10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 0-26844

RADISYS CORPORATION

(Exact name of registrant as specified in its charter)

OREGON	93-0945232
(State or other jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

5445 N.E. Dawson Creek Drive

Hillsboro, OR 97124

(Address of principal executive offices, including zip code)

(503) 615-1100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨                Accelerated filer  þ                Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act) Yes  ¨    No  þ

Number of shares of common stock outstanding as of November 5, 2007: 22,192,648

RADISYS CORPORATION

FORM 10-Q

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	3
Consolidated Statements of Operations (unaudited) – Three and Nine Months Ended September 30, 2007 and 2006	3
Consolidated Balance Sheets – September 30, 2007 (unaudited) and December 31, 2006	4
Consolidated Statement of Changes in Shareholders’ Equity (unaudited) – Nine Months Ended September 30, 2007	5
Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended September 30, 2007 and 2006	6
Notes to Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures About Market Risk	29
Item 4. Controls and Procedures	30
PART II. OTHER INFORMATION
Item 1A. Risk Factors	30
Item 5. Other Events	32
Item 6. Exhibits	32
Signatures	34

2

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

RADISYS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2007			2006			2007			2006
Revenues	$	83,630		$	81,430		$	226,013		$	231,780
Cost of sales:
Cost of sales		60,907			60,744			165,348			169,767
Amortization of purchased technology		3,532			—			9,999			—
Total cost of sales		64,439			60,744			175,347			169,767
Gross margin		19,191			20,686			50,666			62,013
Research and development		11,775			10,381			34,084			30,222
Selling, general and administrative		11,889			10,414			35,146			28,103
Intangible assets amortization		1,078			1,508			3,124			1,969
In-process research and development charge		—			14,000			—			14,000
Restructuring and other charges (reversals)		(141	)		—			1,391			(174	)
Loss from operations		(5,410	)		(15,617	)		(23,079	)		(12,107	)
Interest expense		(416	)		(432	)		(1,279	)		(1,301	)
Interest income		1,690			2,630			4,946			7,501
Other income (expense), net		(30	)		(32	)		(151	)		443
Loss before income tax provision (benefit)		(4,166	)		(13,451	)		(19,563	)		(5,464	)
Income tax provision (benefit)		(1,720	)		(121	)		(4,401	)		2,081
Net loss	$	(2,446	)	$	(13,330	)	$	(15,162	)	$	(7,545	)
Net loss per share:
Basic	$	(0.11	)	$	(0.62	)	$	(0.70	)	$	(0.36	)
Diluted	$	(0.11	)	$	(0.62	)	$	(0.70	)	$	(0.36	)
Weighted average shares outstanding:
Basic		21,937			21,336			21,808			21,019
Diluted		21,937			21,336			21,808			21,019

The accompanying notes are an integral part of these financial statements.

3

RADISYS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

	September 30, 2007			December 31, 2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	30,245		$	23,734
Short-term investments, net		70,000			102,250
Accounts receivable, net		60,255			42,549
Other receivables		2,304			3,782
Inventories, net		26,381			35,184
Assets held for sale		644			3,497
Other current assets		8,416			4,609
Deferred tax assets		5,779			5,779
Total current assets		204,024			221,384
Property and equipment, net		10,738			11,075
Goodwill		68,073			67,183
Intangible assets, net		45,092			42,935
Long-term investments, net		10,000			10,000
Long-term deferred tax assets		38,482			24,531
Other assets		4,115			4,546
Total assets	$	380,524		$	381,654
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	42,924		$	39,699
Accrued wages and bonuses		5,913			5,995
Accrued interest payable		516			222
Accrued restructuring		508			329
Convertible subordinated notes, net		—			2,410
Other accrued liabilities		11,441			11,154
Total current liabilities		61,302			59,809
Long-term liabilities:
Convertible senior notes, net		97,513			97,412
Other long-term liabilities		2,714			978
Total long-term liabilities		100,227			98,390
Total liabilities		161,529			158,199
Shareholders’ equity:
Preferred stock - $.01 par value, 10,000 shares authorized; none issued or outstanding		—			—
Common stock - no par value, 100,000 shares authorized; 22,196 and 21,835 shares issued and outstanding at September 30, 2007 and December 31, 2006		223,625			212,887
Retained earnings (deficit)		(8,895	)		6,555
Accumulated other comprehensive income:
Cumulative currency translation adjustments		4,265			4,013
Total shareholders’ equity		218,995			223,455
Total liabilities and shareholders’ equity	$	380,524		$	381,654

The accompanying notes are an integral part of these financial statements.

