SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
RadiSys Corporation
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: Set forth the amount on which
the filing fee is calculated and state how it was determined.
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4) Proposed maximum aggregate value of transaction:
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* Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
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<PAGE>
Notice of Annual Meeting of Shareholders
to be Held May 18, 1999
To the Shareholders of RadiSys Corporation:
The Annual Meeting of Shareholders of RadiSys Corporation, an Oregon corporation
(the "Company"), will be held at the Company's headquarters, located at 5445 NE
Dawson Creek Drive, Hillsboro, Oregon, on May 18, 1999 at 8:30 a.m. for the
following purposes:
1. To elect seven directors, each to serve until the next Annual Meeting
of Shareholders or until a successor has been elected and qualified;
2. To vote on an amendment to the Company's 1995 Stock Incentive Plan to
increase the number of shares of the Company's Common Stock that may
be issued pursuant to the plan from 1,500,000 to 2,250,000, and to
increase the aggregate number of options or stock appreciation rights
which an employee may be granted pursuant to the plan;
3. To vote on an amendment to the Company's 1996 Employees Stock Purchase
Plan to increase the number of shares of the Company's Common Stock
that may be issued pursuant to the plan from 250,000 to 500,000; and
4. To transact any other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on March 31, 1999 are
entitled to notice of and to vote at the meeting or any adjournments thereof.
Please sign and date the enclosed proxy and return it promptly in the enclosed
reply envelope. If you are able to attend the meeting, you may, if you wish,
revoke the proxy and vote personally on all matters brought before the meeting.
A list of shareholders will be available for inspection by the shareholders
commencing May 1, 1999 at the corporate headquarters of the Company, located at
5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124.
By Order of the Board of Directors,
Annette M. Mulee
Corporate Secretary
April 10, 1999
Hillsboro, Oregon
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE 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.
<PAGE>
RADISYS CORPORATION
---------------
PROXY STATEMENT
---------------
SOLICITATION AND REVOCABILITY OF PROXY
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of RadiSys Corporation, an Oregon corporation
(the "Company"), to be voted at the Annual Meeting of Shareholders to be held at
the Company's headquarters, located at 5445 NE Dawson Creek Drive, Hillsboro,
Oregon, on May 18, 1999 at 8:30 a.m. for the purposes set forth in the
accompanying Notice of Annual Meeting. All proxies in the enclosed form that are
properly executed and received by the Company prior to or at the Annual Meeting
and not revoked will be voted at the Annual Meeting or any adjournments thereof
in accordance with the instructions thereon. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before it is
voted. Proxies may be revoked by (i) filing with the Secretary of the Company,
at or before the taking of the vote at the Annual Meeting, a written notice of
revocation bearing a later date than the date of the proxy, (ii) duly executing
a subsequent proxy relating to the same shares and delivering it to the
Secretary of the Company before the Annual Meeting or (iii) attending the Annual
Meeting and voting in person (although attendance at the Annual Meeting will not
in and of itself constitute a revocation of a proxy). Any written notice
revoking a proxy should be sent to RadiSys Corporation, 5445 NE Dawson Creek
Drive, Hillsboro, Oregon 97124, Attention: Corporate Secretary, or hand
delivered to the Secretary at or before the taking of the vote at the Annual
Meeting. For purposes of proposals other than the election of directors,
abstentions are counted as no votes and broker non-votes are not counted for any
purpose in determining whether a proposal is approved.
The mailing address of the principal executive offices of the Company is
5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124. This Proxy Statement and
the accompanying Notice of Annual Meeting and the Proxy Card are first being
mailed to the Shareholders on or about April 10, 1999.
The cost of preparing, printing and mailing this Proxy Statement and of the
solicitation of proxies by the Company will be borne by the Company.
Solicitation will be made by mail and, in addition, may be made by directors,
officers and employees of the Company personally, or by telephone or telegram.
The Company will request brokers, custodians, nominees and other like parties to
forward copies of proxy materials to beneficial owners of stock and will
reimburse such parties for their reasonable and customary charges or expenses in
this connection. The Company has retained Chase Mellon Shareholder Services to
assist in the solicitation of proxies from brokers and other nominees at an
estimated cost to the Company of $8,000.
The record date for determination of shareholders entitled to receive
notice of and to vote at the Annual Meeting is March 31, 1999. At the close of
business on March 31, 1999, 7,935,764 shares of Common Stock of the Company were
outstanding and entitled to vote at the Annual Meeting. Each share of Common
Stock is entitled to one vote with respect to each matter to be voted on at the
annual meeting.
The Company will provide to any person whose proxy is solicited by this
proxy statement, without charge, upon written request to 5445 NE Dawson Creek
Drive, Hillsboro, Oregon 97124, Attention: Annette M. Mulee, Corporate
Secretary, a copy of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors of the Company currently 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 and qualified. Proxies
received from shareholders, unless directed otherwise, will be voted FOR the
election of the following nominees: Dr. Glenford J. Myers, James F. Dalton,
Richard J. Faubert, C. Scott Gibson, Dr. William W. Lattin, Jean-Pierre D.
Patkay and Jean-Claude Peterschmitt.
If no instructions are given, proxies will be voted for the election of the
seven nominees named below. All of the nominees are currently directors of the
Company. The Company is not aware that any nominee is or will be unable to stand
for reelection. If any nominee is not available as a candidate for director, the
number of directors constituting the Board of Directors may be reduced prior to
the Annual Meeting or the proxies may be voted for such other candidate or
candidates as are nominated by the Board of Directors, in accordance with the
authority conferred in the proxy. Directors shall be elected by a plurality of
the votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors. Abstentions and broker
non-votes are accounted for purposes of determining whether a quorum exists at
the Annual Meeting, but have no effect on the determination of whether a
plurality exists with respect to a given nominee.
Set forth below is the name, position with the Company, principal
occupation and age of each of the nominees for director of the Company. Certain
of the information about each of the nominees is described below and in
"Security Ownership of Certain Beneficial Owners and Management." There are no
family relationships among the directors and executive officers of the Company.
Name Age Position with the Company
---- --- -------------------------
Dr. Glenford J. Myers 52 Chairman of the Board, President
and Chief Executive Officer
James F. Dalton 40 Director
Richard J. Faubert 50 Director
C. Scott Gibson 46 Director
Dr. William W. Lattin 58 Director
Jean-Pierre D. Patkay 48 Director
Jean-Claude Peterschmitt 65 Director
Dr. Glenford J. Myers co-founded the Company in March 1987 and has served
as the Company's Chairman of the Board, President and Chief Executive Officer
since that time. From 1981 to 1987, he held various management positions with
Intel Corporation ("Intel"), including Manager of Microprocessor Product Line
Architecture and Manager of the Microprocessor Strategic Business Segment. While
at Intel, Dr. Myers had primary management responsibility for the feasibility
and design of Intel's 386 and 80960 microprocessor chips, both of which became
industry standards in their respective application areas. From 1968 to 1981, Dr.
Myers held various engineering and management positions with IBM. Dr. Myers
holds a Ph.D. from the Polytechnic Institute of New York, M.S. from Syracuse
University and B.S.E.E. from Clarkson College.
2
<PAGE>
James F. Dalton has served as a Director since December 1993. Since April
1989, Mr. Dalton has been employed by Tektronix, Inc. ("Tektronix"), an
electronics manufacturing company. He presently serves as Tektronix' Vice
President and General Counsel. Prior to that he served as Director of Corporate
Development. Additionally, Mr. Dalton serves as a director and Vice President of
Tektronix Development Company.
Richard J. Faubert has served as a Director since June 1993 and a member of
the Compensation Committee since December 1993. From 1986 through 1992, Mr.
Faubert served as Vice President of Product Development of GenRad, Inc. From
1992 through 1998, Mr. Faubert was employed by Tektronix, first as General
Manager of its Instruments Business Unit and most recently as Vice President and
General Manager of the Television and Communications Business Unit, Measurement
Business Division. Since that time, Mr. Faubert has served as President and CEO
of SpeedFam Corporation.
C. Scott Gibson has served as a Director since June 1993 and as a member of
the Compensation Committee since January 1995. From January 1983 through
February 1992, Mr. Gibson co-founded and served as President of Sequent Computer
Systems, Inc. ("Sequent"). Prior to co-founding Sequent, Mr. Gibson served as
General Manager, Memory Components Operation, at Intel. Since August 1992, Mr.
Gibson has served as the Chairman of the Board for Adaptive Solutions, Inc.
Currently, Mr. Gibson is the Chairman of the Board of Trustees of Oregon
Graduate Institute. Mr. Gibson also serves on the boards of several other
companies, including Inference Corporation, Triquint Semiconductor, Inc.,
Integrated Measurement Systems, Inc., Health Systems Technologies, Inc. and
Webridge Inc. Mr. Gibson holds a B.S.E.E. and a M.B.A. from the University of
Illinois.
Dr. William W. Lattin has served as a Director since September 1987 and
Chair of the Compensation Committee since July 1993. From September 1986 through
February 1994, Dr. Lattin served as President and Chief Executive Officer of
Logic Modeling Corp. From February 1994 through October 1994, he was employed by
Synopsys, Inc. as President of the Logic Modeling Group until his appointment in
October 1994 to Executive Vice President, in which capacity he presently serves.
From 1975 to 1986, Dr. Lattin held various engineering and management positions
with Intel, the most recent being Corporate Vice President and General Manager
of Intel's Systems Group. Dr. Lattin also serves as a director on the boards of
the Oregon Graduate Institute, EasyStreet Online Services, Inc., and Synopsys,
Inc. Dr. Lattin holds a Ph.D. from Arizona State University and M.S.E.E. and
B.S.E.E. from the University of California-Berkeley.
Jean-Pierre D. Patkay has served as a Director since July 1998. From 1973
to 1990, Mr. Patkay held a variety of manufacturing and general management
positions with Hewlett-Packard Company. From 1990 to 1994, Mr. Patkay was Vice
President Of Operations for Quantum Corp., a diversified mass storage company.
Since that time, Mr. Patkay has served as Vice President of Worldwide
Manufacturing for 3Com Corp.
Jean-Claude Peterschmitt has served as a Director since July 1996. From
1967 to 1987, Mr. Peterschmitt served in various capacities with Digital
Equipment Corporation, a corporate information systems supplier, most recently
as General Manager, Vice President, Europe and Chairman of the European Board of
Directors. Prior to that time, Mr. Peterschmitt was a member of Arthur D.
Little's European Operations Research Group. He currently serves on the
supervisory boards of Adaptive Solutions, Inc., Euroventures B.V., a European
venture funds, LeRoseau, a network structure for the creation and development of
high-technology enterprises in Switzerland, and various private American and
European companies. Mr. Peterschmitt received an engineering degree from
Eidgenossiche Technische Hochscule (Zurich) and an M.S. degree from the MIT
Sloan School of Business.
3
<PAGE>
Board Committees and Meetings
The Board of Directors met seven times during the fiscal year ended
December 31, 1998. Each director attended at least 75 percent of the aggregate
number of meetings of the Board of Directors and the committees of which the
director was a member.
The Company maintains an Audit Committee comprised of C. Scott Gibson and
James Dalton. The Audit Committee oversees actions taken by the Company's
independent auditors. The Audit Committee met two times in the last fiscal year.
The Company maintains a Compensation Committee comprised of William W.
Lattin, Richard J. Faubert, C. Scott Gibson and Jean-Pierre D. Patkay. None of
the members of the Compensation Committee are current or former officers or
employees of the Company. The Compensation Committee reviews and determines the
compensation of the Company's executive officers. Additionally, the Compensation
Committee makes grants to executive officers under the Company's 1995 Stock
Incentive Plan. The Compensation Committee met three times in the last fiscal
year.
Director Compensation
Directors do not receive any fees for serving on the Company's Board of
Directors or any committee thereof but are reimbursed for reasonable expenses
incurred in attending meetings. Pursuant to the terms of the 1995 Stock
Incentive Plan, each individual who becomes a non-employee director of the
Company after August 7, 1995 is automatically granted, on the date the
individual joins the Board of Directors, a non-statutory option to purchase
15,000 shares of Common Stock. In addition, each non-employee director of the
Company automatically is granted an annual, non-statutory option to purchase
5,000 shares of Common Stock. No such grants are made, however, if the
non-employee director's employer prohibits the non-employee director from
receiving such options. The exercise price of options automatically granted to
non-employee directors is the fair market value of the Common Stock on the date
of grant. The Company's 1995 Stock Option Plan authorizes the Company to grant
non-statutory stock options to non-employee directors. Pursuant to the foregoing
policy and the terms of the 1995 Stock Incentive Plan, Mr. Gibson, Dr. Lattin
and Mr. Peterschmitt each received a non-statutory stock option to purchase
5,000 shares of Common Stock and Mr. Dalton, Mr. Faubert and Mr. Patkay each
received a non-statutory stock option to purchase 15,000 shares of Common Stock
in 1998 for their services as directors of the Company. The grants to Messrs.
