders of Sequent Computer Systems, Inc.:
The Annual Meeting of Shareholders of Sequent Computer Systems, Inc., an
Oregon corporation, will be held on Thursday, May 18, 1995 at 3:00 pm.,
Pacific Time, at the Company's facilities at 15450 S.W. Koll Parkway,
Beaverton, Oregon, for the following purposes:
1. Electing six directors;
2. Voting on approval of the Company's 1995 Stock Incentive Plan;
3. Voting on approval of an amendment to the Company's Employee Stock Purchase
Plan;
4. Voting on approval of the selection of Price Waterhouse as the Company's
independent auditors; and
5. Transacting such other business as may properly come before the meeting.
You are respectfully requested to date and sign the enclosed proxy and
return it in the postage prepaid envelope enclosed for that purpose. You
may attend the meeting in person even though you have sent in your proxy,
since retention of the proxy is not necessary for admission to or
identification at the meeting.
By Order of the Board of Directors
Karl C. Powell, Jr.,
Chairman of the Board
and Chief Executive Officer
March 23, 1995
Beaverton, Oregon
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THIS MEETING IN
PERSON, PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE SO THAT YOUR STOCK WILL BE VOTED. THE ENVELOPE REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
SEQUENT COMPUTER SYSTEMS, INC.
PROXY STATEMENT
The mailing address of the principal executive offices of Sequent Computer
Systems, Inc., an Oregon corporation (the Company" or Sequent"), is 15450
S.W. Koll Parkway, Beaverton, Oregon 97006-6063. The approximate date this
proxy statement and the accompanying proxy form are first being sent to
shareholders is April 5, 1995.
Upon written request to the Secretary, any person whose proxy is solicited by
this proxy statement will be provided without charge a copy of the Company's
Annual Report on Form 10-K.
SOLICITATION AND REVOCABILITY OF PROXY
The enclosed proxy is solicited on behalf of the Board of Directors of the
Company for use at the annual meeting of shareholders to be held on Thursday,
May 18, 1995. The Company will bear the cost of preparing and mailing the
proxy, proxy statement and any other material furnished to the shareholders by
the Company in connection with the annual meeting. Proxies will be solicited
by use of the mails. Officers and employees of the Company may also solicit
proxies by telephone or personal contact. Copies of solicitation materials
will be furnished to fiduciaries, custodians and brokerage houses for
forwarding to beneficial owners of the stock held in their names. The Company
has retained Chemical Bank to assist in the solicitation of proxies from
brokers and other nominees at an estimated cost of $8,500 plus certain
expenses.
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. The proxy may be
revoked by filing with the Company, attention Henry H. Hewitt, Secretary, an
instrument of revocation or a duly executed proxy bearing a later date. The
proxy may also be revoked by affirmatively electing to vote in person while in
attendance at the meeting. However, a shareholder who attends the meeting need
not revoke his proxy and vote in person unless he wishes to do so. All valid,
unrevoked proxies will be voted at the annual meeting.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Common Stock is the only outstanding voting security of the Company. The
record date for determining holders of Common Stock entitled to vote at the
annual meeting is March 23, 1995. On that date there were 31,745,666 shares of
Common Stock outstanding, entitled to one vote per share. The Common Stock
does not have cumulative voting rights.
The following table shows Common Stock ownership on March 1, 1995 by (i) each
person who, to the knowledge of the Company, beneficially owns more than 5% of
the Common Stock, (ii) the Chief Executive Officer of the Company, (iii) the
other executive officers of the Company, and (iv) all directors and executive
officers of the Company as of March 1, 1995 as a group:
Name and Address Shares(1) Percent
Merrill Lynch & Co., Inc. 3,025,600(2) 9.6%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281
Neuberger & Berman 1,973,500(3) 6.3%
605 Third Avenue
New York, NY 10158
The Capital Group Companies, Inc. 1,925,000(4) 6.1%
333 Hope Street
Los Angeles, CA 90071
State Farm Mutual Automobile 1,715,950 5.5%
Insurance Company
1 State Farm Plaza
Bloomington, IL 61710
State Farm Insurance Companies 533,300 1.7%
Employee Retirement Trust
c/o Continental Bank N.A.
30 North LaSalle Street
Chicago, IL 60693
Karl C. Powell, Jr. 547,634(5) 1.7%
John McAdam 32,726(6) *
Robert S. Gregg 78,110(7) *
Lary L. Evans 46,679(8) *
Paul J. O'Mara 10,015(9) *
10 directors and executive
officers as a group 907,041(10) 2.8%
* Less than 1%.
(1) Shares are held directly with sole voting and dispositive power except as
otherwise indicated. Shares issuable pursuant to outstanding stock options
that are currently exercisable or become exercisable within 60 days of the
date of this table are considered outstanding for the purpose of calculating
the percentage of Common Stock owned by such person, but not for the purpose
of calculating the percentage of Common Stock owned by any other person.
(2) Based solely on information provided as of December 31, 1994 in a Schedule
13G filed by the shareholder. The shareholder reports shared voting power and
shared dispositive power with respect to these shares.
(3) Based solely on information provided as of December 31, 1994 in a Schedule
13G filed by the shareholder. Includes 672,500 shares over which the
shareholder reports sole voting, 1,150,000 shares over which the shareholder
reports shared voting, and 1,973,500 shares over which the shareholder reports
shared dispositive power.
(4) Based solely on information provided as of December 31, 1994 in a
Schedule 13G filed by the shareholder. The shareholder reports sole
dispositive power with respect to these shares.
(5) Includes 160,000 shares held in trust for the benefit of Mr. Powell's
family, as to which Mr. Powell has shared voting and dispositive power, and
318,652 shares of Common Stock subject to options that are currently
exercisable or become exercisable within 60 days.
(6) Includes 21,780 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days.
(7) Includes 50,176 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days.
(8) Includes 46,679 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days.
(9) Includes 10,015 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days.
(10) Includes 619,954 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days.
<TABLE>
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of six directors who are
elected at the annual meeting to serve until the next annual meeting of
shareholders and until their successors are elected. The Company's nominees
for director are listed below, together with certain information about each of
them.
<CAPTION>
Shares of
Common Stock
Position with the held on
Company and Principal March 1 Approximate
Name Occupation Age 1995(1) percent
<S> <C> <C> <C> <C>
Karl C. Powell, Jr. Chairman of the Board, 51 547,634(2) 1.71%
Chief Executive Officer and
Director of the Company
David R. Hathaway(3)(4)(5) Director of the Company; 50 71,460(6) *
General Partner of Venrock
Associates
Robert C. Mathis(3)(4)(5) Director of the Company; 67 16,960(7) *
Chairman, President and
CEO of TMA Technologies, Inc.
Richard C. Palermo, Sr. (5) Director of the Company; 57 6,840(8) *
Michael S. Scott Morton(3)(5) Director of the Company; 57 18,040(9) *
Professor of Management at
the Massachusetts Institute
of Technology
Robert W. Wilmot(4)(5) Director of the Company; 50 78,552(10) *
Chairman of the Board of
Wilmot Consulting, Inc.
*Less than 1%.
</TABLE>
(1) Shares held directly with sole voting and sole dispositive power unless
otherwise indicated.
(2) Includes 160,000 shares held in trust for the benefit of Mr. Powell's
family, as to which Mr. Powell has shared voting and dispositive power, and
318,652 shares of Common Stock subject to options that are currently
exercisable or become exercisable within 60 days.
(3) Member of Compensation Committee.
(4) Member of Audit Committee.
(5) Member of Nominating Committee.
(6) Includes 1,700 shares held in trust for the benefit of Mr. Hathaway's
family, as to which Mr. Hathaway has shared voting and dispositive power, and
53,260 shares of Common Stock subject to options that are currently
exercisable or become exercisable within 60 days.
(7) Includes 16,960 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days.
(8) Includes 6,840 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days.
(9) Includes 17,040 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days.
(10) Includes 78,552 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days.
Mr. Powell, a co-founder of the Company, is Chairman of the Board and Chief
Executive Officer and has been a director since 1983. Mr. Powell has served as
the Company's sole Chief Executive Officer or shared the Office of the Chief
Executive with the other co-founder of the Company since the Company's
inception. From 1974 to 1983, Mr. Powell was employed by Intel Corporation,
where his most recent position was General Manager for Microprocessor
Operations. Mr. Powell served on the National Board of Directors of the
American Electronics Association from 1985 to 1986. He holds a B.S. degree in
mechanical engineering from the U.S. Merchant Marine Academy.
Mr. Hathaway has been a director of the Company since 1983. For the last five
years, Mr. Hathaway has been a general partner of Venrock Associates, a
venture capital investment partnership. He is a director of Mentor Graphics
Corporation, Mitek Surgical Products, Inc. and several privately-held, high-
technology companies.
Dr. Mathis has been a director of the Company since 1985. Dr. Mathis was a
General in the United States Air Force and served as Vice Chief of Staff from
1980-1982. He retired from the Air Force in 1982. Dr. Mathis is Chairman of
the I Am Third Foundation, a non-profit organization serving the disabled,
which he and his wife founded in 1982. He has also served on a number of
boards and is currently Chairman of Eagle Pass Engineering, a consulting firm;
Chairman of TMA Technologies, an electro-optics and aerospace engineering firm
he founded; and a principal in the Zebulon Group, a corporate development
firm.
Mr. Palermo has been a director of the Company since March 1993. Mr. Palermo
was employed by Xerox Corporation from 1965 until his retirement in March
1993, serving most recently as Senior Vice President, U.S. Quality and
Customer Satisfaction and Vice President of Marketing. He currently serves as
a quality consultant to Xerox Corporation and other companies.
Dr. Scott Morton has been a director of the Company since 1991. Dr. Scott
Morton is the Jay W. Forrester Professor of Management at the Sloan School of
Management and was Chairman of the Faculty for the Senior Executive Program at
M.I.T. He has also served as Program Director of the Management in the 1990s
Research Program and as Associate Dean of the Sloan School of Management at
M.I.T. Dr. Scott Morton is a Trustee of the State Street Research Funds and
the Metropolitan Life Series Funds.
Dr. Wilmot has been a director of the Company since 1992. Dr. Wilmot is
Chairman of Wilmot Consulting Inc., a consulting firm, and has been a
consultant to the Company since January 1987. He has also been an advisor to
the Board of Directors since November 1988. Dr. Wilmot was a managing director
of Texas Instruments, Ltd. from 1978 to 1981. From 1981 to 1985 he was Chief
Executive and then Chairman of I.C.L., Britain's major computer company. He
has founded several companies in Europe and the United States, including
Organization and System Innovations, The OASIS Group (a leading European
company engaged in re-engineering management consultancy now a wholly owned
subsidiary of Sybase Inc.) and Poqet Computers Corporation (a palm top
computer manufacturer in California now a wholly owned subsidiary of Fujitsu
Ltd.). He is a director of several privately-held, high-technology companies
in Europe and the United States.
The Board of Directors met seven times during the last fiscal year. Each
director attended at least 75 percent of the aggregate of the meetings of the
Board of Directors and the committees of which he was a member. The only
standing committees of the Board of Directors are the Audit Committee, the
Compensation Committee and the Nominating Committee. The Audit Committee,
which met two times in 1994, recommends selection of independent accountants
to the Board of Directors and reviews the scope and results of audits. The
Compensation Committee, which met five times during 1994, reviews and
establishes compensation for executive officers and considers incentive
compensation alternatives for the Company's employees. The Nominating
Committee, which did not meet in 1994, seeks and makes recommendations
concerning qualified candidates to serve on the Company's Board of Directors.
Shareholders who wish to submit names to the Nominating Committee for
consideration should do so in writing addressed to the Nominating Committee,
c/o Robert S. Gregg, Assistant Secretary, c/o Sequent Computer Systems, Inc.,
15450 SW Koll Parkway, Beaverton, Oregon 97006.
Director Compensation
Directors who are not employees of the Company are paid an annual retainer of
$6,000 plus an attendance fee of $1,000 per day for each board meeting and
related travel expenses. Members of the Compensation and Nominating Committees
receive an annual retainer of $2,000 for each committee, and members of the
Audit Committees receive $1,000 for each meeting attended. Under the Company's
1989 Stock Incentive Plan and 1995 Stock Incentive Plan, each person who
becomes a non-employee director of the Company automatically receives an
initial option to purchase 10,000 shares of the Company's Common Stock. Each
non-employee director automatically receives additional annual grants of
options to purchase 5,000 shares, provided the non-employee director continues
to serve in that capacity. Members of the Compensation, Audit and Nominating
Committees receive annual option grants for 2,000 shares for participation on
each such committee. Each option granted to a non-employee director has an
exercise price equal to 85% of the fair market value of the Company's Common
Stock on the date of grant and has a term of ten years. Options become
exercisable to the extent of 24% of the shares one year after the date of
grant and become exercisable to the extent of 2% each month thereafter. Dr.
Wilmot performs consulting services relating to the Company's European
operations (for which he is paid $1,000 per day plus travel expenses). In 1994
he was paid $62,400 under this consulting arrangement and received options to
purchase a total of 28,000 shares of Common Stock (with exercise prices equal
to 85% of fair market value on the date of grant). In 1994, Mr. Palermo was
paid $8,000 for consulting services relating to total quality management.
Voting
The proxies will be voted with respect to the election of the nominees in
accordance with the instructions specified in the proxy form. If no
instructions are given, proxies will be voted for the election of the
nominees. If for some unforeseen reason any of the nominees would not be
available as a candidate for director, the number of directors constituting
the Board of Directors may be reduced prior to the meeting or the proxies may
be voted for such other candidate or candidates as may be nominated by the
Board of Directors, in accordance with the authority conferred in the proxy.
The Board of Directors recommends election of the nominees listed above.
Directors are elected by a plurality of the votes cast by the shares entitled
to vote if a quorum is present at the annual meeting. Abstentions and broker
non-votes are counted for purposes of determining whether a quorum exists at
the annual meeting but are not counted and have no effect on the determination
of whether a plurality exists with respect to a given nominee.
<TABLE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation paid to the Chief Executive
Officer of the Company and the other four most highly compensated executive
officers of the Company for services in all capacities to the Company and its
subsidiaries during each of the last three fiscal years.
<CAPTION>
Long-Term Compensation
Annual Compensation (1) Awards
Name and Restricted Securities
Principal Stock Underylying All Other
Position Year Salary Bonus Other Awards($) Options(#)(2) Compensation(3)
<S> <C> <C> <C> <C> <C> <C> <C>
Karl C. Powell, Jr. 1994 $453,140 $231,101 -- -- 75,000 $ 6,616
Chairman of the 1993 $405,849 -- -- -- 35,000 --
Board and Chief 1992 $296,668 $235,540 -- -- 450,000 --
Executive Officer
John McAdam 1994 $170,010 $171,471 -- $49,375(4) 50,000 $121,379(5)
President and Chief 1993 $125,800 $161,138 -- -- 10,000 $ 13,905
Operating Officer 1992 $106,667 $244,000 -- -- 29,500 $ 14,989
Robert S. Gregg 1994 $218,341 $ 80,000 -- -- 7,500 $ 3,188
Sr. Vice President of 1993 $179,500 -- -- -- 6,000 --
Finance & Legal and 1992 $167,458 $ 44,309 -- -- 50,000 --
Chief Financial Officer
Lary L. Evans 1994 $198,962 $ 67,647 -- -- 10,000 $ 2,905
Vice President and 1993 $174,262 -- -- -- 11,000 --
General Manager, 1992 $154,583 $ 47,720 -- -- 9,100 --
Platform Division
Paul J. O'Mara 1994 $170,631 $ 74,821 -- -- 20,000 --
Vice President and 1993 $139,378 $ 17,500 -- -- 7,500 --
General Manager, 1992 $ 52,083 $ 20,213 -- -- 23,025 --
Enterprise Division
</TABLE>
(1) Includes compensation deferred at the election of the executive under the
Company's 401(k) Plan. Under the Company's 401(k) Plan, officers and other
employees of the Company may elect to defer up to 15% of their compensation,
subject to limitations under the Internal Revenue Code. Amounts deferred are
deposited by the Company in a trust account for distribution to employees upon
retirement, attainment of age 59 to 62, permanent disability, death,
termination of employment or the occurrence of conditions constituting
extraordinary hardship. The Company did not make any contributions for
executive officers under this plan during the last three years.