4

RADISYS CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands, unaudited)

	Common stock					Accumulated Translation Adjustments			Retained Earnings (Deficit)			Total			Total Comprehensive Loss (1)
	Shares		Amount
Balances, December 31, 2006	21,835		$	212,887		$	4,013		$	6,555		$	223,455
Shares issued pursuant to benefit plans	322			3,614			—			—			3,614
Stock-based compensation associated with employee benefit plans	—			7,425			—			—			7,425
Restricted shares granted, net of cancellations	61			—			—			—			—
Net settlement of restricted shares	(22	)		(301	)								(301	)
Translation adjustments	—			—			284			—			284			284
Recognition of accumulated foreign currency translation adjustment due to liquidation of subsidiary	—			—			(32	)		—			(32	)		(32	)
Cumulative effect of adjustment resulting from the adoption of accounting policy (note 12)	—			—			—			(288	)		(288	)
Net loss for the period	—			—			—			(15,162	)		(15,162	)		(15,162	)
Balances, September 30, 2007	22,196		$	223,625		$	4,265		$	(8,895	)	$	218,995
Comprehensive loss for the nine months ended September 30, 2007															$	(14,910	)

(1) For the three months ended September 30, 2007, comprehensive loss amounted to $2.2 million and consisted of net loss for the period of $2.4 million, net gains from currency translation adjustments of $240 thousand and a net loss from the liquidation of a subsidiary of $32 thousand. For the three months ended September 30, 2006, other comprehensive loss amounted to $13.3 million and consisted of the net loss for the period of $13.3 million and net losses from translation adjustments of $7 thousand. For the nine months ended September 30, 2006, other comprehensive loss amounted to $7.3 million and consisted of the net loss for the period of $7.5 million and net gains from translation adjustments of $225 thousand.

The accompanying notes are an integral part of these financial statements.

5

RADISYS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

	For the Nine Months Ended September 30,
	2007			2006
Cash flows from operating activities:
Net loss	$	(15,162	)	$	(7,545	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		19,245			6,155
In-process research and development charge		—			14,000
Inventory valuation allowance		5,179			3,505
Deferred income taxes		(4,976	)		1,667
Stock-based compensation expense		7,425			4,465
Other		118			(95	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(17,690	)		(12,898	)
Other receivables		1,478			1,788
Inventories		3,624			(642	)
Other current assets		1,571			(629	)
Accounts payable		3,209			15,140
Accrued restructuring		179			(859	)
Accrued interest payable		294			308
Accrued wages and bonuses		(127	)		(496	)
Other accrued liabilities		1,616			2,006
Net cash provided by operating activities		5,983			25,870
Cash flows from investing activities:
Proceeds from sale or maturity of held-to-maturity investments		—			39,750
Purchase of held-to-maturity investments		—			(9,997	)
Proceeds from the sale of auction rate securities		50,100			113,900
Purchase of auction rate securities		(17,850	)		(122,950	)
Capital expenditures		(3,759	)		(4,098	)
Acquisition of Convedia, net of cash acquired		—			(106,300	)
Acquisition of MCPD		(32,032	)		—
Proceeds from the sale of property and equipment		3,032			74
Purchase of long-term assets		(106	)		(523	)
Net cash used in investing activities		(615	)		(90,144	)
Cash flows from financing activities:
Early extinguishments of convertible subordinated notes		—			(100	)
Final payment of convertible subordinated notes		(2,416	)		—
Net resettlement of restricted shares		(301	)		—
Proceeds from issuance of common stock		3,614			10,931
Net cash provided by financing activities		897			10,831
Effect of exchange rate changes on cash		246			300
Net increase (decrease) in cash and cash equivalents		6,511			(53,143	)
Cash and cash equivalents, beginning of period		23,734			90,055
Cash and cash equivalents, end of period	$	30,245		$	36,912

The accompanying notes are an integral part of these financial statements.