Dalton and Faubert were made as a result of the removal of employer restrictions
on the ability of Messrs. Faubert and Dalton to receive grants of 15,000 shares
upon joining the board.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of March 25, 1999 by (i) each
person known to the Company to be the beneficial owner of more than 5% of the
Company's Common Stock, (ii) each of the Company's directors and nominees for
director, (iii) each executive officer of the Company named in the Summary
Compensation Table and (iv) all directors and executive officers of the Company
as a group. Unless otherwise noted in the footnotes to the table, the persons
4
<PAGE>
named in the table have sole voting and investment power with respect to all
outstanding shares of Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
Shares
Beneficially Percentage of
Name Owned Common Stock
---- ------------ -------------
<S> <C> <C>
Dr. Glenford J. Myers (1) 263,164 3.4%
Ronald A. Dilbeck (2) 40,805 *
Brian V. Turner (3) 28,000 *
Stephen J. Verleye (4) 41,997 *
John D. Watkins (5) 64,967 *
James F. Dalton (6) 200 *
Richard J. Faubert (6) 0 *
C. Scott Gibson (7) 28,628 *
Dr. William W. Lattin (8) 51,849 *
Jean-Pierre D. Patkay (6) 0
Jean-Claude Peterschmitt (9) 25,000 *
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052 (10) 1,186,167 15.2%
Lord Abbett & Co.
767 Fifth Avenue
New York, NY 10153 881,140 11.2%
All directors and officers
as a group (17 persons) (11) 573,473 7.4%
* Less than 1%
(1) Includes options to purchase 41,000 shares of Common Stock exercisable
within 60 days after March 25, 1999. Excludes options to purchase 85,000
shares of Common Stock not exercisable within 60 days after March 25, 1999.
Includes 1,950 shares of Common Stock held by Dr. Myers' minor child.
(2) Includes options to purchase 27,084 shares of Common Stock exercisable
within 60 days after March 25, 1999. Excludes options to purchase 49,166
shares of Common Stock not exercisable within 60 days after March 25, 1999.
(3) Excludes options to purchase 24,000 shares of Common Stock not exercisable
within 60 days after March 25, 1999.
(4) Includes options to purchase 20,000 shares of Common Stock exercisable
within 60 days after March 25, 1999. Excludes options to purchase 32,250
shares of Common Stock not exercisable within 60 days after March 25, 1999.
(5) Includes options to purchase 20,000 shares of Common Stock exercisable
within 60 days after March 25, 1999. Excludes options to purchase 32,500
shares of Common Stock not exercisable within 60 days after March 25, 1999.
(6) Excludes options to purchase 15,000 shares of Common Stock not exercisable
within 60 days after March 25, 1999.
(7) Includes options to purchase 15,000 shares of Common Stock exercisable
within 60 days after March 25, 1999.
(8) Includes options to purchase 19,546 shares of Common Stock exercisable
within 60 days after March 25, 1999.
5
<PAGE>
(9) Includes options to purchase 25,000 shares of Common Stock exercisable
within 60 days after March 25, 1999.
(10) Based solely on information provided as of December 31, 1998 in a Schedule
13G filed by the shareholder.
(11) Includes options to purchase 202,755 shares of Common Stock exercisable
within 60 days after March 25, 1999. Excludes options to purchase 468,491
shares of Common Stock not exercisable within 60 days after March 25, 1999.
</TABLE>
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth, for the chief
executive officer and the four most highly compensated executive officers,
information concerning compensation paid or accrued for services to the Company
in all capacities for each of the last three fiscal years. Two other executive
officers of the Company other than the persons shown below received total annual
salary and bonus for the fiscal year 1998 in excess of $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Shares
Name and ---------------------- Underlying
Principal Position Year Salary Bonus(1) Options
- ------------------ ---- ---------- -------- ----------
<S> <C> <C> <C> <C>
Glenford J. Myers 1998 $ 248,846 $ 87,140 50,000 (3)
Chairman of the Board, 1997 $ 227,500 $ 133,800 35,000 (2)
President and Chief 1996 $ 169,375 $ 24,400 35,000
Executive Officer
Ronald Dilbeck 1998 $ 167,154 $ 32,580 20,000 (3)
Vice President and 1997 $ 159,792 $ 41,169 20,000 (2)
General Manager of 1996 $ 88,802 50,000
Automated Equipment Division
Brian V. Turner 1998 $ 156,577 $ 29,220 15,000 (3)
Chief Financial Officer 1997 $ 143,875 $ 46,920 15,000 (2)
and Vice President of 1996 $ 117,917 $ 4,880 15,000
Finance and
Administration
Stephen J. Verleye 1998 $ 156,384 $ 28,710 20,000 (3)
Vice President and 1997 $ 139,392 $ 54,600 20,000 (2)
General Manager of 1996 $ 124,967 $ 9,150 20,000
Automated Equipment Division
John D. Watkins 1998 $ 170,561 $ 20,680 20,000 (3)
Vice President of 1997 $ 157,932 $ 49,980 20,000 (2)
Corporate Development 1996 $ 134,289 $ 12,200 20,000
(1) Represents amounts paid under the Incentive Compensation Plan. See
"Compensation Committee Report on Executive Compensation - Incentive
Compensation Plan".
(2) Represents options issued in 1997 in replacement of canceled options
granted during 1996 at higher exercise prices. See "Ten Year Option
Repricing". No new options were granted to these officers in 1997
(excluding options issued to replace canceled options).
6
<PAGE>
(3) Excludes options issued in 1998 in replacement of canceled options granted
during 1997 and 1998 at higher exercise prices. See "Compensation Committee
Report on Executive Compensation - Canceled Stock Options" and "Ten Year
Option Repricing".
</TABLE>
Stock Option Grants in Fiscal 1998. The following table sets forth information
concerning individual grants of stock options made by the Company during the
fiscal year 1998 to each of the officers of the Company named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Percent Potential Realizable
of Total Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Price Appreciation for
Underlying Employees Exercise Option Term (4)
Granted in Fiscal Price Expiration --------------------------
Name (1) Year (2) Per Share Date (3) 5% 10%
- --------------------- ---------- ---------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Glenford J. Myers (5) 50,000 8.8% $30.06-$38.31 1/5/05-1/4/06 $ 729,425 $ 1,699,865
Ronald A. Dilbeck 20,000 3.5% $38.31 1/5/05 $ 311,920 $ 726,900
Brian V. Turner 15,000 2.6% $38.31 1/5/05 $ 233,940 $ 545,180
Stephen J. Verleye 20,000 3.5% $38.31 1/5/05 $ 311,920 $ 726,900
John D. Watkins 20,000 3.4% $38.31 1/5/05 $ 296,325 $ 690,560
(1) All option grants were made pursuant to the Company's 1995 Stock Incentive
Plan. These balances exclude options issued in 1998 in replacement of
canceled options granted during 1997 and 1998 at higher exercise prices;
see "Compensation Committee Report on Executive Compensation - Canceled
Stock Options". With the exception of the options granted to Dr. Glenford
J. Myers and 2,500 of the options granted to Mr. Verleye, all of these
options were subsequently canceled; see "Compensation Committee Report on
Executive Compensation - Stock Options Canceled in 1998".
(2) In fiscal 1998, the Company granted options for a total of 566,900 shares
of Common Stock under the 1995 Stock Incentive Plan and this number was
used in calculating the percentages set forth in this column.
(3) Options expire prior to this date (i) if the optionee's employment is
terminated for any reason (other than death or disability), in which case
options vested but unexercised at the date of termination may be exercised
within 30 days after the date of termination, or (ii) if employment
terminates because of death or disability, in which case options vested but
unexercised at the date of termination may be exercised within 12 months
after the date of termination. If employment (or service as a director, as
applicable) is terminated by death of the optionee, the option generally
may be exercised by persons to whom the optionee's rights pass by will or
the laws of descent or distribution. Remaining vested but unexercised
options terminate at the end of the earliest of the above described
periods, as applicable.
(4) In accordance with the rules of the Securities and Exchange Commission,
these amounts are the hypothetical gains or "option spreads" that would
exist for the respective options based on assumed rates of annual compound
stock price appreciation of 5% and 10% from the date the options were
granted over the full option term.
7
<PAGE>
(5) Dr. Myers received 30,000 options expiring on January 5, 2005 with an
exercise price of $38.31 and 20,000 options expiring on January 4, 2006
with an exercise price of $30.06.
</TABLE>
Aggregated Option Exercises. The following table sets forth information (on an
aggregated basis) concerning each exercise of stock options during the fiscal
year 1998 by each of the officers of the Company named in the Summary
Compensation Table and the fiscal year-end value of unexercised options.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Fiscal Year 1998
and Fiscal Year-End Option Values
Number of Number of Securities Value of Unexercised
Shares Underlying Options In-the-Money Options at
Acquired Options at December 31, 1998 December 31, 1998 (1)
on Value ---------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------ --------- ---------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Glenford J. Myers 9,000 $ 217,680 32,000 85,000 $ 608,000 $ 52,500
Ronald A. Dilbeck 3,000 $ 390 23,834 52,416 $ 119,170 $ 406,380
Brian V. Turner 2,000 $ 28,260 28,000 24,000 $ 532,000 $ 271,440
Stephen J. Verleye 20,000 27,150 $ 380,000 $ 339,300
John D. Watkins 18,121 $ 367,233 19,000 32,500 $ 361,000 $ 339,300
(1) Options are "in-the-money" at the fiscal year-end if the fair market value
of the underlying securities on such date exceeds the exercise price of the
option. The amounts set forth represent the difference between the fair
market value of the securities underlying the options on December 31, 1998
based on the last sale price of $30.00 per share of Common Stock on that
date (as reported on the Nasdaq National Market) and the exercise price of
the options, multiplied by the applicable number of shares.
</TABLE>
Ten Year Option Repricing
As discussed in the Compensation Committee Report on Executive Compensation
contained in the proxy statement furnished to shareholders in connection with
last year's annual meeting, in May 1997 the Committee approved the offering to
all employees, including executive officers, holding stock options the
opportunity to cancel unexercised stock options in exchange for new options
equal to the then current fair market value defined as the highest closing price
for the Company's common stock for the five trading days preceding May 30, 1997
(the date of issue). New options were issued at a price of $38.00 per share. The
committee concluded that, with the decline in the market price of the stock,
certain outstanding options no longer provided a significant incentive to
management and employees and that the options were no longer serving the
purposes intended. With the exception of options granted to officers, the new
options issued to employees retained the same term of the canceled options,
however, the term started anew from May 30, 1997. For options granted to
officers, the new options issued retained the same term of the canceled options,
however, the initial exercise dates were deferred by one year from the initial
exercise dates of the canceled options.
