<PAGE>
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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material under 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
/ / $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: Set forth the amount on which the
filing fee is calculated and state how it was determined.
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously by written preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
PRELIMINARY COPY
Notice of Annual Meeting of Shareholders
to be Held May 16, 2000
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 16, 2000 at 8:30 a.m.
for the following purposes:
1. To elect six directors, each to serve until the next Annual Meeting of
Shareholders or until a successor has been elected and qualified;
2. To amend the Company's Second Restated Articles of Incorporation to
increase the number of authorized shares of common stock of the Company from
50,000,000 to 100,000,000;
3. To vote on amendments to the Company's 1995 Stock Incentive Plan to
(i) increase the number of shares of the Company's Common Stock that may be
issued pursuant to the plan from 4,125,000 to 5,425,000, (ii) provide that
shareholder approval is required before any option or stock appreciation right
granted under the plan may be repriced, replaced or regranted through the
cancellation and reissuance of the option or stock appreciation right at a lower
exercise price, or by lowering the exercise price of a previously granted option
or stock appreciation right, and (iii) clarify that incentive stock options can
be granted to both employees of the Company and employees of the Company's
subsidiaries;
4. To vote on an amendment to 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 750,000 to 1,250,000; and
5. 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, 2000 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.
<PAGE>
A list of shareholders will be available for inspection by the shareholders
commencing May 1, 2000 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 14, 2000
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.
2
<PAGE>
PRELIMINARY COPY
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 16, 2000 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.
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 14, 2000.
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 $9,000.
<PAGE>
The record date for determination of shareholders entitled to receive
notice of and to vote at the Annual Meeting is March 31, 2000. At the close of
business on March 31, 2000, _________ 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: BRIAN BRONSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999.
2
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of seven members
and immediately preceding the Annual Meeting will consist of six members. The
directors are elected at the Annual Meeting of Shareholders 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, Jean-Pierre D. Patkay and
Jean-Claude Peterschmitt.
If no instructions are given, proxies will be voted for the election of
the six 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 counted 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.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Dr. Glenford J. Myers 53 Chairman of the Board,
President and Chief Executive Officer
James F. Dalton 41 Director
Richard J. Faubert 51 Director
C. Scott Gibson 47 Director
Jean-Pierre D. Patkay 49 Director
Jean-Claude Peterschmitt 66 Director
</TABLE>
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
3
<PAGE>
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, an
M.S. from Syracuse University and a B.S.E.E. from Clarkson College.
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 Vice President,
General Counsel, and Secretary of Tektronix. Prior to that, he served as
Director of Corporate Development at Tektronix. Additionally, Mr. Dalton
serves as Chairman of the Board and Vice President of Tektronix Development
Company.
Richard J. Faubert has served as a Director since June 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 then 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-IPEC, Inc., a semiconductor capital equipment
manufacturing company. Mr. Faubert also serves on the Board of Directors of
SpeedFam-IPEC, Inc.
C. Scott Gibson has served as a Director since June 1993. From January 1983
through February 1992, Mr. Gibson co-founded and served as President of Sequent
Computer Systems, Inc. ("Sequent"), a computer systems company. Prior to
co-founding Sequent, Mr. Gibson served as General Manager, Memory Components
Operation, at Intel. Since March 1992, Mr. Gibson has been a director and
consultant to high technology companies. 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 Egghead.com, Inc., Emerald
Solutions, Inc., Inference Corporation, Triquint Semiconductor, Inc., Integrated
Measurement Systems, Inc., and Webridge Inc. Mr. Gibson holds a B.S.E.E. and an
M.B.A. from the University of Illinois.
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.
From 1994 through 1999, Mr. Patkay served as Vice President of Worldwide
Manufacturing for 3Com Corporation, a computer networking company. Since 1999,
Mr. Patkay has served as Vice President and General Manager, 3Com OEM.
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
4
<PAGE>
of Arthur D. Little's European Operations Research Group. He currently serves
on the advisory and supervisory boards of Euroventures B.V., a European
venture fund, 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.
BOARD COMMITTEES AND MEETINGS
The Board of Directors acted by meeting and by unanimous written consent in
lieu of a meeting ten times during the fiscal year ended December 31, 1999. Each
director attended or participated in at least 75 percent of the aggregate number
of meetings and actions taken by unanimous written consent in lieu of a meeting
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 three 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. Mr.
Lattin will be retiring from the Board of Directors at the time of the Annual
Meeting. 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 acted by meeting
and by unanimous written consent in lieu of a meeting eight times in the last
fiscal year.
The Company maintains a Nominating and Governance Committee comprised of
William W. Lattin and James Dalton. The Nominating and Governance Committee
was formed on January 18, 2000. The Nominating and Governance Committee has
the general authority and responsibility to develop and maintain a list of
candidates for membership on the Board of Directors, shall recommend specific
candidates to the Board of Directors upon request, shall review and make
recommendations regarding board governance issues, and shall determine board
compensation. The Nominating and Governance Committee determined the nominees
for election as directors of the Company at this Annual Meeting. The
Nominating and Governance Committee will consider nominees recommended by
shareholders of the Company. Recommendations for nominees should be sent to
5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124, Attention: Corporate
Secretary.