(2) Represents shares of Common Stock issuable upon exercise of nonstatutory
stock options granted under the Company's 1989 Stock Incentive Plan.
(3) Represents Company contributions under the Company's deferred compensation
plan and retirement plan for a foreign subsidiary.
(4) Represents the market price of the Common Stock on the grant date
multiplied by the number of shares granted. On December 31, 1994, 2,500 shares
of Common Stock were restricted. These shares become fully vested in April
1995 and will no longer be subject to any restrictions.
(5) In August 1994, in connection with Mr. McAdam's appointment as Senior Vice
President, World Wide Field Operations, the Company made a special payment to
him of $100,044 in order to compensate Mr. McAdam for the extensive travel and
inconvenience to Mr. McAdam and his family, who continued to reside in
England. In addition, the Company's subsidiary contributed an aggregate of
$21,368 to retirement plans in 1994 on behalf of Mr. McAdam.
<TABLE>
Stock Option Grants in Last Fiscal Year
The following table provides information regarding stock options granted to
certain executive officers in 1994.
<CAPTION>
Individual Grants
Percent of Potential
Total Reliazable Value at
Number of Options Assumed Annual
Shares Granted to Rates of Stock Price
Underlying Employees Exercise Appreciation
Options in Fiscal Price Expiration for Option Term(2)
Name Granted(1) Year per Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Karl C. Powell, Jr. 75,000(3) 6.6% $12.31 7/19/04 $580,994 $1,472,006
John McAdam 25,000(4) 2.2% $13.88 1/18/04 $218,148 $ 552,829
25,000(3) 2.2% $12.31 7/19/04 $193,665 $ 490,669
Robert S. Gregg 7,500(3) * $12.31 7/19/04 $ 58,099 $ 147,201
Lary L. Evans 10,000(3) * $12.31 7/19/04 $ 77,466 $ 196,268
Paul J. O'Mara 20,000(3) 1.8% $12.31 7/19/04 $154,932 $ 392,535
* Less than 1%
</TABLE>
(1) Under the terms of the Company's 1989 Stock Incentive Plan, each of the
options is subject to accelerated vesting in the event of a future change in
control of the Company or the occurrence of certain events indicating an
imminent change in control of the Company. Upon such acceleration, the
optionee has the right to cause the Company to repurchase the option for a
cash amount calculated in accordance with a formula set forth in the 1989
Stock Incentive Plan. Each of the options is subject to early termination in
the event of termination of employment. Each option terminates 12 months after
termination following death or disability and 30 days after termination for
any other reason.
(2) In accordance with rules of the Securities and Exchange Commission, these
amounts are the hypothetical gains or option spreads" that would exist for
the respective options based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the options were granted over the
full option term.
(3) This option becomes exercisable in full on July 19, 1998.
(4) This option becomes exercisable to the extent of 5,000 shares on January
18, 1995, January 18, 1996, January 18, 1997, January 18, 1998 and January 18,
1999.
<TABLE>
Stock Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values.
The following table indicates (i) stock options exercised by certain executive
officers during 1994, including the value realized on the date of exercise,
(ii) the number of shares subject to exercisable (vested) and unexercisable
(unvested) stock options as of December 31, 1994, and (iii) the value of in-
the-money" options, which represents the positive spread between the exercise
price of existing stock options and the year-end price of the Common Stock.
<CAPTION>
Number of
Shares Subject Unexercised
to Unexercised In-the-Money
Number of Options Options
Shares at Fiscal Year End at Fiscal Year End
Acquired Value (Exercisable/ (Exercisable/
Name on Exercise Realized(1) Unexercisable) (Unexercisable)
<S> <C> <C> <C> <C>
Karl C. Powell, Jr. 0 0 298,652 (exercisable) $2,924,752 (exercisable)
457,500 (unexercisable) $3,650,500 (unexercisable)
John McAdam 0 0 14,280 (exercisable) $ 96,018 (exercisable)
80,000 (unexercisable) $ 529,063 (unexercisable)
Robert S. Gregg 0 0 46,176 (exercisable) $ 357,666 (exercisable)
46,500 (unexercisable) $ 363,300 (unexercisable)
Lary L. Evans 1,000 $14,872 46,679 (exercisable) $ 591,674 (exercisable)
41,600 (unexercisable) $ 331,363 (unexercisable)
Paul J. O'Mara 2,095 $14,822 9,855 (exercisable) $ 62,049 (exercisable)
43,340 (unexercisable) $ 303,893 (unexercisable)
</TABLE>
(1) Aggregate market value of the shares covered by the option, less the
aggregate price paid by the executive.
(2) Does not include options granted in 1995. In 1995 options were granted
under the 1989 Stock Incentive Plan, with exercise prices equal to fair
market value at the time of grant, to Karl C. Powell, Jr. (100,000 shares),
John McAdam (100,000 shares) and Robert S. Gregg (75,000 shares). In 1995
options were granted under the 1995 Stock Incentive Plan (subject to
shareholder approval of the plan) to Karl C. Powell, Jr. (462,500 shares) and
John McAdam (20,000 shares), with exercise prices equal to fair market value
of the stock at the time of grant. Of the options granted under the 1995
Stock Incentive Plan to Mr. Powell, options for 37,500 shares vest in 1998
and options for the balance vest based on Company performance standards
established by the Board of Directors or in ten years, also subject to
continued employment. The options granted to Mr. McAdam under the 1995 Stock
Incentive Plan vest over four years subject to continued employment. See
Proposal to Approve 1995 Stock Incentive Plan."
(3) Calculated based on the stock price on December 31, 1994.
Compensation Committee Report on Executive Compensation.
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
The Compensation Committee of the Board of Directors (the Committee") is
composed of three outside directors and, pursuant to authority delegated by
the Board, determines the compensation to be paid to the Chief Executive
Officer and each of the other executive officers of the Company. The Committee
also is responsible for developing and making recommendations to the Board
with respect to the Company's executive compensation policies.
The Company's objectives for executive compensation are to (i) attract and
retain key executives important to the long term success of the Company; (ii)
reward executives for performance and enhancement of shareholder value; and
(iii) align the interests of the executive officer with the success of the
Company by basing a portion of the compensation upon corporate performance.
Executive Officer Compensation Program. The Company's executive officer
compensation program is comprised of base salary, annual cash incentive
compensation, and long term incentive compensation in the form of stock
options. Compensation based upon sales is also part of the
compensation program for certain executive officers with sales responsibility.
Base salary levels for the Company's executive officers are set relative to
companies of similar size in the electronics industry and other comparable
companies. There are 48 companies in the comparative group, 6 of which are
included in the S&P Computer Systems Index referred to in the table on page 11
of this proxy statement. The companies included in the comparative group sell
electronic hardware and software and are believed to be companies that the
Company competes with in attracting and retaining executives. Of the 48
companies included in the comparative group, 31 companies have revenues under
$500 million and 17 companies have revenues over $500 million. Base salaries
for executive officers of the Company are generally in the 50 to 75 percentile
of the range of salaries of the comparable companies in the surveys considered
by the Committee. In determining salaries, the Company also takes into account
individual experience, job responsibility and individual performance. The
Committee does not assign a specific weight to each of these factors in
establishing base salaries.
The Company's Executive and Management Incentive Plan is an annual incentive
program for executive officers and key managers. The purpose of the plan is to
provide a direct financial incentive in the form of an annual cash bonus to
executives to achieve predetermined individual and Company goals. Goals for
Company, functional and individual performance are set at the beginning of
each fiscal year. In fiscal 1994 the measures of Company performance and
relative importance in calculating the bonus amount were revenue (25%), profit
before taxes (50%), asset management (15%), creation of customer success
measures (5%) and creation of employee success measures (5%). All of the
Company's performance measures were satisfied in 1994 except for asset
management. Target bonuses for each executive officer were set in relation to
base salary and level of responsibility within the Company and are generally
in the 50 to 75 percentile of the range of cash bonuses of the comparable
companies in the surveys considered by the Committee.
The Company's stock option program is intended as a long term incentive plan
for executives, managers and other employees broadly within the Company. The
objectives of the program are to align employee and shareholder long term
interests by creating a strong and direct link between compensation and
shareholder value. The Company's 1989 Stock Incentive Plan and the Company's
1995 Stock Incentive Plan authorize the Committee to award stock options to
executive officers and other employees of the Company. Stock options for new
employees (including new officers) are granted at an option price equal to 85
percent of fair market value of the Company's Common Stock on the date of
grant. Options are granted to new officers at a discount from market as an
additional incentive for new officers to join the Company. In most cases new
officers will forfeit significant stock options or other benefits from a prior
employer. Options granted to existing officers and employees are granted at
fair market value of the Common Stock on the date of grant. Initial stock
options become exercisable to the extent of 24 percent of the shares one year
after the date of grant and to the extent of two percent of the shares each
month thereafter. Additional grants to existing officers and employees are
generally made annually to vest at the end of the vesting period for
previously granted options. Stock options have 10-year terms and generally
terminate in the event of termination of employment. The amount of stock
option grants for an individual is at the discretion of the Committee and
depends upon the level of responsibility and position in the Company.
Section 162(m) of the Internal Revenue Code of 1986, as adopted in 1993,
limits to $1,000,000 per person the amount that the company may deduct for
compensation paid to any of its most highly compensated officers in any year
after 1993. The levels of salary and bonus generally paid by the Company do
not exceed this limit. Under proposed regulations, the $1,000,000 cap on
deductibility will not apply to compensation received through the exercise of
a nonqualified stock option that meets certain requirements. This option
exercise compensation is equal to the excess of the market price at the time
of exercise over the option price and, unless limited by Section 162(m), is
generally deductible by the Company. It is the Company's current policy
generally to grant options that meet the requirements of the proposed
regulations.
Chief Executive Officer Compensation. The Committee determined the Chief
Executive Officer's compensation for 1994 based upon a number of factors and
criteria. The Chief Executive Officer's base salary was determined based upon
a review of the salaries of chief executive officers for similar companies of
comparable size and complexity and upon a review by the Committee of the Chief
Executive Officer's performance and is not based on the Company's performance.
The Chief Executive Officer's 1994 salary and target bonus amounts were set at
approximately the median for salaries and bonuses for chief executive officers
of the companies in the comparative group. The Chief Executive Officer
received a bonus for 1994 based on satisfaction of the Company performance
objectives for the year established under the Company's 1994 Executive and
Management Incentive Plan described above and his individual performance as
evaluated by the Committee.
During 1994 the Chief Executive Officer was granted an option to purchase
75,000 shares of the Company's Common Stock as part of the Company's annual
option grant program. Prior to the grant of this option, Mr. Powell held
options with vesting based exclusively on continued service for 69,500 shares
vesting in 1996, 28,000 shares vesting in 1997 and 25,000 shares vesting in
1998. The 1994 option grant vests in full in 1998. This option is part of an
ongoing program to increase the options held by Mr. Powell which vest after
1994 to provide him with significant ongoing incentives to remain with the
Company and to further align his long-term interests with shareholder
interests. The number of shares granted in 1994 was based on a subjective
determination of the number of shares needed in 1994 as part of this long-term
program.
David R. Hathaway
Robert C. Mathis
Michael S. Scott Morton
Comparison of Five Year Cumulative Total Return
The following graph provides a comparison of the five year cumulative total
shareholder return on (i) the Company's Common Stock, (ii) the S&P 500 Index
and (iii) the S&P Computer Systems Index, in each case assuming the
reinvestment of any dividends.
1989 1990 1991 1992 1993 1994
S&P Computer
Systems Index $100.00 $112.06 $ 99.58 $ 73.10 $ 75.87 $ 97.98
S&P 500 Index $100.00 $ 96.90 $126.42 $136.05 $149.76 $151.74
Sequent Computer
Systems, Inc. $100.00 $ 90.00 $ 68.75 $104.38 $ 76.25 $ 98.75
The graph assumes that $100 was invested on December 31, 1989 in Company
Common Stock, the S&P 500 Index and the S&P Computer Systems Index, and that
all dividends were reinvested.
CERTAIN TRANSACTIONS
During 1994 Sequent leased an airplane (the Airplane") from a corporation
owned by Karl C. Powell, Jr. (the Corporation"). The Airplane is leased by
Sequent pursuant to a three-year lease ending on September 30, 1996 and
providing for monthly airplane lease fees of $50,000. Under the lease, Sequent
is responsible for all maintenance expenses, storage expenses and insurance
premiums relating to the Airplane. The terms of this lease including the
monthly fees, are believed to be more favorable to Sequent than the rates that
would be charged by an unrelated lessor to lease a comparable airplane, and,
based on Sequent's usage of the Airplane, are also less than the amounts
Sequent would pay to lease a comparable airplane on an hourly basis. When the
Airplane is not being used by Sequent, Sequent is permitted to sublease it.
During the last fiscal year, Sequent paid $964,092 in lease fees, insurance
premiums, hangar fees, and maintenance expenses and reserves related to the
Airplane. During 1994 Sequent paid $473,850 for improvements to the Airplane,
consisting principally of structural improvements to the Airplane to improve
its fuel efficiency and to reduce operating expenses. The structural
improvements are owned by Sequent, and the Corporation has the right to
purchase them on expiration of the lease at book value.
PROPOSAL TO APPROVE
THE 1995 STOCK INCENTIVE PLAN
As described under Executive Compensation" the Company maintains stock option
plans for the benefit of its employees. The Board of Directors believes that
the availability of stock incentives is an important factor in the Company's
ability to attract and retain experienced and competent employees and to
provide an incentive for them to exert their best efforts on behalf of the
Company. As of March 1, 1995, out of a total of 4,640,000 shares reserved for
issuance under the Company's 1989 Stock Incentive Plan (the 1989 Incentive
Plan"), only 140,542 shares remained available for grant. The Board of
Directors believes that additional shares will be needed in the next year to
provide appropriate incentives. Accordingly, the Board of Directors adopted
and approved the 1995 Stock Incentive Plan (the 1995 Incentive Plan"),
subject to shareholder approval, and reserved 1,200,000 shares for the plan.
Certain provisions of the 1995 Incentive Plan are described below. The
complete text of the 1995 Incentive Plan is attached to this proxy statement
as Appendix A.
Description of 1995 Incentive Plan.
Eligibility. All employees, officers and directors of the Company and its
subsidiaries are eligible to participate in the 1995 Incentive Plan. Also
eligible are non-employee agents, consultants, advisors, persons involved in
the sale or distribution of the Company's products and independent contractors
of the Company or any subsidiary.
