SEQUENT COMPUTER SYSTEMS, INC.
Notice of Annual Meeting of Shareholders to be Held
May 11, 1999
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 Tuesday, May 11, 1999 at 9:00 am, Pacific
Time, at the Company's facilities at 15450 S.W. Koll Parkway, Beaverton,
Oregon, for the following purposes:
1. Electing seven directors;
2. Voting on approval of the Company's 1997 Stock Option Plan, as
amended;
3. Voting on approval of the Company's Employee Stock Purchase Plan, as
amended; and
4. 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 31, 1999
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 9, 1999.
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 Tuesday,
May 11, 1999. 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 ChaseMellon Shareholder Services 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 David B. Cunningham, 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 18, 1999. On that date there were 41,669,846
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, 1999 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 current and former executive officers of the Company named in the
executive compensation table set forth below, and (iv) all directors and
executive officers of the Company as of March 1, 1999 as a group:
Name and Address Shares(1) Percent
Crabbe Huson Group Inc. 2,566,500(2) 5.9%
121 S.W. Morrison, Suite 1400
Portland, OR 97204
The Capital Group Companies, Inc. 2,540,000(3) 5.8%
333 South Hope St.
Los Angeles, CA 90071
Karl C. Powell, Jr. 1,212,172(4) 2.7%
John McAdam 500,219(5) 1.1%
Barbara L. Gaffney 92,601(6) *
Robert S. Gregg 284,922(7) *
Peter W. O'Neill 0 *
9 directors and executive
officers as a group 2,408,998(8) 5.3%
- --------------------------
*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, 1998 in a Schedule
13G filed by the shareholder. The shareholder reports shared voting power
with respect to 2,321,600 shares and shared dispositive power with respect
to 2,566,500 shares.
(3) Based solely on information provided as of December 31, 1998 in a Schedule
13G filed by the shareholder. The shareholder reports sole dispositive
power with respect to 2,540,000 shares.
(4) Includes 112,000 shares held in trust for the benefit of Mr. Powell's
family, as to which Mr. Powell has shared voting and dispositive power,
and 1,043,694 shares of Common Stock subject to options that are currently
exercisable or become exercisable within 60 days. Mr. Powell also holds
100,000 shares of Common Stock of DP Applications, Inc., a subsidiary of
the Company, representing approximately 1% of the equity of DP
Applications, Inc. on a fully diluted basis.
(5) Includes 484,000 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days. Mr. McAdam
also holds 100,000 shares of Common Stock of DP Applications, Inc., a
subsidiary of the Company, representing approximately 1% of the equity of
DP Applications, Inc. on a fully diluted basis.
(6) Includes 91,648 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days.
(7) Includes 259,500 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days. Mr. Gregg also
holds 100,000 shares of Common Stock of DP Applications, Inc., a
subsidiary of the Company, representing approximately 1% of the equity of
DP Applications, Inc. on a fully diluted basis.
(8) Includes 2,076,926 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 seven 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 1999(1) percent
<S> <C> <C> <C> <C>
Karl C. Powell, Jr. Chairman of the Board, 55 1,212,172(2) 2.7%
Chief Executive Officer and
Director of the Company
John McAdam President, Chief Operating 48 500,219(3) 1.1%
Officer and Director of
the Company
Frank C. Gill (4)(5)(6) Director of the Company 55 10,000 *
Larry R. Levitan Director of the Company 57 0 *
Michael S. Scott Morton (4)(5)(6) Director of the Company; 61 57,900(7) *
Professor of Management at
the Massachusetts Institute
of Technology
Martin A. Stein Director of the Company 58 0 *
Robert W. Wilmot (4)(5)(6) Director of the Company; 54 251,184(8) *
Chairman of the Board of
Wilmot Capital
- ---------------------
*Less than 1%.
(1) Shares held directly with sole voting and sole dispositive power unless
otherwise indicated.
(2) Includes 112,000 shares held in trust for the benefit of Mr. Powell's
family, as to which Mr. Powell has shared voting and dispositive power,
and 1,043,694 shares of Common Stock subject to options that are currently
exercisable or become exercisable within 60 days. Mr. Powell also holds
100,000 shares of Common Stock of DP Applications, Inc., a subsidiary of
the Company, representing approximately 1% of the equity of DP
Applications, Inc. on a fully diluted basis.
(3) Includes 484,000 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days. Mr. McAdam
also holds 100,000 shares of Common Stock of DP Applications, Inc., a
subsidiary of the Company, representing approximately 1% of the equity of
DP Applications, Inc. on a fully diluted basis.
(4) Member of Compensation Committee.
(5) Member of Audit Committee.
(6) Member of Nominating Committee.
(7) Includes 51,900 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days.
(8) Includes 146,184 shares of Common Stock subject to options that are
currently exercisable or become exercisable within 60 days. Dr. Wilmot
also holds 180,000 shares of Restricted Common Stock, 695,537 shares of
Preferred Stock and warrants to purchase 193,548 shares of Preferred Stock
of DP Applications Inc., a subsidiary of the Company, representing
approximately 13% of the equity of DP Applications, Inc. on a fully
diluted basis.
</TABLE>
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. McAdam, President and Chief Operating Officer, became a director of
the Company in November 1995. Mr. McAdam joined the Company in August 1989 as
U.K. Sales Director. He became U.K. General Manager in January 1991, Vice
President and General Manager of European Operations in October 1992, and
Senior Vice President of European and Asian Operations in January 1994. He was
promoted to President and Chief Operating Officer in February 1995. Prior to
joining the Company, Mr. McAdam was employed for 10 years by Data General U.K.
Ltd., serving most recently as Regional Manager, Public Sector, Finance and
Government Market. Mr. McAdam holds a degree in Computer Sciences from Glasgow
University.