DIRECTOR COMPENSATION
Directors do not receive any cash fees for serving on the Company's Board
of Directors or any committee thereof, but are reimbursed for reasonable
expenses incurred in attending
5
<PAGE>
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 stock option to purchase 15,000 shares of Common
Stock. If the non-employee director's employer prohibits the non-employee
director from receiving such a grant, no such grant is made until such time, if
any, as such employer restrictions are removed. In addition, each non-employee
director of the Company is automatically granted on an annual basis a
non-statutory stock option to purchase 5,000 shares of Common Stock, beginning
in the calendar year subsequent to the year in which the non-employee director
was granted a non-statutory stock option to purchase 15,000 shares of Common
Stock. 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 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 15, 2000 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
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 PERCENTAGE OF
BENEFICIALLY COMMON
NAME OWNED STOCK
---- ----- -----
<S> <C> <C>
Dr. Glenford J. Myers (1) 547,370 3.17%
Stuart F. Cohen (2) 10,815 *
Ronald A. Dilbeck (3) 10,702 *
Douglas D. Goodyear (4) 30,936 *
Arif Kareem (5) 13,745 *
James F. Dalton (6) 22,800 *
Richard J. Faubert (6) 22,500 *
C. Scott Gibson (6) 42,942 *
Dr. William W. Lattin 70,956 *
Jean-Pierre D. Patkay (6) 22,500 *
Jean-Claude Peterschmitt (7) 37,500 *
Intel Corporation
6
<PAGE>
2200 Mission College Blvd.
Santa Clara, CA 95052 1,779,251 10.30%
Lord, Abbett & Co. (8)
767 Fifth Avenue
New York, NY 10153 1,694,142 9.81%
All directors and officers as a group
(14 persons) (9) 884,464 5.12%
</TABLE>
* Less than 1%
(1) Includes options to purchase 204,414 shares of Common Stock exercisable
within 60 days after March 15, 2000. Includes 3,425 shares of Common Stock
held by Dr. Myers' minor child.
(2) Includes options to purchase 10,000 shares of Common Stock exercisable
within 60 days after March 15, 2000.
(3) Includes options to purchase 3,350 shares of Common Stock exercisable
within 60 days after March 15, 2000.
(4) Includes options to purchase 30,000 shares of Common Stock exercisable
within 60 days after March 15, 2000.
(5) Includes options to purchase 9,600 shares of Common Stock exercisable
within 60 days after March 15, 2000.
(6) Includes options to purchase 22,500 shares of Common Stock exercisable
within 60 days after March 15, 2000.
(7) Includes options to purchase 37,500 shares of Common Stock exercisable
within 60 days after March 15, 2000.
(8) Based solely on information set forth in Schedule 13G/A dated January 20,
2000, filed with the Securities and Exchange Commission.
(9) Includes options to purchase 431,238 shares of Common Stock exercisable
within 60 days after March 15, 2000.
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
7
<PAGE>
three fiscal years. Three other executive officers of the Company other than the
persons shown below received total annual salary and bonus for the fiscal year
1999 in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND ANNUAL COMPENSATION SHARES
PRINCIPAL POSITION ---------------------------------- UNDERLYING
------------------ YEAR SALARY BONUS (1) OPTIONS
---- ------ --------- -------
<S> <C> <C> <C> <C>
Glenford J. Myers 1999 $259,692 $216,100 75,000 (4)
Chairman of the Board, 1998 $248,846 $ 87,140 75,000 (3)
President and Chief 1997 $227,500 $133,800 52,500 (2)
Executive Officer
Stuart F. Cohen 1999 $155,481 $ 68,500 60,000 (4)
Vice President of Marketing 1998 -- -- --
and Sales 1997 -- -- --
Ronald A. Dilbeck 1999 $164,938 $ 73,670 30,000 (4)
Vice President and 1998 $167,154 $ 32,580 75,001 (3)
General Manager, Computer 1997 $159,792 $ 41,169 38,626 (2)
Platforms Division
Douglas D. Goodyear 1999 $240,000 $ 98,925 -- (4)
Vice President 1998 $ 55,385 -- 90,000 (3)
of Sales 1997 -- -- --
Arif Kareem 1999 $164,769 $119,900 30,000 (4)
Vice President and General 1998 $155,769 $ 25,620 55,800 (3)
Manager of 1997 $ 66,477 -- --
Telecommunications Division
</TABLE>
(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. No new options were granted
to these officers in 1997 (excluding options issued to replace canceled
options).
(3) Excludes options issued in 1998 in replacement of canceled options granted
during 1997 and 1998 at higher exercise prices.
(4) Represents options issued in 1999.
8
<PAGE>
STOCK OPTION GRANTS IN FISCAL 1999. The following table sets forth
information concerning individual grants of stock options made by the Company
during the fiscal year 1999 to each of the officers of the Company named in the
Summary Compensation Table.