8
<PAGE>
<TABLE>
<CAPTION>
Table of Repricings of Options
Held by Executive Officers of the Company
in the Last Ten Years
Months of
Number of Market Exercise Original
Shares Price of Price of Option Term
Underlying Stock at Stock at New Remaining
Options Time of Time of Exercise at Date of
Name Date Canceled Amendment Amendment Price Amendment
- ------------------ ------- ---------- --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Glenford J. Myers 5/30/97 35,000 $ 36.75 $ 57.88 $ 38.00 65
Ronald A. Dilbeck 5/30/97 20,000 $ 36.75 $ 57.88 $ 38.00 77
John S. Sonneborn 5/30/97 15,000 $ 36.75 $ 57.88 $ 38.00 77
Brian V. Turner 5/30/97 15,000 $ 36.75 $ 57.88 $ 38.00 65
Stephen J. Verleye 5/30/97 20,000 $ 36.75 $ 57.88 $ 38.00 65
John D. Watkins 5/30/97 20,000 $ 36.75 $ 57.88 $ 38.00 65
</TABLE>
<TABLE>
<CAPTION>
Months of
Number of Market Exercise Original
Shares Price of Price of Option Term
Underlying Stock at Stock at New Remaining
Options Time of Time of Exercise at Date of
Name Date Canceled (1) Amendment Amendment Price Amendment
- ------------------ ------- ------------ --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ronald A. Dilbeck 7/28/98 20,000 $ 17.00 $ 38.31 $ 18.69 78
Ronald A. Dilbeck 7/28/98 3,250 $ 17.00 $ 30.75 $ 18.69 34
Ronald A. Dilbeck 7/28/98 14,250 $ 17.00 $ 38.00 $ 18.69 64
Arif Kareem 7/28/98 24,000 $ 17.00 $ 39.87 $ 18.69 60
Arif Kareem 7/28/98 10,000 $ 17.00 $ 38.31 $ 18.69 78
John S. Sonneborn 7/28/98 13,750 $ 17.00 $ 39.25 $ 18.69 37
John S. Sonneborn 7/28/98 15,000 $ 17.00 $ 38.00 $ 18.69 64
John S. Sonneborn 7/28/98 15,000 $ 17.00 $ 38.31 $ 18.69 78
Brian V. Turner 7/28/98 15,000 $ 17.00 $ 38.00 $ 18.69 64
Brian V. Turner 7/28/98 15,000 $ 17.00 $ 38.31 $ 18.69 78
Stephen J. Verleye 7/28/98 20,000 $ 17.00 $ 38.31 $ 18.69 51
Stephen J. Verleye 7/28/98 17,500 $ 17.00 $ 38.31 $ 18.69 78
John D. Watkins 7/28/98 10,000 $ 17.00 $ 38.31 $ 18.69 114
John D. Watkins 7/28/98 10,000 $ 17.00 $ 38.31 $ 18.69 78
John D. Watkins 7/28/98 17,500 $ 17.00 $ 38.00 $ 18.69 42
(1) Each individual represented in the table received a new number of options
equal to 80 percent of the canceled options.
</TABLE>
Additionally, as discussed in the Compensation Committee Report on Executive
Compensation, in July 1998 the Committee approved the offering to all employees,
including executive officers but excluding the Chief Executive Officer, holding
stock options the opportunity to cancel unexercised stock options in exchange
for new options equal to the then current fair market value defined as the
highest closing price for the Company's common stock for the five trading days
preceding July 28, 1998 (the date of issue). New options were issued at a price
of $18.69 per share and were exchanged at a ratio of 8 new shares for every 10
canceled shares. The committee concluded that, with the decline in the market
price of the stock, certain outstanding options no longer provided a significant
incentive to management and employees and that the options were no longer
serving the purposes intended. With the exception of options granted to
officers, the new options issued to employees retained the same term of the
canceled options, unless the option was already vested in which case the new
option had a six month holding period. For options granted to officers, the new
options issued retained the same terms of the canceled options, however, the
term started anew from July 28, 1998 unless the option was already vested in
which case the new option had a one year holding period.
9
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION<F1>
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 four 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 is also
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.
Base salary levels of the Company's executive officers are set relative to
similar companies in the electronics industry. In determining salaries, the
Company also takes into account individual experience, job responsibilities, and
individual performance.
Executive Officer Compensation Program. The Company's executive officer
compensation program is comprised of base salary, annual bonus, and long term
incentive compensation in the form of stock options. Compensation based upon
sales is also part of the compensation program for certain executive officers
with sales responsibility.
Stock Options. The Company's stock option program is intended as a long term
incentive plan for executives, managers and other employees 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 Plan provides for the award of
incentive stock options to selected employees and the award of nonqualified
stock options, restricted stock, stock appreciation rights, bonus rights and
other incentive grants to selected employees, independent contractors and
consultants.
Canceled Stock Options. In July 1998 the Committee approved the offering to all
employees holding stock options, including executive officers but excluding the
Chief Executive Officer, the opportunity to cancel unexercised stock options in
exchange for new options with an exercise price equal to the then current fair
market value defined as the highest closing price of the Company's common stock
for the five trading days from July 23, 1998 through and including July 28,
1998. New options were issued at a price of $18.69 per share. The Committee
concluded that, with the decline in the market price of the stock, certain
outstanding options no longer provided a significant incentive to management and
employees and that the options were no longer serving the purposes intended.
With the exception of options
- --------------
<F1>This Section is not "soliciting material," is not deemed "filed" with
the Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933 or the
Securities Exchange Act of 1934, regardless of date or any general incorporation
language in such filing.
10
<PAGE>
granted to officers, the new options issued to employees were for 80 percent of
the number of shares covered by the canceled options (applied equally to the
vested and unvested shares) with the already vested portion of the shares to
remain vested but not exercisable until January 27, 1999. All other terms and
conditions of the new options remained the same as for the canceled options. For
options granted to officers, the new options issued were for 80 percent of the
number of shares covered by the canceled options (applied equally to the vested
and unvested shares), with the already vested portion of the shares to remain
vested but not exercisable until July 27, 1999, and the exercisability schedule
of unvested options and the duration to start anew from July 28, 1998.
In fiscal 1998, the Board of Directors made the following new option grants
under the 1995 Stock Incentive Plan to executive officers, where, as noted, the
options replaced previously granted options at higher exercise prices that were
canceled: Dr. Glenford J. Myers, 50,000 shares; John D. Watkins - 30,000 shares
(replaced canceled options for 37,500 shares); Stephen J. Verleye - 32,500
shares (30,000 shares replaced canceled options for 37,500 shares); Brian V.
Turner - 24,000 shares (replaced canceled options for 30,000 shares); John
Sonneborn - 35,000 shares (replaced canceled options for 43,750 shares); Ronald
Dilbeck - 30,000 shares (replaced canceled options for 37,500 shares; Arif
Kareem - 27,200 shares (replaced canceled options for 34,000 shares); Douglas D.
Goodyear - 60,000 shares; Diane Williams - 30,000 shares. Dr. Myers did not have
any previously granted options at higher exercise prices canceled and replaced.
Options granted to Mr. Goodyear and Ms. Williams were upon their initial
employment, which vest in equal portions over three years from the grant date.
Incentive Compensation Plan. The Company maintains an Incentive Compensation
Plan (the "Compensation Plan") pursuant to which all employees of the Company in
good standing for one pay period following the plan period are eligible to
receive incentive compensation if certain six-month operational income and other
Company goals are achieved. At its discretion, the Board of Directors, which
administers the Compensation Plan, may reduce the incentive compensation to be
paid pursuant to the Compensation Plan to executive officers of the Company.
Chief Executive Officer Compensation. The Committee determined the Chief
Executive Officer 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 received a bonus
for 1998 based on satisfaction of the Company's performance objectives for the
year established under the Company's Compensation Plan described above and his
individual performance as evaluated by the Committee.
During 1998 the Chief Executive Officer was issued options to purchase 50,000
shares of the Company's Common Stock. As noted above, the Chief Executive
Officer did not have any options canceled in exchange for new options in 1998.
These options are part of an ongoing program to provide Dr. Myers with
significant ongoing incentives to remain with the Company and to further align
his long-term interests with shareholder interests. The number of shares granted
in 1998 was based on a subjective determination of the number of shares needed
in 1998 as part of this long-term program.
11
<PAGE>
Deductibility of Compensation. Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") 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. The levels of salary and bonus generally paid
by the Company do not exceed this limit. Many of the options granted under the
Company's 1995 Stock Incentive Plan have been Incentive Stock options. The
Company receives no tax deduction from the exercise of an Incentive Stock Option
unless the optionee disposes of the acquired shares before satisfying certain
holding periods. Under IRS regulations, the $1,000,000 cap on deductibility
applies to compensation recognized by an optionee upon such an early
disposition, as well as compensation recognized upon the exercise of a
Nonstatutory Stock Option, unless the option meets certain requirements. It is
the Company's policy generally to grant options that meet the requirements of
the IRS regulations so that any such compensation recognized by an optionee will
be fully deductible. The Committee believes that the grant of Incentive Stock
Options, despite the general nondeductibility, benefits the Company by
encouraging the long-term ownership of the Company's stock by officers and other
employees.
Richard J. Faubert
C. Scott Gibson
William L. Lattin
Jean-Pierre Patkay
12
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN<F2>
The following graph sets forth the Company's total cumulative shareholder
return as compared to the Standard and Poor's 500 Composite Index and the
Hambrecht and Quist Computer Hardware Sector Index for the period October 20,
1995 (the date of the Company's initial public offering) through December 31,
1998. Total shareholder return assumes $100 invested at the beginning of the
period in the Common Stock of the Company, the stocks represented in the
Standard and Poor's 500 Composite Index and the stocks represented in the
Hambrecht and Quist Computer Hardware Sector Index, respectively. Total return
also assumes reinvestment of dividends; the Company has never paid dividends on
its Common Stock.
Historical stock price performance should not be relied upon as indicative
of future stock price performance.
[Graphic line chart depicting Total Return to Stockholders omitted.]
<TABLE>
<CAPTION>
Total Return Analysis
10/20/95 12/29/95 12/31/96 12/31/97 12/31/98
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
RadiSys $ 100.00 $ 78.33 $ 325.00 $ 248.33 $ 200.00
H&Q Computer Hardware $ 100.00 $ 104.00 $ 137.73 $ 187.37 $ 359.73
S&P 500 $ 100.00 $ 105.36 $ 129.53 $ 172.74 $ 222.10
Source: Carl Thompson Associates www.ctaonline.com (800) 959-9677. Data from
Bloomberg Financial Markets.
</TABLE>
- --------------
<F2>This Section is not "soliciting material," is not deemed "filed" with
the Securities and Exchange Commission and is not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933 or the
Securities Exchange Act of 1934, regardless of date or any general incorporation
language in such filing.
13
<PAGE>
PROPOSAL 2: AMENDMENT OF THE 1995 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF
SHARES OF THE COMPANY'S COMMON STOCK THAT MAY BE ISSUED PURSUANT TO THE PLAN
FROM 1,500,000 TO 2,250,000 AND TO INCREASE INDIVIDUAL EMPLOYEE LIMITS ON GRANTS
OF OPTIONS AND STOCK APRECIATION RIGHTS UNDER THE PLAN
The 1995 Stock Incentive Plan of the Company ("the Plan") provides for the
award of incentive stock options to select officers and employees and the award
of non-qualified stock options, stock appreciation rights, bonus rights and
other incentive grants to selected employees, officers and directors of the
Company and its subsidiaries and selected non-employee agents, consultants,
advisors, persons involved in the sale and distribution of the Company's
products and independent contractors. The Board of Directors believes the
availability of stock incentives under the Plan is an important factor in the
Company's ability to attract and retain experienced and competent employees and
directors and to provide an incentive for them to exert their best efforts on
behalf of the Company. As of April 1, 1999, out of a total of 1,500,000 shares
reserved for issuance under the Plan, 1,446,817 shares had been issued leaving
53,183 shares available for issuance under the Plan. The Board of Directors
believes additional shares will be needed under the Plan to provide appropriate
incentives to key employees and others. Accordingly, on January 26, 1999, the
Board of Directors approved an amendment to the Plan, subject to shareholder
approval, to reserve an additional 750,000 shares for the Plan, thereby
increasing the total number of shares of the Company's Common Stock reserved for
issuance under the Plan from 1,500,000 to 2,250,000. In addition, shareholder
approval of this Proposal 2 will constitute an approval of an increase in the
per employee limits on grants of options and stock appreciation rights under the
Plan. This amendment, also approved by the Board of Directors on January 26,
1999, subject to shareholders approval, would increase the number of options or
stock appreciation rights that can be granted an employee under the Plan from an
aggregate of 200,000 shares of common stock in connection with the hiring of the
employee to 450,000 and from 50,000 shares in any calendar year otherwise to
100,000 shares.
Certain provisions of the Plan are summarized below.
Eligibility. All employees, officers and directors of the Company are
eligible to participate in the Plan. Also eligible are nonemployee consultants
and advisors to the Company.
Administration. The Plan is administered by the Board of Directors, which
designates from time to time the individuals, except executive officers, to whom
awards are made under the Plan, the amount of any such award and the price and
other terms and conditions of any such award. However, the Board has delegated
to Dr. Myers the authority to grant an incentive stock option to purchase up to
2,500 shares to each new employee upon hiring on the same terms regarding
vesting and other matters as options that are commonly granted to other
employees. The Compensation Committee makes grants to executive officers under
the Plan. Subject to the provisions of the Plan, the Board may adopt and amend
rules and regulations relating to the administration of the Plan. Only the Board
of Directors may amend, modify or terminate the Plan.
