As filed with the Securities and Exchange Commission
August 31, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
RSI SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1767211
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5555 West 78th Street
Minneapolis, Minnesota 55439
(Address of Principal Executive Offices) (Zip Code)
RSI SYSTEMS, INC.
1994 STOCK PLAN
(Full title of the plan)
James Hanzlik Copy to:
Chief Financial Officer Robert R. Ribeiro
5555 W. 78th Street Hinshaw & Culbertson
Minneapolis, Minnesota 55439 3100 Piper Jaffray Tower
(Name and address of agent for service) 222 South Ninth Street
(612) 896-3020 Minneapolis, Minnesota 55402
(Telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public: from time to
time after the effective date of this Registration Statement.
-1-
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed maximum Proposed maximum Amount of
Title of securities Amount to offering price aggregate offering registration
to be registered be registered per share(l) price fee
<S> <C> <C> <C> <C>
Common Stock, 900,000 $2.00 $1,800,000 $531
$.01 par value
</TABLE>
(1) Estimated solely for purposes of computing the registration fee and based
upon the average of the high and low sales prices for the Company's common
stock on August 28, 1998, as reported on the Nasdaq market system.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of RSI Systems, Inc. ("RSI" or the "Company") which have
been filed with the Securities and Exchange Commission are hereby incorporated
by reference in this Registration Statement:
(a) the Company's Annual Report on Form 10-K for the year ended June 30, 1997;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended
September 30 and December 31, 1997 and March 31, 1998.
(c) all other reports filed by RSI pursuant to Sections 13 or 15(d) of the
Exchange Act since June 30, 1997;
(d) the Company's Registration Statement on Form S-3, as amended, as filed
with the Securities Exchange Commission as Commission File No. 333-46721;
(e) the description of RSI's Common Stock and Common Stock Purchase Rights
contained in any Registration Statement of the Company filed under the
Exchange Act and any amendment or report filed for the purpose of updating
any such description.
All documents filed by the Company pursuant to Sections 13, 14 or 15(d) of the
Exchange Act subsequent to the date of this Registration Statement and prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference into this Registration
Statement and to be a part hereof from the respective dates of
-2-
<PAGE>
filing of such documents. Any statement contained herein or in a document all or
part of which is incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained herein or in any subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws of the Company provide that the Company shall indemnify the directors
and officers of the Company against liability (and expenses related thereto)
arising out of their status as directors and officers to the extent permitted by
law. Additionally certain indemnification rights are available under the
Minnesota General Corporation Law ("MCL") to officers and directors to the
extent they are successful in the defense of any proceeding to which they were a
party by virtue of their position as a director or officer.
Further, as permitted by the MCL, the Restated Articles of Incorporation of the
Company include a provision limiting the personal liability of its directors for
monetary damages for certain breaches of their duties as directors to the extent
permitted under the MCL. The Company also maintains a directors' and officers'
liability policy which insures such person against claims arising from certain
acts or decisions by them in their capacities as directors and officers of the
Company, subject to certain exclusions and deductible and maximum amounts.
Such limitation of liability pursuant to state law does not affect liability, if
any, arising under the federal securities laws. Further, insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to contractual provisions or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore
unenforceable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
-3-
<PAGE>
Not applicable.
ITEM 8. EXHIBITS
Exhibit Number Description
4.1 RSI Systems, Inc. 1994 Stock Plan
5.1 Opinion of Hinshaw & Culbertson.
23.1 Consent of Hinshaw & Culbertson (included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP, independent auditors.
24.1 Powers of Attorney.
ITEM 9. UNDERTAKINGS
A. Post-Effective Amendments
The Company hereby undertakes:
(l) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in
the maximum aggregate-offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change in the information set forth in the Registration
Statement;
-4-
<PAGE>
PROVIDED, HOWEVER, that subparagraphs (i) and (ii) above do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Company pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
B. Subsequent Documents Incorporated by Reference
The Company hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the Company's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Claims for Indemnification
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
-5-
<PAGE>
thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on
August 31, 1998.
RSI SYSTEMS, INC.
By /s/ Donald Lies
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
By /s/ Donald Lies Dated: August 31, 1998
Chief Executive Officer
By /s/ James Hanzlik Dated: August 31, 1998
Chief Financial Officer
By Dated: August 31, 1998
Manfred Haiderer
Director
By Dated: August 31, 1998
Richard Craven
Director
By Dated: August 31, 1998
Byron Shaffer
Director
By Dated: August 31, 1998
David Stassen
Director
-6-
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
4.1 RSI Systems, Inc. 1994 Stock Plan Filed Electronically
5.1 Opinion of Hinshaw & Culbertson Filed Electronically
23.1 Consent of Hinshaw & Culbertson (included in Filed Electronically
Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP, Filed Electronically
independent auditors.