<TABLE>
<CAPTION>
Number of
Securities Percent of Total Potential Realizable Value
Underlying Options Granted Exercise at Assumed Annual Rates of
Options to Employees in Price Per Expiration Stock Price Appreciation for
Name Granted (1) Fiscal Year (2) Share Date (3) Option Term (4)
- ----------------------- ------------- ----------------- ----------- --------------- ----------------------------
5% 10%
----------------------------
<S> <C> <C> <C> <C> <C> <C>
Glenford J. Myers 75,000 5.2% $20.04 1/04/06 $612,051 $1,426,170
Stuart F. Cohen 60,000 4.1% $19.29 1/18/04 $316,705 $702,739
Ronald A. Dilbeck 30,000 2.0% $20.04 1/04/06 $244,821 $570,468
Douglas D. Goodyear -- -- -- -- -- --
Arif Kareem 30,000 2.0% $20.04 1/04/06 $244,821 $570,468
</TABLE>
(1) All option grants were made pursuant to the Company's 1995 Stock Incentive
Plan. Each option (other than the options granted to Mr. Myers and Mr.
Cohen) was granted on January 4, 1999 for a term of seven years, is not
exercisable until January 4, 2001, on which date each option shall be
exercisable for 50 percent of the total number of shares covered by the
option, and shall be exercisable in full on January 4, 2002. The option
granted to Mr. Myers was granted on January 4, 1999 for a term of seven
years and is not exercisable until December 15, 2001, on which date the
option shall be exercisable in full. The option granted to Mr. Cohen was
granted on January 18, 1999 for a term of five years, and on the first,
second and third anniversaries of the grant date, the option is exercisable
for one-third of the total number of shares covered by the option, so that
the option shall be exercisable in full on January 4, 2002.
(2) In fiscal 1999, the Company granted options for a total of 1,449,582 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.
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<PAGE>
(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.
AGGREGATED OPTION EXERCISES. The following table sets forth information (on
an aggregated basis) concerning each exercise of stock options during the fiscal
year 1999 by each of the officers of the Company named in the Summary
Compensation Table and the fiscal year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Options at December 31, In-the-Money Options at
Shares 1999 December 31, 1999 (1)
Acquired on Value --------------------------- ---------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Glenford J. Myers 57,000 $1,760,970 106,914 100,086 $2,814,457 $3,138,308
Stuart F. Cohen -- -- -- 60,000 -- $1,902,600
Ronald A. Dilbeck 35,751 $689,044 28,899 107,141 $989,850 $3,437,979
Douglas D. Goodyear -- -- 30,000 60,000 $1,248,900 $2,497,800
Arif Kareem -- -- 9,600 61,200 $369,984 $2,131,248
</TABLE>
(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, 1999
based on the last sale price of $51.00 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.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION(1)
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
- -------------------------
(1) This section and the following section entitled "Comparison of
Cumulative Total Return" are not "soliciting material," are not deemed "filed"
with the Securities and Exchange Commission and are not to be incorporated by
reference in any filing of the Company under the Securities Act of 1933 or the
Securities Act of 1934, regardless of date or any general incorporation language
in such filing.
10
<PAGE>
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 1995 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.
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 1999 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 1999 based on satisfaction of the Company's performance objectives for the
year
11
<PAGE>
established under the Company's Compensation Plan described above and his
individual performance as evaluated by the Committee.
During 1999 the Chief Executive Officer was issued options to purchase
75,000 shares of the Company's Common Stock. 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 1999 was based on a
subjective determination of the number of shares needed in 1999 as part of this
long-term program.
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 Treasury 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 Treasury 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 their 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
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COMPARISON OF CUMULATIVE TOTAL RETURN
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,
1999. 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.
[GRAPH]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN ANALYSIS
10/20/1995 12/29/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RADISYS CORP. $ 100.00 $ 78.33 $ 325.00 $ 248.33 $ 200.00 $ 510.00
- ---------------------------------------------------------------------------------------------------
H&Q COMPUTER HARDWARE $ 100.00 $ 104.00 $ 137.73 $ 187.37 $ 359.73 $ 655.93
- ---------------------------------------------------------------------------------------------------
S&P 500 $ 100.00 $ 105.36 $ 129.53 $ 172.74 $ 222.10 $ 268.83
- ---------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
PROPOSAL 2: AMENDMENT OF THE COMPANY'S SECOND RESTATED ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 50,000,000 TO
100,000,000.
The Company's Second Restated Articles of Incorporation currently provide
that the authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock and 10,000,000 shares of Preferred Stock. As of March 31, 2000,
the Company had ___________ shares of Common Stock issued and outstanding and
___________ shares of Common Stock were issuable pursuant to outstanding stock
options.
The Board of Directors believes that additional shares of Common Stock need
to be authorized to provide the Company with the flexibility to consider a
future stock split, to finance potential acquisitions, and to effect additional
increases in the shares reserved for issuance under the Company's equity
incentive plans. For this reason, on January 18, 2000, the Board of Directors
approved an amendment to the Company's Second Restated Articles of Incorporation
to increase the number of authorized shares of Common Stock from 50,000,000 to
100,000,000.