14
<PAGE>
Shares Available. A total of 1,500,000 shares of Common Stock were reserved
for issuance under the Plan. As of December 31, 1998, options to purchase a
total of 1,350,467 shares had been granted under the Plan, leaving 149,533
shares available for future grants. If an option, stock appreciation right or
performance unit granted under the Plan expires, terminates or is canceled, or
if shares sold or awarded as a bonus are forfeited to the Company or are
repurchased by the Company, the shares again become available for issuance under
the Plan.
Term of the Plan. The Plan will continue until all shares available for
issuance under the Plan have been issued and all restrictions on such shares
have lapsed. The Board of Directors may suspend or terminate the Plan at any
time.
Stock Options. The Compensation Committee determines the executive
officers, and the Board of Directors determines other persons to whom options
are granted, the option price, the number of shares subject to 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 an option
other than an ISO (a "Non-Statutory Stock Option" or "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. 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 may be any
price determined by the Board. No ISO may be granted on or after the tenth
anniversary of the date the Plan was adopted by the Board of Directors. The
aggregate fair market value, on the date of the grant, of the stock for which
ISOs are exercisable for the first time by an employee during any calendar year
may not exceed $100,000. No monetary consideration is paid to the Company upon
the granting of options. On December 31, 1998, the last sale price of the Common
Stock on the Nasdaq National Market System was $30.00 per share.
Options granted under the Plan generally continue in effect for the period
fixed by the Board, except that ISOs are not exercisable after the expiration of
10 years from the date of grant or five years in the case of 10% shareholders.
Options are exercisable in accordance with the terms of an options agreement
entered into at the time of grant and, except as otherwise determined by the
Board with respect to a NSO granted to a person who is neither an officer or a
director of the Company, are nontransferable except on death of a holder.
Options may be exercised only while an optionee is employed by or in the service
of 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 Plan provides that the Board 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, with the consent of the Board, in
whole or in part, in shares of Common Stock valued at fair market value, in
restricted stock, in performance units or other contingent awards denominated in
either stock or cash, in deferred compensation credits, in promissory notes, or
in other forms of consideration.
15
<PAGE>
Upon the exercise of an option, the number of shares subject to the option and
the number of shares available under the Plan for future option grants are
reduced by the number of shares with respect to which the option is exercised.
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be
granted under the Plan. SARs may, but need not, be granted in connection with an
option grant or an outstanding option previously granted under the Plan. A SAR
gives the holder the right to payment from the Company of an amount equal in
value to the excess of fair market value on the date of exercise of a share of
Common Stock of the Company over its fair market value on the date of the grant,
or if granted in connection with an option, the option price per share under the
option to which the SAR relates.
A SAR is exercisable only at the time or times established by the Board. If
a SAR is granted in connection with an option, it is exercisable only to the
extent and on the same conditions that the related option is exercisable. Unless
otherwise determined by the Committee, no SAR granted to an officer or director
can be exercised during the first six months after the date of grant. Payment by
the Company upon exercise of a SAR may be made in Common Stock of the Company
valued at its fair market value, in cash, or partly in stock and partly in cash,
as determined by the Board. The Board may withdraw any SAR granted under the
Plan at any time and may impose any condition upon the exercise of a SAR or
adopt rules and regulations from time to time affecting the rights of holders of
SARs. No SARs have been granted under the Plan.
The existence of SARs, as well as certain bonus rights described below,
would require charges to income over the life of the right based upon the amount
of appreciation, if any, in the market value of the Common Stock of the Company
over the exercise price of shares subject to exercisable SARs or bonus rights.
Stock Bonus Awards. The Board may award Common Stock of the Company as a
stock bonus under the Plan. The Board may determine the recipients of the
awards, the number of shares to be awarded and the time of the award. Stock
received as a stock bonus is subject to the terms, conditions and restrictions
determined by the Board at the time the stock is awarded.
Restricted Stock. The Plan provides that the Company may issue restricted
stock in amounts, for consideration, subject to restrictions and on terms the
Board determines.
Cash Bonus Rights. The Board may grant cash bonus rights under the Plan in
connection with (i) options granted or previously granted, (ii) SARs granted or
previously granted, (iii) stock bonuses awarded or previously awarded and (iv)
shares sold or previously sold under the Plan. Bonus rights granted in
connection with options entitle the optionee to a cash bonus if and when the
related option is exercised. The amount of the bonus is determined by
multiplying the excess of the total fair market value of the shares acquired
upon the exercise over the total option price for the shares by the applicable
bonus percentage. The bonus percentage applicable to any bonus right is
determined by the Board but may in no event exceed 75%. Bonus rights granted in
connection with stock bonuses or restricted stock purchases entitle the
recipient to a cash bonus, in an amount determined by the Board, when the stock
is awarded or purchased or any restrictions to which the stock is subject lapse.
No bonus rights have been granted under the Plan.
16
<PAGE>
Performance Units. The Board may grant performance units consisting of
monetary units which may be earned in whole or in part if the Company achieves
goals established by the Board over a designated period of time, but in any
event not more than 10 years. Payment of an award earned may be in cash or stock
or both, and may be made when earned, or vested and deferred, as the Board
determines. No performance units have been granted under the Plan.
Changes in Capital Structure. The 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
in the number and kind of shares available for awards under the Plan. In
addition, the Board will make appropriate adjustments in outstanding options and
SARs. In the event of dissolution of the Company or a merger, consolidation or
plan of exchange affecting the Company, in lieu of the foregoing treatment for
options and SARs, the Board may, in its sole discretion, provide a 30-day period
prior to such event during which optionees shall have the right to exercise
options and SARs in whole or in part without any limitation on exercisability
and upon the expiration of which 30-day period all unexercised options and SARs
shall immediately terminate.
Stock Option Grants to Non-Employee Directors. Pursuant to the terms of the
Plan, each individual who becomes a non-employee director of the Company after
August 7, 1995 is automatically granted, on the date the individual joins the
Board of Directors, a non-statutory option to purchase 15,000 shares of Common
Stock. In addition, each non-employee director of the Company automatically is
granted an annual, non-statutory option to purchase 5,000 shares of Common
Stock. No such grants are made, however, if the non-employee director's employer
prohibits the non-employee director from receiving such options.
Tax Consequences. Certain options authorized to be granted under the 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 upon
grant or exercise of the ISO. If an employee exercises an ISO and does not
dispose of any of the option shares within two years following the date of grant
and within one year following the date of exercise, then any gain realized upon
subsequent disposition of the shares will be treated as income from the sale or
exchange of a capital asset. If an employee disposes of shares acquired upon
exercise of an ISO before the expiration of either the one-year holding period
or the two-year waiting period, any amount realized will be taxable as ordinary
compensation income in the year of such disqualifying disposition to the extent
that the lesser of the fair market value of the shares on the date of
disposition exceeds the exercise price. The Company will not be allowed any
deduction for federal income tax purposes at either the time of the grant or
exercise of an ISO. Upon any disqualifying disposition by an employee, the
Company will generally be entitled to a deduction to the extent the employee
realized ordinary income.
Certain options authorized to be granted under the 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 until the option is
exercised. When the NSO is exercised, the optionee will realize
17
<PAGE>
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. Upon the sale of
shares acquired upon exercise of an NSO, the excess of the amount realized from
the sale over the market value of the shares on the date of exercise will be
taxable.
Under federal income tax law currently in effect, no income is realized by
the grantee of a SAR until the SAR is exercised. At the time the SAR is
exercised, the grantee will realize ordinary compensation income, and the
Company generally will be entitled to a deduction, in the amount equal to the
fair market value of the shares or cash received. The Company is required to
withhold on the income amount.
An employee who received stock in connection with the performance of
services will generally realize taxable income at the time of receipt of the
shares if either the shares are "substantially vested" for purposes of Section
83 of the Code or the employee elects under Section 83(b) of the Code within 30
days after the original transfer to include in gross income the excess of the
fair market value of the shares at the time of transfer over the amount paid for
the shares. If the shares are not substantially vested at the time of receipt
and no Section 83(b) election is made, the employee will realize taxable income
in each year in which a portion of the shares substantially vest. The Company
generally will be entitled to a deduction in the amount includable as income by
the employee at the same time or times as the employee recognized income with
respect to the shares. A participant who receives a cash bonus right under the
Plan generally will recognize income equal to the amount of any cash bonus paid
at the time of receipt of the bonus, and the Company generally will be entitled
to a deduction equal to the income recognized by the participant. The Company is
required to withhold on the income amount.
Section 162(m) of the Code limits to $1 million per person the amount the
Company may deduct for compensation paid to any of its most highly compensated
officers in any taxable year. Under IRS regulations, compensation received
through the exercise of an option or SAR will not be subject to the $1 million
limit if the option or SAR and the plan meet certain requirements. One such
requirement is shareholder approval at least once every five years of per
employee limits on the number of shares as to which options or SARs may be
granted. Approval of this Proposal 2 will constitute reapproval of the per
employee limits under the Plan previously approved by the shareholders. Other
requirements are that the option or SAR be granted by a committee composed
solely of two or more outside directors and that the exercise price of the
option or the SAR be not less than fair market value of the stock subject to the
option or SAR on the date of grant. Accordingly, the Company believes that if
this proposal is approved by the shareholders, compensation received on exercise
of options and SARs granted under the Plan in compliance with the above
requirements will not be subject to the $1 million deduction limit.
Recommendation by the Board of Directors. The Board of Directors recommends
that the proposed amendment to the Plan be approved. The affirmative vote of the
holders of a majority at the Annual Meeting of the shares of Common Stock
present and entitled to vote on the matter is required to approve this Proposal
2. Abstentions have the same effect as "no" votes in determining whether the
amendment is approved. Broker non-votes are counted
18
<PAGE>
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 on Proposal 2. 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 amendment to the Plan.
PROPOSAL 3: AMENDMENT OF THE COMPANY'S 1996 EMPLOYEE STOCK PURCHASE PLAN TO
INCREASE THE NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK THAT MAY BE ISSUED
PURSUANT TO THE PLAN FROM 250,000 TO 500,000.
The Employee Stock Purchase Plan ("ESPP") provides 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 ESPP is an important aspect of the
Company's ability to attract and retain highly qualified and motivated
employees. As of March 28, 1999, out of a total of 250,000 shares reserved for
issuance under the ESPP, 250,000 shares had been issued leaving no shares
available for issuance under the ESPP. The Board of Directors believes
additional shares will be needed under the ESPP to provide appropriate
incentives to key employees and others. Accordingly, on January 26, 1999, the
Board of Directors approved an amendment to the ESPP, subject to shareholder
approval, to reserve an additional 250,000 shares for the ESPP, thereby
increasing the total number of shares of the Company's Common Stock reserved for
issuance under the Plan from 250,000 to 500,000.
The ESPP 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
ESPP 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
ESPP and has broad authority to amend the Purchase Plan, subject to certain
amendments requiring shareholder approval.
All regular status employees of the Company, including the Company's
officers, are eligible to participate in the ESPP. Eligible employees may elect
to contribute from 1% to 10% of the compensation paid to the participant during
each pay period. Each participant may enroll in an 18-month offering in which
shares of Common Stock are purchased on the last day of each six-month period of
an offering. A separate offering commences on February 15 and August 15 ("the
Enrollment Dates") of each year. The purchase price per share is equal to 85% of
the lower of (a) the fair market value of the Common Stock on the enrollment
date of the offering or (b) the fair market value on the date of purchase.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the purchase of shares under the ESPP 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, the payroll deductions credited to the
19
<PAGE>
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.
Recommendation by the Board of Directors. The Board of Directors recommends that
the proposed amendment to the ESPP be approved. The affirmative vote of the
holders of a majority at the Annual Meeting of the shares of Common Stock
present and entitled to vote on the matter is required to approve this Proposal
3. Abstentions have the same effect as "no" votes in determining whether the
amendment 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 on Proposal 3. 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 amendment to the ESPP.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's 1995 Stock Option Plan permitted the Company to grant
non-statutory stock options to non-employees who provided important services to
the Company. As compensation for their services rendered as directors of the
Company, the Company granted under the 1995 Stock Option Plan non-statutory
stock options to purchase 5,000 shares of Common Stock to each Mr. Gibson, Dr.
Lattin and Mr. Peterschmitt and 15,000 shares of Common Stock to each Mr.