Administration. The 1995 Incentive Plan is administered by the Board of
Directors, which may promulgate rules and regulations for the operation of the
plan and generally supervises the administration of the plan. The Board of
Directors has delegated to a committee of officers authority for making option
grants to non-officer employees and consultants, subject to certain
limitations. The Board of Directors has delegated to the Compensation
Committee of the Board authority for making other option grants. These
committees determine the employees and consultants to whom option grants are
made under the 1995 Incentive Plan, and the price and terms of any such grants
within limits specified by the Board. The Board of Directors may delegate to a
committee of the Board of Directors or specified officers of the Company, or
both, any other authority to administer the 1995 Incentive Plan, except that
only the Board of Directors may amend, modify or terminate the 1995 Incentive
Plan, and a committee including officers of the Company may not grant options
to persons who are officers of the Company.
Term of Plan. The 1995 Incentive Plan will continue until all shares available
for issuance under the plan have been issued and all restrictions on such
shares have lapsed. The Board of Directors may suspend or terminate the 1995
Incentive Plan at any time.
Stock Options. The Board of Directors or appropriate committee determines the
persons to whom options are granted, the option price, the number of shares to
be covered by each option, the period of each option and the times at which
options may be exercised and whether the option is an ISO or an NSO. If the
option is an ISO, the option price cannot be less than the fair market value
of the Common Stock on the date of grant and the option may not be granted on
or after the tenth anniversary of the effective date of the 1995 Incentive
Plan. If an optionee of an ISO at the time of grant owns stock possessing more
than 10% of the combined voting power of the Company, the option price may not
be less than 110% of the fair market value of the Common Stock on the date of
grant. If the option is an NSO, the option price cannot be less than 50% of
the fair market value of the Common Stock on the date of the grant. The 1995
Incentive Plan provides that no employee may be granted options or stock
appreciation rights under the Plan for more than an aggregate of 500,000
shares in any calendar year. In addition, the 1995 Incentive Plan limits the
amount of ISOs that may become vested under the 1989 Incentive Plan in any
year to $100,000 per optionee (based on the exercise price of the stock). No
monetary consideration is paid to the Company upon the granting of options. On
March 23, 1995, the closing price of the Common Stock of the Company on the
NASDAQ National Market System was $16.875 per share.
Options granted under the 1995 Incentive Plan generally continue in effect for
the period fixed by the Board of Directors or committee, except that ISOs are
not exercisable after the expiration of 10 years from the date of grant, or 5
years in the case of optionees who at the time of the grant own stock
possessing more than 10% of the combined voting power of the Company. Options
are exercisable in accordance with the terms of an option agreement entered
into at the time of grant and are nontransferable except on death of a holder.
Options may be exercised only while an optionee is employed by the Company or
a subsidiary or within 12 months following termination of employment by reason
of death or disability or 30 days following termination for any other reason.
The 1995 Incentive Plan provides that the Board of Directors may extend the
exercise period for any period up to the expiration date of the option and may
increase the number of shares for which the option may be exercised up to the
total number underlying the option. The purchase price for each share
purchased pursuant to exercise of options must be paid in cash, including cash
which may be the proceeds of a loan from the Company, in shares of Common
Stock valued at fair market value, in restricted stock, in performance units
or other contingent awards denominated in either stock or cash, in deferred
compensation credits, or in other forms of consideration, as determined by the
Board of Directors. Upon the exercise of an option, the number of shares
subject to the option and the number of shares available under the 1995
Incentive Plan for future option grants are reduced by the number of shares
with respect to which the option is exercised, less any shares surrendered in
payment or withheld to satisfy withholding obligations.
Stock Option Grants to Non-employee Directors. Under the 1995 Incentive Plan,
each person who becomes a non-employee director will automatically be granted
an initial option to purchase 10,000 shares. Each non-employee director
automatically receives additional annual grants of options to purchase 5,000
shares, provided the non-employee director continues to serve in that
capacity. Each non-employee director also receives an annual option grant of
2,000 shares for each committee on which he or she serves. Options granted to
non-employee directors generally are governed by the terms discussed above,
except that the options have an exercise price equal to 85% of fair market
value and have a term of 10 years.
Stock Appreciation Rights. Stock appreciation rights ( SARs") may be granted
under the 1995 Incentive Plan. SARs may, but need not, be granted in
connection with an option grant or an outstanding option previously granted
under the 1995 Incentive Plan. A SAR gives the holder the right to payment
from the Company of an amount equal in value to the excess of the fair market
value on the date of exercise of a share of Common Stock of the Company over
its fair market value on the date of grant, or if granted in connection with
an option, the option price per share under the option to which the SAR
relates.
A SAR is exercisable only at the time or times established by the Board of
Directors. If a SAR is granted in connection with an option it is exercisable
only to the extent and on the same conditions that the related option is
exercisable. No SAR granted to an officer or director can be exercised during
the first six months after the date of grant. Payment by the Company upon
exercise of a SAR may be made in Common Stock of the Company valued at its
fair market value, in cash, or partly in stock and partly in cash, as
determined by the Board of Directors. The Board of Directors may withdraw any
SAR granted under the 1995 Incentive Plan at any time and may impose any
condition upon the exercise of a SAR or adopt rules and regulations from time
to time affecting the rights of holders of SARs. No SARs have been granted
under the 1995 Incentive Plan.
The existence of SARs, as well as certain bonus rights described below, would
require charges to income over the life of the right based upon the amount of
appreciation, if any, in the market value of the Common Stock of the Company
over the exercise price of shares subject to exercisable SARs or bonus rights.
Stock Bonus Awards. The Board of Directors may award Common Stock of the
Company to employees as a stock bonus under the 1995 Incentive Plan. The Board
of Directors may determine the employees to receive awards, the number of
shares to be awarded and the time of the award. Stock received as a stock
bonus is subject to the terms, conditions and restrictions determined by the
Board of Directors at the time the stock is awarded.
Restricted Stock. The 1995 Incentive Plan provides that the Company may issue
restricted stock to employees in such amounts, for such consideration, subject
to such restrictions and on such terms as the Board of Directors may
determine. No restricted stock may be issued for consideration less than 50%
of the fair market value of the stock at the time of issuance.
Cash Bonus Rights. The Board of Directors may grant cash bonus rights under
the 1995 Incentive Plan in connection with (i) options granted or previously
granted, (ii) SARs granted or previously granted, (iii) stock bonuses awarded
or previously awarded, and (iv) shares sold or previously sold under the 1995
Incentive Plan. Bonus rights may be used to provide cash to employees for the
payment of taxes in connection with awards under the 1995 Incentive Plan.
Bonus rights granted in connection with options entitle the optionee to a cash
bonus if and when the related option is exercised or terminates in connection
with the exercise of a SAR related to the option. If the shares are purchased
on the exercise of an option and the optionee does not exercise a related SAR,
the amount of the bonus shall be determined by multiplying the excess of the
total fair market value for the shares to be acquired upon the exercise over
the total option price for the shares by the applicable bonus percentage. If
an optionee exercises a related SAR in connection with the termination of an
option, the amount of the bonus shall be determined by multiplying the total
fair market value of the shares and cash received pursuant to the exercise of
the SAR by the applicable bonus percentage. The bonus percentage applicable to
any bonus right is determined by the Board of Directors but may in no event
exceed 75%. Bonus rights granted in connection with stock bonuses entitle the
recipient to a cash bonus, in an amount determined by the Board of Directors,
at the time the stock is awarded or at such time as any restrictions to which
the stock is subject lapse. Bonus rights granted in connection with restricted
stock purchases entitle the recipient to a cash bonus in an amount determined
by the Board of Directors, payable when the shares are purchased or
restrictions, if any, to which the stock is subject lapse. Bonus rights
granted in connection with restricted stock purchases or stock bonuses
terminate in the event that restricted stock is repurchased by the Company or
forfeited by the holder pursuant to the restrictions. No bonus rights have
been granted under the 1995 Incentive Plan.
Performance Units. The Board of Directors may grant performance units
consisting of monetary units which may be earned in whole or in part if the
Company achieves goals established by the Board of Directors over a designated
period of time, but in any event not more than 10 years. Payment of an award
earned may be in cash or stock or both, and may be made when earned, or vested
and deferred, as the Board of Directors determines. No performance units have
been granted under the 1995 Incentive Plan.
Foreign Qualified Grants. Awards under the 1995 Incentive Plan may be granted
to eligible persons residing in foreign jurisdictions. The Board of Directors
may adopt such supplements to the plan as may be necessary to comply with the
applicable laws of such foreign jurisdictions and to afford participants
favorable treatment under such laws except that no award shall be granted
under any such supplement with terms which are more beneficial to the
participants than the terms permitted by the 1995 Incentive Plan.
Changes in Capital Structure. The 1995 Incentive Plan provides that if the
outstanding Common Stock of the Company is increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of any recapitalization,
stock split or certain other transactions, appropriate adjustment will be made
by the Board of Directors in the number and kind of shares available for
awards under the plan. In addition, the Board of Directors will make
appropriate adjustments in outstanding options and SARs. If the stockholders
of the Company receive capital stock of another corporation ( Exchange Stock")
in exchange for their shares of Common Stock in any transaction involving a
merger, consolidation or plan of exchange, all options granted hereunder shall
be converted into fully vested options to purchase shares of Exchange Stock
based on the exchange rate applied to Common Stock in the transaction. In the
event of dissolution of the Company or a merger, consolidation or plan of
exchange affecting the Company, in lieu of the foregoing treatment for options
and SARs, the Board of Directors may, in its sole discretion, provide a 30-day
period prior to such event during which optionees shall have the right to
exercise options and SARs in whole or in part without any limitation on
exercisability and upon the expiration of which 30-day period all unexercised
options and SARs shall immediately terminate.
Acceleration in Certain Events. The 1995 Incentive Plan provides for
accelerated vesting of options and SARs granted under the 1995 Incentive Plan
in the event of a future change in control of the Company or the occurrence of
certain events indicating an imminent change in control of the Company as
specified in the 1995 Incentive Plan. Upon such an acceleration, holders of
options have the right to have the Company repurchase such options for cash
and SARs shall be exercisable only for cash. The repurchase price of options
and the amount payable upon exercise of SARs is calculated according to a
formula set forth in the 1995 Incentive Plan and is generally equal to the
product of (1) the excess of the highest purchase price paid in connection
with the transactions indicating a change in control or potential change over
the option price and (2) the number of shares of Common Stock covered by the
stock option or SAR, or portions thereof surrendered. The special acceleration
provision may, in certain circumstances, have the effect of discouraging
attempts to take over the Company.
Federal Income Tax Consequences
Certain options authorized to be granted under the 1995 Incentive Plan are
intended to qualify as ISOs for federal income tax purposes. Under federal
income tax law currently in effect, the optionee will recognize no income, and
the Company will be entitled to no deduction, upon grant or upon a proper
exercise of the ISO. The excess of the fair market value of the shares on the
exercise date over the exercise price will, however, be taken into account in
calculating the employee's alternative minimum taxable income. If an employee
exercises an ISO and does not dispose of any of the option shares within two
years following the date of grant and within one year following the date of
exercise, then any gain realized upon subsequent disposition of the shares
will be treated as income from the sale or exchange of a capital asset. If an
employee disposes of shares acquired upon exercise of an ISO before the
expiration of either the one-year holding period or the two-year waiting
period, any amount realized will be taxable as ordinary compensation income in
the year of such disqualifying disposition to the extent of the lesser of the
excess of the fair market value of the shares on the exercise date over the
exercise price or the excess of the fair market value of the shares on the
date of disposition over the employee's tax basis in the shares. If the
employee disposes of the shares in a transaction in which loss would not be
recognized, the amount realized will be taxable as ordinary compensation
income to the extent that the fair market value of the shares on the exercise
date exceeds the exercise price. The Company will not be allowed any deduction
for federal income tax purposes at either the time of the grant or exercise of
an ISO. Upon any disqualifying disposition by an employee, the Company will
generally be entitled to a deduction to the extent the employee realized
ordinary income.
Certain options authorized to be granted under the 1995 Incentive Plan will be
treated as NSOs for federal income tax purposes. Under federal income tax law
presently in effect, no income is realized by the grantee of an NSO pursuant
to the 1995 Incentive Plan until the option is exercised. At the time of
exercise of an NSO, the optionee will realize ordinary compensation income,
and the Company will generally be entitled to a deduction, in the amount by
which the market value of the shares subject to the option at the time of
exercise exceeds the exercise price. The Company's deduction is conditioned
upon withholding on the income amount. Upon the sale of shares acquired upon
exercise of an NSO, the excess of the amount realized from the sale over the
employee's tax basis in the shares will be taxable.
An employee who receives stock in connection with the performance of services
will generally realize taxable income at the time of receipt unless the shares
are substantially nonvested for purposes of Section 83 of the Internal
Revenue Code of 1986, as amended, and no Section 83(b) election is made. If
the shares are not vested at the time of receipt, the employee will realize
taxable income in each year in which a portion of the shares substantially
vest, unless the employee elects under Section 83(b) within 30 days after the
original transfer. The Company will generally be entitled to a tax deduction
in the amount includable as income by the employee at the same time or times
as the employee recognizes income with respect to the shares, provided the
Company withholds on the income amount. A participant who receives a cash
bonus right under the plan will generally recognize income equal to the amount
of a cash bonus paid at the time of receipt, and the Company
will generally be entitled to a deduction equal to the income recognized by
the participant.
Section 162(m) of the Internal Revenue Code of 1986, as adopted in 1993,
limits to $1,000,000 per person the amount that the Company may deduct for
compensation paid to any of its most highly compensated officers in any year
after 1993. Under proposed regulations, compensation received through the
exercise of an option or stock appreciation right will not be subject to the
$1,000,000 limit if the option or stock appreciation right and the plan meet
certain requirements. One such requirement is that shareholders approve per-
employee limits on the number of shares as to which options and stock
appreciation rights may be granted. Other requirements are that the option or
stock appreciation right be granted by a committee composed solely of at least
two outside directors and that the exercise price of the option or the stock
appreciation right be not less than fair market value of the Common Stock on
the date of grant. Accordingly, the Company believes that compensation
received on exercise of options and stock appreciation rights granted under
the 1995 Incentive Plan in compliance with all of the above requirements will
not be subject to the $1,000,000 deduction limit.
Grants Under 1995 Incentive Plan
The Compensation Committee of the Board of Directors has granted options under
the 1995 Incentive Plan to two executive officers of the Company, subject to
shareholder approval of the 1995 Incentive Plan. See the table under
Executive Compensation _ Stock Option Exercises in Last Fiscal Year and
Fiscal Year-End Values" for information regarding these grants. Under the
provisions of the 1995 Plan providing for automatic option grants to non-
employee directors, it is expected that each director who is not an employee
of the Company will receive under the 1995 Incentive Plan an option for 5,000
shares for board service and an additional option for 2,000 shares for each
committee on which he serves, effective on the date of the 1995 annual
meeting, for a total of 47,000 shares for all directors.
Recommendation by the Board of Directors
The Board of Directors recommends that the 1995 Incentive Plan be approved.