The availability of the additional shares of Common Stock may have an
anti-takeover effect, since the Board of Directors would possess the ability to
dilute the position of a major shareholder by issuing additional shares of the
same class, which may make a takeover more difficult or less attractive. The
Board of Directors is not aware of any effort to obtain control of the Company,
and the proposed amendment is not part of a plan by management to adopt a series
of anti-takeover measures.
RECOMMENDATION BY THE BOARD OF DIRECTORS. The Board of Directors recommends
that the proposed amendment to the Company's Second Amended and Restated
Articles of Incorporation increasing the number of authorized shares of Common
Stock to 100,000,000 be approved. The presence, in person or by proxy, of a
majority of the outstanding shares of Common Stock entitled to be voted at the
Annual Meeting is necessary to constitute a quorum for the transaction of
business. The amendment to the Company's Second Amended and Restated Articles of
Incorporation requires the approval of a majority of the votes cast on the
proposal, provided a quorum is present. Abstentions will count as votes cast on
the proposal, but will not count as votes cast in favor of the proposal and,
therefore, will have the same effect as votes against the proposal. Broker
non-votes are counted for purposes of determining whether a quorum exists at the
Annual Meeting, but will not be considered to have voted on the proposal. 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 Company's
Second Amended and Restated Articles of Incorporation.
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<PAGE>
PROPOSAL 3: 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 4,125,000 TO 5,425,000 AND MAKE CERTAIN OTHER CHANGES.
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 March 31, 2000, out of a total of 4,125,000 shares
reserved for issuance under the Plan (after giving effect to a 3-for-2 stock
split of the shares of Common Stock of the Company effected in the form of a 50%
share dividend declared by the Board of Directors on October 19, 1999 and paid
on November 29, 1999 to shareholders of record at the close of business on
November 8, 1999), ___________ shares had been issued leaving ___________ 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 February 25, 2000, the
Board of Directors approved amendments to the Plan to reserve an additional
1,300,000 shares for the Plan, thereby increasing the total number of shares of
the Company's Common Stock reserved for issuance under the Plan from 4,125,000
to 5,425,000, and also to include in the Plan a provision that shareholder
approval is required before any option or stock appreciation right granted under
the Plan may be repriced, replaced or regranted through the cancellation and
reissuance of the option or stock appreciation right at a lower exercise price,
or by lowering the exercise price of a previously granted option or stock
appreciation right. The proposed amendments also provide for clarification that
incentive stock options can be granted to both employees of the Company and
employees of the Company's subsidiaries. All of these proposed amendments are
subject to shareholder approval.
Certain provisions of the Plan are summarized below. The complete text of
the Plan, marked to show the proposed amendments, is attached to this document
as Appendix A. Shareholders are urged to read the amendments to the Plan
carefully and in their entirety.
ELIGIBILITY. All employees, officers and directors of the Company and
its subsidiaries 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 options to purchase up to 7,500 shares to
new hires on the same terms regarding vesting and other matters as options
15
<PAGE>
that are commonly granted to other employees and for refreshment and enabler
options in accordance with the equity compensation framework approved by the
Compensation Committee each year and on other specified terms. 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.
SHARES AVAILABLE. A total of 4,125,000 shares of Common Stock were reserved
for issuance under the Plan. As of December 31, 1999, out of a total of
4,125,000 shares reserved for issuance under the Plan, only 1,142,704 shares
remained 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, 1999, the last sale price of the Common
Stock on the Nasdaq National Market System was $51.00 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 option 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
16
<PAGE>
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. 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.
17
<PAGE>
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.
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.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES. Certain options authorized to be
granted under the Plan are intended to qualify as ISOs for federal income tax
purposes. The following discussion of the federal income tax consequences of
ISOs applies to optionees who have been employed by the Company or a subsidiary
at all times from the date of grant to the date three
18
<PAGE>
months before exercise. 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 generally will be taxed as income from the sale or exchange of a capital
asset and the Company will not be allowed any deduction for federal income tax
purposes. 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 gain realized generally will be taxable as ordinary
compensation income in the year of such disqualifying disposition to the extent
that the fair market value of the shares on the date of exercise 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 generally will be entitled
to a deduction to the extent the employee recognized ordinary income, provided
the Company reports the disposition as required by the Internal Revenue Service.
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 recognize ordinary
compensation income, and the Company generally will 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 generally will
be taxable to the optionee as capital gain.
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 recognize 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 amount of compensation
income is subject to withholding and employment tax.
A person who receives stock in connection with the performance of services
will generally recognize ordinary compensation income at the time of receipt of
the shares, in an amount equal to the fair market value of the shares over the
amount paid for the shares, if either the shares are "substantially vested" for
purposes of Section 83 of the Code or the recipient 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 recipient will
recognize ordinary compensation income in each year in which a portion of the
shares substantially vest. The amount of compensation income will equal the
excess, if any, of the fair market value of the shares at the time of vesting
over the amount paid for the shares. The Company generally will be entitled to a
deduction equal to the amount includable as ordinary compensation income by the
recipient in the year the recipient recognized the income. The amount of
compensation income recognized by an employee is subject to withholding and
19
<PAGE>
employment tax. A participant who receives a cash bonus right under the Plan
generally will recognize ordinary compensation 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 amount of compensation income recognized by an employee is
subject to a withholding and employment tax.