-7-
EXHIBIT 4.1
RSI SYSTEMS, INC.
1994 STOCK PLAN
<PAGE>
TABLE OF CONTENTS
Section Page
- --------------------------------------------------------------------------------
SECTION 1. General Purpose of Plan; Definitions............................. 1
SECTION 2. Administration................................................... 2
SECTION 3. Stock Subject to Plan............................................ 3
SECTION 4. Eligibility...................................................... 4
SECTION 5. Stock Options.................................................... 4
SECTION 6. Restricted Stock................................................. 8
SECTION 7. Transfer, Leave of Absence, etc.................................. 9
SECTION 8. Amendments and Termination....................................... 10
SECTION 9. Unfunded Status of Plan.......................................... 10
SECTION 10. General Provisions.............................................. 10
SECTION 11. Effective Date of Plan.......................................... 12
<PAGE>
RSI SYSTEMS, INC.
1994 STOCK PLAN
SECTION 1. General Purpose of Plan; Definitions.
The name of this plan is the RSI Systems, Inc. 1994 Stock Plan (the
"Plan"). The purpose of the Plan is to enable RSI Systems, Inc. (the "Company")
and its Subsidiaries to retain and attract executives and other key employees
and non-employee directors who contribute to the Company's success by their
ability, ingenuity and industry, and to enable such individuals to participate
in the long-term success and growth of the Company by giving them a proprietary
interest in the Company.
For purposes of the Plan, the following terms shall be defined as
set forth below:
a. "Board" means the Board of Directors of the Company.
b. "Cause" means a felony conviction of a participant or
the failure of a participant to contest prosecution for
a felony, or a participant's willful misconduct or
dishonesty, any of which is harmful to the business or
reputation of the Company.
c. "Code" means the Internal Revenue Code of 1986, as
amended.
d. "Committee" means the Committee referred to in Section 2
of the Plan. If at any time no Committee shall be in
office, then the functions of the Committee specified in
the Plan shall be exercised by the Board, unless the
Plan specifically states otherwise.
e. "Company" means RSI Systems, Inc., a corporation
organized under the laws of the State of Minnesota (or
any successor corporation).
f. "Disability" means permanent and total disability as
determined by the Committee.
g. "Disinterested Person" shall have the meaning set forth
in Rule 16b-3(d)(3) as promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of
1934, or any successor definition adopted by the
Commission.
h. "Early Retirement" means retirement, with consent of the
Committee at the time of retirement, from active
employment with the Company and any Subsidiary or Parent
Corporation of the Company.
i. "Fair Market Value" means the value of the Stock on a
given date as determined by the Committee in accordance
with the applicable Treasury Department
<PAGE>
regulations under Section 422 of the Code with respect
to "incentive stock options."
j. "Incentive Stock Option" means any Stock Option intended
to be and designated as an "Incentive Stock Option"
within the meaning of Section 422 of the Code.
k. "Non-Employee Director" means any member of the Board
who is not an employee of the Company, any Parent
Corporation or Subsidiary.
1. "Non-Qualified Stock Option" means any Stock Option that
is not an Incentive Stock Option, and is intended to be
and is designated as a "NonQualified Stock Option."
m. "Normal Retirement" means retirement from active
employment with the Company and any Subsidiary or Parent
Corporation of the Company on or after age 60.
n. "Parent Corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending
with the Company if each of the corporations (other than
the Company) owns stock possessing 50% or more of the
total combined voting power of all classes of stock in
one of the other corporations in the chain.
o. "Restricted Stock" means an award of shares of Stock
that are subject to restrictions under Section 6 below.
p. "Retirement" means Normal Retirement or Early
Retirement.
q. "Stock" means the Common Stock of the Company.
r. "Stock Option" means any option to purchase shares of
Stock granted pursuant to Section 5 below.
s. "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning
with the Company if each of the corporations (other than
the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting
power of all classes of stock in one of the other
corporations in the chain.
SECTION 2. Administration.
The Plan shall be administered by the Board of Directors or by a
Committee of not less than three Disinterested Persons, who shall be appointed
by the Board of Directors of the Company and who shall serve at the pleasure of
the Board.