Mr. Gill is a former Intel Corporation executive and is currently a
private investor and board member of Inktomi Corporation, Telcom Semiconductor
and several private technology companies. At the time of his retirement from
Intel, he was Executive Vice President and had held a variety of positions in
sales, marketing, product development and manufacturing operations during his
23 year career. Mr. Gill holds a BS degree in electrical engineering from the
University of California at Davis.
Mr. Levitan was elected a director of the Company in October 1998. He
spent his entire 34 year professional career with Andersen Consulting,
commencing in 1963 until his retirement in 1997. During this period he held
numerous management and executive positions. Since retiring from Andersen
Consulting, Mr. Levitan has been active on corporate and not-for-profit
boards. He holds a BSBA degree in accounting from the University of Florida.
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 , the
Metropolitan Life Series Funds and a director of the Merrill Corporation. Dr.
Scott Morton holds a B.Sc. degree in industrial management from Carnegie
Mellon University, and a doctorate from the Harvard University Graduate School
of Business Administration.
Mr. Stein was elected a director of the Company in September 1998. Mr.
Stein is President of Sonoma Mountain Ventures, a company dedicated to
providing strategic and technology consulting companies as well as venture
capital for emerging technology companies. From 1990 to 1998, he was Vice
Chairman of Technology and Operations for BankAmerica Corp. and from 1986 to
1990, he was Executive Vice President and Chief Information Officer for
PaineWebber in New York. Additionally, from 1976 to 1986, he served as
Executive Vice President for Fleet Financial Group, responsible for strategic
planning, product development, marketing, MIS, operations and payments. Mr.
Stein also holds board positions with the Bank of Hawaii, FICS - a Belgium
software company, Cardis Enterprises, LYNX Photonic Networks, PaymentNet Inc.
and the Hurwitz Group which supplies guidance on distributed software
technology. He graduated cum laude with a BA degree in English and Philosophy
and holds an Honorary Doctrate in Commercial Science from St. John's
University.
Dr. Wilmot has been a director of the Company since 1992. Dr. Wilmot is
Chairman of Wilmot Capital, a private venture capital firm with a high tech
portfolio, 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. Previous founding investments include The OASIS
Group (now a Sybase subsidiary), Poqet Computers Corporation (now a Fujitsu
subsidiary), Integrity Arts (now a Sun Microsystems subsidiary) and Vxtreme
(now a Microsoft subsidiary). He is a director of COM21, Inc. and FVC.com,
Inc. Dr. Wilmot holds an Electrical Engineering First Class Honours Degree
from Nottingham University and Honorary Doctrates from City University London,
Cranfield Institute of Technology and Nottingham University.
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 three times in 1998, recommends selection of independent accountants
to the Board of Directors and reviews the scope and results of audits. The
Compensation Committee, which met seven times during 1998, reviews and
establishes compensation for executive officers and considers incentive
compensation alternatives for the Company's employees. The Nominating
Committee, which met four times during 1998, 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 David B. Cunningham, 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 $15,000 plus an attendance fee of $1,000 per day for each board meeting and
related travel expenses. Members of the Audit, Compensation and Nominating
Committees receive $1,000 per meeting, whether such meeting is held in person
or via teleconference, provided such meeting is held independent of and not
during a regular session of the Board of Directors. Under the Company's
stock plans, 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 1998 he was paid $33,500 under this consulting arrangement and
received options to purchase a total of 5,333 shares of Common Stock (with
exercise prices equal to 85% of fair market value on the date of grant). Dr.
Wilmot also performs consulting services for DP Applications, Inc., a
subsidiary of the Company. In connection with these consulting services he
purchased 180,000 shares of Restricted Common Stock of DP Applications at $.15
per share, which was determined by the Board of Directors of DP Applications
to be equal to the fair market value of the stock.
Voting
The proxies will be voted with respect to the election of the nominees in
accordance with the instructions specified in the proxy form. If no
instructions are given, proxies will be voted for the election of the
nominees. If for some unforeseen reason any of the nominees would not be
available as a candidate for director, the number of directors constituting
the Board of Directors may be reduced prior to the meeting or the proxies may
be voted for such other candidate or candidates as may be nominated by the
Board of Directors, in accordance with the authority conferred in the proxy.
The Board of Directors recommends election of the nominees listed above.
Directors are elected by a plurality of the votes cast by the shares entitled
to vote if a quorum is present at the annual meeting. Abstentions are counted
for purposes of determining whether a quorum exists at the annual meeting but
are not counted and have no effect on the determination of whether a plurality
exists with respect to a given nominee.
<TABLE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation paid to the Chief Executive
Officer of the Company and the other four executive officers of the Company
for services in all capacities to the Company and its subsidiaries during each
of the last three fiscal years.
<CAPTION>
Annual Compensation (1) Long Term Compensation Awards
Name and Restricted Securities
Principal Stock Underlying All Other
Position Year Salary Bonus Other Awards($) Options(#)(2) Compensation(3)
<S> <C> <C> <C> <C> <C> <C> <C>
Karl C. Powell, Jr. 1998 $606,408 $90,961 - - 100,000 $0
Chairman of the 1997 $577,512 $575,221 - - 375,000 $11,550
Board and Chief 1996 $550,008 $210,309 - - (4) 600,000 (5) $7,603
Executive Officer
John McAdam 1998 $457,992 $59,539 - - 100,000 $164,793(6)
President, Chief 1997 $428,017 $385,937 - - 300,000 $104,062(6)
Operating Officer 1996 $400,008 $131,103 - $41,563(4)(7) 275,000 (5) $69,444(6)
and Director
Barbara L. Gaffney 1998 $225,750 $21,168 - - 35,000 -
Sr. Vice President 1997 $210,000 $122,672 - - 48,000 -
of Business Programs 1996 $195,750 $32,079 - - 53,000 (5) -
Robert S. Gregg 1998 $294,312 $32,374 - - 45,000 $0
Sr. Vice President of 1997 $272,520 $204,309 - - 48,000 $9,537
Finance & Legal and 1996 $250,238 $68,346 - - (4) 174,500 (5) $3,185
Chief Financial Officer
Peter W. O'Neill (8) 1998 $291,667 $371,374 - - 45,000 $116,528(9)
Sr. Vice President of 1997 $203,969 $316,014 - - 165,000 $140,174(9)
Worldwide Sales and 1996 $112,627 $179,828 - - 32,000 (5) -
Professional Services
</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.