The proposal must be approved by the holders of at least a majority of the
outstanding shares of Common Stock present, or represented by proxy, and
entitled to vote on the matter at the annual meeting. Abstentions have the
effect of no" votes in determining whether the 1995 Incentive Plan is
approved. Broker non-votes are counted for purposes of determining whether a
quorum exists at the annual meeting but are not counted and have no effect on
the results of the vote. The proxies will be voted for or against the
proposal, or as an abstention, in accordance with the instructions specified
on the proxy form. If no instructions are given, proxies will be voted for
approval of the 1995 Incentive Plan.
PROPOSAL TO AMEND
EMPLOYEE STOCK PURCHASE PLAN
A total of 2,950,000 shares of Common Stock have been reserved for the
Employee Stock Purchase Plan (the Purchase Plan"). As of March 1, 1995, only
126,199 shares remained available for purchase under the Purchase Plan. The
Board of Directors believes that it is desirable for the Company to continue
to provide the opportunity for employees to acquire Common Stock through the
Purchase Plan. Accordingly, subject to shareholder approval, the Board of
Directors has adopted an amendment to the Purchase Plan reserving an
additional 1,200,000 shares for issuance under the Purchase Plan. The
following is a summary of the basic provisions of the Purchase Plan, a
complete copy of which, marked to indicate the proposed change, is attached to
this Proxy Statement as Appendix B.
Description of the Purchase Plan
The purpose of the Purchase Plan is to provide a convenient and practical
means by which employees may participate in stock ownership of the Company.
The Board of Directors believes that the opportunity to acquire a proprietary
interest in the success of the Company through the acquisition of shares of
Common Stock pursuant to the Purchase Plan is an important aspect of the
Company's ability to attract and retain highly qualified and motivated
employees.
The Purchase Plan is intended to qualify as an employee stock purchase plan"
within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended (the Code"). The Purchase Plan is administered by the Board of
Directors. The Board has the power to make and interpret all rules and
regulations it deems necessary to administer the Purchase Plan and has broad
authority to amend the Purchase Plan, subject to certain amendments requiring
shareholder approval.
All regular status employees of the Company and its subsidiaries, including
the Company's officers, are eligible to participate in the Purchase Plan.
Eligible employees may elect to contribute from 2% to 10% of their cash
compensation during each pay period. Each participant may enroll in an 18-
month offering in which shares of Common Stock are purchased on the last day
of each six-month period of an offering. A separate offering commences on
March 1, June 1, September 1 and December 1 of each year (the Enrollment
Dates"). The purchase price per share is equal to 85% of the lower of (a) the
fair market value of the Common Stock on the Enrollment Date of the Offering
or (b) the fair market value on the date of purchase.
Neither payroll deductions credited to a participant's account nor any rights
with regard to the purchase of shares under the Purchase Plan may be assigned,
transferred, pledged or otherwise disposed of in any way by the participant.
Upon termination of a participant's employment for any reason other than
death, retirement or disability of the participant, the payroll deductions
credited to the participant's account will be returned to the participant.
Upon termination of the participant's employment because of death, retirement
or disability, the payroll deductions credited to the participant's account
will be used to purchase shares on the next purchase date. Any remaining
balance will be returned to the participant or his or her beneficiary. As of
February 28, 1995, there were 1,865 employees of the Company eligible to
participate in the Purchase Plan and 1,253 employees participating.
Federal Income Tax Consequences
The Purchase Plan is intended to qualify as an employee stock purchase plan"
within the meaning of Section 423 of the Code. Under the Code, no taxable
income is recognized by the participant with respect to shares purchased under
the Purchase Plan either at the time of enrollment or at any purchase date
within an Offering.
If the participant disposes of shares purchased pursuant to the Purchase Plan
more than two years from the Enrollment Date and more than one year from the
date on which the shares were purchased, the participant will recognize
ordinary income equal to the lesser of (1) the excess of the fair market value
of the shares at the time of disposition over the purchase price, or (2) 15%
of the fair market value of the shares on the Enrollment Date. Any gain on the
disposition in excess of the amount treated as ordinary income will be capital
gain. The Company is not entitled to take a deduction for the amount of the
discount in the circumstances indicated above.
If the participant disposes of shares purchased pursuant to the Purchase Plan
within two years after the Enrollment Date or within one year after the
Purchase Date, the employee will recognize ordinary income on the excess of
the fair market value of the stock on the purchase date over the purchase
price. Any difference between the sale price of the shares and the fair market
value on the purchase date will be capital gain or loss. The Company is
entitled to a deduction from income equal to the amount the employee is
required to report as ordinary compensation income.
The federal income tax rules relating to employee stock purchase plans
qualifying under Section 423 of the Code are complex. Therefore, the foregoing
outline is intended to summarize only certain major federal income tax rules
concerning employee stock purchase plans.
Purchases Under Plan
The following table indicates shares purchased under the Purchase Plan during
the last fiscal year and since the inception of the plan in 1987 by certain
executive officers, by all executive officers as a group and by all employees
(excluding executive officers) as a group:
Shares Purchased Shares Purchased
in 1994 since 1987
Name Dollar Number Dollar Number
and Position Value(1) of Shares Value(1) of Shares
Karl C. Powell, Jr. $ 4,042 1,685 $ 184,779 20,669
John McAdam $ 4,143 1,687 $ 87,504 11,854
Robert S. Gregg $ 5,288 1,582 $ 102,866 12,921
Lary L. Evans $ 6,150 1,436 $ 75,581 8,532
Paul J. O'Mara $ 0 0 $ 0 0
All Current Executive
Officers (5 persons) $ 19,623 6,639 $ 450,730 53,976
All employees, excluding
executive officers $1,563,295 461,089 $16,959,604 2,562,735
(1) Dollar Value" equals the difference between the price paid for shares
purchased under the Purchase Plan and the fair market value of the shares on
the purchase date.
Recommendation by the Board of Directors
The Board of Directors recommends that the amendment to the Purchase Plan be
approved. The proposal must be approved by the holders of at least a majority
of the shares of Common Stock present or represented by proxy and entitled to
vote at the annual meeting. Abstentions have the effect of no" votes in
determining whether the amendment to the Purchase Plan is approved. Broker
non-votes are counted for purposes of determining whether a quorum exists at
the annual meeting but are not counted and have no effect on the results of
the vote. The proxies will be voted for or against the proposal, or an
abstention, in accordance with the instructions specified on the proxy form.
If no instructions are given, proxies will be voted for approval of the
amendment to the Purchase Plan.
APPROVAL OF SELECTION OF AUDITORS
The Board of Directors has selected Price Waterhouse as the Company's
independent auditors for the current fiscal year and is submitting the
selection to the shareholders for approval. Price Waterhouse has audited the
financial statements of the Company since incorporation. Proxies will be voted
in accordance with the instructions specified in the proxy form. If no
instructions are given, proxies will be voted for approval of the selection of
Price Waterhouse as independent auditors. Representatives of Price Waterhouse
are expected to be present at the annual meeting, will have the opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of the
Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ( SEC"). Executive officers, directors and
beneficial owners of more than ten percent of the Common Stock are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on a review of the copies of such forms received by
the Company and on written representations from certain reporting persons that
they have complied with the relevant filing requirements, the Company believes
that all Section 16(a) filing requirements applicable to its executive
officers and directors were complied with during the last fiscal year ending
on December 31, 1994, except that Alan Schallop (formerly an executive officer
of the Company) was late in filing one report (reporting two transactions)
with the SEC and Robert S. Gregg was late in filing one report (reporting two
exempt transactions) with the SEC.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Shareholders provides for transaction
of such other business as may properly come before the meeting, the Board of
Directors has no knowledge of any matters to be presented at the meeting other
than those referred to herein. However, the enclosed proxy gives discretionary
authority in the event that any other matters should be presented.
SHAREHOLDER PROPOSALS
Any shareholder proposals to be considered for inclusion in proxy material for
the Company's 1996 annual meeting must be received at the principal executive
offices of the Company not later than December 6, 1995.
By Order of the Board of Directors
Karl C. Powell, Jr.
Chairman of the Board
and Chief Executive Officer
March 24, 1994
APPENDIX A
SEQUENT COMPUTER SYSTEMS, INC.
1995 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this Stock Incentive Plan (the Plan") is to enable
Sequent Computer Systems, Inc. (the Company") to attract and retain the
services of (1) selected employees, officers and directors of the Company or
of any subsidiary of the Company and (2) selected non- employee agents,
consultants, advisors, persons involved in the sale or distribution of the
Company's products and independent contractors of the Company or any
subsidiary.
2. Shares Subject to the Plan. Subject to adjustment as provided below and in
paragraph 14, the shares to be offered under the Plan shall consist of Common
Stock of the Company, and the total number of shares of Common Stock that may
be issued under the Plan shall not exceed 1,200,000 shares plus any shares
that are available for grant under the Company's 1989 Incentive Plan or that
may subsequently become available for grant under such plan or the 1987
Nonstatutory Stock Option Plan or the 1987 Employee Stock Option through the
expiration, termination, forfeiture or cancellation of awards under such
plans. The shares issued under the Plan may be authorized and unissued shares
or reacquired shares. If an option, stock appreciation right or performance
unit granted under the Plan expires, terminates or is cancelled, the unissued
shares subject to such option, stock appreciation right or performance unit
shall again be available under the Plan. If shares sold or awarded as a bonus
under the Plan are forfeited to the Company or repurchased by the Company, the
number of shares forfeited or repurchased shall again be available under the
Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. The Plan shall become effective as of January 26, 1995
(the Effective Date"). No option, stock appreciation right or performance
unit granted under the Plan to an officer who is subject to Section 16(b) of
the Securities Exchange Act of 1934, as amended (the Exchange Act") or a
director shall become exercisable, however, until the Plan is approved by
shareholders in accordance with Rule 16b-3 as in effect at the time of the
Company's 1995 annual meeting of shareholders and any such awards under the
Plan prior to such approval shall be conditioned on and subject to such
approval. Subject to this limitation, options, stock appreciation rights and
performance units may be granted and shares may be awarded as bonuses or sold
under the Plan at any time after the effective date and before termination of
the Plan.
(b) Duration. The Plan shall continue in effect until all shares available for
issuance under the Plan have been issued and all restrictions on such shares
have lapsed. The Board of Directors may suspend or terminate the Plan at any
time except with respect to options, performance units and shares subject to
restrictions then outstanding under the Plan. Termination shall not affect any
outstanding options, any right of the Company to repurchase shares or the
forfeitability of shares issued under the Plan.
4. Administration.
(a) Board of Directors. The Plan shall be administered by the Board of
Directors of the Company, which shall determine and designate from time to
time the individuals to whom awards shall be made, the amount of the awards
and the other terms and conditions of the awards. Subject to the provisions of
the Plan, the Board of Directors may from time to time adopt and amend rules
and regulations relating to administration of the Plan, advance the
lapse of any waiting period, accelerate any exercise date, waive or modify any
restriction applicable to shares (except those restrictions imposed by law)
and make all other determinations in the judgment of the Board of Directors
necessary or desirable for the administration of the Plan. The interpretation
and construction of the provisions of the Plan and related agreements by the
Board of Directors shall be final and conclusive. The Board of Directors may
correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any related agreement in the manner and to the extent it shall
deem expedient to carry the Plan into effect, and it shall be the sole and
final judge of such expediency.
(b) Committee. The Board of Directors may delegate to a committee of the Board
of Directors or specified officers of the Company, or both (the Committee")
any or all authority for administration of the Plan. If authority is delegated
to a Committee, all references to the Board of Directors in the Plan shall
mean and relate to the Committee except (i) as otherwise provided by the Board
of Directors, (ii) that only the Board of Directors may amend or terminate the
Plan as provided in paragraphs 3 and 17 and (iii) that a Committee including
officers of the Company shall not be permitted to grant options to persons who
are officers of the Company.
5. Types of Awards; Eligibility; Limitations on Certain Awards. The Board of
Directors may, from time to time, take the following action, separately or in
combination, under the Plan: (i) grant Incentive Stock Options, as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the Code"), as
provided in paragraphs 6(a) and 6(b); (ii) grant options other than Incentive
Stock Options ( Non-Statutory Stock Options") as provided in paragraphs 6(a)
and 6(c); (iii) award stock bonuses as provided in paragraph 7; (iv) sell
shares subject to restrictions as provided in paragraph 8; (v) grant stock
appreciation rights as provided in paragraph 9; (vi) grant cash bonus rights
as provided in paragraph 10; (vii) grant performance units as provided in
paragraph 11 and (viii) grant foreign qualified awards as provided in
paragraph 12. Any such awards may be made to employees, including employees
who are officers or directors, and to other individuals described in paragraph
1 who the Board of Directors believes have made or will make an important
contribution to the Company or its subsidiaries; provided, however, that only
employees of the Company shall be eligible to receive Incentive Stock Options
under the Plan and directors who are not employees shall receive awards only
pursuant to paragraph 13. The Board of Directors shall select the individuals
to whom awards shall be made and shall specify the action taken with respect
to each individual to whom an award is made. At the discretion of the Board of
Directors, an individual may be given an election to surrender an award in
exchange for the grant of a new award. No employee may be granted options or
stock appreciation rights under the Plan for more than an aggregate of 500,000
shares of Common Stock in any calendar year.
6. Option Grants.
(a) General Rules Relating to Options.
(i) Terms of Grant. The Board of Directors may grant options under the Plan.
With respect to each option grant, the Board of Directors shall determine the
number of shares subject to the option, the option price, the period of the
option, the time or times at which the option may be exercised and whether the
option is an Incentive Stock Option or a Non-Statutory Stock Option. At the
time of the grant of an option or at any time thereafter, the Board of
Directors may provide that an optionee who exercised an option with Common
Stock of the Company shall automatically receive a new option to purchase
additional shares equal to the number of shares surrendered and may specify
the terms and conditions of such new options.
(ii) Exercise of Options. Except as provided in paragraph 6(a)(iv) or as
determined by the Board of Directors, no option granted under the Plan may be
exercised unless at the time of such exercise the optionee is employed by or
in the service of the Company or any subsidiary of the Company and shall have
been so employed or provided such service continuously since the date such
option was granted. Absence on leave or on account of illness or disability
under rules established by the Board of Directors shall not, however, be
deemed an interruption of employment or service for this purpose. Unless
otherwise determined by the Board of Directors, vesting of options shall not
continue during an absence on leave (including an extended illness) or on
account of disability. Except as provided in paragraphs 6(a)(iv), 14 and 15,
options granted under the Plan may be exercised from time to time over the
period stated in each option in such amounts and at such times as shall be
prescribed by the Board of Directors, provided that options shall not be
exercised for fractional shares. Unless otherwise determined by the Board of
Directors, if the optionee does not exercise an option in any one year with
respect to the full number of shares to which the optionee is entitled in that
year, the optionee's rights shall be cumulative and the optionee may purchase
those shares in any subsequent year during the term of the option.
(iii) Nontransferability. Each Incentive Stock Option and, unless otherwise
determined by the Board of Directors with respect to an option granted to a
person who is neither an officer nor a director of the Company, each other
option granted under the Plan by its terms shall be nonassignable and
nontransferable by the optionee, either voluntarily or by operation of law,
except by will or by the laws of descent and distribution of the state or
country of the optionees domicile at the time of death, and each option by its
terms shall be exercisable during the optionees lifetime only by the optionee.
(iv) Termination of Employment or Service.