2
<PAGE>
The Committee shall have the power and authority to grant to
eligible employees, pursuant to the terms of the Plan: (i) Stock Options or (ii)
Restricted Stock.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the
Company and its Subsidiaries to whom Stock Options
and/or Restricted Stock awards may from time to time be
granted hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, or Restricted
Stock awards, or a combination of the foregoing, are to
be granted hereunder;
(iii) to determine the number of shares to be covered by each
such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted
hereunder (including, but not limited to, any
restriction on any Stock Option or other award and/or
the shares of Stock relating thereto); and
(v) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with
respect to an award under this Plan shall be deferred
either automatically or at the election of the
participant.
The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable; to interpret the terms and provisions
of the Plan and any award issued under the Plan (and any agreements relating
thereto); and to otherwise supervise the administration of the Plan. The
Committee may delegate its authority to officers of the Company for the purpose
of selecting employees who are not officers of the Company for purposes of (i)
above.
All decisions made by the Committee pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
Plan participants.
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 900,000. Such shares may consist, in whole
or in part, of authorized and unissued shares.
Subject to paragraph (b)(iv) of Section 6 below, if any shares that
have been optioned ceased to be subject to Stock Options, or if any shares
subject to any Restricted Stock award granted hereunder are forfeited or such
award otherwise terminates without a payment being
3
<PAGE>
made to the participant, such shares shall again be available for distribution
in connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding options granted under the Plan, and in the number of
shares subject to Restricted Stock awards granted under the Plan as may be
determined to be appropriate by the Committee, in its sole discretion, provided
that the number of shares subject to any award shall always be a whole number.
SECTION 4. Eligibility.
Officers, other key employees of the Company and Subsidiaries and
NonEmployee Directors, and consultants and other persons having a contractual
relationship with the Company or its Subsidiaries who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Company and its Subsidiaries are eligible to be granted Stock Options or
Restricted Stock awards under the Plan. The optionees and participants under the
Plan shall be selected from time to time by the Committee, in its sole
discretion, from among those eligible, and the Committee shall determine, in its
sole discretion, the number of shares covered by each award.
SECTION 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive Stock
Options shall be granted under the Plan after October 31, 2004.
The Committee shall have the authority to grant any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of options.
To the extent that any option does not qualify as an Incentive Stock Option, it
shall constitute a separate NonQualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of
this Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Option as
an Incentive Stock Option, provided the optionee consents in writing to the
modification or amendment.
4
<PAGE>
Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant.
In no event shall the option price per share of Stock purchasable under an
Incentive Stock Option be less than 100% of the Fair Market Value of the Stock
on the date of the grant of the option. If an employee owns or is deemed to own
(by reason of the attribution rules applicable under Section 425(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation or Subsidiary and an Incentive Stock Option is
granted to such employee, the option price shall be no less than 110% of the
Fair Market Value of the Stock on the date the option is granted.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 425(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
(c) Exercisability. Stock Options shall be exercisable at such time
or times as determined by the Committee at or after grant. If the Committee
provides, in its discretion, that any option is exercisable only in
installments, the Committee may waive such installment exercise provisions at
any time. Notwithstanding anything contained in the Plan to the contrary, in the
event of the sale by the Company of substantially all of its assets and the
consequent discontinuance of its business, or in the event of a merger,
exchange, consolidation or liquidation of the Company, the Board shall, in its
sole discretion, in connection with the Board's adoption of the plan for sale,
merger, exchange, consolidation or liquidation, provide for one or more of the
following: (i) the acceleration of the exercisability of any or all outstanding
Stock Options; (ii) the complete termination of this Plan and cancellation of
outstanding Stock Options not exercised prior to a date specified by the Board
(which date shall give optionees a reasonable period of time in which to
exercise vested options prior to the effectiveness of such sale, merger,
exchange, consolidation or liquidation); and (iii) the continuance. of the Plan
with respect to the exercise of options which were outstanding as of the date of
adoption by the Board of such plan for sale, merger, exchange, consolidation or
liquidation and provide to optionees holding such options the right to exercise
their respective options as to an equivalent number of shares of stock of the
corporation succeeding the Company by reason of such sale, merger, exchange,
consolidation or liquidation. The grant of an option pursuant to the Plan shall
not limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, exchange or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
5
<PAGE>
(d) Method of Exercise. Stock Options may be exercised in whole or
in part at any time during the option period by giving written notice of
exercise to the Company specifying the number of shares to be purchased. Such