Dalton, Mr. Faubert and Mr. Patkay. In addition, the Company has entered into a
consulting arrangement with Mr. Gibson pursuant to which the Company pays Mr.
Gibson $20,000 per year.
The Company and Tektronix are parties to multiple Design Agreement pursuant
to which the Company agreed to design and develop certain products as specified
and required by Tektronix. Tektronix was affiliated with two of the Company's
directors, Mr. Dalton and Mr. Faubert, in 1998. Sales to Tektronix accounted for
approximately two percent of the Company's revenues in 1998.
The Company and Intel are parties to multiple Design Agreement pursuant to
which the Company agreed to design and develop certain products as specified and
required by Intel. Sales to Intel accounted for less than one percent of the
Company's revenues in 1998. Additionally, Intel is a key supplier of components
to the Company. The Company received approximately $2.4 million of components
from Intel in 1998. Intel beneficially owns approximately 15.1 percent of the
Company's outstanding Common Stock.
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than 10% of
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<PAGE>
the outstanding Common Stock of the Company to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater than 10%
shareholders are also required to furnish the Company with copies of all forms
they file under this regulation. Based solely on a review of the copies of the
reports received by the Company and on written representations of certain
reporting persons, the Company believes that during fiscal 1998, all persons
required to report under Section 16(a) of the Securities Exchange Act of 1934
filed timely reports.
INDEPENDENT ACCOUNTANTS
Representatives of PricewaterhouseCoopers LLP, the Company's independent
accountants, will be present at the Annual Meeting and will be available to
respond to appropriate questions. They do not plan to make any statement but
will have the opportunity to make a statement if they wish.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
The Company's bylaws require shareholders to give the Company advance
notice of any proposal or director nomination to be submitted at an annual
meeting of shareholders. A copy of the relevant provisions of the bylaws will be
provided to any shareholder upon written request to 5445 NE Dawson Creek Drive,
Hillsboro, Oregon, Attention: Annette M. Mulee, Corporate Secretary. The bylaws
prescribe the information to be contained in any such notice. To be timely, a
shareholder's notice must be delivered to or mailed and received by the
Secretary not less than 50 days nor more than 75 days prior to the annual
meeting, provided, however, that if less than 65 days' notice or prior public
disclosure of the date of the meeting is given to shareholders, notice by the
shareholder, to be timely, must be received by the Secretary not later than the
close of business on the tenth day following the earlier of the day on which
such notice of the date of the meeting was mailed or public disclosure was made.
The Company's 2000 annual meeting of shareholders is expected to be held on May
16, 2000. Any notice relating to a shareholder proposal for the 2000 annual
meeting, to be timely, must be received by the Company between March 2, 2000 and
March 27, 2000. Shareholders wishing to submit proposals for inclusion in the
Company's proxy statement for the 2000 annual meeting of shareholders must
submit the proposals for receipt by the Company not later than December 11,
1999.
DISCRETIONARY AUTHORITY
Although the Notice of the Annual Meeting of Shareholders provides for
transaction of any other business that properly comes before the meeting, the
Board of Directors has no knowledge of any matters to be presented at the
meeting other than the matters described in this proxy statement. The enclosed
proxy, however, gives discretionary authority to the proxy holders to vote in
accordance with their judgment if any other matters are presented.
For this year's annual meeting of shareholders, if notice of a shareholder
proposal to be raised at the annual meeting of shareholders is received at the
principal executive offices of the Company after the close of
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business on April 20, 1999, proxy voting on that proposal when and if raised at
the annual meeting will be subject to the discretionary voting authority of the
designated proxy holders. For the 2000 annual meeting of shareholders, if notice
of a shareholder proposal to be raised at the meeting is received at the
principal executive offices of the Company after March 27, 2000 or before March
2, 2000, proxy voting on that proposal when and if raised at the annual meeting
will be subject to the discretionary voting authority of the designated proxy
holders.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS
WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO EXECUTE AND
RETURN THE ENCLOSED PROXY IN THE REPLY ENVELOPE PROVIDED.
By Order of the Board of Directors,
Annette M. Mulee
Corporate Secretary
April 10, 1999
Hillsboro, Oregon
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<PAGE>
PROXY
RADISYS CORPORATION
Annual Meeting, May 18, 1999
PROXY SOLICITED BY BOARD OF DIRECTORS
PLEASE SIGN AND RETURN THIS PROXY
The undersigned hereby appoints Dr. Glenford J. Myers, James F. Dalton, Richard
C. Faubert, C. Scott Gibson, Dr. William W. Lattin, Jean-Pierre Patkay and
Jean-Claude Peterschmitt, and each of them, proxies with power of substitution
to vote on behalf of the undersigned all shares that the undersigned may be
entitled to vote at the annual meeting of shareholders of RadiSys Corporation
(the "Company") on May 18, 1999 and any adjournments thereof, with all powers
that the undersigned would possess if personally present, with respect to the
following:
1. Election of Directors: [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
except as marked to vote for all
to the contrary nominees listed
below. below.
(Instructions: To withhold authority to vote for any individual,
strike a line through the nominee's name below.)
Dr. Glenford J. Myers, James F. Dalton, Richard C. Faubert,
C. Scott Gibson, Dr. William W. Lattin, Jean-Pierre Patkay
and Jean-Claude Peterschmitt
2. To amend the Company's 1995 Stock Incentive Plan to increase the number of
shares of the Company's Common Stock that may be issued pursuant to the plan
from 1,500,000 to 2,250,000 and to increase the number of options or stock
appreciation rights that can be granted an employee under the plan from an
aggregate of 200,000 shares of Common Stock in connection with the hiring of
the employee to 450,000 and from 50,000 shares in any calendar year to
100,000 shares.
[ ] FOR [ ] AGAINST [ ] Abstain
3. To amend the Company's 1996 Employee Stock Purchase Plan to increase the
number of shares of the Company's Common Stock that may be issued pursuant
to the plan from 250,000 to 500,000.
[ ] FOR [ ] AGAINST [ ] Abstain
4. Transaction of any business that properly comes before the meeting or any
adjournments thereof. A majority of the proxies or substitutes at the
meeting may exercise all the powers granted hereby.
(Continued and to be signed on the other side.)
<PAGE>
The shares represented by this proxy will be voted as specified on the
reverse hereof, but if no specification is made, this proxy will be voted
for the election of directors and adoption of the Plan The proxies may vote
in their discretion as to other matters that may come before this meeting.
Shares:
Date: _____________________________, 1999
P
R
0 _________________________________________
X Signature or Signatures
Y
Please date and sign as name is imprinted
hereon, including designation as
executor, trustee, etc., if applicable. A
corporation must sign its name by the
president or other authorized officer.
The Annual Meeting of Shareholders of
RadiSys Corporation will be held on May
18, 1999 at 8:30 am., Pacific Daylight
Time, at the corporate headquarters at
5445 NE Dawson Creek Drive, Hillsboro,
Oregon.
Please Note: Any shares of stock of the Company held in the name of fiduciaries,
custodians or brokerage houses for the benefit of their clients may only be
voted by the fiduciary, custodian or brokerage house itself--the beneficial
owner may not directly vote or appoint a proxy to vote the shares and must
instruct the person or entity in whose name the shares are held how to vote the
shares held for the beneficial owner. Therefore, if any shares of stock of the
Company are held in "street name" by a brokerage house, only the brokerage
house, at the instructions of its client, may vote or appoint a proxy to vote
the shares.
<PAGE>
APPENDIX A
RADISYS CORPORATION
1995 STOCK INCENTIVE PLAN*
As Amended May 18, 1999
=======================
1. Purpose. The purpose of this Stock Incentive Plan (the "Plan") is to
enable RadiSys Corporation (the "Company") to attract and retain the services of
(1) selected employees, officers and directors of the Company or of any
subsidiary of the Company and (2) selected nonemployee agents, consultants,
advisors, persons involved in the sale or distribution of the Company's products
and independent contractors of the Company or any subsidiary.
2. Shares Subject to the Plan. Subject to adjustment as provided below and
in paragraph 13, the shares to be offered under the Plan shall consist of Common
Stock of the Company, and the total number of shares of Common Stock that may be
issued under the Plan shall not exceed [1,500,000] 2,250,000 shares. The shares
=========
issued under the Plan may be authorized and unissued shares or reacquired
shares. If an option, stock appreciation right or performance unit granted under
the Plan expires, terminates or is cancelled, the unissued shares subject to
such option, stock appreciation right or performance unit shall again be
available under the Plan. If shares sold or awarded as a bonus under the Plan
are forfeited to the Company or repurchased by the Company, the number of shares
forfeited or repurchased shall again be available under the Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. The Plan shall become effective as of August 7,
1995. No option, stock appreciation right or performance unit granted under the
Plan to an officer who is subject to Section 16(b) of the Securities Exchange
Act of 1934, as amended (an "Officer") or a director, and no incentive stock
option, 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
awards under the Plan prior to such approval shall be conditioned on and subject
to such approval. Subject to this limitation, options, stock appreciation rights
and performance units may be granted and shares may be awarded as bonuses or
sold under the Plan at any time after the effective date and before termination
of the Plan.
(b) Duration. The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all restrictions on
such shares have lapsed. The Board of Directors may suspend or terminate the
Plan at any time except with respect to options, performance units and shares
subject to restrictions then outstanding under the Plan. Termination shall not
affect any outstanding options, any right of the Company to repurchase shares or
the forfeitability of shares issued under the Plan.
- --------------
* Note: Double-underscored text is new; text in brackets is to be deleted.
<PAGE>
4. Administration.
(a) Board of Directors. The Plan shall be administered by the Board of
Directors of the Company, which shall determine and designate from time to time
the individuals to whom awards shall be made, the amount of the awards and the
other terms and conditions of the awards. Subject to the provisions of the Plan,
the Board of Directors may from time to time adopt and amend rules and
regulations relating to administration of the Plan, advance the lapse of any
waiting period, accelerate any exercise date, waive or modify any restriction
applicable to shares (except those restrictions imposed by law) and make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements by the Board
of Directors shall be final and conclusive. The Board of Directors may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any related agreement in the manner and to the extent it shall deem expedient
to carry the Plan into effect, and it shall be the sole and final judge of such
expediency.
(b) Committee. The Board of Directors may delegate to a committee of
the Board of Directors or specified officers of the Company, or both (the
"Committee") any or all authority for administration of the Plan. If authority
is delegated to a Committee, all references to the Board of Directors in the
Plan shall mean and relate to the Committee except (i) as otherwise provided by
the Board of Directors, (ii) that only the Board of Directors may amend or
terminate the Plan as provided in paragraphs 3 and 15 and (iii) that a Committee
including officers of the Company shall not be permitted to grant options to
persons who are officers of the Company. If awards are to be made under the Plan
to Officers or directors, authority for selection of Officers and directors for
participation and decisions concerning the timing, pricing and amount of a grant
or award, if not determined under a formula meeting the requirements of Rule
16b-3 under the Securities Exchange Act of 1934, as amended, shall be delegated
to a committee consisting of two or more disinterested directors.
5. Types of Awards; Eligibility. The Board of Directors may, from time to
time, take the following action, separately or in combination, under the Plan:
(i) grant Incentive Stock Options, as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), as provided in paragraphs 6(a)
and 6(b); (ii) grant options other than Incentive Stock Options ("Non-Statutory
Stock Options") as provided in paragraphs 6(a) and 6(c); (iii) award stock
bonuses as provided in paragraph 7; (iv) sell shares subject to restrictions as
provided in paragraph 8; (v) grant stock appreciation rights as provided in
paragraph 9; (vi) grant cash bonus rights as provided in paragraph 10; (vii)
grant performance units as provided in paragraph 11 and (viii) grant foreign
qualified awards as provided in paragraph 12. Any such awards may be made to
employees, including employees who are officers or directors, and to other
individuals described in paragraph 1 who the Board of Directors believes have
made or will make an important contribution to
2
<PAGE>
the Company or any subsidiary of the Company; provided, however, that only
employees of the Company shall be eligible to receive Incentive Stock Options
under the Plan. The Board of Directors shall select the individuals to whom
awards shall be made and shall specify the action taken with respect to each
individual to whom an award is made. At the discretion of the Board of
Directors, an individual may be given an election to surrender an award in
exchange for the grant of a new award. No employee may be granted options or
stock appreciation rights under the Plan for more than an aggregate of [200,000]
450,000 shares of Common Stock in connection with the hiring of the employee or
=======
[50,000] 100,000 shares of Common Stock in any calendar year otherwise.