(2) Represents shares of Common Stock issuable upon exercise of nonstatutory
stock options granted under the Company's 1989 Stock Incentive Plan, the
1995 Stock Incentive Plan and/or the 1997 Stock Option Plan.
(3) Represents Company contributions under the Company's deferred compensation
plan, retirement plan for a foreign subsidiary and matching contributions
under the Company's 401(k) Plan, except as otherwise indicated.
(4) During 1996 Messrs. Powell, McAdam and Gregg each purchased 100,000 shares
of restricted Common Stock of DP Applications, Inc., a subsidiary of the
Company ("DP"), at a price of $.15 per share. These shares vest over
approximately four years based on continued employment of the executive
with Sequent. There is no public market for the stock of DP and the market
value of these shares at the end of fiscal 1998 was not readily
ascertainable.
(5) Represents options granted in 1996 in replacement of options granted during
1995 at higher exercise prices. The number of options granted in 1996
(excluding options granted to replace cancelled options) was 37,500 shares
for Mr. Powell, 120,000 shares for Mr. McAdam, 8,000 shares for Ms.
Gaffney, 85,000 shares for Mr. Gregg and 8,000 shares for Mr. O'Neill.
(6) In connection with Mr. McAdam's appointment as President and Chief
Operating Officer, the Company made special payments on his behalf related
to the relocation of Mr. McAdam and his family from England to the United
States. The amounts include relocation expenses, interest, tax and
insurance payments for his home in the US, overseas expatriate
reimbursement for property management of his home in the UK, pension
payments and reimbursements of taxes to cover the withholding due on the
above mentioned payments. These amounts totaled $69,444 in 1996, $104,062
in 1997 and $164,793 in 1998. The increase in the total amount of other
compensation year over year is due mainly to pension contributions on Mr.
McAdam's salary and bonus as well as a reimbursement for income taxes under
the relocation agreement. The reimbursement for income taxes is reported
in the subsequent year and can fluctuate based upon income levels and
changes in tax laws and rates.
(7) Represents the market price of the Common Stock on the grant date
multiplied by the number of shares granted. On December 31, 1998 2,500
shares of Common Stock were restricted. These shares become vested to the
extent of 2,500 shares on February 7, 1999 and are no longer subject to any
restrictions.
(8) Mr. O'Neill was appointed Vice President of American Operations in January
1997. In April 1998, he was appointed Sr. Vice President of Worldwide
Sales and Professional Services. Mr. O'Neill resigned his position with
the Company in January 1999.
(9) In connection with Mr. O'Neill's appointment as Vice President of American
Operations in January 1997, the Company made payments on his behalf related
to the relocation of Mr. O'Neill and his family from England to the United
States. The amounts include relocation expenses and overseas expatriate
reimbursement for property management of his home in the UK. The total
amount paid was $140,174 in 1997 and $116,528 in 1998.
<TABLE>
Stock Option Grants in Last Fiscal Year
The following table provides information regarding stock options granted
in 1998 to the named executive officers.
<CAPTION>
Individual Grants
Percent of
Total
Number of Options Grant
Shares Granted to Date Fair
Underlying Employees Market Exercise Grant Date
Options in Fiscal Value Price Expiration Present Value
Name Granted(1)(2) Year per Share per Share Date $ (3)
<S> <C> <C> <C> <C> <C> <C>
Karl C. Powell, Jr. 100,000 1.7% $9.13 $9.13 10/28/08 $459,605
John McAdam 100,000 1.7% $9.13 $9.13 10/28/08 $459,605
Barbara L. Gaffney 30,000 (4) * $11.50 $13.00 7/10/08 $146,493
5,000 * $8.13 $8.13 10/22/08 $20,462
Robert S. Gregg 40,000 (4) * $11.50 $13.00 7/10/08 $195,324
5,000 * $8.13 $8.13 10/22/08 $20,462
Peter W. O'Neill(5) 5,000 (6) * $19.56 $19.56 2/16/08 $57,004
35,000 (7) * $11.50 $13.00 7/10/08 $170,909
5,000 (8) * $8.13 $8.13 10/22/08 $20,462
- ---------------------
* Less than 1%.
</TABLE>
(1) Under the terms of the Company's stock incentive plans, 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 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) Unless otherwise indicated the option becomes exercisable in equal
installments of 50% in 1999 and 2000, subject to continued employment.
(3) Although the Company believes that it is not possible to place a value on
an option, in accordance with the rules of the Securities and Exchange
Commission, the Company has used a Black-Scholes model of option valuation
to estimate grant date present value. The actual value realized, if any,
may vary significantly from the values estimated by this model. Any
future values realized will ultimately depend upon the excess of the stock
price over the exercise price on the date the option is exercised. The
assumptions used to estimate the grant date present value of this option
were volatility (81%), average risk-free rate of return (4.67%), dividend
yield (0) and time of exercise (2.47 years).
(4) This option becomes exercisable for the full number of shares on 7/10/99,
subject to continued employment.
(5) Upon Mr. O'Neill's termination from the Company in January 1999, the
options were cancelled.