notice shall be accompanied by payment in full of the purchase price, either by
certified or bank check, or by any other form of legal consideration deemed
sufficient by the Committee and consistent with the Plan's purpose and
applicable law, including promissory notes or a properly executed exercise
notice together with irrevocable instructions to a broker acceptable to the
Company to promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price. As determined by the Committee, in its sole
discretion, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee or, in the case of the exercise
of a NonQualified Stock Option or Restricted Stock subject to an award hereunder
(based, in each case, on the Fair Market Value of the Stock on the date the
option is exercised, as determined by the Committee), provided, however, that,
in the case of an Incentive Stock Option, the right to make a payment in the
form of already owned shares may be authorized only at the time the option is
granted, and provided further that in the event payment is made in the form of
shares of Restricted Stock award, the optionee will receive a portion of the
option shares in the form of, and in an amount equal to, the Restricted Stock
award tendered as payment by the optionee. If the terms of an option so permit,
an optionee may elect to pay all or part of the option exercise price by having
the Company withhold from the shares of Stock that would otherwise be issued
upon exercise that number of shares of Stock having a Fair Market Value equal to
the aggregate option exercise price for the shares with respect to which such
election is made. No shares of Stock shall be issued until full payment therefor
has been made. An optionee shall generally have the rights to dividends and
other rights of a shareholder with respect to shares subject to the option when
the optionee has given written notice of exercise, has paid in full for such
shares, and, if requested, has given the representation described in paragraph
(a) of Section 10.
(e) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionees lifetime, only by the optionee.
(f) Termination by Death. If an optionees employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, the
Stock Option may thereafter be immediately exercised, to the extent then
exercisable (or on such accelerated basis as the Committee shall determine at or
after grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of six (6) months (or such
shorter period as the Committee shall specify at grant) from the date of such
death or until the expiration of the stated term of the option, whichever period
is shorter.
(g) Termination by Reason of Disability. If an optionees employment
by the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of termination due to Disability
(or on such accelerated basis as the Committee shall determine at or after
grant), but may not be exercised after six (6) months (or such shorter period as
the
6
<PAGE>
Committee shall specify at grant) from the date of such termination of
employment or the expiration of the stated term of the option, whichever period
is the shorter. In the event of termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, the
option will thereafter be treated as a Non-Qualified Stock Option.
(h) Termination by Reason of Retirement. If an optionees employment
by the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement, any Stock Option held by such optionee may thereafter be exercised
to the extent it was exercisable at the time of such Retirement, but may not be
exercised after six (6) months (or such shorter period as Committee shall
specify at grant) from the date of such termination of employment or the
expiration of the stated term of the option, whichever period is the shorter. In
the event of termination of employment by reason of Retirement, if an Incentive
Stock Option is exercised after the expiration of the exercise periods that
apply for purposes of Section 422 of the Code, the option will thereafter be
treated as a Non-Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee,
if an optionees employment by the Company and any Subsidiary or Parent
Corporation terminates for any reason other than death, Disability or
Retirement, the Stock Option shall thereupon terminate, except that, if the
optionee is involuntarily terminated without Cause by the Company and any
Subsidiary or Parent Corporation, the option may be exercised to the extent it
was exercisable at such termination for the lesser of three months (or such
shorter or longer period as the Committee may specify at the time of grant) or
the balance of the option's term.
(j) Annual Limit on Incentive Stock Options. The aggregate Fair
Market Value (determined as of the time the Stock Option is granted) of the
Common Stock with respect to which an Incentive Stock Option under this Plan or
any other plan of the Company and any Subsidiary or Parent Corporation is
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000.
(k) Non-Employee Directors. Each Non-Employee Director shall, as of
the date of the meeting in which such Non-Employee Director is first elected to
the Board of Directors, automatically be granted an Option to purchase 10,000
shares of Stock at an option price per share equal to 100% of the Fair Market
Value of a share of Stock on such date. All such Options shall be designated as
Non-Qualified Options and shall be subject to the same terms and provisions as
are then in effect with respect to the granting of Non-Qualified Options to
officers.and employees of the Company, except that (i) the term of each such
Option shall be ten years, which term shall not expire upon,the termination of
service as a director, and (ii) the Option shall become exercisable as to 25% of
the total shares subject to the Option after each consecutive three-month period
during a period of one year following the date of grant. After the year a
Non-Employee Director is first elected, such Non-Employee Director shall receive
a Non-Qualified Stock Option to purchase 5,000 shares, at an option price equal
to 100% of the Fair Market Value of a share of Stock on such date, each year in
connection with the
7
<PAGE>
shareholders meeting where directors are elected, even if such Non-Employee
Director will not be elected at such meeting but continues to serve as a
Non-Employee Director.
