Stock-based Compensation

9 Months Ended

Sep. 30, 2011

Share-based Compensation [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments

Stock-based Compensation

On June 15, 2011 the Company's stockholders approved an amendment to the RadiSys Corporation 2007 Stock Plan. The amendment increased the number of shares of the Company's common stock reserved and authorized for issuance under the plan from 3.7 million to 4.7 million.

On May 3, 2011 the Company registered 600,000 shares of its common stock under the RadiSys Corporation Inducement Stock Plan for CCPU Employees (the "CCPU Plan"). The CCPU Plan was adopted without shareholder approval in reliance upon the exception provided under Nasdaq Listing Rule 5635(c)(4) relating to awards granted in connection with the hiring of new employees, including grants to transferred employees in connection with a merger or acquisition. Awards under the CCPU Plan are made only to employees of Continuous Computing or its subsidiaries and became effective upon the completion of the acquisition. The CCPU Plan provides for the issuance of stock options, restricted shares and restricted stock units.

The Company assumed the stock plans of Continuous Computing during the three and nine months ended September 30, 2011. Under the terms of the Company's merger agreement with Continuous Computing, options outstanding under these plans were converted to options to purchase shares of the Company's common stock. Options issued under these plans vest over four years from the original grant date and have an expiration date of 10 years from the original grant date. The exercise price of each converted option is equal to the product of the original exercise price and the original number of options granted divided by the number of converted options received. These stock plans have been suspended and no future awards will be granted under these plans. A total of 322,000 shares of common stock have been authorized and issued under the Continuous Computing plans.

In accordance with the merger agreement the options were required to be converted into multiple awards on the acquisition date, with the resulting awards being non-contingent and contingent options. Both the non-contingent and contingent awards continue to vest under the original service conditions of the awards. However, the contingent awards contain post-vesting restrictions tied to payment of certain merger contingencies such as the earn-out and indemnification agreements. The assumed options were valued using a Black-Scholes option-pricing model. In addition, we utilized the Finnerty Asian Put Option Approach to estimate the discount associated with the post-vesting restrictions for the contingent options. The resulting discount applied was 10%.

The following table summarizes awards granted and assumed under all of the Company's stock plans (in thousands):

	For the Three Months Ended		For the Nine Months Ended
	September 30,		September 30,
	2011	2010	2011	2010
Stock options	242	20	303	78
Restricted stock	497	79	693	113
Continuous Computing assumed options	322	—	322	—
Total	1,061	99	1,318	191

Stock-based compensation was recognized and allocated as follows (in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
Cost of sales	$	217	$	194	$	572	$	640
Research and development	464		302		1,070		1,010
Selling, general and administrative	1,220		944		2,396		3,230
Total	$	1,901	$	1,440	$	4,038	$	4,880