In certain situations, stock acquired, by exercise of an option or
otherwise, by persons who are "insiders" under Section 16(a) of the Securities
Exchange Act of 1934 may not be "substantially vested" when acquired. Therefore,
the above discussion under "Material Federal Income Tax Consequences" may not be
fully applicable to stock acquired by insiders under the Plan.
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 Treasury 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 of the plan before the options are granted.
Other requirements are that (1) the plan provide per-employee limits on the
number of shares to which options or SARs may be granted during a specified time
period, and (2) options or SARs 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 amendment to the Plan
requires the approval of a majority of the votes cast on the proposal, provided
a quorum is present. Abstentions will count as votes cast on the proposal, but
will not count as votes cast in favor of the proposal and, therefore, will have
the same effect as votes against the proposal. Broker non-votes are counted for
purposes of determining whether a quorum exists at the Annual Meeting, but will
not be considered to have voted on the proposal. 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 4: 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 750,000 TO 1,250,000.
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
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<PAGE>
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 31, 2000, out of a total
of 750,000 shares reserved for issuance under the ESPP (after giving effect to a
3-for-2 stock split of the shares of Common Stock of the Company effected in the
form of a 50% share dividend declared by the Board of Directors on October 19,
1999 and paid on November 29, 1999 to shareholders of record at the close of
business on November 8, 1999), 391,161 shares had been issued leaving 358,839
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 18, 2000, the
Board of Directors approved an amendment to the ESPP, subject to shareholder
approval, to reserve an additional 500,000 shares for the ESPP, thereby
increasing the total number of shares of the Company's Common Stock reserved for
issuance under the Plan from 750,000 to 1,250,000.
Certain provisions of the ESPP are summarized below. The complete text of
the ESPP, marked to show the proposed amendment, is attached to this document as
Appendix B.
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 ESPP, 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 calendar year under the ESPP, other than calendar
year 1999. In calendar year 1999, the first offering commenced on June 12, 1999
and will end on August 15, 2000, and the second offering is the 18-month period
commenced on August 15, 1999. The purchase dates for the offering beginning on
June 12, 1999 are August 14, 1999, February 14, 2000 and August 14, 2000, rather
than the last day of each six-month period of such offering. 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 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.
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<PAGE>
MATERIAL FEDERAL INCOME TAX CONSEQUENCES. The ESPP is intended to qualify
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code. The following discussion of federal income tax consequences applies to
employees who are continuously employed by the Company or a subsidiary until at
least three months before the applicable purchase date. Under the Code, current
or former employees will not recognize taxable income or gain with respect to
shares purchased under the ESPP either at an Enrollment Date or at a purchase
date. If a current or former employee disposes of shares purchased under the
ESPP more than two years after the Enrollment Date and more than one year after
the purchase date, or in the event of the employee's death at any time, the
employee or the employee's estate generally will be required to report as
ordinary compensation income for the taxable year of disposition or death an
amount equal to the lesser of the excess of the fair market value of the shares
at the time of disposition or death over the purchase price, or 15 percent of
the fair market value of the shares on the Enrollment Date. In the case of such
a disposition or death, the Company will not be entitled to any federal income
tax deduction. Any gain on the disposition in excess of the amount treated as
ordinary compensation income generally will be taxed as capital gain to the
employee.
If a current or former employee disposes of shares purchased under the ESPP
within two years after the Enrollment Date or within one year after the purchase
date, the employee will be required to report the excess of the fair market
value of the shares on the purchase date over the purchase price as ordinary
compensation income for the year of disposition. If the disposition is by sale,
any difference between the fair market value of the shares on the purchase date
and the disposition price generally will be taxed as capital gain or loss. In
the event of a disposition within two years after the Enrollment Date or within
one year after the purchase date, the Company generally will be entitled to a
deduction from income in the year of such disposition equal to the amount that
the employee is required to report as ordinary compensation income, provided the
Company reports the disposition as required by the IRS. For dispositions made by
the Company's most highly compensated officers, the Company's deduction may be
limited by the $1,000,000 cap on deductibility under Section 162(m) of the Code.
Under the terms of the ESPP, participants are required to pay to the
Company any amounts necessary to satisfy any tax withholding determined by the
Company to be required in connection with either the purchase or sale of shares
acquired under the ESPP.
RECOMMENDATION BY THE BOARD OF DIRECTORS. The Board of Directors recommends
that the proposed amendment to the ESPP be approved. The amendment to the ESPP
requires the approval of a majority of the votes cast on the proposal, provided
a quorum is present. Abstentions will count as votes cast on the proposal, but
will not count as votes cast in favor of the proposal and, therefore, will have
the same effect as votes against the proposal. Broker non-votes are counted for
purposes of determining whether a quorum exists at the Annual Meeting, but will
not be considered to have voted on the proposal. 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.