(6) This option would have become exercisable to the extent of 1,250 shares in
each year commencing in 1999, 2000, 2001 and 2002, subject to continued
employment.
(7) This option would have become exercisable for the full number of shares on
7/10/99, subject to continued employment.
(8) This option would have become exercisable to the extent of 2,500 shares in
each year commencing in 1999 and 2000, subject to continued to employment.
<TABLE>
Stock Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table indicates (i) stock options exercised by the named
executive officers during 1998, 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 January 2, 1999, 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 Value 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)(2) (Unexercisable)
<S> <C> <C> <C> <C>
Karl C. Powell, Jr. 0 - 868,565 (exercisable) $276,115 (exercisable)
698,614 (unexercisable) $350,521 (unexercisable)
John McAdam 0 - 427,335 (exercisable) $164,375(exercisable)
316,665 (unexercisable) $301,875 (unexercisable)
Barbara L. Gaffney 0 - 88,982 (exercisable) $50,225 (exercisable)
69,166 (unexercisable) $21,719 (unexercisable)
Robert S. Gregg 0 - 229,667 (exercisable) $127,031(exercisable)
101,333 (unexercisable) $21,719(unexercisable)
Peter W. O'Neill 0 - 89,167 (exercisable) $32,063(exercisable)
102,166 (unexercisable) $21,313(unexercisable)
</TABLE>
(1) Aggregate market value of the shares covered by the option, less the
aggregate price paid by the executive.
(2) Calculated based on the stock price on January 2, 1999.
Change of Control Agreements
The Company has entered into change of control agreements with the
executive officers. If an executive officer is involuntarily terminated
within 18 months after a change of control, the executive officer would
receive a severance payment equal to 12 or 24 months of base salary, a bonus
based on "on-target earnings" and continued health insurance for 12 months.
The severance amount would be 24 months for Messrs. Powell, McAdam and Gregg
and 12 months for Ms. Gaffney. In addition, if Mr. Powell leaves the Company
voluntarily within 12 months following a change of control, he would receive a
severance payment equal to 12 months of his base salary plus a bonus based on
"on-target earnings" and Mr. Powell would receive an additional amount to
reimburse him for any excise taxes incurred in connection with any change of
control severance payments.
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, quarterly and annual cash
incentive compensation, and long term incentive compensation in the form of
stock options.
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 approximately 50 companies in the comparative group. 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. The majority of companies have revenues
near or above $1 billion. 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 Bonus Plan is an annual incentive program for
executive officers based on quarterly and annual performance of the Company
and individual contributions. The purpose of the plan is to provide a direct
financial incentive in the form of quarterly and annual cash bonuses to
executives to achieve predetermined levels of Company performance. Company
performance measures and participant target bonus amounts are set at the
beginning of each fiscal year. The performance measures for 1998 and relative
importance in calculating the bonus amount were: revenues (35%), earnings per
share (35%), functional asset utilization (10%) and achieving individual
performance goals (20%). Target bonuses for each executive officer were set by
the Committee in relation to base salary and level of responsibility within
the Company and were generally in the 50 to 75 percentile of the range of cash
bonuses of the comparable companies in the survey considered by the Committee.
The Company's performance in 1998 and evaluation of the executive officers
individual performance resulted in bonus amounts to executive officers equal
to 20% of the target bonus amounts.
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 stock incentive plans 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 2 percent of
the shares each month thereafter. Additional grants to existing officers and
employees are generally made annually. 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 IRS 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 regulations.
Chief Executive Officer Compensation. The Committee determined the Chief
Executive Officer's compensation for 1998 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. The Chief Executive Officer's 1998 salary and
target bonus amounts were set between the 50th and 75th percentile for
salaries and bonuses for chief executive officers of the companies in the
comparative group. The Chief Executive Officer received a bonus for 1998 based
on Company performance as measured under the Company's 1998 Executive Bonus
Plan described above and his individual performance.
During 1998 the Chief Executive Officer was granted options to purchase
100,000 shares of Common Stock as a part of the Company's annual option grant
programs. The number of shares granted in 1998 was based on a subjective
determination of the number of shares needed in 1998 as part of this long-term
program.
Frank C. Gill
Michael S. Scott Morton
Robert W. Wilmot
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.
<TABLE>
TOTAL RETURN TO SHAREHOLDERS
REINVESTED DIVIDENDS
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
S&P Computer Systems Index 100 129.14 171.86 230.12 336.84 590.24
S&P 500 Index 100 101.32 139.40 171.40 228.59 293.91
Sequent Computer Systems, Inc. 100 129.51 95.08 116.39 131.15 79.10
</TABLE>
The graph assumes that $100 was invested on January 2, 1994 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 1996 Sequent leased an airplane (the "Airplane") from a
corporation owned by Karl C. Powell, Jr. The Airplane is leased by Sequent
pursuant to a three-year lease ending on September 30, 1999 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. During
the last fiscal year, Sequent paid $1,094,321 in lease fees, insurance
premiums, hangar fees, maintenance expenses and reserves related to the
Airplane.
In 1998, Sequent paid $450,000 to Team Scandia to sponsor a race car in
professional competitions in connection with the promotion, marketing and
advertising of Sequent's products. The race car is owned by Team Scandia and
the primary sponsor was Reebok. Sequent was one of several associate sponsors
of the race car. Sequent did not renew its sponsorship arrangement with Team
Scandia for fiscal 1999. Since January 1997, the race car has been driven in
professional competitions by Karl C. Powell, Jr.'s daughter, Cristen Powell.
Ms. Powell is not employed by the Company nor does she receive any payments
from the Company under this arrangement.