6

RADISYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Significant Accounting Policies

RadiSys Corporation (the “Company” or “RadiSys”) has adhered to the accounting policies set forth in its Annual Report on Form 10-K for the year ended December 31, 2006 in preparing the accompanying interim consolidated financial statements. The preparation of these statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Additionally, the accompanying financial data as of September 30, 2007 and for the three and nine months ended September 30, 2007 and 2006 has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

The financial information included herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for interim periods.

For the three and nine months ended September 30, 2007, there have been no significant changes to these accounting policies.

Reclassifications

Certain reclassifications have been made to amounts in prior years to conform to current year presentation.

With the acquisition of Convedia on September 1, 2006 RadiSys acquired technology-related intangible assets that are directly incorporated into the line of products included in this acquisition. From the date of acquisition through the period ended June 30, 2007 the Company has recorded amortization of these and other previously purchased intangible assets to a separate line item within operating expenses. As these technologies contribute directly to the revenue generating process the Company has begun to classify the amortization of these intangible assets to cost of sales. The year to date consolidated statement of operations for the period ended September 30, 2007 has been reclassified to reflect this change. Amortization of intangible assets for prior periods is considered immaterial and has not been adjusted.

Recent Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value accounting but does not affect existing standards, which require assets or liabilities to be carried at fair value. Under SFAS 159, a company may elect to use fair value to measure accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees and issued debt. Other eligible items include firm commitments. SFAS 159 is effective for fiscal years ending after November 15, 2007. The Company has completed its evaluation of the impact of SFAS 159 and has determined not to adopt its provisions.

In June 2007, the FASB also ratified EITF 07-3, “Accounting for NonRefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities” (“EITF 07-3”). EITF 07-3 requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and capitalized and recognized as an expense as the goods are delivered or the related services are performed. EITF 07-3 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. The Company is currently evaluating the impact, if any, that the adoption of EITF 07-3 will have on its financial statements.

7

Note 2 — Stock-based Compensation

On May 15, 2007, the Shareholders approved the 2007 Stock Plan (the “Plan”) to replace the 1995 Stock Incentive Plan, the 2001 Nonqualified Stock Option Plan and the RadiSys Corporation Stock Plan for Convedia Employees. The Plan provides the Board of Directors broad discretion in creating employee equity incentives. Unless otherwise stipulated in the plan document, the Board of Directors, at their discretion, determines stock option exercise prices, which may not be less than the fair market value of RadiSys common stock at the date of grant, vesting periods and the expiration periods which are a maximum of 10 years from the date of grant. Under the Plan, 3,200,000 shares of common stock have been reserved and authorized for issuance to any non-employee directors and employees, with a maximum of 400,000 shares in any calendar year to one participant. The Plan provides for the issuance of stock options, restricted shares, restricted stock units and performance-based awards.

During the second quarter of 2007, 545 thousand stock options and 167 thousand restricted stock units were issued to non-employee directors and employees under the Plan. During the third quarter of 2007, the number of stock options and restricted stock units issued was not significant.

For the three and nine months ended September 30, 2007 and 2006, stock-based compensation was recognized and allocated as follows (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2007		2006		2007		2006
Cost of sales	$	195	$	224	$	727	$	640
Research and development		716		452		2,030		1,203
Selling, general and administrative		1,633		1,098		4,668		2,622
Total		2,544		1,774		7,425		4,465

Note 3 — Investments

Short-term and long-term investments consisted of the following (in thousands):

	September 30, 2007		December 31, 2006
Short-term investments, classified as available-for-sale	$	70,000	$	102,250
Long-term held-to-maturity investments	$	10,000	$	10,000

The Company invests excess cash in debt instruments of the U.S. Government and its agencies, high-quality corporate issuers and municipalities. The Company’s investments in the debt instruments of municipalities primarily consist of investments in auction rate securities. Auction rate securities have been classified as available-for-sale short-term investments. Available-for-sale securities are recorded at fair value, and unrealized holding gains and losses are recorded, net of tax, as a separate component of accumulated other comprehensive income. For the three and nine months ended September 30, 2007 and 2006, the Company did not recognize any gains or losses on the sale of available-for-sale investments as the fair value of these investments approximated their carrying value. The Company incurred no unrealized gains or losses on investments classified as available-for-sale as of September 30, 2007 or December 31, 2006.