=======
6. Option Grants.
(a) General Rules Relating to Options.
(i) Terms of Grant. The Board of Directors may grant options
under the Plan. With respect to each option grant, the Board of Directors
shall determine the number of shares subject to the option, the option
price, the period of the option, the time or times at which the option may
be exercised and whether the option is an Incentive Stock Option or a
Non-Statutory Stock Option. At the time of the grant of an option or at any
time thereafter, the Board of Directors may provide that an optionee who
exercised an option with Common Stock of the Company shall automatically
receive a new option to purchase additional shares equal to the number of
shares surrendered and may specify the terms and conditions of such new
options.
(ii) Exercise of Options. Except as provided in paragraph
6(a)(iv) or as determined by the Board of Directors, no option granted
under the Plan may be exercised unless at the time of such exercise the
optionee is employed by or in the service of the Company or any subsidiary
of the Company and shall have been so employed or provided such service
continuously since the date such option was granted. Absence on leave or on
account of illness or disability under rules established by the Board of
Directors shall not, however, be deemed an interruption of employment or
service for this purpose. Unless otherwise determined by the Board of
Directors, vesting of options shall not continue during an absence on leave
(including an extended illness) or on account of disability. Except as
provided in paragraphs 6(a)(iv) and 13, 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. Unless
otherwise determined by the Board of Directors, if an Officer exercises an
option within six months of the grant
3
<PAGE>
of the option, the shares acquired upon exercise of the option may not be
sold until six months after the date of grant of the option.
(iii) Nontransferability. Each Incentive Stock Option and, unless
otherwise determined by the Board of Directors with respect to an option
granted to a person who is neither an Officer nor a director of the
Company, each other option granted under the Plan by its terms shall be
nonassignable and nontransferable by the optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution
of the state or country of the optionee's domicile at the time of death.
(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 medically
determinable 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 death, whichever is the
4
<PAGE>
shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of death and only by the
person or persons to whom such optionee's 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, with respect to an
option that is not an Incentive Stock Option, at any time thereafter,
may extend the 30-day and 12-month exercise periods any length of time
not longer 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 (provided that, with respect to an
Incentive Stock Option, such loan is approved at the time of option grant))
or, with the consent of the Board of Directors, in whole or in part, in
Common Stock of the Company valued at fair market value, restricted stock,
performance units or other contingent awards denominated in either stock or
cash, promissory notes and other forms of consideration. The fair market
value of Common Stock provided in payment of the purchase price shall be
determined by the Board of Directors. If the Common Stock of the Company is
not publicly traded on the date the option is exercised, the Board of
Directors may consider any valuation methods it deems appropriate and may,
but is not required to, obtain one or more independent appraisals of the
Company. If the Common Stock of the Company is publicly traded on the date
the option is exercised, 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 last
5
<PAGE>
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 for the shares has
been made. With the consent of the Board of Directors (which, in the case
of an Incentive Stock Option, shall be given only at the time of option
grant), 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.
(b) Incentive Stock Options. Incentive Stock Options shall be subject
to the following additional terms and conditions:
(i) Limitation on Amount of Grants. No employee may be granted
Incentive Stock Options under the Plan if the aggregate fair market value,
on the date of grant, of the Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by that employee during
any calendar year under the Plan and under all incentive stock option plans
(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, as described in paragraph 6(b)(iv), of the Common Stock subject to
the option on the date it is granted 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
6
<PAGE>
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
determined by the Board of Directors. If the Common Stock of the Company is
not publicly traded on the date the option is granted, the Board of
Directors may consider any valuation methods it deems appropriate and may,
but is not required to, obtain one or more independent appraisals of the
Company. If the Common Stock of the Company is publicly traded on the date
the option is exercised, 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.
(c) Non-Statutory Stock Options. Non-Statutory Stock Options shall be
subject to the following terms and conditions in addition to those set forth in
Section 6(a) above:
(i) Option Price. The option price for Non-Statutory Stock
Options shall be determined by the Board of Directors at the time of grant
and may be any amount determined by the Board of Directors.
(ii) Duration of Options. Non-Statutory Stock Options granted
under the Plan shall continue in effect for the period fixed by the Board
of Directors.
7. Stock Bonuses. The Board of Directors may award shares under the Plan as
stock bonuses. Shares awarded as a bonus shall be subject to the terms,
conditions, and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability and forfeiture
of the shares awarded, together with such other restrictions as may be
determined by the Board of Directors. If shares are subject to forfeiture, all
dividends or other distributions paid by the Company with respect to the shares
shall be retained by the Company until the shares are no longer subject to
forfeiture, at which time all accumulated amounts shall be paid to the
recipient. The Board of
7
<PAGE>
Directors may require the recipient to sign an agreement as a condition of the
award, but may not require the recipient to pay any monetary consideration other
than amounts necessary to satisfy tax withholding requirements. The agreement
may contain any terms, conditions, restrictions, representations and warranties
required by the Board of Directors. The certificates representing the shares
awarded shall bear any legends required by the Board of Directors. Unless
otherwise determined by the Board of Directors, shares awarded as a stock bonus
to an Officer may not be sold until six months after the date of the award. The
Company may require any recipient of a stock bonus to pay to the Company in cash
upon demand amounts necessary to satisfy any applicable federal, state or local
tax withholding requirements. If the recipient fails to pay the amount demanded,
the Company may withhold that amount from other amounts payable by the Company
to the recipient, including salary or fees for services, subject to applicable
law. With the consent of the Board of Directors, a recipient may deliver Common
Stock to the Company to satisfy this withholding obligation. Upon the issuance
of a stock bonus, the number of shares reserved for issuance under the Plan
shall be reduced by the number of shares issued.
8. Restricted Stock. The Board of Directors may issue shares under the Plan
for such consideration (including promissory notes and services) as determined
by the Board of Directors. Shares issued under the Plan shall be subject to the
terms, conditions and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability, repurchase by
the Company and forfeiture of the shares issued, together with such other
restrictions as may be determined by the Board of Directors. If shares are
subject to forfeiture or repurchase by the Company, all dividends or other
distributions paid by the Company with respect to the shares shall be retained
by the Company until the shares are no longer subject to forfeiture or
repurchase, at which time all accumulated amounts shall be paid to the
recipient. All Common Stock issued pursuant to this paragraph 8 shall be subject
to a purchase agreement, which shall be executed by the Company and the
prospective recipient of the shares prior to the delivery of certificates
representing such shares to the recipient. The purchase agreement may contain
any terms, conditions, restrictions, representations and warranties required by
the Board of Directors. The certificates representing the shares shall bear any
legends required by the Board of Directors. Unless otherwise determined by the
Board of Directors, shares issued under this paragraph 8 to an Officer may not
be sold until six months after the shares are issued. The Company may require
any purchaser of restricted stock to pay to the Company in cash upon demand
amounts necessary to satisfy any applicable federal, state or local tax
withholding requirements. If the purchaser fails to pay the amount demanded, the
Company may withhold that amount from other amounts payable by the Company to
the purchaser, including salary, subject to applicable law. With the consent of
the Board of Directors, a purchaser may deliver Common Stock to the Company to
satisfy this withholding obligation. Upon the issuance of restricted stock, the
number of shares reserved for issuance under the Plan shall be reduced by the
number of shares issued.
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9. Stock Appreciation Rights.
(a) Grant. Stock appreciation rights may be granted under the Plan by
the Board of Directors, subject to such rules, terms, and conditions as the
Board of Directors prescribes.
(b) Exercise.
(i) Each stock appreciation right shall entitle the holder, upon
exercise, to receive from the Company in exchange therefor an amount equal
in value to the excess of the fair market value on the date of exercise of
one share of Common Stock of the Company over its fair market value on the
date of grant (or, in the case of a stock appreciation right granted in
connection with an option, the excess of the fair market value of one share
of Common Stock of the Company over the option price per share under the
option to which the stock appreciation right relates), multiplied by the
number of shares covered by the stock appreciation right or the option, or
portion thereof, that is surrendered. No stock appreciation right shall be
exercisable at a time that the amount determined under this subparagraph is
negative. Payment by the Company upon exercise of a stock appreciation
right may be made in Common Stock valued at fair market value, in cash, or
partly in Common Stock and partly in cash, all as determined by the Board
of Directors.
(ii) A stock appreciation right shall be exercisable only at the
time or times established by the Board of Directors. If a stock
appreciation right is granted in connection with an option, the following
rules shall apply: (1) the stock appreciation right shall be exercisable
only to the extent and on the same conditions that the related option could
be exercised; (2) the stock appreciation rights shall be exercisable only
when the fair market value of the stock exceeds the option price of the
related option; (3) the stock appreciation right shall be for no more than
100 percent of the excess of the fair market value of the stock at the time
of exercise over the option price; (4) upon exercise of the stock
appreciation right, the option or portion thereof to which the stock
appreciation right relates terminates; and (5) upon exercise of the option,
the related stock appreciation right or portion thereof terminates. Unless
otherwise determined by the Board of Directors, no stock appreciation right
granted to an Officer or director may be exercised during the first six
months following the date it is granted.
(iii) The Board of Directors may withdraw any stock appreciation
right granted under the Plan at any time and may impose any conditions upon
the exercise of a stock appreciation right or adopt rules and regulations
from time to time affecting the rights of holders of stock appreciation
rights. Such rules and regulations may govern the right to exercise stock
appreciation rights granted prior to adoption or amendment of such rules
and regulations as well as stock appreciation rights granted thereafter.
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(iv) For purposes of this paragraph 9, the fair market value of
the Common Stock shall be determined as of the date the stock appreciation
right is exercised, under the methods set forth in paragraph 6(b)(iv).
(v) No fractional shares shall be issued upon exercise of a stock
appreciation right. In lieu thereof, cash may be paid in an amount equal to
the value of the fraction or, if the Board of Directors shall determine,
the number of shares may be rounded downward to the next whole share.
(vi) Each stock appreciation right granted in connection with an
Incentive Stock Option, and unless otherwise determined by the Board of
Directors with respect to a stock appreciation right granted to a person
who is neither an Officer nor a director of the Company, each other stock
appreciation right granted under the Plan by its terms shall be
nonassignable and nontransferable by the holder, 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 holder's domicile at the time of death, and
each stock appreciation right by its terms shall be exercisable during the
holder's lifetime only by the holder.
(vii) Each participant who has exercised a stock appreciation
right shall, upon notification of the amount due, pay to the Company in
cash amounts necessary to satisfy any applicable federal, state and local
tax withholding requirements. If the participant fails to pay the amount
demanded, the Company may withhold that amount from other amounts payable
by the Company to the participant including salary, subject to applicable
law. With the consent of the Board of Directors a participant may satisfy
this obligation, in whole or in part, by having the Company withhold from
any shares to be issued upon the exercise that number of shares that would
satisfy the withholding amount due or by delivering Common Stock to the
Company to satisfy the withholding amount.
(viii) Upon the exercise of a stock appreciation right for
shares, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued. Cash payments of stock appreciation
rights shall not reduce the number of shares of Common Stock reserved for
issuance under the Plan.
10. Cash Bonus Rights.
(a) Grant. The Board of Directors may grant cash bonus rights under
the Plan in connection with (i) options granted or previously granted, (ii)
stock appreciation rights granted or previously granted, (iii) stock bonuses
awarded or previously awarded and (iv) shares sold or previously sold under the
Plan. Cash bonus rights will be subject to rules, terms and conditions as the
Board of Directors may prescribe. Unless otherwise determined by the Board of
Directors with respect to a cash bonus right granted to a person who is neither
an Officer nor a director of the Company, each cash bonus right granted
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under the Plan by its terms shall be nonassignable and nontransferable by the
holder, 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 holder's domicile at
the time of death. The payment of a cash bonus shall not reduce the number of
shares of Common Stock reserved for issuance under the Plan.
(b) Cash Bonus Rights in Connection With Options. A cash bonus right
granted in connection with an option will entitle an optionee to a cash bonus
when the related option is exercised (or terminates in connection with the
exercise of a stock appreciation right related to the option) in whole or in
part if, in the sole discretion of the Board of Directors, the bonus right will
result in a tax deduction that the Company has sufficient taxable income to use.