(A) General Rule. Unless otherwise determined by the Board of Directors, in
the event the employment or service of the optionee with the Company or a
subsidiary terminates for any reason other than because of physical disability
or death as provided in subparagraphs 6(a)(iv)(B) and (C), the option may be
exercised at any time prior to the expiration date of the option or the
expiration of 30 days after the date of such termination, whichever is the
shorter period, but only if and to the extent the optionee was entitled to
exercise the option at the date of such termination.
(B) Termination Because of Total Disability. Unless otherwise determined by
the Board of Directors, in the event of the termination of employment or
service because of total disability, the option may be exercised at any time
prior to the expiration date of the option or the expiration of 12 months
after the date of such termination, whichever is the shorter period, but only
if and to the extent the optionee was entitled to exercise the option at the
date of such termination. The term total disability" means a mental or
physical impairment which is expected to result in death or which has lasted
or is expected to last for a continuous period of 12 months or more and which
causes the optionee to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties as an employee, director,
officer or consultant of the Company and to be engaged in any substantial
gainful activity. Total disability shall be deemed to have occurred on the
first day after the Company and the two independent physicians have furnished
their opinion of total disability to the Company.
(C) Termination Because of Death. Unless otherwise determined by the Board
of Directors, in the event of the death of an optionee while employed by or
providing service to the Company or a subsidiary, the option may be exercised
at any time prior to the expiration date of the option or the expiration of 12
months after the date of such death, whichever is the shorter period, but only
if and to the extent the optionee was entitled to exercise the option at the
date of such termination and only by the person or persons to whom such
optionees rights under the option shall pass by the optionee's will or by the
laws of descent and distribution of the state or country of domicile at the
time of death.
(D) Amendment of Exercise Period Applicable to Termination. The Board of
Directors, at the time of grant or at any time thereafter, may extend the 30-
day and 12-month exercise periods any length of time not later than the
original expiration date of the option, and may increase the portion of an
option that is exercisable, subject to such terms and conditions as the Board
of Directors may determine.
(E) Failure to Exercise Option. To the extent that the option of any deceased
optionee or of any optionee whose employment or service terminates is not
exercised within the applicable period, all further rights to purchase shares
pursuant to such option shall cease and terminate.
(v) Purchase of Shares. Unless the Board of Directors determines otherwise,
shares may be acquired pursuant to an option granted under the Plan only upon
receipt by the Company of notice in writing from the optionee of the
optionee's intention to exercise, specifying the number of shares as to which
the optionee desires to exercise the option and the date on which the optionee
desires to complete the transaction, and if required in order to comply with
the Securities Act of 1933, as amended, containing a representation that it is
the optionee's present intention to acquire the shares for investment and not
with a view to distribution. Unless the Board of Directors determines
otherwise, on or before the date specified for completion of the purchase of
shares pursuant to an option, the optionee must have paid the Company the full
purchase price of such shares in cash (including, with the consent of the
Board of Directors, cash that may be the proceeds of a loan from the Company)
or, with the consent of the Board of Directors, in whole or in part, in Common
Stock of the Company valued at fair market value, restricted stock,
performance units or other contingent awards denominated in either stock or
cash, deferred compensation credits, promissory notes and other forms of
consideration. The fair market value of Common Stock provided in payment of
the purchase price shall be the closing price of the Common Stock as reported
in The Wall Street Journal on the trading day preceding the date the option is
exercised, or such other reported value of the Common Stock as shall be
specified by the Board of Directors. No shares shall be issued until full
payment therefor has been made. With the consent of the Board of Directors, an
optionee may request the Company to apply automatically the shares to be
received upon the exercise of a portion of a stock option (even though stock
certificates have not yet been issued) to satisfy the purchase price for
additional portions of the option. Each optionee who has exercised an option
shall immediately upon notification of the amount due, if any, pay to the
Company in cash amounts necessary to satisfy any applicable federal, state and
local tax withholding requirements. If additional withholding is or becomes
required beyond any amount deposited before delivery of the certificates, the
optionee shall pay such amount to the Company on demand. If the optionee fails
to pay the amount demanded, the Company may withhold that amount from other
amounts payable by the Company to the optionee, including salary, subject to
applicable law. With the consent of the Board of Directors an optionee may
satisfy this obligation, in whole or in part, by having the Company withhold
from the shares to be issued upon the exercise that number of shares that
would satisfy the withholding amount due or by delivering to the Company
Common Stock to satisfy the withholding amount. Upon the exercise of an
option, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued upon exercise of the option, less the
number of shares surrendered in payment of the option exercise or surrendered
or withheld to satisfy withholding obligations.
(b) Incentive Stock Options. Incentive Stock Options shall be subject to the
following additional terms and conditions:
(i) Limitation on Amount of Grants. No employee may be granted Incentive
Stock Options under the Plan if the aggregate fair market value, on the date
of grant, of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by that employee during any calendar year
under the Plan and under any other incentive stock option plan (within the
meaning of Section 422 of the Code) of the Company or any parent or subsidiary
of the Company exceeds $100,000.
(ii) Limitations on Grants to 10 Percent Shareholders. An Incentive Stock
Option may be granted under the Plan to an employee possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company or of any parent or subsidiary of the Company only if the option price
is at least 110 percent of the fair market value of the Common Stock subject
to the option on the date it is granted, as described in paragraph 6(b)(iv),
and the option by its terms is not exercisable after the expiration of five
years from the date it is granted.
(iii) Duration of Options. Subject to paragraphs 6(a)(ii) and 6(b)(ii),
Incentive Stock Options granted under the Plan shall continue in effect for
the period fixed by the Board of Directors, except that no Incentive Stock
Option shall be exercisable after the expiration of 10 years from the date it
is granted.
(iv) Option Price. The option price per share shall be determined by the
Board of Directors at the time of grant. Except as provided in paragraph
6(b)(ii), the option price shall not be less than 100 percent of the fair
market value of the Common Stock covered by the Incentive Stock Option at the
date the option is granted. The fair market value shall be deemed to be the
closing price of the Common Stock as reported in The Wall Street Journal on
the day preceding the date the option is granted, or if there has been no sale
on that date, on the last preceding date on which a sale occurred, or such
other value of the Common Stock as shall be specified by the Board of
Directors.
(v) Limitation on Time of Grant. No Incentive Stock Option shall be granted
on or after the tenth anniversary of the effective date of the Plan.
(vi) Conversion of Incentive Stock Options. The Board of Directors may at any
time without the consent of the optionee convert an Incentive Stock Option to
a Non-Statutory Stock Option.
(vii) Limitation on Number of Shares Issuable Under Incentive Stock Options.
Subject to adjustment as provided in paragraph 14, the total number of shares
of Common Stock that may be issued under the Plan upon exercise of Incentive
Stock Options shall not exceed 1,200,000 shares.
(c) Non-Statutory Stock Options. Non-Statutory Stock Options shall be subject
to the following additional terms and conditions:
(i) Option Price. The option price for Non-Statutory Stock Options shall be
determined by the Board of Directors at the time of grant. The option price
may not be less than 50 percent of the fair market value of the shares on the
date of grant. The fair market value of shares covered by a Non-Statutory
Stock Option shall be determined pursuant to paragraph 6(b)(iv).
(ii) Duration of Options. Non-Statutory Stock Options granted under the Plan
shall continue in effect for the period fixed by the Board of Directors.
7. Stock Bonuses. The Board of Directors may award shares under the Plan as
stock bonuses. Shares awarded as a bonus shall be subject to the terms,
conditions, and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability and
forfeiture of the shares awarded, together with such other restrictions as may
be determined by the Board of Directors. The Board of Directors may require
the recipient to sign an agreement as a condition of the award, but may not
require the recipient to pay any monetary consideration other than amounts
necessary to satisfy tax withholding requirements. The agreement may contain
any terms, conditions, restrictions, representations and warranties required
by the Board of Directors. The certificates representing the shares awarded
shall bear any legends required by the Board of Directors. The Company may
require any recipient of a stock bonus to pay to the Company in cash upon
demand amounts necessary to satisfy any applicable federal, state or local tax
withholding requirements. If the recipient fails to pay the amount demanded,
the Company may withhold that amount from other amounts payable by the
Company to the recipient, including salary or fees for services, subject to
applicable law. With the consent of the Board of Directors, a recipient may
deliver Common Stock to the Company to satisfy this withholding obligation.
Upon the issuance of a stock bonus, the number of shares reserved for
issuance under the Plan shall be reduced by the number of shares issued,
less the number of shares surrendered or withheld to satisfy withholding
obligations.
8. Restricted Stock. The Board of Directors may issue shares under the Plan
for such consideration (including promissory notes and services) as determined
by the Board of Directors provided that in no event shall the consideration be
less than 50 percent of fair market value of the Common Stock at the time of
issuance. Shares issued under the Plan shall be subject to the terms,
conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability, repurchase
by the Company and forfeiture of the shares issued, together with such other
restrictions as may be determined by the Board of Directors. All Common Stock
issued pursuant to this paragraph 8 shall be subject to a purchase agreement,
which shall be executed by the Company and the prospective recipient of the
shares prior to the delivery of certificates representing such shares to the
recipient. The purchase agreement may contain any terms, conditions,
restrictions, representations and warranties required by the Board of
Directors. The certificates representing the shares shall bear any legends
required by the Board of Directors. The Company may require any purchaser of
restricted stock to pay to the Company in cash upon demand amounts necessary
to satisfy any applicable federal, state or local tax withholding
requirements. If the purchaser fails to pay the amount demanded, the Company
may withhold that amount from other amounts payable by the Company to the
purchaser, including salary, subject to applicable law. With the consent of
the Board of Directors, a purchaser may deliver Common Stock to the Company to
satisfy this withholding obligation. Upon the issuance of restricted stock,
the number of shares reserved for issuance under the Plan shall be reduced by
the number of shares issued, less the number of shares surrendered in payment
of the restricted stock or surrendered or withheld to satisfy withholding
obligations.
9. Stock Appreciation Rights.
(a) Grant. Stock appreciation rights may be granted under the Plan by the
Board of Directors, subject to such rules, terms, and conditions as the Board
of Directors prescribes.
(b) Exercise.
(I) Each stock appreciation right shall entitle the holder, upon exercise, to
receive from the Company in exchange therefor an amount equal in value to the
excess of the fair market value on the date of exercise of one share of Common
Stock of the Company over its fair market value on the date of grant (or, in
the case of a stock appreciation right granted in connection with an option,
the excess of the fair market value of one share of Common Stock of the
Company over the option price per share under the option to which the stock
appreciation right relates), multiplied by the number of shares covered by the
stock appreciation right or the option, or portion thereof, that is
surrendered. No stock appreciation right shall be exercisable at a time that
the amount determined under this subparagraph is negative. Payment by the
Company upon exercise of a stock appreciation right may be made in Common
Stock valued at fair market value, in cash, or partly in Common Stock and
partly in cash, all as determined by the Board of Directors.
(ii) A stock appreciation right shall be exercisable only at the time or
times established by the Board of Directors. If a stock appreciation right is
granted in connection with an option, the following rules shall apply: (1) the
stock appreciation right shall be exercisable only to the extent and on the
same conditions that the related option could be exercised; (2) upon exercise
of the stock appreciation right, the option or portion thereof to which the
stock appreciation right relates terminates; and (3) upon exercise of the
option, the related stock appreciation right or portion thereof terminates. No
stock appreciation right granted to an officer or director may be exercised
during the first six months following the date it is granted.
(iii) The Board of Directors may withdraw any stock appreciation right
granted under the Plan at any time and may impose any conditions upon the
exercise of a stock appreciation right or adopt rules and regulations from
time to time affecting the rights of holders of stock appreciation rights.
Such rules and regulations may govern the right to exercise stock appreciation
rights granted prior to adoption or amendment of such rules and regulations as
well as stock appreciation rights granted thereafter.
(iv) For purposes of this paragraph 9, the fair market value of the Common
Stock shall be the closing price of the Common Stock as reported in The Wall
Street Journal, or such other reported value of the Common Stock as shall be
specified by the Board of Directors, on the trading day preceding the date the
stock appreciation right is exercised.
(v) No fractional shares shall be issued upon exercise of a stock
appreciation right. In lieu thereof, cash may be paid in an amount equal to
the value of the fraction or, if the Board of Directors shall determine, the
number of shares may be rounded downward to the next whole share.
(vi) Each participant who has exercised a stock appreciation right shall,
upon notification of the amount due, pay to the Company in cash amounts
necessary to satisfy any applicable federal, state and local tax withholding
requirements. If the participant fails to pay the amount demanded, the Company
may withhold that amount from other amounts payable by the Company to the
participant including salary, subject to applicable law. With the consent of
the Board of Directors a participant may satisfy this obligation, in whole or
in part, by having the Company withhold from any shares to be issued upon the
exercise that number of shares that would satisfy the withholding amount due
or by delivering Common Stock to the Company to satisfy the withholding
amount.
(vii) Upon the exercise of a stock appreciation right for shares, the number
of shares reserved for issuance under the Plan shall be reduced by the number
of shares issued, less the number of shares surrendered or withheld to satisfy
withholding obligations. Cash payments of stock appreciation rights shall not
reduce the number of shares of Common Stock reserved for issuance under the
Plan.
10. Cash Bonus Rights.
(a) Grant. The Board of Directors may grant cash bonus rights under the Plan
in connection with (i) options granted or previously granted, (ii) stock
appreciation rights granted or previously granted, (iii) stock bonuses awarded
or previously awarded and (iv) shares sold or previously sold under the Plan.
Cash bonus rights will be subject to rules, terms and conditions as the Board
of Directors may prescribe. The payment of a cash bonus shall not reduce the
number of shares of Common Stock reserved for issuance under the Plan.
(b) Cash Bonus Rights in Connection With Options. A cash bonus right granted
in connection with an option will entitle an optionee to a cash bonus when the
related option is exercised (or terminates in connection with the exercise of
a stock appreciation right related to the option) in whole or in part. No cash
bonus right granted to an officer or director in connection with an option may
be exercised during the first six months following the date the bonus right is
granted. If an optionee purchases shares upon exercise of an option and does
not exercise a related stock appreciation right, the amount of the bonus shall
be determined by multiplying the excess of the total fair market value of the
shares to be acquired upon the exercise over the total option price for the
shares by the applicable bonus percentage. If the optionee exercises a related
stock appreciation right in connection with the termination of an option, the
amount of the bonus shall be determined by multiplying the total fair market
value of the shares and cash received pursuant to the exercise of the stock
appreciation right by the applicable bonus percentage. The bonus percentage
applicable to a bonus right shall be determined from time to time by the Board
of Directors but shall in no event exceed 75 percent.
(c) Cash Bonus Rights in Connection With Stock Bonus. A cash bonus right
granted in connection with a stock bonus will entitle the recipient to a cash
bonus payable when the stock bonus is awarded or restrictions, if any, to
which the stock is subject lapse. If bonus stock awarded is subject to
restrictions and is repurchased by the Company or forfeited by the holder, the
cash bonus right granted in connection with the stock bonus shall terminate
and may not be exercised. The amount and timing of payment of a cash bonus
shall be determined by the Board of Directors.