During the period July 1996 through December 1997 the Company loaned a
total of $936,000 to DP Applications, Inc., a subsidiary of the Company, to
fund its start-up operation. During 1997 the Board of Directors approved a
line of credit to fund additional start-up costs, fixed assets and receivables
and the Board of Directors recently increased the line of credit to $10 millon
to fund operations. The loan of $936,000 is due on demand and loans under the
line of credit are due in October 2000. The loans bear interest at 10%. At
February 28, 1999 an aggregate of $5,970,000 was outstanding under these
loans. Dr. Wilmot, a director of the Company, owns or has the right to
acquire approximately 13% of the equity of DP Applications on a fully diluted
basis and Messrs. Powell, McAdam and Gregg each own approximately 1% of the
equity on a fully diluted basis.
PROPOSAL TO APPROVE
THE 1997 STOCK OPTION PLAN, AS AMENDED
As described under "Executive Compensation" the Company maintains stock
option plans for the benefit of officers and other 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 officers and to provide an incentive for them to exert their best
efforts on behalf of the Company. As of March 1, 1999, only 351,775 shares
remained available for grant to officers and directors under the Company's
existing plans. The Board of Directors believes that additional shares are
needed to provide option grants to officers during the next one to two years.
In addition, additional shares are needed for the automatic annual stock
option grants to non-employee directors. Accordingly, the Board of Directors
approved an amendment to the 1997 Stock Option Plan (the "1997 Plan"), subject
to shareholder approval, to reserve an additional 2,000,000 shares for the
1997 Plan, thereby increasing the total number of shares reserved for issuance
under the 1997 Plan from 750,000 to 2,750,000 shares.
Certain provisions of the 1997 Plan are described below. The complete
text of the 1997 Plan is attached to this proxy statement as Appendix A.
Description of the 1997 Option Plan
Eligibility. All officers of the Company and its subsidiaries are
eligible to participate in the 1997 Plan. Non-employee directors performing
consulting services to the Company are also eligible to participate.
Administration. The Board of Directors has delegated to the Compensation
Committee of the Board authority to administer the 1997 Plan. The
Compensation Committee will determine the officers to whom options grants are
made under the 1997 Plan and the terms of such grants and may promulgate rules
and regulations for the operation of the 1997 Plan. The Board of Directors
may amend, modify or terminate the 1997 Plan at anytime without shareholder
approval.
Term of Plan. The 1997 Plan will continue until all shares available for
issuance under the 1997 Plan have been issued. The Board of Directors may
suspend or terminate the 1997 Plan at any time.
Stock Options. The Compensation Committee will determine the officers 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 incentive stock option ("ISO") as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") or a non-statutory option that does not so qualify ("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 1997 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 85% of the fair
market value of the Common Stock on the date of the grant. The 1997 Plan
provides that no employee may be granted options under the 1997 Plan for more
than an aggregate of 300,000 shares in any calendar year. In addition, the
1997 Plan limits the amount of ISOs that may become vested under the 1997 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 17, 1998, the closing price of the Common Stock of the
Company on the NASDAQ National Market System was $9.63 per share.
Options granted under the 1997 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 1997 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 or shares of Common Stock valued at
fair market value, 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 1997 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 1997 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. Non-employee directors are also eligible
for discretionary option grants in connection with performing services to the
Company.
Foreign Qualified Grants. Options may be granted to officers residing in
foreign jurisdictions. The Board of Directors may adopt such supplements to
the 1997 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 options shall be granted under any such supplement
with terms which are more beneficial to the participants than the terms
permitted by the 1997 Plan.
Changes in Capital Structure. The 1997 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 1997 Plan. In addition, the Board of Directors will make
appropriate adjustments in outstanding options. 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, 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 in whole or in part without any limitation on exercisability
and upon the expiration of which 30-day period all unexercised options shall
immediately terminate.
Acceleration in Certain Events. The 1997 Plan provides for accelerated
vesting of options granted under the 1997 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 1997 Plan. 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 1997 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 1997 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.
Certain options authorized to be granted under the 1997 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 any
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 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.
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. Compensation received through the exercise of an option will not
be subject to the $1,000,000 limit if the option and the 1997 Plan meet
certain requirements. One such requirement is that the shareholders approve
per-employee limits on the number of shares as to which options may be
granted. Other requirements are that the option be granted by a committee
composed solely of at least two outside directors and that the exercise price
of the option 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 granted under the 1997 Plan in compliance with all of
the above requirements will not be subject to the $1,000,000 deduction limit.
Grants Under 1997 Option Plan
Under the provisions of the 1997 Plan providing for automatic option
grants to non-employee directors, at the 1999 Annual Meeting the non-employee
directors would receive options to purchase shares in the following amounts
(based upon current board committee memberships):
Mr. Gill - 16,000 shares
Mr. Levitan - 5,000 shares
Dr. Scott Morton - 11,000 shares
Mr. Stein - 5,000 shares
Dr. Wilmot - 11,000 shares
Recommendation by the Board of Directors
The Board of Directors recommends that the 1997 Plan, as amended, 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 1997 Plan, as amended, is
approved. Broker non-votes are counted for the 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 1997 Plan, as amended.
PROPOSAL TO APPROVE
THE EMPLOYEE STOCK PURCHASE PLAN,
AS AMENDED
A total of 8,700,000 shares of Common Stock have been reserved for the
Employee Stock Purchase Plan (the "Purchase Plan"). As of March 1, 1999, only
1,215,350 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. In addition, recent accounting pronouncements have altered the
accounting treatment in the case of a shortfall of shares reserved for
issuance under an employee stock purchase plan. As a result, if a shortfall
occurs during an offering period, the company is unable to seek shareholder
approval for an increase without incurring significant compensation charges.
Therefore, the Board of Directors has approved an amendment to the Purchase
Plan reserving an additional 2,500,000 shares for issuance under the Purchase
Plan. The Board believes that the number of additional shares to be reserved
is sufficient and minimizes the likelihood of a shortfall and resulting
compensation charge. If a shortfall occurs, the Company will make a pro rata
allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and equitable.