SECTION 6. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee shall
determine the officers and key employees of the Company and Subsidiaries to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards. The
Committee may also condition the grant of Restricted Stock upon the attainment
of specified performance goals. The provisions of Restricted Stock awards need
not be the same with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of an award
of shares of Restricted Stock shall not have any rights with respect to such
award, unless and until such recipient has executed an agreement evidencing the
award and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate
in respect of shares of Restricted Stock awarded under the Plan.
Such certificate shall be registered in the name of the participant,
and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially
in the following form:
"The transferability of this certificate and the
shares of stock represented hereby are subject to
the terms and conditions (including forfeiture) of
the RSI Systems, Inc. 1994 Stock Plan and an
Agreement entered into between the registered owner
and RSI Systems, Inc. Copies of such Plan and
Agreement are on file in the offices of RSI
Systems, Inc., 7400 Metro Boulevard, Suite 475,
Minneapolis, MN 55424."
(ii) The Committee shall require that the stock
certificates evidencing such shares be held in custody by the
Company until the restrictions thereon shall have lapsed, and that,
as a condition of any Restricted Stock award, the participant shall
have delivered a stock power, endorsed in blank, relating to the
Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to the Plan shall be subject to the following restrictions and
conditions:
8
<PAGE>
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the
date of such award (the "Restriction Period"), the participant shall
not be permitted to sell, transfer, pledge or assign shares of
Restricted Stock awarded under the Plan. In no event shall the
Restriction Period be less than one (1) year. Within these limits,
the Committee may provide for the lapse of such restrictions in
installments where deemed appropriate.
(ii) Except as provided in paragraph (c)(i) of this
Section 6, the participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the shares and the right to receive any
cash dividends. The Committee, in its sole discretion, may permit or
require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested in additional shares of
Restricted Stock (to the extent shares are available under Section 3
and subject to paragraph (O of Section 10). Certificates for shares
of unrestricted Stock shall be delivered to the grantee promptly
after, and only after, the period of forfeiture shall have expired
without forfeiture in respect of such shares of Restricted Stock.
(iii) Subject to the provisions of the award agreement
and paragraph (c)(iv) of this Section 6, upon termination of
employment for any reason during the Restriction Period, all shares
still subject to restriction shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause),
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the
Committee may, in its sole discretion, when it finds that a waiver
would be in the best interest of the Company, waive in whole or in
part any or all remaining restrictions with respect to such
participant's shares of Restricted Stock.
(v) Notwithstanding the foregoing, all restrictions with
respect to any participant's shares of Restricted Stock shall lapse,
on the date determined by the Committee, prior to, but in no event
more than sixty (60) days prior to, the occurrence of any of the
following events: (i) dissolution or liquidation of the Company,
other than in conjunction with a bankruptcy of the Company or any
similar occurrence, (ii) any merger, consolidation, acquisition,
separation, reorganization, or similar occurrence, where the Company
will not be the surviving entity or (iii) the transfer of
substantially all of the assets of the Company or 75% or more of the
outstanding Stock of the Company.
SECTION 7. Transfer, Leave of Absence, etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
9
<PAGE>
(a) a transfer of an employee from the Company to a Parent
Corporation or Subsidiary, or from a Parent Corporation or Subsidiary to the
Company, or from one Subsidiary to another;
(b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.
SECTION 8. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made (i) which would impair
the rights of an optionee or participant under a Stock Option, Restricted Stock
or other Stock-based award theretofore granted, without the optionees or
participant's consent, or (ii) which without the approval of the stockholders of
the Company would cause the Plan to no longer comply with Rule 16b-3 under the
Securities Exchange Act of 1934, Section 422 of the Code or any other regulatory
requirements.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively, but no such amendment shall impair the
rights of any holder without his or her consent except to the extent authorized
under the Plan. The Committee may also substitute new Stock Options for
previously granted options, including previously granted options having higher
option prices.
SECTION 9. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet,made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
SECTION 10. General Provisions.