(d) Cash Bonus Rights in Connection With Stock Purchases. A cash bonus right
granted in connection with the purchase of stock pursuant to paragraph 8 will
entitle the recipient to a cash bonus when the shares are purchased or
restrictions, if any, to which the stock is subject lapse. Any cash bonus
right granted in connection with shares purchased pursuant to paragraph 8
shall terminate and may not be exercised in the event the shares are
repurchased by the Company or forfeited by the holder pursuant to applicable
restrictions. The amount of any cash bonus to be awarded and timing of payment
of a cash bonus shall be determined by the Board of Directors.
(e) Taxes. The Company shall withhold from any cash bonus paid pursuant to
paragraph 10 the amount necessary to satisfy any applicable federal, state and
local withholding requirements.
11. Performance Units. The Board of Directors may grant performance units
consisting of monetary units which may be earned in whole or in part if the
Company achieves certain goals established by the Board of Directors over a
designated period of time, but not in any event more than 10 years. The goals
established by the Board of Directors may include earnings per share, return
on shareholders' equity, return on invested capital, and such other goals as
may be established by the Board of Directors. In the event that the minimum
performance goal established by the Board of Directors is not achieved at the
conclusion of a period, no payment shall be made to the participants. In the
event the maximum corporate goal is achieved, 100 percent of the monetary
value of the performance units shall be paid to or vested in the participants.
Partial achievement of the maximum goal may result in a payment or vesting
corresponding to the degree of achievement as determined by the Board of
Directors. Payment of an award earned may be in cash or in Common Stock or in
a combination of both, and may be made when earned, or vested and deferred, as
the Board of Directors determines. Deferred awards shall earn interest on the
terms and at a rate determined by the Board of Directors. Each participant who
has been awarded a performance unit shall, upon notification of the amount
due, pay to the Company in cash amounts necessary to satisfy any applicable
federal, state and local tax withholding requirements. If the participant
fails to pay the amount demanded, the Company may withhold that amount from
other amounts payable by the Company to the participant, including salary or
fees for services, subject to applicable law. With the consent of the Board of
Directors a participant may satisfy this obligation, in whole or in part, by
having the Company withhold from any shares to be issued that number of shares
that would satisfy the withholding amount due or by delivering Common Stock to
the Company to satisfy the withholding amount. The payment of a performance
unit in cash shall not reduce the number of shares of Common Stock reserved
for issuance under the Plan. The number of shares reserved for issuance under
the Plan shall be reduced by the number of shares issued upon payment of an
award, less any shares surrendered or withheld to satisfy withholding
obligations.
12. Foreign Qualified Grants. Awards under the Plan may be granted to such
officers and employees of the Company and its subsidiaries and such other
persons described in paragraph 1 residing in foreign jurisdictions as the
Board of Directors may determine from time to time. The Board of Directors may
adopt such supplements to the Plan as may be necessary to comply with the
applicable laws of such foreign jurisdictions and to afford participants
favorable treatment under such laws; provided, however, that no award shall be
granted under any such supplement with terms which are more beneficial to the
participants than the terms permitted by the Plan.
13. Option Grants to Non-Employee Directors.
(a) Initial Board Grants. Each person who becomes a Non-Employee Director
after the Effective Date shall be automatically granted an option to purchase
10,000 shares of Common Stock on the date he or she becomes a Non-Employee
Director. A Non-Employee Director" is a director who is not an employee of
the Company or any of its subsidiaries and has not been an employee of the
Company or any of its subsidiaries within one year of any date as of which a
determination of eligibility is made.
(b) Additional Board Grants. Each Non-Employee Director shall be automatically
granted an option to purchase additional shares of Common Stock in each
calendar year subsequent to the year in which such Non-Employee Director
became a director, such option to be granted as of the date of the Company's
annual meeting of stockholders held in such calendar year, provided that the
Non-Employee Director continues to serve in such capacity as of such date. The
number of shares subject to each additional grant shall be 5,000 shares.
(c) Committee Grants. On the date of each annual meeting of shareholders, each
Non-Employee Director who then serves on a committee of the Board of Directors
shall be automatically granted an option to purchase 2,000 shares of Common
Stock for each committee on which he or she then serves.
(d) Exercise Price. The exercise price of the options granted pursuant to this
paragraph 13 shall be equal to 85 percent of the fair market value of the
Common Stock determined pursuant to paragraph 6(b)(iv).
(e) Term of Option. The term of each option granted pursuant to this paragraph
13 shall be 10 years from the date of grant.
(f) Exercisability. Until an option expires or is terminated and except as
provided in paragraph 13(f), 14 and 15, an option granted under this paragraph
13 shall be exercisable according to the following schedule:
<TABLE>
<CAPTION>
Period of Non-Employee Director's
Continuous Service as a Director of the
Company from the Date the Option is Granted Portion of Total Option Which is Exercisable
<S> <C>
Less than 12 months 0%
After 12 months 24% plus 2% for each complete month of
continuous service in excess of 12 months,
until fully vested.
</TABLE>
For purposes of this paragraph 13(e), a complete month shall be deemed to be
the period which starts on the day of grant and ends on the same day of the
following calendar month, so that each successive complete month" ends on the
same day of each successive calendar month (or, in respect of any calendar
month which does not include such a day, that complete month" shall end on
the first day of the next following calendar month).
(g) Termination As a Director. If an optionee ceases to be a director of the
Company for any reason, including death, the option may be exercised at any
time prior to the expiration date of the option or the expiration of 30 days
(or 12 months in the event of death) after the last
day the optionee served as a director, whichever is the shorter period, but
only if and to the extent the optionee was entitled to exercise the option as
of the last day the optionee served as a director.
(h) Nontransferability. Each option by its terms shall be nonassignable and
nontransferable by the optionee, either voluntarily or by operation of law,
except by will or by the laws of descent and distribution of the state or
country of the optionee's domicile at the time of death, and each option by
its terms shall be exercisable during the optionee's lifetime only by the
optionee.
(i) Exercise of Options. Options may be exercised upon payment of cash or
shares of Common Stock of the Company in accordance with paragraph 6(a)(v).
14. Changes in Capital Structure. If the outstanding Common Stock of the
Company is hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation by reason of any reorganization, merger, consolidation,
plan of exchange, recapitalization, reclassification, stock splitup,
combination of shares or dividend payable in shares, appropriate adjustment
shall be made by the Board of Directors in the number and kind of shares
available for awards under the Plan. In addition, except with respect to
transactions referred to in paragraph 15, the Board of Directors shall make
appropriate adjustment in the number and kind of shares as to which
outstanding options and stock appreciation rights, or portions thereof then
unexercised, shall be exercisable, so that the optionees proportionate
interest before and after the occurrence of the event is maintained.
Notwithstanding the foregoing, the Board of Directors shall have no obligation
to effect any adjustment that would or might result in the issuance of
fractional shares, and any fractional shares resulting from any adjustment may
be disregarded or provided for in any manner determined by the Board of
Directors. Any such adjustments made by the Board of Directors shall be
conclusive. If the stockholders of the Company receive capital stock of
another corporation ( Exchange Stock") in exchange for their shares of Common
Stock in any transaction involving a merger, consolidation or plan of
exchange, all options granted hereunder shall be converted into options to
purchase shares of Exchange Stock unless the Company and the corporation
issuing the Exchange Stock, in their sole discretion, determine that any or
all such options granted hereunder shall be converted into options to purchase
shares of Exchange Stock but instead shall terminate in accordance with the
provisions of the last sentence of this paragraph 14. The amount and price of
converted options shall be determined by adjusting the amount and price of the
options granted hereunder in the same proportion as used for determining the
number of shares of Exchange Stock the holders of the Common Stock receive in
such merger. The converted options shall be fully vested whether or not the
vesting requirements set forth in the option agreement have been satisfied. In
the event of dissolution of the Company or a merger, consolidation or plan of
exchange affecting the Company in lieu of providing for options and stock
appreciation rights as provided above in this paragraph 14 the Board of
Directors may, in its sole discretion, provide a 30-day period prior to such
event during which optionees shall have the right to exercise options and
stock appreciation rights in whole or in part without any limitation on
exercisability and upon the expiration of which 30-day period all unexercised
options and stock appreciation rights shall immediately terminate.
15. Special Acceleration in Certain Events.
(a) Special Acceleration. Notwithstanding any other provisions of the Plan, a
special acceleration ( Special Acceleration") of options and stock
appreciation rights outstanding under the Plan shall occur with the effect set
forth in paragraph 15(b) at any time when any one of the following events has
taken place:
(I) The shareholders of the Company approve one of the following ( Approved
Transactions"):
(A) Any consolidation, merger or plan of exchange involving the Company
( Merger") pursuant to which Common Stock would be converted into cash; or
(B) Any sale, lease, exchange, or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of
the Company or the adoption of any plan or proposal for the liquidation or
dissolution of the Company; or
(ii) A tender or exchange offer, other than one made by the Company, is made
for Common Stock (or securities convertible into Common Stock) and such offer
results in a portion of those securities being purchased and the offeror after
the consummation of the offer is the beneficial owner (as determined pursuant
to Section 13(d) of the Exchange Act), directly or indirectly, of at least 20
percent of the outstanding Common Stock (an Offer"); or
(iii) The Company receives a report on Schedule 13D of the Exchange Act
reporting the beneficial ownership by any person of 20 percent or more of the
Company's outstanding Common Stock, except that if such receipt shall occur
during a tender offer or exchange offer by any person other than the Company
or a wholly owned subsidiary of the Company, Special Acceleration shall not
take place until the conclusion of such offer; or
(iv) During any period of 12 months or less, individuals who at the beginning
of such a period constituted a majority of the Board of Directors cease for
any reason to constitute a majority thereof unless the nomination or election
of such new directors was approved by a vote of at least two thirds of the
directors then still in office who were directors at the beginning of such
period.
The terms used in this paragraph 15 and not defined elsewhere in the Plan
shall have the same meanings as such terms have in the Exchange Act and
the rules and regulations adopted thereunder.
(b) Effect on Outstanding Options and Stock Appreciation Rights. Upon a
Special Acceleration pursuant to paragraph 15(a):
(i) Exercise or Purchase of Options. All options then outstanding under the
Plan shall immediately become exercisable in full for the remainder of their
terms, provided that no option may be exercised by an officer or director of
the Company within six months of its date of grant; and each optionee shall
have the right during a period of 30 days following a Special Acceleration to
have the Company purchase any Non-Statutory Stock Options as to which no stock
appreciation rights have been granted at a cash purchase price computed in
accordance with paragraph 15(b)(iii) below and any Incentive Stock Options as
to which no stock appreciation rights have been granted at a cash purchase
price equal to the product of (1) the excess, if any, of the fair market value
of a share of Common Stock (computed in accordance with procedures for
granting Incentive Stock Options) over the option price and (2) the number of
shares of Common Stock covered by the Incentive Stock Options or portion
thereof surrendered, provided that the Company shall have the right during
such period to purchase any Incentive Stock Option as to which no stock
appreciation rights have been granted at the purchase price computed in
accordance with paragraph 15(b)(iii) below. With respect to an option (as to
which no stock appreciation rights have been granted) granted less than six
months prior to a Special Acceleration to an officer or director of the
Company, the officer or director shall have the right to have the Company
purchase such stock option in accordance with this paragraph 14(b)(i) during
the 30 days following the expiration of six months after the date of such
grant, and this right shall apply even if the option has otherwise terminated
pursuant to paragraph 6(a)(iv) after a Special Acceleration.
(ii) All stock appreciation rights outstanding under the Plan shall
immediately become exercisable in full for a period of 30 days following a
Special Acceleration, with payment to be made solely in cash upon any exercise
during such period of a stock appreciation right granted with respect to a
Non-Statutory Stock Option in an amount computed in accordance with paragraph
15(b)(iii) below, and in cash upon exercise during such period of a stock
appreciation right granted with respect to an Incentive Stock Option in an
amount equal to the product of (1) the excess, if any, of the fair market
value of a Common Share (computed in accordance with procedures for granting
Incentive Stock Options) over the exercise price of the related option and (2)
the number of shares of Common Stock covered by the related option.
Notwithstanding the foregoing, the Company shall have the right during such
period to purchase any stock appreciation right granted with respect to an
Incentive Stock Option (and cancel the related options) at the purchase price
computed in accordance with paragraph 15(b)(iii) below, and no stock
appreciation right may be exercised by an officer or director of the Company
within six months of its date of grant. With respect to a stock appreciation
right granted less than six months prior to a Special Acceleration to an
officer or director of the Company, the stock appreciation right shall become
exercisable in full for a period of 30 days following the expiration of six
months after the date of such grant, and this right shall apply even if the
stock appreciation right has otherwise terminated pursuant to paragraph
6(a)(iv) after a Special Acceleration.
(iii) Except as otherwise specified in paragraphs 15(b)(i) and 15(b)(ii)
above, the purchase price for an option or a stock appreciation right and the
amount to be paid upon exercise of a stock appreciation right shall be an
amount equal to the product of (1) the excess, if any, of the highest of (A)
the highest reported closing sales price of a share of Common Stock as
reported in The Wall Street Journal during the 60 days preceding such
exercise, (B) the highest purchase price shown in any Schedule 13D referred to
in paragraphs 15(a)(ii) or 15(a)(iii) as paid within the 60 days prior to the
date of such report, (C) the highest gross price (before brokerage commissions
and soliciting dealers' fees) paid or to be paid for a share of Common Stock
(whether by way of exchange, conversion, distribution, or liquidation or
otherwise) in any Approved Transaction or Offer that is in effect at any time
during the 60 days preceding such exercise, over the option price, and (2) the
number of shares of Common Stock covered by the stock option or stock
appreciation right, or portions thereof surrendered. If the consideration paid
or to be paid in any Approved Transaction or offer consists, in whole or part,
of consideration other than cash, the Board of Directors shall take action it
deems appropriate to establish the cash value of the consideration, but the
valuation shall not be less than the value, if any, attributed to the
consideration by any other party to the Approved Transaction or Offer.
(iv) No options or stock appreciation rights may be exercised upon a Special
Acceleration if the amount determined under paragraph 15(b)(iii) is negative.
The rights set forth in paragraph 15 shall be transferable only to the extent
the related option is transferable in accordance with paragraph 6(a)(iii).
16. Corporate Mergers, Acquisitions, etc. The Board of Directors may also
grant options, stock appreciation rights, performance units, stock bonuses and
cash bonuses and issue restricted stock under the Plan having terms,
conditions and provisions that vary from those specified in this Plan provided
that any such awards are granted in substitution for, or in connection with
the assumption of, existing options, stock appreciation rights, stock bonuses,
cash bonuses, restricted stock and performance units granted, awarded or
issued by another corporation and assumed or otherwise agreed to be provided
for by the Company pursuant to or by reason of a transaction involving a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to which the Company or a subsidiary is a party.
17. Amendment of Plan. The Board of Directors may at any time, and from time
to time, modify or amend the Plan in such respects as it shall deem advisable
because of changes in the law while the Plan is in effect or for any other
reason. Except as provided in paragraphs 6(a)(iv), 9, 14 and 15, however, no
change in an award already granted shall be made without the written consent
of the holder of such award.
18. Approvals. The obligations of the Company under the Plan are subject to
the approval of state and federal authorities or agencies with jurisdiction in
the matter. The Company will use its best efforts to take steps required by
state or federal law or applicable regulations, including rules and
regulations of the Securities and Exchange Commission and any stock exchange
on which the Company's shares may then be listed, in connection with the
grants under the Plan. The foregoing notwithstanding, the Company shall not be
obligated to issue or deliver Common Stock under the Plan if such issuance or
delivery would violate applicable state or federal securities laws.