The following is a summary of the basic provisions of the Purchase Plan,
a complete copy of which, marked to indicate the proposed changes, 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, including officers of the Company and its
designated subsidiaries, 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
business day of each three-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. The Board of
Directors is authorized to change the duration of offering periods with
respect to future offerings, except that no offering period can be longer than
18 months.
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 March 1, 1999, there were 2,622 employees of the Company
eligible to participate in the Purchase Plan and 1,973 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 (i) the excess of the fair market value
of the shares at the time of disposition over the purchase price, or (ii) 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 the Purchase 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 the
named executive officers, by all executive officers as a group and by all
employees (excluding executive officers) as a group:
Shares Purchased Shares Purchased
in 1998 since 1987
Dollar Number Dollar Number
Name Value(1) of Shares Value(1) of Shares
Karl C. Powell, Jr. $31,291 2,691 $248,144 28,785
John McAdam $23,405 3,072 $142,289 20,446
Barbara L. Gaffney $29,614 2,933 $123,417 14,145
Robert S. Gregg $24,318 2,517 $180,453 22,354
Peter W. O'Neill $10,662 1,543 $101,417 15,593
All Executive Officers
(5 persons) $119,290 12,756 $795,720 101,323
All employees, excluding
executive officers $9,256,270 1,858,120 $43,689,626 6,772,979
(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 Purchase Plan, as amended, 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 Purchase Plan, as amended, 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.
INDEPENDENT AUDITORS
Pricewaterhouse Coopers LLP ("PWC") was the Company's independent
auditors for its fiscal year ended January 2, 1999. Representatives of PWC
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.
On Monday, March 22, 1999, with the approval of the Audit Committee of
the Board of Directors, the Company dismissed PricewaterhouseCoopers as its
independent auditors. PWC's reports on the Company's financial statements for
the last two years did not contain an adverse opinion or a disclaimer of
opinion and the reports were not qualified or modified as to uncertainty,
audit scope or accounting principles. During the Company's last two fiscal
years and during the current year, through March 22, 1999, there have not been
any disagreements with PWC on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of PWC, would have
caused it to make a reference to the subject matter of the disagreement in
connection with its reports. The Company is in the process of selecting new
independent auditors for its current fiscal year.
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 January 2, 1999.
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 proposal to be considered at the Company's 2000 annual
meeting or considered for inclusion in proxy materials for the 2000 annual
meeting must be received at the principal executive offices of the Company no
later than December 14, 1999. Any shareholder proposal must include the
information specified in the Company's Bylaws, and a copy of the relevant
provisions of the Bylaws will be provided to any shareholder upon written
request to David Cunningham, Secretary of the Company.
By Order of the Board of Directors
Karl C. Powell, Jr.
Chairman of the Board
and Chief Executive Officer
April 9, 1999
APPENDIX A
SEQUENT COMPUTER SYSTEMS, INC.
1997 STOCK OPTION PLAN
1. Purpose. The purpose of this Stock Option Plan (the "Plan") is
to enable Sequent Computer Systems, Inc. (the "Company") to attract and retain
the services of officers and directors of the Company or of any subsidiary of
the Company.
2. Shares Subject to the Plan. Subject to adjustment as provided
below and in paragraph 9, 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 2,750,000
[750,000] shares plus any shares that become available for grant under the
Plan through the expiration, termination or cancellation of option grants
under the Plan. The shares issued under the Plan may be authorized and
unissued shares or reacquired shares. If an option granted under the Plan
expires, terminates or is canceled, the unissued shares subject to such option
shall again be available under the Plan.
3. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective as of
March 11, 1997 (the "Effective Date"). No option granted under the Plan
shall become exercisable, however, until the Plan is approved by the
affirmative vote of the holders of a majority of the shares of Common
Stock represented at a shareholders meeting at which a quorum is present
and any such grant under the Plan prior to such approval shall be
conditioned on and subject to such approval. Subject to this
limitation, options may be granted 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. The
Board of Directors may suspend or terminate the Plan at any time except
with respect to options then outstanding under the Plan. Termination
shall not affect any outstanding options 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 officers and directors to whom option grants
shall be made, the amount of the grants 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 (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 and (ii) that only the Board of Directors may amend
or terminate the Plan as provided in paragraphs 3 and 12.
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); and (iii) grant foreign qualified awards
as provided in paragraph 7. Option grants may be made to officers of the
Company and to non-employee directors providing consulting services to the
Company selected by the Board of Directors. The Board of Directors shall
select the officers and directors to whom grants shall be made and shall
specify the action taken with respect to each individual to whom a grant is
made. The Board of Directors shall determine which employees or officers are
officers for purposes of the Plan. 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
under the Plan for more than an aggregate of 300,000 shares of Common Stock
in any calendar year.
6. Option Grants.
(a) General Rules Relating to Options.
(i) Terms of Grant. 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 Nonstatutory Stock
Option.
(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 performing services for
the Company or any subsidiary of the Company and shall have been
so employed 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), 9 and 10, 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, 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. 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. Incentive Stock
Options may be granted only to employees of the Company or its
subsidiaries. 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 9, the total number of shares of Common Stock that may
be issued under the Plan upon exercise of Incentive Stock Options
shall not exceed 750,000 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 85 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. Foreign Qualified Grants. Options may be granted under the Plan
to such officers of the Company and its subsidiaries 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.
8. Automatic 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.
(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 8 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 8 shall be 10 years from the date of grant.
(f) Exercisability. Until an option expires or is terminated and
except as provided in paragraph 8(g), 9 and 10, an option granted under
this paragraph 8 shall be exercisable according to the following
schedule:
Period of Non-Employee
Director's Continuous Service
as a Director of the Company Portion of Total Option Which
from the Date the Option is Granted is Exercisable
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.