If an optionee purchases shares upon exercise of an option and does not exercise
a related stock appreciation right, the amount of the bonus, if any, shall be
determined by multiplying the excess of the total fair market value of the
shares to be acquired upon the exercise over the total option price for the
shares by the applicable bonus percentage. If the optionee exercises a related
stock appreciation right in connection with the termination of an option, the
amount of the bonus, if any, shall be determined by multiplying the total fair
market value of the shares and cash received pursuant to the exercise of the
stock appreciation right by the applicable bonus percentage. The bonus
percentage applicable to a bonus right, including a previously granted bonus
right, may be changed from time to time at the sole discretion of the Board of
Directors but shall in no event exceed 75 percent.
(c) Cash Bonus Rights in Connection With Stock Bonus. A cash bonus
right granted in connection with a stock bonus will entitle the recipient to a
cash bonus payable when the stock bonus is awarded or restrictions, if any, to
which the stock is subject lapse. If bonus stock awarded is subject to
restrictions and is repurchased by the Company or forfeited by the holder, the
cash bonus right granted in connection with the stock bonus shall terminate and
may not be exercised. The amount and timing of payment of a cash bonus shall be
determined by the Board of Directors.
(d) Cash Bonus Rights in Connection With Stock Purchases. A cash bonus
right granted in connection with the purchase of stock pursuant to paragraph 8
will entitle the recipient to a cash bonus when the shares are purchased or
restrictions, if any, to which the stock is subject lapse. Any cash bonus right
granted in connection with shares purchased pursuant to paragraph 8 shall
terminate and may not be exercised in the event the shares are repurchased by
the Company or forfeited by the holder pursuant to applicable restrictions. The
amount of any cash bonus to be awarded and timing of payment of a cash bonus
shall be determined by the Board of Directors.
(e) Taxes. The Company shall withhold from any cash bonus paid
pursuant to paragraph 10 the amount necessary to satisfy any applicable federal,
state and local withholding requirements.
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11. Performance Units. The Board of Directors may grant performance units
consisting of monetary units which may be earned in whole or in part if the
Company achieves certain goals established by the Board of Directors over a
designated period of time, but not in any event more than 10 years. The goals
established by the Board of Directors may include earnings per share, return on
shareholders' equity, return on invested capital, and such other goals as may be
established by the Board of Directors. In the event that the minimum performance
goal established by the Board of Directors is not achieved at the conclusion of
a period, no payment shall be made to the participants. In the event the maximum
corporate goal is achieved, 100 percent of the monetary value of the performance
units shall be paid to or vested in the participants. Partial achievement of the
maximum goal may result in a payment or vesting corresponding to the degree of
achievement as determined by the Board of Directors. Payment of an award earned
may be in cash or in Common Stock or in a combination of both, and may be made
when earned, or vested and deferred, as the Board of Directors determines.
Deferred awards shall earn interest on the terms and at a rate determined by the
Board of Directors. Unless otherwise determined by the Board of Directors with
respect to a performance unit granted to a person who is neither an Officer nor
a director of the Company, each performance unit granted under the Plan by its
terms shall be nonassignable and nontransferable by the holder, 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 holder's domicile at the time of
death. Each participant who has been awarded a performance unit shall, upon
notification of the amount due, pay to the Company in cash amounts necessary to
satisfy any applicable federal, state and local tax withholding requirements. If
the participant fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the participant, including
salary or fees for services, subject to applicable law. With the consent of the
Board of Directors a participant may satisfy this obligation, in whole or in
part, by having the Company withhold from any shares to be issued that number of
shares that would satisfy the withholding amount due or by delivering Common
Stock to the Company to satisfy the withholding amount. The payment of a
performance unit in cash shall not reduce the number of shares of Common Stock
reserved for issuance under the Plan. The number of shares reserved for issuance
under the Plan shall be reduced by the number of shares issued upon payment of
an award.
12. Foreign Qualified Grants. Awards under the Plan may be granted to such
officers and employees of the Company and its subsidiaries and such other
persons described in paragraph 1 residing in foreign jurisdictions as the Board
of Directors may determine from time to time. The Board of Directors may adopt
such supplements to the Plan as may be necessary to comply with the applicable
laws of such foreign jurisdictions and to afford participants favorable
treatment under such laws; provided, however, that no award shall be granted
under any such supplement with terms which are more beneficial to the
participants than the terms permitted by the Plan.
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13. Changes in Capital Structure.
(a) Stock Splits; Stock Dividends. 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 by
reason of any stock split, combination of shares or dividend payable in shares,
recapitalization or reclassification appropriate adjustment shall be made by the
Board of Directors in the number and kind of shares available for grants 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.
(b) Mergers, Reorganizations, Etc. In the event of a merger,
consolidation, plan of exchange, acquisition of property or stock, separation,
reorganization or liquidation to which the Company or a subsidiary is a party or
a sale of all or substantially all of the Company's assets (each, a
"Transaction"), the Board of Directors shall, in its sole discretion and to the
extent possible under the structure of the Transaction, select one of the
following alternatives for treating outstanding options under the Plan:
(i) Outstanding options shall remain in effect in accordance with
their terms.
(ii) Outstanding options shall be converted into options to
purchase stock in the corporation that is the surviving or acquiring
corporation in the Transaction. The amount, type of securities subject
thereto and exercise price of the converted options shall be determined by
the Board of Directors of the Company, taking into account the relative
values of the companies involved in the Transaction and the exchange rate,
if any, used in determining shares of the surviving corporation to be
issued to holders of shares of the Company. Unless otherwise determined by
the Board of Directors, the converted options shall be vested only to the
extent that the vesting requirements relating to options granted hereunder
have been satisfied.
(iii) The Board of Directors shall provide a 30-day period prior
to the consummation of the Transaction during which outstanding options may
be exercised to the extent then exercisable, and upon the expiration of
such 30-day period, all unexercised options shall immediately terminate.
The Board of Directors may, in its sole discretion, accelerate the
exercisability of options so that they are exercisable in full during such
30-day period.
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(c) Dissolution of the Company. In the event of the dissolution of the
Company, options shall be treated in accordance with paragraph 13(b)(iii).
(d) Rights Issued by Another Corporation. The Board of Directors may
also grant options, stock appreciation rights, performance units, stock bonuses
and cash bonuses and issue restricted stock under the Plan having terms,
conditions and provisions that vary from those specified in this Plan provided
that any such awards are granted in substitution for, or in connection with the
assumption of, existing options, stock appreciation rights, stock bonuses, cash
bonuses, restricted stock and performance units granted, awarded or issued by
another corporation and assumed or otherwise agreed to be provided for by the
Company pursuant to or by reason of a Transaction.
14. Amendment of Plan. The Board of Directors may at any time, and from
time to time, modify or amend the Plan in such respects as it shall deem
advisable because of changes in the law while the Plan is in effect or for any
other reason. Except as provided in paragraphs 6(a)(iv), 9, 10 and 13, however,
no change in an award already granted shall be made without the written consent
of the holder of such award.
15. 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.
16. 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.
17. 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.
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18. Option Grants to Non-Employee Directors.
(a) Initial Board Grants. Each person who becomes a Non-Employee
Director after the Plan is adopted shall be automatically granted an option to
purchase 15,000 shares of Common Stock when he or she becomes a Non-Employee
Director, so long as such person has not previously served as a director of the
Company. A "Non-Employee Director" is a director who is not an employee of the
Company or any of its subsidiaries, but does not include such a director whose
employer prohibits such director from receiving any grant of an option to
purchase shares of Common Stock of the Company.
(b) Additional 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
was granted an option pursuant to paragraph 18(a), such option to be granted as
of the date of the Company's annual meeting of shareholders 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 for each Non-Employee Director.
(c) Exercise Price. The exercise price of all options granted pursuant
to this paragraph 18 shall be equal to 100 percent of the fair market value of
the Common Stock determined pursuant to paragraph 6(b)(iv).
(d) Term of Option. The term of each option granted pursuant to this
paragraph 18 shall be 10 years from the date of grant.
(e) Exercisability. Until an option expires or is terminated and
except as provided in paragraphs 18(g) and 13, an option granted under this
paragraph 18 shall be exercisable in full on the date one year following the
grant of the option.
(f) Termination As a Director. If an optionee ceases to be a director
of the Company for any reason, including death, the option may be exercised at
any time prior to the expiration date of the option or the expiration of 30 days
(or 12 months in the event of death) after the last day the optionee served as a
director, whichever is the shorter period, but only if and to the extent the
optionee was entitled to exercise the option as of the last day the optionee
served as a director.
(g) Nontransferability. Each option by its terms shall be
nonassignable and nontransferable by the optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution of
the state or country of the optionee's domicile at the time of death, and each
option by its terms shall be exercisable during the optionee's lifetime only by
the optionee.
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(h) 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).
Adopted: August 7, 1995.
Amended: May 20, 1997
May 18, 1999
============
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APPENDIX B
RADISYS CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN*
As Amended May 18, 1999
=======================
I. PURPOSE OF PLAN
As a means by which Employees may share in the Company's growth and
success, RadiSys Corporation (the "Company") believes that ownership of
shares of its Common Stock by its Employees is desirable. To this end, and
as an incentive to better performance and improved profits, the Company
has established the RadiSys Corporation 1996 Employee Stock Purchase Plan
(the "Plan").
The Company intends that the Plan will constitute an "employee stock
purchase plan" within the meaning of Section 423 of the Code.
II. DEFINITIONS
Terms that are capitalized within this document shall have the meanings as
set forth in Exhibit A, unless otherwise specified within the text.
III. EMPLOYEE PARTICIPATION
Participation
Subject to the provisions of this Section 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
IV. 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.
Requirements for Participation
A person shall become eligible to participate in the Plan on the first
Enrollment Date on which that person meets the following requirements:
a) The person is an Employee, and
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* Note: Double-underscored text is new; text in brackets is to be deleted.
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b) The person's customary period of Employment is more than twenty (20)
hours per week.
Any eligible Employee may enroll in the Plan as of the Enrollment Date of
any Offering by filing timely written notice of such participation,
subject to the following provisions:
(i) In order to enroll in the Plan initially, an eligible Employee must
complete, sign and submit to the Company the following forms:
(A) Payroll Deduction Authorization Form Must be received by the
Company at least fifteen (15) days prior to the Enrollment
Date of an Offering to be effective for that Offering.
(B) ESPP New Account Form This form must accompany the Payroll
Deduction Authorization Form submitted for enrollment in the
Plan. An ESPP New Account Form must be received by the Company
at least fifteen (15) days prior to the Enrollment Date of an
Offering to be effective for that Offering.
(ii) A Participant in an ongoing Offering may elect as of any Enrollment
Date to enroll in the new Offering commencing on that Enrollment
Date by filing a Payroll Deduction Authorization Form making such
election prior to 4:00 p.m. Pacific Time on the Enrollment Date. An
election by a current Participant to enroll in a new Offering shall
constitute a withdrawal, effective as of such Enrollment Date, from
the ongoing Offering and simultaneous reenrollment in the new
Offering. A reenrollment shall not affect the purchase of Shares
under the ongoing Offering occurring on the Purchase Date
immediately preceding the Enrollment Date. A Participant may make an
ongoing election to reenroll on any Enrollment Date as of which the
fair market value of the Shares for purposes of Section VI is less
than it was as of the Enrollment Date for the Offering in which the
Participant is currently participating. Unless otherwise specified
by the Participant, any such ongoing reenrollment election shall be
subject to revocation; provided, however, that to be effective to
prevent reenrollment on any Enrollment Date, such revocation must be
received by the Company prior to 4:00 p.m. Pacific Time on the
Enrollment Date.
(iii) Absent withdrawal from the Plan pursuant to Section VII, a
Participant will automatically be re-enrolled in the Offering
commencing on the Enrollment Date immediately following the
expiration of the Offering of which that person is then a
Participant.
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A Participant shall become ineligible to participate in the Plan and shall
cease to be a Participant when the Participant ceases to meet the
eligibility requirements as defined above.
Limitations on Participation
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.
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 within the meaning of Section 423 of
the Code 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.
The maximum number of Shares that an Employee may purchase in an Offering
shall not exceed 10,000 shares, no more than one-third of which may be
purchased on any Purchase Date with respect to that Offering.
Voluntary Participation
Participation in the Plan shall be strictly voluntary.
IV. PAYROLL DEDUCTIONS
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 administrator at least fifteen (15) days prior to the
Enrollment Date as of which the payroll deductions are to take effect.