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<PAGE>
EMPLOYMENT CONTRACTS AND SEVERANCE ARRANGEMENTS
On February 8, 2000, the Company entered into an Executive Severance
Agreement with Dr. Myers providing for severance pay in a cash amount equal to
12 months of Dr. Myers' annual base pay at the rate in effect immediately prior
to the date of termination. Dr. Myers is entitled to receive the severance pay
in the event that his employment with the Company is terminated by the Company
other than for cause, death or disability. Upon such termination, and in
addition to the severance pay, Dr. Myers is also entitled to receive COBRA
benefits and an amount equal to a prorated portion of Dr. Myers' target bonus
amount under any cash incentive plans in effect at the time of termination. In
addition, all stock options granted to Dr. Myers under the Company's 1995 Stock
Incentive Plan or any other equity plan that would vest during the 12-month
period following the date of termination shall become immediately exercisable in
full.
In the event that Dr. Myers' employment with the Company is terminated by
the Company (other than for cause, death or disability) within 18 months
following a change of control of the Company, Dr. Myers is entitled to receive
severance pay in a cash amount equal to 24 months of Dr. Myers' annual base pay
at the rate in effect immediately prior to the date of termination. Upon such
termination, and in addition to the severance pay, Dr. Myers is also entitled to
receive COBRA benefits and an amount equal to Dr. Myers' full target bonus
amount for the year and any partial year period in which the termination
occurred under any cash incentive plans in effect at the time of termination. In
addition, all stock options granted to Dr. Myers under the Company's 1995 Stock
Incentive Plan or any other equity plan shall become immediately exercisable in
full.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and Tektronix are parties to multiple Design Agreements
pursuant to which the Company agreed to design and develop certain products as
specified and required by Tektronix. One of the Company's directors, Mr. Dalton,
is an officer of Tektronix. Sales to Tektronix accounted for less than one
percent of the Company's revenues in 1999.
The Company and Intel are parties to multiple Design Agreements 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 1999. Additionally, Intel is a key supplier of components
to the Company. The Company received approximately $ worth of
components from Intel in 1999. As of March 15, 2000, Intel beneficially owns
approximately eleven percent of the Company's outstanding Common Stock.
The Company is party to a Consulting Services Agreement dated January 21,
2000 with John Leonardo, a former executive officer of the Company, providing
for the provision of consulting services by Mr. Leonardo to the Company for the
six-month period following the date of Mr. Leonardo's retirement from employment
with RadiSys. Mr. Leonardo retired effective January 28, 2000. The agreement
provides for a monthly consulting fee of $50,000.
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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 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 1999, John Watkins, Ronald Dilbeck, Diane
Williams, Glenford J. Myers and John C. Leonardo failed to file on a timely
basis reports required by Section 16(a) of the Securities Exchange Act of 1934.
Mr. Watkins filed late a Form 4 reporting three transactions in securities of
the Company occurring in March of 1999. Mr. Dilbeck filed late a Form 4
reporting four transactions in securities of the Company occurring in November
of 1999. Ms. Williams filed late a Form 4 reporting six transactions in
securities of the Company occurring in November of 1999. Dr. Myers filed late a
Form 4 reporting six transactions in securities of the Company occurring in
November of 1999. Dr. Myers also filed late a Form 4 reporting one transaction
in securities of the Company occurring in December of 1999. In fiscal year 1999,
Mr. Leonardo filed late a Form 3.
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 2001 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 2001 annual meeting of shareholders is expected to be held on May
15, 2001. Any notice relating to a shareholder proposal for the 2001 annual
meeting, to be timely, must be received by the
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Company between March 1, 2001 and March 26, 2001. Shareholders wishing to submit
proposals for inclusion in the Company's proxy statement for the 2001 annual
meeting of shareholders must submit the proposals for receipt by the Company not
later than December 16, 2000.
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 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. For the 2001 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 26, 2001 or before March 1, 2001, 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 14, 2000
Hillsboro, Oregon
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APPENDIX A
RADISYS CORPORATION
**
1995 STOCK INCENTIVE PLAN
(As Amended Through -- February 25 --
++ May 16 ++, 2000)
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 -- 4,125,000* --
++ 5,425,000* ++ 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
canceled, 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.
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* Adjusted to reflect a 3-for-2 stock split of the shares of Common
Stock, without par value, of the Company, effected in the form of a
50% share dividend in accordance with ORS 60.154, declared by the
Board of Directors on October 19, 1999, and paid on November 29, 1999
to shareholders of record at the close of business on November 8,
1999.
** Text between double negative signs is to be deleted; text between
double positive signs is new.
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(b) DURATION. The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all restrictions on
such shares have lapsed. The Board of Directors may suspend or terminate the
Plan at any time except with respect to options, performance units and shares
subject to restrictions then outstanding under the Plan. Termination shall not
affect any outstanding options, any right of the Company to repurchase shares or
the forfeitability of shares issued under the Plan.