For purposes of this paragraph 8(f), 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. Unless otherwise determined by
the Board of Directors, 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. Unless otherwise determined by the Board
of Directors, 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).
9. 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, combi-
nation 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, the Board of Directors shall make
appropriate adjustment in the number and kind of shares as to which
outstanding options, or portions thereof then unexercised, shall be
exercisable, so that the optionee's 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 not 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 9. 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 as provided above in this paragraph 9 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
in whole or in part without any limitation on exercisability and upon the
expiration of such 30-day period, all unexercised options shall immediately
terminate.
10. Special Acceleration in Certain Events.
(a) Special Acceleration. Notwithstanding any other provisions
of the Plan, a special acceleration ("Special Acceleration") of options
outstanding under the Plan shall occur with the effect set forth in
paragraph 10(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 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 10 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 10(a), all options
then outstanding under the Plan shall immediately become exercisable in
full for the remainder of their terms or until terminated pursuant to
paragraph 9.
11. Corporate Mergers, Acquisitions, etc. The Board of Directors may
also grant options under the Plan having terms, conditions and provisions that
vary from those specified in this Plan provided that any such options are
granted in substitution for, or in connection with the assumption of, existing
options, 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, reorganization or liquidation to which the Company or a
subsidiary is a party.
12. 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, 9 and 10, however, no
change in an award already granted shall be made without the written consent
of the holder of such award.
13. 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.
14. 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.
15. 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
eligible employees of Sequent Computer Systems, Inc. (the "Company") and its
Participating Subsidiaries (hereinafter defined) 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 Business Day shall mean a day on which the public equity securities
markets in the United States are open for trading.
2.5 Code shall mean the Internal Revenue Code of 1986, as amended from time
to time.
2.6 Committee shall mean the Committee appointed by the Board of Directors
in accordance with Section 9.1 of the Plan.
2.7 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. An Employee's Compensation shall not include:
(a) severance pay;
(b) hiring or relocation bonuses;
(c) pay in lieu of vacations or sick leave.
2.8 Common Stock shall mean the common stock, par value $.01 per share, of
the Company.
2.9 Company shall mean Sequent Computer Systems, Inc., an Oregon
corporation.
2.10 Custodian shall mean the investment or financial firm appointed by the
Plan Administrator to hold all Shares issued pursuant to the Plan.
2.11 Custodian Account shall mean the account maintained by the Custodian
for a Participant under the Plan. By enrolling in the Plan initially and
completing a Payroll Deduction Authorization Form, the Participant authorizes
the Company to open an account with the Custodian and authorizes the delivery
to the Custodian all Shares issued for the Participant Account.
2.12 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.
2.13 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.
2.14 Employer shall mean, collectively, the Company and any Participating
Subsidiary (as hereinafter defined), 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.
2.15 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.
2.16 Enrollment Date shall mean the first day of each Offering.
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 of the Enrollment Date
for the first Offering and shall continue for 18 months thereafter. The Board
of Directors shall have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to future offerings,
however, in no event, shall the duration of an Offering extend beyond 18
months. Any such change shall be announced at least five (5) days prior to
the scheduled beginning of the first Offering Period to be affected thereafter.
2.18 Participant shall mean any Employee who is participating in any
Offering under the Plan pursuant to Article III.
2.19 Participating Subsidiary shall mean each Subsidiary designated by the
Board of Directors of the Company as a Participant in the Plan.
2.20 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.
2.21 Plan shall mean this document.
2.22 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.
2.23 Purchase Date shall mean the last Business Day of each of the third,
sixth, ninth, twelfth, fifteenth and eighteenth months of the Offering.
2.24 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.
2.25 Share shall mean one share of Common Stock.
2.26 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.
2.27 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 (a). 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 last Business Day prior to the Enrollment Date for which such
fair market value may be determined.
2.28 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 be automatically re-enrolled in
the Plan as of the Enrollment Date of any Offering, 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 form:
(A) Payroll Deduction Authorization Form. Any Payroll
Deduction Authorization Form received by the Company on or before
any Enrollment Date will be effective on that Enrollment Date.
(ii) Automatic re-enrollment to a lower priced Offering. If the
fair market value on the Valuation Date of an Offering in which a
Participant is enrolled (the "Current Offering") is equal to or greater
than the fair market value on the Valuation Date of a succeeding
Offering (the "Succeeding Offering"), the Participant's enrollment in
the Current Offering automatically will be terminated following the
Purchase of Shares under the Current Offering on the Purchase Date that
occurs immediately prior to the Enrollment Date of the Succeeding
Offering, and the Participant will automatically be enrolled in the
Succeeding Offering. A participant may elect to remain in the Current
Offering by delivery of a written notice to the Company declaring such
election prior to the Enrollment Date of the Succeeding Offering.
(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 2.14.
(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 to 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-sixth 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 by means of payroll deductions. A Payroll Deduction Authorization
Form must be filed with the Company's stock administration department no later
than the Enrollment Date for an Offering, provided that payroll deductions will
not become effective sooner than the next pay period after receipt of the
authorization.
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 with the next pay period following receipt of the Payroll Deduction
Authorization Form 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 three 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 Participant may increase or
decrease the amount of his or her payroll deduction by filing an amended
Payroll Deduction Authorization Form with the Company's stock administration
department at any time. The change may not become effective sooner than the
next pay period after receipt of the authorization.
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 in 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. By enrolling in the Plan initially and completing a Payroll Deduction
Authorization Form, the Participant authorizes the Company to open an Account
with the Custodian.
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 III and
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 Purchase Date under the
Current Offering or the Succeeding Offering.
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
re-designate 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. 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 11,200,000
[8,700,000] 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 11,200,000 [8,700,000]
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 purchased 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.