(a) The Committee may require each person purchasing shares pursuant
to a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee
10
<PAGE>
is acquiring the shares without a view to distribution thereof. The certificates
for such shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan
pursuant to any Restricted Stock or other Stock-based awards shall be subject to
such stock-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the Securities
and Exchange Commission, an y stock exchange upon which the Stock is then
listed, and any applicable Federal or state securities laws, and the Committee
may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted Stock
and other Stock-based awards under the Plan (other than Stock Options) are not
required to make any payment or provide consideration other than the rendering
of services.
(c) Nothing contained in this Plan shall prevent the Board of
Directors from adopting other or additional compensation arrangements, subject
to stockholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases. The
adoption of the Plan shall not confer upon any employee of the Company or any
Subsidiary any right to continued employment with the Company or a Subsidiary,
as the case may be, nor shall it interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of any of its employees at
any time.
(d) Each participant shall, no later than the date as of which any
part of the value of an award first becomes includible as compensation in the
gross income of the participant for Federal income tax purposes, pay to the
Company, or make arrangements satisfactory to the Committee regarding payment
of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to the award. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements and the Company and
Subsidiaries shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the participant. With
respect to any award under the Plan, if the terms of such award so permit, a
participant may elect by written notice to the Company to satisfy part or all of
the withholding tax requirements associated with the award by (i) authorizing
the Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 10(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
(e) At the time of grant, the Committee may provide in connection
with any grant made under this Plan that the shares of Stock received as a
result of such grant shall be subject to a repurchase right in favor of the
Company, pursuant to which the participant shall be required to offer to the
Company upon termination of employment for any reason any shares
11
<PAGE>
that the participant acquired under the Plan, with the price being the then Fair
Market Value of the Stock or, in the case of a termination for Cause, an amount
equal to the cash consideration paid for the Stock, subject to such other terms
and conditions as the Committee may specify at the time of grant. The Committee
may, at the time of the grant of an award under the Plan, provide the Company
with the right to repurchase, or require the forfeiture of, shares of Stock
acquired pursuant to the Plan by any participant who, at any time within two
years after termination of employment with the Company, directly or indirectly
competes with, or is employed by a competitor of, the Company.
(f) The reinvestment of dividends in additional Restricted Stock (or
other types of Plan awards) at the time of any dividend payment shall only be
permissible if the Committee (or the Company's chief financial officer)
certifies in writing that under Section 3 sufficient shares are available for
such reinvestment (taking into account then outstanding Stock Options and other
Plan awards).
SECTION 11. Effective Date of Plan.
The Plan shall be effective on the date it is approved by a vote of
the holders of a majority of the Stock present and entitled to vote at a meeting
of the Company's shareholders.
12
Exhibit 5.1
Hinshaw & Culbertson Letterhead
August 31, 1998
RSI Systems, Inc.
5555 W. 78th Street
Minneapolis, MN 55439
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-8 that you intend to
file with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended, for the purpose of registering 900,000 shares of Common
Stock, $.01 par value (the "Shares") of RSI Systems, Inc., a Minnesota
corporation (the "Company"), initially issuable upon the exercise of stock
options granted pursuant to the RSI Systems, Inc. 1994 Stock Plan adopted
November, 1994 (the "Plan"), as amended.
We have examined such documents and have reviewed such questions of law as we
have considered necessary and appropriate for the purposes of the opinion set
forth below.
In rendering our opinion set forth below, we have assumed the authenticity of
all documents submitted to us as originals, the genuineness of all signatures
and the conformity to authentic originals of all documents submitted to us as
copies. We have also assumed the legal capacity for all purposes relevant hereto
of all natural persons and, with respect to all parties to agreements or
instruments relevant hereto other than the Company, that such parties had the
requisite power and authority (corporate or otherwise) to execute, deliver and
perform such agreements or instruments, that such agreements or instruments have
been duly authorized by all requisite action (corporate or otherwise), executed
and delivered by such parties and that such agreements or instruments are the
valid, binding and enforceable obligations of such Parties. As to questions of
fact material to our opinions, we have relied upon certificates of officers of
the Company and of public officials.
Based on the foregoing, we are of the opinion that the Shares have been duly
authorized and, upon issuance, delivery and payment therefor in accordance with
the terms of the Plan, will be validly issued, fully paid and nonassessable.
Our opinion expressed above is limited to the laws of the State of Minnesota.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Hinshaw & Culbertson
By: /s/ Robert R. Ribeiro
Robert R. Ribeiro
EXHIBIT 23.2
Independent Auditors' Consent
The Board of Directors
RSI Systems, Inc.
We consent to the use of our report incorporated herein by reference in this
Form S-8 Registration Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 26, 1998