19. Employment and Service Rights. Nothing in the Plan or any award pursuant
to the Plan shall (i) confer upon any employee any right to be continued in
the employment of the Company or any subsidiary or interfere in any way with
the right of the Company or any subsidiary by whom such employee is employed
to terminate such employee's employment at any time, for any reason, with or
without cause, or to decrease such employee's compensation or benefits, or
(ii) confer upon any person engaged by the Company any right to be retained or
employed by the Company or to the continuation, extension, renewal, or
modification of any compensation, contract, or arrangement with or by the
Company.
20. Rights as a Shareholder. The recipient of any award under the Plan shall
have no rights as a shareholder with respect to any Common Stock until the
date of issue to the recipient of a stock certificate for such shares. Except
as otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.
APPENDIX B
SEQUENT COMPUTER SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
PURPOSE
The purpose of the Sequent Computer Systems, Inc. Employee Stock Purchase Plan
(the Plan") is to provide a convenient and practical means through which
employees of Sequent Computer Systems, Inc. (the Company") may participate in
stock ownership of the Company. The Company believes the Plan will be to the
mutual benefit of the employees and the Company by creating a greater
community of interest between the Company's stockholders and its employees and
by permitting the Company to compete with other companies in obtaining and
retaining the services of competent employees. The Company intends that the
Plan shall constitute an employee stock purchase plan" within the meaning of
Section 423 of the Internal Revenue Code of 1986. Further, the Company intends
that the Plan shall satisfy the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934.
ARTICLE II
DEFINITIONS
The following terms, when capitalized, shall have the meanings specified below
unless the context clearly indicates to the contrary.
2.1 Account shall mean each separate account maintained for a Participant
under the Plan, collectively or singly as the context requires. Each Account
shall be credited with a Participant's contributions, and shall be charged for
the purchase of Shares. A Participant shall be fully vested in the cash
contributions to his or her account at all times. The Plan Administrator may
create special types of accounts for administrative reasons, even though the
Accounts are not expressly authorized by the Plan.
2.2 Beneficiary shall mean a person or entity entitled under Section 7.2 to
receive shares purchased by, and any remaining balance in, a Participant's
Account on the Participant's death.
2.3 Board of Directors shall mean the Board of Directors of the Company.
2.4 Code shall mean the Internal Revenue Code of 1986, as amended from time to
time.
2.5 Committee shall mean the Committee appointed by the Board of Directors in
accordance with Section 8.1 of the Plan.
2.6 Compensation shall mean the total cash compensation (except as otherwise
set forth below) paid to an Employee in the period in question for services
rendered to the Employer by the Employee while a Participant. Compensation
shall include the earnings waived by an Employee pursuant to a salary
reduction arrangement under any cash or deferred or cafeteria plan that is
maintained by the Employer and that is intended to be qualified under Section
401(k) or 125 of the Code. An Employee's Compensation shall not include:
(a) severance pay;
(b) hiring or relocation bonuses;
(c) pay in lieu of vacations or sick leave.
2.7 Common Stock shall mean the common stock, par value $.01 per share, of the
Company.
2.8 Company shall mean Sequent Computer Systems, Inc., an Oregon corporation.
2.9 Custodian shall mean the investment or financial firm appointed by the
Plan Administrator to hold all Shares issued pursuant to the Plan.
2.10 Custodian Account shall mean the account maintained by the Custodian for
a Participant under the Plan.
2.11 Disability shall refer to a mental or physical impairment which is
expected to result in death or which has lasted or is expected to last for a
continuous period of twelve (12) months or more and which causes the Employee
to be unable, in the opinion of the Company and two independent physicians, to
perform his or her duties as an employee of the Company. Disability shall be
deemed to have occurred on the first day after the Company and two independent
physicians have furnished their opinion of Disability to the Plan
Administrator.
2.12 Employee shall mean an individual who renders services to his or her
Employer pursuant to a regular-status Employment relationship with such
Employer. A person rendering services to an Employer purportedly as an
independent consultant or contractor shall not be an Employee for purposes of
the Plan.
2.13 Employer shall mean, collectively, the Company and any Subsidiary, or any
successor entity that continues the Plan, or all such entities collectively.
All Employees of entities which constitute the Employer shall be treated as
employed by a single company for all Plan purposes; except that:
(a) No person shall become a Participant except while employed by an entity
which is an Employer;
(b) A Participant shall cease to be a Participant if he or she transfers to an
entity which is not an Employer and ceases to be employed by an Employer;
(c) An Employer shall cease to be an Employer for purposes of the Plan, and a
Participant who is an employee of such an Employer shall cease to be a
Participant, upon the happening of any event or the consummation of any
transaction which causes such Employer to cease being an Employer, as defined
above; and
(d) Amounts paid by entities other than the Employer shall be ignored in
determining Compensation under the Plan.
In contexts in which actions are required or permitted to be taken or notices
to be given, the Employer shall mean the Company or any successor corporation.
2.14 Employment shall mean the period during which an individual is an
Employee. Employment shall commence on the day the individual first performs
services for the Employer as an Employee and shall terminate on the day such
services cease, except as determined under Article XI.
2.15 Enrollment Date shall mean the first day of each Offering.
2.16 ESPP New Account Form shall mean the form provided by the Company on
which a Participant shall elect to open an account with the Custodian and
authorize the delivery to the Custodian of all Shares issued for the
Participant's Account.
2.17 Offering shall mean any one of the separate overlapping 18-month periods
commencing on March 1, June 1, September 1, and December 1 of each calendar
year under the Plan; provided, however, that the first Offering shall commence
on the date set by the Plan Administrator as the Enrollment Date for the first
Offering and shall continue for 18 months thereafter.
2.18 Participant shall mean any Employee who is participating in any Offering
under the Plan pursuant to Article III.
2.19 Payroll Deduction Authorization Form shall mean the form provided by the
Company on which a Participant shall elect to participate in the Plan and
designate the percentage of his or her Compensation to be contributed to his
or her Account through payroll deductions.
2.20 Plan shall mean this document.
2.21 Plan Administrator shall mean the Board of Directors or the Committee,
whichever shall be administering the Plan from time to time in the discretion
of the Board of Directors, as described in Article IX.
2.22 Purchase Date shall mean the last day of each of the sixth, twelfth and
eighteenth months of the Offering.
2.23 Retirement shall mean a Participant's termination of Employment on or
after attaining the age of 65 or after the Plan Administrator has determined
that he or she has suffered a Disability.
2.24 Share shall mean one share of Common Stock.
2.25 Subsidiary shall mean any corporation, association or other business
entity at least fifty percent (50%) or more of the total combined voting power
of all classes of stock of which is owned or controlled directly or indirectly
by the Company or one or more of such Subsidiaries or both.
2.26 Valuation Date shall mean the date upon which the fair market value of
Shares is to be determined for purposes of setting the price of Shares under
Section 6.2 (that is, the Enrollment Date or the applicable Purchase Date). If
the Enrollment Date is not a date on which the fair market value may be
determined in accordance with Section 6.3, the Valuation Date shall be the
first day after the Enrollment Date for which such fair market value may be
determined. If the Purchase Date is not a date on which the fair market value
may be determined in accordance with Section 6.3, the Valuation Date shall be
the first date prior to the Purchase Date on which such fair market value may
be determined.
2.27 Vested shall mean non-forfeitable.
ARTICLE III
EMPLOYEE PARTICIPATION
3.1 Participation. Subject to the provisions of this Article III, an Employee
may elect to participate in the Plan effective as of any Enrollment date, by
completing and filing a Payroll Deduction Authorization Form as provided in
Section 4.1. As of each Enrollment Date, the Company hereby grants a right to
purchase Shares under the terms of the Plan to each eligible Employee who has
elected to participate in the Offering commencing on that Enrollment Date.
3.2 Requirements for Participation.
(a) A person shall become eligible to participate in the Plan on the first
Enrollment Date on which he or she first meets all of the following
requirements; provided, however, that no one shall become eligible to
participate in the Plan prior to the Enrollment Date of the first Offering
provided for in Section 2.17:
(i) The person is an Employee of the Employer;
(ii) The person's customary period of Employment is for more than twenty (20)
hours per week;
(iii) The person's customary period of Employment is for more than five (5)
months in any calendar year.
(b) Employees who are also directors or officers of the Company may
participate only in accordance with Rule 16b-3 under the Securities Exchange
Act of 1934, as in effect from time to time.
(c) Any eligible Employee may enroll or re-enroll in the Plan as of the
Enrollment Date of any Offering by filing timely written notice of such
participation, subject to the following provisions:
(i) In order to enroll in the Plan initially, an eligible Employee must
complete, sign and submit to the Company the following forms:
(A) Payroll Deduction Authorization Form. Any Payroll Deduction Authorization
Form received by the Company no later than 5:00 p.m. on the Enrollment Date of
the Offering will be effective on that Enrollment Date.
(B) ESPP New Account Form. The ESPP New Account Form must accompany the
Payroll Deduction Authorization Form submitted for enrollment in the Plan. Any
ESPP New Account Form received by the Company no later than 5:00 p.m. on the
Enrollment Date of the Offering will be effective on that Enrollment Date.
(ii) A Participant may re-enroll in the Plan as of any Enrollment Date by the
submission of a new Payroll Deduction Authorization Form and, if applicable,
an ESPP New Account Form required to open a Custodian Account. If a
Participant is participating in an Offering at the time of re-enrollment, such
re-enrollment shall constitute withdrawal, effective as of such Enrollment
Date, from the ongoing Offering and simultaneous enrollment in the new
Offering commencing on the Enrollment Date. If the Enrollment Date coincides
with a Purchase Date of an ongoing Offering, the funds that have been credited
to the Participant's Account as of such Purchase Date may at the Participant's
election either be applied to the purchase of Shares under the ongoing
Offering from which the Participant is withdrawing, or returned to the
Participant if the Participant has given 15 days' notice to the Company in
accordance with Section 7.4. If the Enrollment Date does not coincide with a
Purchase Date under the ongoing Offering, all funds credited to the
Participant's Account as of the Enrollment Date will be returned to the
Participant in accordance with Section 7.4.
(iii) Absent withdrawal from the Plan pursuant to Section 7.4, a Participant
will automatically be re-enrolled in the Plan on the next Enrollment Date
immediately following the expiration of the Offering of which he or she is
then a Participant.
(d) An Employee may participate in only one Offering at any one time.
(e) A Participant shall become ineligible to participate in the Plan and shall
cease to be a Participant when any of the following occurs:
(i) The entity of which the Participant is an Employee ceases to be an
Employer as defined in Section 2.13.
(ii) The Participant ceases to meet the eligibility requirements of Section
3.2(a).
3.3 Limitations on Participation.
(a) No Employee may obtain a right the purchase Shares under the Plan if,
immediately after the right is granted, the Employee owns or is deemed to own
Shares possessing five percent (5%) or more of the combined voting power or
value of all classes of stock of the Company or any parent or Subsidiary of
the Company. For purposes of determining share ownership, the rules of Section
425(d) of the Code shall apply and Shares that the Employee may purchase under
any options or rights to purchase, whether or not Vested, shall be treated as
Shares owned by the Employee.
(b) No Employee may obtain a right to purchase Shares under the Plan that
permits the Employee's rights to purchase Shares under the Plan and any other
employee stock purchase plan of the Company or any parent or Subsidiary of the
Company to accrue at a rate which exceeds $25,000 in fair market value of
Shares (determined as of the Enrollment Date ) for each calendar year of the
Offering. This section shall be interpreted to permit an Employee to purchase
the maximum number of Shares permitted under Section 423(b)(8) of the Code and
regulations and interpretations adopted thereunder.
(c) The maximum number of Shares that an Employee may purchase in an Offering
shall not exceed 10,000 Shares, no more than one-third of which may be
purchased on any Purchase Date with respect to that Offering.
3.4 Termination of Participation. Unless Section 7.2 applies, a Participant
whose participation is terminated in accordance with Section 3.2(e) shall have
the rights provided in Section 7.1.
3.5 Voluntary Participation. Participation in the Plan shall be voluntary.
ARTICLE IV
PAYROLL DEDUCTIONS
4.1 Payroll Deduction Authorization. An Employee may contribute to the plan
only be means of payroll deductions. A Payroll Deduction Authorization Form
must be filed with the Company's stock administration department no later than
5:00 p.m. on the Enrollment Date as of which the payroll deductions are to
take effect; provided, however, that a Payroll Deduction Authorization Form
that effects a withdrawal and simultaneous re-enrollment may be filed at any
time on or before the Enrollment Date.
4.2 Amount of Deductions. A Participant may specify that he or she desires to
make contributions to the Plan at a rate not less than two percent (2%) and
not more than ten percent (10%) of the Participant's Compensation during each
pay period in the Offering, or such other minimum or maximum percentages as
the Plan Administrator shall establish from time to time. Such specification
shall apply during any period of continuous participation in the Plan, unless
modified or terminated as provided in Section 4.5 or as otherwise provided in
the Plan. If a payroll deduction cannot be made in whole or in part because
the Participant's pay for the period in question is insufficient to fund the
deduction after having first withheld all other amounts deductible from his or
her pay, the amount that was not withheld cannot be made up by the Participant
nor will it be withheld from subsequent pay checks.
4.3 Commencement of Deductions. Payroll deductions for a Participant shall
commence on the Enrollment Date of the Offering for which his or her Payroll
Deduction Authorization Form is effective and shall continue indefinitely,
unless modified or terminated as provided in Section 4.5 or as otherwise
provided in the Plan.
4.4 Accounts. All payroll deductions made for a Participant shall be credited
to his or her Account under the Plan. Following each Purchase Date, the Plan
Administrator shall promptly deliver a report to each Participant setting
forth the aggregate payroll deductions credited to such Participant's Account
during the preceding six months and the number of Shares purchased and
delivered to the Custodian for deposit into the Participant's Custodian
Account.
4.5 Modification of Authorized Deductions.
(a) A Participant may,
(i) prior to the commencement of each Offering in which he or she will be a
Participant, and
(ii) on not more than one occasion during each such Offering,
increase or reduce the amount of his or her payroll deduction effective for
all subsequent payroll periods, by completing an amended Payroll Deduction
Authorization Form and filing it with the Company's stock administration
department in accordance with Section 4.1; provided, however, that no
modification in a Participant's payroll deduction shall cause such
Participant's contribution to be less than two percent (2%) or more than ten
percent (10%) of such Participant's Compensation during any pay period.
(b) A Participant may at any time discontinue his or her payroll deductions,
without withdrawing from the Plan, by completing an amended Payroll Deduction
Authorization Form and filing it with the Company's stock administration
department. Previous payroll deductions will then be retained in the
Participant's Account for application to purchase Shares on the next Purchase
Date, after which the Participant's participation in the Offering will
terminate.
(c) For purposes of this Section 4.5, an amended Payroll Deduction
Authorization Form shall be effective for a specific pay period when filed 15
days prior to the last day of such
period.
ARTICLE V
CUSTODY OF SHARES
5.1 Delivery and Custody of Shares. Shares purchased pursuant to the Plan
shall be delivered to and held by the Custodian.