4. ADMINISTRATION.
(a) BOARD OF DIRECTORS. The Plan shall be administered by the Board
of Directors of the Company, which shall determine and designate from time to
time the individuals to whom awards shall be made, the amount of the awards and
the other terms and conditions of the awards. Subject to the provisions of the
Plan, the Board of Directors may from time to time adopt and amend rules and
regulations relating to administration of the Plan, advance the lapse of any
waiting period, accelerate any exercise date, waive or modify any restriction
applicable to shares (except those restrictions imposed by law) and make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements by the Board
of Directors shall be final and conclusive. The Board of Directors may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any related agreement in the manner and to the extent it shall deem expedient
to carry the Plan into effect, and it shall be the sole and final judge of such
expediency.
(b) COMMITTEE. The Board of Directors may delegate to a committee of
the Board of Directors or specified officers of the Company, or both (the
"Committee") any or all authority for administration of the Plan. If authority
is delegated to a Committee, all references to the Board of Directors in the
Plan shall mean and relate to the Committee except (i) as otherwise provided by
the Board of Directors, (ii) that only the Board of Directors may amend or
terminate the Plan as provided in paragraphs 3 and 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
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rights as provided in paragraph 10; (vii) grant performance units as provided
in paragraph 11 and (viii) grant foreign qualified awards as provided in
paragraph 12. Any such awards may be made to employees, including employees
who are officers or directors, and to other individuals described in
paragraph 1 who the Board of Directors believes have made or will make an
important contribution to the Company or any subsidiary of the Company;
provided, however, that only employees of the Company ++ or any subsidiary ++
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; ++ provided, however, that, notwithstanding anything to the contrary
contained herein, in no event shall any option or stock appreciation right
granted under the Plan be repriced, replaced or regranted through the
cancellation and reissuance thereof at a lower exercise price, or by lowering
the exercise price of a previously granted option or stock appreciation
right, without the prior approval of the shareholders of the Company. ++ No
employee may be granted options or stock appreciation rights under the Plan
for more than an aggregate of 450,000 shares of Common Stock in connection
with the hiring of the employee or 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
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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 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,
and shall be exercisable during the optionee's lifetime only by the
optionee.
(iv) TERMINATION OF EMPLOYMENT OR SERVICE.
(A) GENERAL RULE. Unless otherwise determined by the Board
of Directors, in the event the employment or service of the optionee
with the Company or a subsidiary terminates for any reason other than
because of physical disability or death as provided in subparagraphs
6(a)(iv)(B) and (C), the option may be exercised at any time prior to
the expiration date of the option or the expiration of 30 days after
the date of such termination, whichever is the shorter period, but
only if and to the extent the optionee was entitled to exercise the
option at the date of such termination.
(B) TERMINATION BECAUSE OF TOTAL DISABILITY. Unless
otherwise determined by the Board of Directors, in the event of the
termination of employment or service because of total disability, the
option may be exercised at any time prior to the expiration date of
the option or the expiration of 12 months after the date of such
termination, whichever is the shorter period, but only if and to the
extent the optionee was entitled to exercise the option at the date of
such termination. The term "total disability" means a 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
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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 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 (which, in the case of an
Incentive Stock Option, shall be given only at the time of option grant),
in whole or in part, in Common Stock of the Company valued
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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 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
(which in the case of an Incentive Stock Option, shall be given only at the
time of option grant), 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
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** The Board of Directors has consented to the use of Common Stock in
payment of the purchase price, at a fair market value equal to the
closing price of the Common Stock as reported in THE WALL STREET
JOURNAL on the last trading day preceding the date the option is
exercised.
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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 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
paragraph 6(a) above:
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(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 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
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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.
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
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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.
(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
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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 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
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recipient to a cash bonus when the shares are purchased or restrictions, if any,
to which the stock is subject lapse. Any cash bonus right granted in connection
with shares purchased pursuant to paragraph 8 shall terminate and may not be
exercised in the event the shares are repurchased by the Company or forfeited by
the holder pursuant to applicable restrictions. The amount of any cash bonus to
be awarded and timing of payment of a cash bonus shall be determined by the
Board of Directors.
(e) TAXES. The Company shall withhold from any cash bonus paid
pursuant to paragraph 10 the amount necessary to satisfy any applicable federal,
state and local withholding requirements.
11. PERFORMANCE UNITS. The Board of Directors may grant performance units
consisting of monetary units which may be earned in whole or in part if the
Company achieves certain goals established by the Board of Directors over a
designated period of time, but not in any event more than 10 years. The goals
established by the Board of Directors may include earnings per share, return on
shareholders' equity, return on invested capital, and such other goals as may be
established by the Board of Directors. In the event that the minimum performance
goal established by the Board of Directors is not achieved at the conclusion of
a period, no payment shall be made to the participants. In the event the maximum
corporate goal is achieved, 100 percent of the monetary value of the performance
units shall be paid to or vested in the participants. Partial achievement of the
maximum goal may result in a payment or vesting corresponding to the degree of
achievement as determined by the Board of Directors. Payment of an award earned
may be in cash or in Common Stock or in a combination of both, and may be made
when earned, or vested and deferred, as the Board of Directors determines.
Deferred awards shall earn interest on the terms and at a rate determined by the
Board of Directors. 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.