(a) 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.
(b) The Plan Administrator shall adopt such procedures as are
necessary and appropriate to permit participation in the Plan by eligible
Employees who are foreign nationals or employed outside of the United States.
(c) The provisions of the Plan shall be 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 or Leave of Absence. 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 2.14;
(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.
PROXY
Annual Meeting of Shareholders of Sequent Computer Systems, Inc.
May 11, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Karl C. Powell, Jr., John McAdam and
Robert S. Gregg, and each of them, proxies with power of substitution to vote
on behalf of the undersigned all shares which the undersigned may be entitled
to vote at the Annual Meeting of Shareholders of Sequent Computer Systems,
Inc. on May 11, 1999 and any adjournments thereof, with all powers that the
undersigned would possess if personally present, with respect to the
following:
Please mark this proxy as indicated on the reverse side to vote on any
item. If you wish to vote in accordance with the Board of Directors'
recommendations, please sign the reverse side; no boxes need to be checked.
COMMENT/ADDRESS CHANGE: PLEASE MARK
COMMENT/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
- --------------------------------------------------------------------------
Annual Meeting of Shareholders
Tuesday, May 11, 1999
9:00 a.m.
Sequent Computer Systems, Inc.
15450 S.W. Koll Parkway
Beaverton, Oregon
The Board of Directors recommends a vote for the nominees and proposals listed
below.
Item 1 - ELECTION OF DIRECTORS
FOR all nominees listed (except for
those nominees whoe names are lined
through below), or, if any named
nominee is unable to serve, for a
substitute nominee. _______
WITHHELD AUTHORITY to vote for all
nominees listed below. _______
Nominees: Frank C. Gill, Larry R. Levitan,
John McAdam, Karl C. Powell, Jr., Michael
S. Scott Morton, Martin A. Stein, Robert
W. Wilmot
FOR AGAINST ABSTAIN
Item 2 - PROPOSAL TO APPROVAL THE
COMPANY'S 1997 STOCK OPTION PLAN,
AS AMENDED ____ ____ ____
Item 3 - PROPOSAL TO APPROVE THE
COMPANY'S EMPLOYEE STOCK PURCHASE
PLAN, AS AMENDED. ____ ____ ____
Item 4 - IN THEIR DISCRETION, THE
PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED HEREON, BUT
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES INDICATED AND FOR APPROVAL OF PROPOSAL NOS. 2 AND 3.
COMMENTS/ADDRESS CHANGE
Please mark this box if you have
written comments/address change on the
reverse side. _____
Receipt is hereby acknowledged of the
Sequent Computer Systems, Inc. Notice of
Meeting and Proxy Statement.
Signature(s):
_______________________________________________________________________
Date: ______________________
NOTE: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title assuch. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
FOLD AND DETACH HERE
PROXY
VOTING INSTRUCTIONS
TO THE TRUSTEE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SEQUENT COMPUTER SYSTEMS, INC.
For the Annual Meeting of Shareholders on May 11, 1999
The undersigned hereby authorizes and instructs the Trustee of the
Sequent Computer Systems, Inc. 401(K) Plan to represent and vote, as
designated below, all shares of Common Stock of Sequent Computer Systems,
Inc. which the undersigned would be entitled to vote at the Annual Meeting of
Shareholders of said corporation to be held on May 11, 1999 and any
adjournments thereof, with all powers that the undersigned would possess if
personally present, with respect to the following:
Please mark this proxy as indicated on the reverse side to vote on any
item. Promptly return this proxy in the enclosed envelope.
COMMENT/ADDRESS CHANGE: PLEASE MARK
COMMENT/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
- ------------------------------------------------------------------------
Annual Meeting of Shareholders
Tuesday, May 11, 1999
9:00 a.m.
Sequent Computer Systems, Inc.
15450 S.W. Koll Parkway
Beaverton, Oregon
The Board of Directors recommends a vote for the nominees and proposals listed
below.
Item 1 - ELECTION OF DIRECTORS
FOR all nominees listed (except for
those nominees whoe names are lined
through below), or, if any
named nominee is unable to serve,
for a substitute nominee. _______
WITHHELD AUTHORITY to vote for all
nominees listed below. _______
Nominees: Frank C. Gill, Larry R. Levitan,
John McAdam, Karl C. Powell, Jr., Michael
S. Scott Morton, Martin A. Stein, Robert
W. Wilmot
FOR AGAINST ABSTAIN
Item 2 - PROPOSAL TO APPROVE THE
COMPANY'S 1997 STOCK OPTION PLAN,
AS AMENDED. ____ ____ ____
Item 3 - PROPOSAL TO APPROVE THE
COMPANY'S EMPLOYEE STOCK
PURCHASE PLAN, AS AMENDED. ____ ____ ____
Item 4 - IN THEIR DISCRETION, THE
PROXIES ARE AUTHORIZED TO VOTE
listed above. UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE
THE MEETING.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED HEREON, BUT
IF NO SPECIFICATION IS MADE, THE TRUSTEE WILL VOTE ALL OF THE SHARES FOR
WHICH YOU ARE ENTITLED TO PROVIDE INSTRUCTION IN THE SAME PROPORTION AS
SHARES FOR WHICH INSTRUCTIONS ARE RECEIVED. THE TRUSTEE MAY VOTE ACCORDING
TO ITS DISCRETION ON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE
MEETING.
COMMENTS/ADDRESS CHANGE
Please mark this box if you have
written comments/address change on the
reverse side. _____
Receipt is hereby acknowledged of the
Sequent Computer Systems, Inc. Notice
of Meeting and Proxy Statement.
Signature(s):
_______________________________________________________________
Date: ______________________
NOTE: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
FOLD AND DETACH HERE