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Amount of Deductions
A Participant may specify that the person desires to make contributions to
the Plan at a rate not less than 1% and not more than 10% of the
Compensation paid to the Participant during each pay period in the
Offering, or other such 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
otherwise modified or terminated as provided in this Section IV 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 that person's pay, the amount that was not
withheld cannot be made up by the Participant nor will it be withheld from
subsequent pay checks.
Commencement of Deductions
Payroll deductions for a Participant shall commence on the Enrollment Date
of the Offering for which that person's Payroll Deduction Authorization
Form is effective and shall continue indefinitely, unless modified or
terminated as provided in this Section IV or as otherwise provided in the
Plan.
Accounts
All payroll deductions made for a Participant shall be credited to his or
her Account under the Plan. Following each Purchase Date, the Plan
Administrator shall promptly deliver a report to each Participant setting
forth the aggregate payroll deductions credited to such Participant's
Account during the preceding six months and the number of Shares purchased
and delivered to the Custodian for deposit into the Participant's
Custodial Account.
Modification of Authorized Deductions
A Participant may, prior to the commencement of each Offering in which
that person will be a Participant, and not more than three times during
each Offering, increase or decrease the amount of that person's payroll
deduction effective for all applicable payroll periods, by completing an
amended Payroll Deduction Authorization Form and filing it with the
Company's stock administrator in accordance with this Section IV.
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A Participant may at any time discontinue the Participant's payroll
deductions, without withdrawing from the Plan, by completing an amended
Payroll Deduction Authorization Form and filing it with the Company's
stock administrator. Previous payroll deductions will then be retained in
the Participant's Account for application to purchase Shares on the next
Purchase Date, after which the Participant's participation in the Offering
and in the Plan will terminate unless the participant has timely filed
another Payroll Deduction Authorization Form to resume payroll deductions.
For purposes of the above, an amended Payroll Deduction Authorization form
shall be effective for a specific pay period when filed 15 days prior to
the last day of such payroll period.
V. CUSTODY OF SHARES
Delivery and Custody of Shares
Shares purchased pursuant to the Plan shall be delivered to and held by
the Custodian.
Custodial 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 Custodial Account specifically established
for this purpose. An Employee must open a Custodial Account with the
Custodian in order to be eligible to purchase Shares under the Plan. In
order to open a Custodial Account, the Participant must complete an ESPP
New Account Form and file it with the stock administrator no later than
fifteen (15) days prior to the Enrollment Date of the Offering as of which
the enrollment is to take effect; provided, however, that an ESPP New
Account Form that effects a change in the status of the Custodial Account
may be filed at any time during participation in the Plan.
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
Custodial Account and deliver such Shares to the Participant.
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Statements
The Custodian will deliver to each Participant a semi-annual statement
showing the activity of the Participant's Custodial 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.
VI. PURCHASE OF SHARES
Purchase of Shares
Subject to the limitations of Section 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 this Section VI, and
shall promptly deliver such Shares to the Custodian for deposit into the
Participant's Custodial Account. Payment for Shares purchased under the
Plan will be made only through payroll withholding deductions in
accordance with Section IV.
Price
The price of Shares to be purchased 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.
Fair Market Value
The fair market value of the Shares on any date shall be equal to the
closing trade price of such shares on the Valuation Date, as reported on
the NASDAQ National Market System or such other quotation system that
supersedes it.
Unused Contributions
Any amount credited to a Participant's Account and remaining therein
immediately after a Purchase Date because it was less than the amount
required to purchase a full
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Share shall be carried forward in such Participant's Account for
application on the next succeeding Purchase Date.
VII. TERMINATION AND WITHDRAWAL
Termination of Employment
Upon termination of a Participant's Employment for any reason other than
death, Retirement or Disability, the payroll deductions credited to such
Participant's Account shall be returned to the Participant. A Participant
shall have no right to accrue Shares upon termination of the person's
Employment.
Termination upon Death, Retirement or Disability
Upon termination of the Participant's Employment because of that person's
death, Retirement or Disability, the payroll deductions credited to that
person's Account shall be used to purchase Shares as provided in Section
VI on the next Purchase Date. Any remaining balance in the Participant's
Account shall be returned to that person 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 that person's estate.
Designation of Beneficiary
Each Participant may designate, revoke, and redesignate Beneficiaries. All
changes to designation of Beneficiary shall be in writing and will be
effective upon delivery to the Plan Administrator.
Withdrawal
A Participant may withdraw the entire amount credited to that individual's
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 accounts within the 15 days immediately
preceding a Purchase Date for the 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 the
person's Compensation unless a Payroll Deduction Authorization Form
directing further deductions is or has been submitted.
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Status of Custodial Account
Upon termination of a Participant's Employment for any reason other than
death, the Participant may,
(a) Elect to retain with the Custodian the Shares held in the
Participant's Custodial Account. The Participant will bear the cost
of any annual fees resulting from maintaining such an account.
(b) Request issuance of the Shares held in the Participant's
Custodial Account by submitting to the Custodian the appropriate
forms provided for that purpose.
Upon termination of a Participant's Employment as a result of death, any
Shares held by the Custodian for the Participant's Account shall be
transferred to the person(s) entitled thereto under the laws of the state
of domicile of the Participant upon a proper showing of authority.
VIII. SHARES PURCHASED UNDER THE PLAN
Source and Limitation of Shares
The Company has reserved for sale under the Plan [250,000] 500,000 shares
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of common stock, subject to adjustment upon changes in capitalization of
the Company as provided in Section X. 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 [250,000] 500,000 Share limitation.
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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 Administrator 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 this 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.
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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.
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 Company 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 Shares, the Participant
shall be entitled to all rights of a stockholder of the Company.
IX. ADMINISTRATION
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. 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 that person dies, resigns or is removed by the Board
of Directors.
Powers
The Plan Administrator shall be vested with full authority to make,
administer and interpret the 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, binding and conclusive upon all Participants and any and
all other persons claiming under or through any Participant. The
provisions of the Plan shall be construed in a manner consistent with the
requirements of Section 423 of the Code.
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X. CHANGES IN CAPITALIZATION, MERGER, ETC.
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,
reclassifications, reorganizations or other changes in its capital or
business structure or to merge, consolidate or dissolve, liquidate or
transfer all or any part of its divisions, subsidiaries, business or
assets.
Recapitalization
Subject to any required action by stockholders, the number of Shares
covered by the Plan as provided in Section VIII and the price per Share
shall be proportionately adjusted for any increase or 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 or any other
increase or decrease in the number of such Shares effected without receipt
or payment of consideration by the Company.
Consolidation or Merger
In the event of the consolidation or merger of the Company with or into
any other business entity, or sale by the Company of substantially all of
its assets, the successor may at its discretion 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 XIII.
XI. TERMINATION OF EMPLOYMENT
Vacation, Leave or Layoff
A person's Employment shall not terminate on account of an authorized
leave of absence, sick leave or vacation, or on account of a military
leave described in this Section XI, 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.
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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 that person fails to make an
application for reemployment within a period specified by such law for
preservation of employment rights. In such event, the individual's
Employment shall terminate by resignation on the day the military leave
expires.
XII. STOCKHOLDER APPROVAL AND RULINGS
The Plan is expressly made subject to (a) the approval of the Plan within
twelve (12) months after the Plan is adopted by the stockholders of the
Company and (b) at the Company's 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 qualification of the
Plan within the meaning of Section 423 of the Code. 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 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 the Participant.
XIII. MISCELLANEOUS PROVISIONS
Amendment and Termination of the Plan
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 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
VIII;
(ii) Permit the sale of Shares to employees of entities which are not
Employers;
(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.
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The Plan is intended to be a permanent program, but the Company reserves
the right to declare the Plan terminated at any time. Upon such
termination, amounts credited to the Accounts of the Participants with
respect to whom the Plan has been terminated shall be returned to such
Participants.
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 VII, 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 VII.
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.
Expenses
All expenses of administering the Plan shall be borne by the Company. The
Company will not pay expenses, commissions 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.
Tax Withholding
Each Participant who has purchased Shares under the Plan shall immediately
upon notification of the amount due, if any, pay to the Employer in cash
amounts necessary to satisfy any applicable federal, state and local tax
withholding determined by the Employer to be required. If the Employer
determines that additional withholding is required beyond any amounts
deposited at the time of purchase, the Participant shall pay such amount
to the Employer on demand. If the Participant fails to pay the amount
demanded, the Employer may withhold that amount from other amounts payable
by the Employer to the Participant, including salary, subject to
applicable law.
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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.
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.
Responsibility and Indemnity
Neither 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, officer, 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.
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 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,
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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.
Service of Process
The Secretary of the Company is hereby designated agent for service or
legal process on the Plan.
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.
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 state law is applicable, the laws of the State of Oregon
shall apply.
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.
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EXHIBIT A
DEFINITIONS
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
that person's 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.
BENEFICIARY shall mean a person or entity entitled under Section VII of the
Plan to receive Shares purchased by, and any remaining balance
in, a Participant's Account on the Participant's death.
BOARD OF shall mean the Board of Directors of the Company.
DIRECTORS
CODE shall mean the Internal Revenue Code of 1986, as amended, or the
corresponding provisions of any future tax code.
COMMITTEE shall mean the Committee appointed by the Board of Directors in
accordance with Section IX of the Plan.
COMPENSATION shall mean the total cash compensation (except as otherwise set
forth below), before tax withholding, paid to an Employee in the
period in question for services rendered to the Employer by the
Employee. Compensation shall include the earnings waived by an
Employee pursuant to a salary reduction arrangement under any
cash or deferred or cafeteria plan that is maintained by the
Employer and that is intended to be qualified under Section
401(k) or 125 of the Code. An Employee's Compensation shall not
include severance pay, hiring or relocation bonuses, or pay in
lieu of vacations or sick leave.
COMMON STOCK shall mean the common stock of the Company.
COMPANY shall mean RadiSys Corporation, an Oregon Corporation.
CUSTODIAN shall mean the investment or financial firm appointed by the Plan
Administrator to hold all Shares pursuant to the Plan.
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CUSTODIAL shall mean the account maintained by the Custodian for a
ACCOUNT Participant under the Plan.
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.
EMPLOYEE shall mean an individual who renders services to the 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.
EMPLOYER shall mean, collectively, the Company and its Subsidiaries or any
successor entity that continues the Plan. All Employees of
entities which constitute the Employer shall be treated as
employed by a single company for all purposes of the Plan.
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 Section XI.
ENROLLMENT shall mean the first day of each Offering.
DATE
ESPP NEW shall mean the form provided by the Company on which a
ACCOUNT FORM Participant shall elect to open an Account with the Custodian and
authorize delivery to the Custodian of all Shares issued for the
Participant's Account.
OFFERING shall mean any one of the separate overlapping eighteen (18)
month periods commencing on February 15 and August 15 of each
calendar year under the Plan; the first Offering will commence on
February 15, 1996.
PARTICIPANT shall mean any Employee who is participating in any Offering
under the Plan pursuant to Section III.
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PAYROLL shall mean the form provided by the Company on which a
DEDUCTION Participant shall elect to participate in the Plan and the
AUTHORIZATION Offering under the Plan and designate the percentage of that
FORM individual's Compensation to be contributed to that individual's
Account through payroll deductions.
PLAN shall mean this document.
PLAN shall mean the Board of Directors or the Committee, whichever
ADMINISTRATOR shall be administering the Plan from time to time in the
discretion of the Board of Directors, as described in Section IX.
PURCHASE DATE shall mean the last day of the sixth, twelfth and eighteenth
one-month periods of the Offering. Accordingly since the
Enrollment Dates occur on February 15 and August 15 of each year
beginning with February 15, 1996, Purchase Dates shall occur on
February 14 and August 14 of each year beginning with August 14,
1996.
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 the individual has suffered a Disability.
SHARE shall mean one share of Common Stock.
SUBSIDIARIES shall mean any corporation in which at least eighty percent (80%)
or more of the total combined voting power of all classes of
stock are owned directly or indirectly by RadiSys Corporation.
VALUATION shall mean the date upon which the fair market value of Shares is
DATE to be determined for purposes of setting the price of Shares
under Section VI (that is, the Enrollment Date or the applicable
Purchase Date). If the Enrollment Date or the Purchase Date is
not a date on which the fair market value may be determined in
accordance with Section VI, the Valuation Date shall be the first
day prior to the Enrollment Date or the Purchase Date, as
applicable, for which such fair market value may be determined.
VESTED shall mean non-forfeitable.
17