5.2 Custodian Account. As soon as practicable after each Purchase Date, the
Company shall deliver to the Custodian the full Shares purchased for each
Participant's Account. The Shares will be held a Custodian Account
specifically established for this purpose. An Employee must open a Custodian
Account with the Custodian in order to be eligible to purchase Shares under
the Plan. In order to open a Custodian Account, the Participant must complete
an ESPP New Account Form and submit it with the enrolling individual's stock
administration office no later than the Enrollment Date of the Offering as of
which the enrollment is to take effect; provided, however, that an ESPP New
Account Form that effects a change in the status of the Custodian Account may
be filed at any time during participation in the Plan.
5.3 Transfer of Shares. Upon receipt of appropriate instructions from a
Participant on forms provided for that purpose, the Custodian will transfer
into the Participant's own name all or part of the Shares held in the
Participant's Custodian Account and deliver such shares to the Participant.
5.4 Statements. The Custodian will deliver to each Participant a quarterly
statement showing the activity of the Participant's Custodian Account and the
balance as to both Shares and cash. Participants will be furnished such other
reports and statements, and at such intervals, as the Custodian and Plan
Administrator shall determine from time to time.
ARTICLE VI
PURCHASE OF SHARES
6.1 Purchase of Shares. Subject to the limitations of Article VII, on each
Purchase Date in an Offering, the Company Shall apply the amount credited to
each Participant's Account to the purchase of as many full Shares that may be
purchased with such amount at the price set forth in Section 6.2, and shall
promptly deliver such Shares to the Custodian for deposit into the
Participant's Custodian Account. Payment for Shares purchased under the Plan
will be made only through payroll withholding in accordance with Article IV.
6.2 Price. The price of Shares to be purchased under Section 6.1 on any
Purchase Date shall be the lower of:
(a) Eighty-five percent (85%) of the fair market value of the Shares on the
Enrollment Date of the Offering; or
(b) Eighty-five percent (85%) of the fair market value of the Shares on the
Purchase Date.
6.3 Fair Market Value.
(a) The fair market value of the Shares on any date shall be equal to the
closing price of such Shares on the Valuation Date, as reported on the NASDAQ
National Market System or such other quotation system that supersedes it.
(b) If (a) is not applicable, the fair market value of the Shares shall be
determined by the Plan Administrator in good faith. Such determination shall
be conclusive and binding on all persons.
6.4 Unused Contributions. Any amount credited to a Participant's Account and
remaining herein immediately after a Purchase Date because it was less than
the amount required to purchase a full Share shall be carried forward in such
Participant's Account for application on the next succeeding Purchase Date.
ARTICLE VII
TERMINATION AND WITHDRAWAL
7.1 Termination of Employment. Upon termination of a Participant's Employment
for any reason other than as set forth in Section 7.2, the payroll deductions
credited to such Participant's Account shall be returned to the Participant. A
Participant shall have no right to acquire shares upon termination of his or
her Employment.
7.2 Termination upon Death, Retirement or Disability. Upon termination of the
Participant's Employment because of his or her Death, Retirement or
Disability, the payroll deductions credited to his or her Account shall be
used to purchase Shares as provided in Article VI on the next Purchase Date.
Any remaining balance in the Participant's Account shall be returned to him or
her or, in the case of death, any Shares purchased and any remaining balance
shall be transferred to the deceased Participant's Beneficiary, or if none, to
his or her estate.
7.3 Designation of Beneficiary. Each Participant may designate, revoke and
redesignate Beneficiaries. This action shall be taken in writing on a form
provided by the Plan Administrator and shall be effective upon delivery to the
Plan Administrator.
7.4 Withdrawal. A Participant may withdraw the entire amount credited to his
or her Account under the Plan and thereby terminate participation in the
current Offering at any time by giving written notice to the Company, but in
no case may a Participant withdraw amounts within the 15 days immediately
preceding a Purchase Date for that Offering. A withdrawal under Section
3.2(c)(ii) not involving a return of funds does not require such 15-day notice
to the Company. Any amount withdrawn shall be paid to the Participant promptly
after receipt of proper notice of withdrawal and no further payroll deductions
shall be made from his or her Compensation unless a Payroll Deduction
Authorization Form directing further deductions is or has been submitted.
7.5 Status of Custodian Account.
(a) Upon the termination of a Participant's Employment as set forth in Section
7.1, the Participant may,
(i) elect to retain with the Custodian the Shares held in the Participant's
Custodian Account. The Participant will bear the cost of any annual fees
resulting from maintaining such account.
(ii) request issuance of the Shares held in the Participant's Custodian
Account by submitting to the Custodian the appropriate forms provided for that
purpose.
(b) Upon the termination of a Participant's Employment as set forth in Section
7.2, any shares held by the Custodian for the Participant's Account shall be
transferred to the persons entitled thereto under the laws of the state of
domicile of the Participant upon a proper showing of authority.
ARTICLE VIII
SHARES PURCHASED UNDER THE PLAN
8.1 Source and Limitation of Shares.
(a) The Company has reserved for sale under the Plan [2,950,000] 4,150,000
shares of its Common Stock, subject to adjustment upon changes in
capitalization of the Company as provided in Section 10.2. Shares sold under
the Plan may be newly issued shares or shares reacquired in private
transactions or open market purchases, but all Shares sold under the Plan
regardless of source shall be counted against the [2,950,000] 4,150,000 Share
limitation.
(b) If there is an insufficient number of Shares to permit the full exercise
of all existing rights to purchase Shares, or if the legal obligations of the
Company prohibit the issuance of all Shares purchasable upon the full exercise
of such rights, the Plan Administration shall make a pro rata allocation of
the Shares remaining available in as nearly a uniform and equitable manner as
possible, based pro rata on the aggregate amounts then credited to each
Participant's Account. In such event, payroll deductions to be made shall be
reduced accordingly and the Plan Administrator shall give written notice of
such reduction to each Participant affected thereby. Any amount remaining in a
Participant's Account immediately after all available Shares have been
purchase will be promptly remitted to such Participant. Determination by the
Plan Administrator in the regard shall be final, binding and conclusive on all
persons. No deductions shall be permitted under the Plan at any time when no
Shares are available.
8.2 Delivery of Shares. As promptly as practicable after each Purchase Date,
the Company shall deliver to the Custodian the full Shares purchased for each
Participant's Account.
8.3 Interest in Shares. The rights to purchase Shares granted pursuant to this
Plan will in all respects be subject to the terms and conditions of the Plan,
as interpreted by the Plan Administrator from time to time. The Participant
shall have no interest in Shares purchasable under the Plan until payment for
the shares has been completed at the close of business on the relevant
Purchase Date. The Plan provides only an unfunded, unsecured promise by the
Employer to pay money or property in the future. Except with respect to the
Shares purchased on a Purchase Date, an Employee choosing to participate in
the Plan shall have no greater rights than an unsecured creditor of the
Company. After the purchase of the Shares, the Participant shall be entitled
to all rights of a stockholder of the Company.
ARTICLE IX
ADMINISTRATION
9.1 Plan Administrator. At the discretion of the Board of Directors, the Plan
shall be administered by the Board of Directors or by a Committee appointed by
the Board of Directors in accordance with Rule 16b-3 under the Securities
Exchange Act of 1934, as in effect from time to time. Each member of the
Committee shall be either a director, an officer or an Employee of the
Company. Each member shall serve for a term commencing on a date specified by
the Board of Directors and continuing until he or she dies, resigns or is
removed from office by the Board of Directors.
9.2 Powers. The Plan Administrator shall be vested with full authority to
make, administer and interpret all rules and regulations as it deems necessary
to administer the Plan. Any determination, decision or act of the Plan
Administrator with respect to any action in connection with the construction,
interpretation, administration or application of the Plan shall be final,
conclusive and binding upon all Participants and any and all other persons
claiming under or through any Participant. The provisions of the Plan shall
construed in a manner consistent with the requirements of Section 423 of the
Code.
ARTICLE X
CHANGES IN CAPITALIZATION, MERGER, ETC.
10.1 Rights of the Company. The grant of a right to purchase Shares pursuant
to this Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassification, reorganizations or other changes of its
capital or business structure or to merge or to consolidate or to dissolve,
liquidate or transfer all or any part of its divisions, subsidiaries, business
or assets.
10.2 Recapitalization. Subject to any required action by the stockholders, the
number of Shares covered by the Plan as provided in Section 8.1 and the price
per share shall be proportionately adjusted for any increase of decrease in
the number of issued Shares of the Company resulting from a subdivision or
consolidation of Shares or the payment of a stock dividend (but only on the
Shares) or any other increase or decrease in the number of such Shares
effected without receipt or payment of consideration by the Company.
10.3 Consolidation or Merger. In the event of the consolidation or merger of
the Company with or into any other business entity, or the sale by the Company
of substantially all of its assets, the successor may continue the Plan by
adopting the same by resolution of its board of directors or agreement of its
partners or proprietors. If, within 90 days after the effective date of a
consolidation, merger or sale of assets, the successor corporation,
partnership or proprietorship does not adopt the Plan, the Plan shall be
terminated in accordance with Section 13.1.
ARTICLE XI
TERMINATION OF EMPLOYMENT
11.1 Vacation, Leave or Layoff. A person's Employment shall not terminate on
account of an authorized leave of absence, sick leave or vacation, or on
account of a military leave described in Section 11.2, or a direct transfer
between Employers. Failure to return to work upon expiration of any leave of
absence, sick leave or vacation shall be considered a resignation effective as
of the expiration of such leave of absence, sick leave or vacation.
11.2 Military Leave. Any Employee who leaves the Employer directly to perform
services in the Armed Forces of the United States or in the United States
Public Health Service under conditions entitling the Employee to reemployment
rights provided by the laws of the United States, shall be on military leave.
An Employee's military leave shall expire if the Employee voluntarily resigns
from the Employer during the leave or if he or she fails to make application
for reemployment within a period specified by such law for the preservation of
employment rights. In such event, the individual's employment shall terminate
by resignation on the day the military leave expires.
ARTICLE XII
STOCKHOLDER APPROVAL AND RULINGS
The Plan is expressly made subject (a) to the approval of the holders of a
majority of the outstanding shares of the Company within 12 months after the
date the Plan is adopted and (b) at its election, to the receipt by the
Company from the Internal Revenue Service of a ruling in scope and content
satisfactory to counsel to the Company, affirming the qualification of the
Plan within the meaning of Section 423 of the Internal Revenue Code of 1986.
If the Plan is not so approved by the stockholders within 12 months after the
date the Plan is adopted and if, at the election of the Company a ruling from
the Internal Revenue Service is sought but is not received on or before one
year after this Plan's adoption by the Board of Directors, this Plan shall not
come into effect. In that case, the Account of each Participant shall
forthwith be paid to him.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Amendment and Termination of the Plan.
(a) The Board of Directors of the Company may at any time amend the Plan.
Except as otherwise provided herein, no amendment may adversely affect or
change any right to purchase Shares previously granted to any Participant. No
amendment shall be made without prior approval of the stockholders of the
Company if the amendment would:
(i) Permit the sale of more Shares than are authorized under Section 8.1;
(ii) Permit the sale of Shares to employees of entities which are not
Employers as defined in Section 2.13;
(iii) Materially increase the benefits accruing to Participants under the
Plan; or
(iv) Materially modify the requirements as to eligibility for participation in
the Plan.
(b) The Plan is intended to be a permanent program, but an Employer shall have
the right at any time to declare the Plan terminated completely as to it. Upon
such termination, amounts credited to the Accounts of Participants with
respect to whom the Plan has been terminated shall be returned to such
Participants.
13.2 Non-Transferability. Neither payroll deductions credited to a
Participant's Account nor any rights with regard to the purchase of Shares
under the Plan may be assigned, transferred, pledged or otherwise disposed of
in any way by the Participant except as provided in Section 7.2, and any
attempted assignment, transfer, pledge, or other disposition shall be null and
void. The Company may treat any such act as an election to withdraw funds in
accordance with Section 7.4.
13.3 Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purposes and the
Company shall not be obligated to segregate the payroll deductions.
13.4 Expenses. All expenses of administering the Plan shall be borne by the
Company and its subsidiaries. The Company will not pay expenses, commission or
taxes incurred in connection with sales of Shares by the Custodian at the
request of a Participant. Expenses to be paid by a Participant will be
deducted from the proceeds of sale prior to remittance.
13.5 No Interest. No Participant shall be entitled, at any time, to any
payment or credit for interest with respect to or on the payroll deductions
contemplated herein, or on any other assets held hereunder for the
Participant's Account.
13.6 Registration and Qualification of Shares. The offering of Shares
hereunder shall be subject to the effecting by the Company of any registration
or qualification of the Shares under any federal or state law or the obtaining
of the consent or approval of any governmental regulatory body which the
Company shall determine, in its sole discretion, is necessary or desirable as
a condition to, or in connection with, the offering or the issue or purchase
of the Shares covered thereby. The Company shall make every reasonable effort
to effect such registration or qualification or to obtain such consent or
approval.
13.7 Responsibility and Indemnity. Neither the Company, any Subsidiary of the
Company, its Board of Directors, the Custodian, nor any member, officer,
agent, or employee of any of them, shall be liable to any Participant under
the Plan for any mistake of judgment or for any omission or wrongful act
unless resulting from gross negligence, willful misconduct or intentional
misfeasance. The Company will indemnify and save harmless its Board of
Directors, the Custodian and any such member, office, agent or employee
against any claim, loss, liability or expense arising out of the Plan, except
such as may result from the gross negligence, willful misconduct or
intentional misfeasance of such entity or person.
13.8 Plan Not a Contract of Employment. The Plan is strictly a voluntary
undertaking on the part of the Employer and shall not constitute a contract
between the Employer and any Employee, or consideration for or an inducement
or a condition of the employment of an Employee. Except as otherwise required
by law, or any applicable collective bargaining agreement, nothing contained
in the Plan shall give any Employee the right to be retained in the service of
the Employer or to interfere with or restrict the right of the Employer, which
is hereby expressly reserved, to discharge or retire any Employee at any time,
with or without cause and with or without notice. Except as otherwise required
by law, inclusion under the Plan will not give any Employee any right or claim
to any benefit hereunder except to the extent such right has specifically
become fixed under the terms of the Plan. The doctrine of substantial
performance shall have no application to any Employee, Participant, or
Beneficiary. Each condition and provision, including numerical items, has been
carefully considered and constitutes the minimum limit on performance which
will give rise to the applicable right.
13.9 Service of process. The Secretary of the Company is hereby designated
agent for service or legal process on the Plan.
13.10 Notice. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received by the Plan Administrator. Any notice required by the Plan
to be received by the Company prior to an Enrollment Date, payroll period or
other specified date, and received by the Plan Administrator subsequent to
such date shall be effective on the next occurring Enrollment Date, payroll
period or other specified date to which such notice applies.
13.11 Governing Law. The Plan shall be interpreted, administered and enforced
in accordance with the Code, and the rights of Participants, former
Participants, Beneficiaries and all other persons shall be determined in
accordance with it. To the extent that state law is applicable, however, the
laws of the State of Oregon shall apply.
13.12 Plurals. Where the context so indicates, the singular shall include the
plural and vice versa.
13.13 Titles. Titles of Articles and Sections are provided herein for
convenience only and are not to serve as the basis for interpretation or
construction of the Plan.
13.14 References. Unless the context clearly indicates to the contrary,
reference to a Plan provision, statute, regulation or document shall be
construed as referring to any subsequently enacted, adopted or executed
counterpart.