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12. FOREIGN QUALIFIED GRANTS. Awards under the Plan may be granted to such
officers and employees of the Company and its subsidiaries and such other
persons described in paragraph 1 residing in foreign jurisdictions as the Board
of Directors may determine from time to time. The Board of Directors may adopt
such supplements to the Plan as may be necessary to comply with the applicable
laws of such foreign jurisdictions and to afford participants favorable
treatment under such laws; provided, however, that no award shall be granted
under any such supplement with terms which are more beneficial to the
participants than the terms permitted by the Plan.
13. 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
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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.
(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 that without the approval of the shareholders of the
Company, the Board of Directors may not increase the number of shares authorized
to be issued under paragraph 2 of the Plan (except for adjustments permitted
under paragraph 13(a) of the Plan). 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
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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.
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
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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.
(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 (to increase shares in paragraph 2 to 1,500,000).
Amended: May 18, 1999 (to increase shares in paragraph 2 to 2,250,000 and to
increase individual limits in paragraph 5 to 450,000 and 100,000 shares).
Amended: August 12, 1999 (to increase shares in paragraph 2 to 2,750,000).
Amended: February 25, 2000 (amendments to paragraphs 6(a)(iii), 6(a)(v) and 14).
++ Amended: May 16, 2000 (to increase shares in paragraph 2 to 5,425,000 and to
make certain other changes to paragraph 5). ++
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APPENDIX B
RADISYS CORPORATION
1996 EMPLOYEE STOCK PURCHASE PLAN*
(As Amended through -- February 25 --
++ May 16 ++, 2000)
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
** Text between double negative signs is to be deleted; text between
double positive signs is new.
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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 424(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.
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
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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 Share shall
B-6
<PAGE>
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, 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
Upon termination of the Participant's Employment because of that person's
death, 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 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.
B-7
<PAGE>
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
-- 750,000* -- ++ 1,250,000* ++ shares 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 -- 750,000* -- ++ 1,250,000* ++ Share limitation.
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
- ---------------------
* Adjusted to reflect a 3-for-2 stock split of the shares of Common
Stock, without par value, of the Company, effected in the form of a 50% share
dividend in accordance with ORS 60.154, declared by the Board of Directors on
October 19, 1999, and paid on November 29, 1999 to shareholders of record at the
close of business on November 8, 1999.
B-8
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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.
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
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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.
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, provided such leave does not exceed 90 days or, if longer, so
long as the person's right to reemployment is guaranteed by statute or by
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<PAGE>
contract. 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.
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;
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<PAGE>
(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.
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. A Participant's rights to purchase Shares
under the Plan are exercisable during the Participant's lifetime only by
the Participant.
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
B-12
<PAGE>
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.
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
B-13
<PAGE>
shall give any Employee the right to be retained in the service of the
Employer or to interfere with or restrict the right of the Employer,
which is hereby expressly reserved, to discharge or retire any Employee
at any time, with or without cause and with or without notice. Except as
otherwise required by law, inclusion under the Plan will not give any
Employee any right or claim to any benefit hereunder except to the extent
such right has specifically become fixed under the terms of the Plan. The
doctrine of substantial performance shall have no application to any
Employee, Participant, or Beneficiary. Each condition and provision,
including numerical items, has been carefully considered and constitutes
the minimum limit on performance which will give rise to the applicable
right.
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.
B-14
<PAGE>
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.
B-15
<PAGE>
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 other than calendar
year 1999; in calendar year 1999, the first Offering shall
be a period commencing on June 12, 1999 and ending on
August 15, 2000, and the second Offering shall be the
eighteen (18) month period commencing on August 15, 1999.
The first Offering will commence on February 15, 1996.
B-16
<PAGE>
PARTICIPANT shall mean any Employee who is participating in any
Offering under the Plan pursuant to Section III.
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
FORM that 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,
ADMINISTRATOR whichever 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, except for
the Offering beginning on June 12, 1999, in which Offering
the Purchase Dates shall be August 14, 1999, February 14,
2000 and August 14, 2000. For all other Offerings, 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
DATE Shares is 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.
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<PAGE>
PRELIMINARY COPY
PROXY
RADISYS CORPORATION
Annual Meeting, May 16, 2000
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, 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 16,
2000 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, Jean-Pierre Patkay and Jean-Claude Peterschmitt
2. Amendment of the Company's Second Amended and Restated Articles of
Incorporation to increase the number of authorized shares of common stock
of the Company from 50,000,000 to 100,000,000.
/ / FOR / / AGAINST / / ABSTAIN
3. Amendment of 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 4,125,000 to 5,425,000 and make certain other
changes.
/ / FOR / / AGAINST / / ABSTAIN
4. 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 750,000 to 1,250,000.
/ / FOR / / AGAINST / / ABSTAIN
5. 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 EACH OF
THE SHAREHOLDER PROPOSALS. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER
MATTERS THAT MAY COME BEFORE THIS MEETING.
Shares:
Date:______________________________________,
2000
P
R
0
X
Y --------------------------------
Signature or Signatures
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 16,
2000 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.