Note 4 — Accounts Receivable and Other Receivables

Accounts receivable consists of trade accounts receivable. Accounts receivable balances consisted of the following (in thousands):

	September 30, 2007			December 31, 2006
Accounts receivable, gross	$	61,120		$	43,407
Less: allowance for doubtful accounts		(865	)		(858	)
Accounts receivable, net	$	60,255		$	42,549

The Company recorded additional provisions for allowance for doubtful accounts of $40 thousand and $46 thousand during the three and nine months ended September 30, 2007, respectively. The Company recorded a $200 thousand provision for allowance for doubtful accounts during the three and nine months ended September 30, 2006.

8

As of September 30, 2007 and December 31, 2006, the balance in other receivables was $2.3 million and $3.8 million, respectively. Other receivables consisted primarily of non-trade receivables, including receivables for inventory sold to our contract manufacturing partners and sub-lease billings. Sales to the Company’s contract manufacturing partners are based on terms and conditions similar to the terms offered to the Company’s regular customers. There is no revenue recorded associated with non-trade receivables.

Note 5 — Inventories

Inventories consisted of the following (in thousands):

	September 30, 2007			December 31, 2006
Raw materials	$	30,172		$	32,034
Work-in-process		4,107			3,138
Finished goods		3,710			8,624
		37,989			43,796
Less: inventory valuation allowance		(11,608	)		(8,612	)
Inventories, net	$	26,381		$	35,184

During the three months ended September 30, 2007 and 2006, the Company recorded provisions for excess and obsolete inventory of $1.5 million and $1.2 million, respectively. During the nine months ended September 30, 2007 and 2006, the Company recorded provisions for excess and obsolete inventory of $5.2 million and $3.5 million, respectively.

Note 6 — Long-lived Assets Held for Sale

Beginning in 2001, the Company made it part of its strategic plan to significantly reduce its costs. As part of this plan, the Company began in 2004 to outsource the manufacture of most of its products. Through various restructuring activities, facilities requirements for manufacturing and other activities in the Hillsboro, Oregon location have decreased significantly. As a result, management decided to transfer operations currently located in one of the Company’s buildings in Hillsboro, Oregon (“DC3 building”) to its other building located in Hillsboro, Oregon and its contract manufacturing partners.

In January 2006, the Company vacated the DC3 building and put it and the surrounding land, which had previously been held for future expansion, on the market for sale. The assets held for sale had a recorded value of $3.5 million, which included land with a value of $2.2 million, building and building improvements with a net value of $1.3 million, and machinery and equipment with a net value of $38 thousand. The Company classified this facility in net assets held for sale as of January 31, 2006, and as a result ceased depreciation of these assets.

In the second quarter of 2007, the Company sold the DC3 building for $2.2 million resulting in a gain of $135 thousand included in selling, general and administrative expenses in the consolidated statements of operations. During the third quarter of 2007, the Company sold one of the two remaining lots of land held for $824 thousand resulting in a gain of $77 thousand included in selling, general and administrative expenses in the consolidated statements of operations. The balance in long-lived assets held for sale as of September 30, 2007 relates to the remaining lot of land.

Note 7 — Accrued Restructuring and Other Charges

Accrued restructuring and other charges consisted of the following (in thousands):

	September 30, 2007		December 31, 2006
Fourth quarter 2006 restructuring charge	$	62	$	329
First quarter 2007 restructuring charge		—		—
Second quarter 2007 restructuring charge		446		—
Total	$	508	$	329

The Company evaluates the adequacy of the accrued restructuring and other charges on a quarterly basis. As a result, the Company records certain reclassifications and reversals to the accrued restructuring and other charges based on the results of the evaluation. The total accrued restructuring and other charges for each restructuring event are not affected by reclassifications. Reversals are recorded in the period in which the Company determines that expected restructuring and other obligations are less than the amounts accrued.

9

Fourth Quarter 2006 Restructuring

During the fourth quarter of 2006, the Company initiated a restructuring plan that included the elimination of 12 positions primarily supporting the Company’s contract manufacturing operations as a result of the termination of our relationship with one of the Company’s contract manufacturers in North America. The restructuring plan also includes closing the Company’s Charlotte, North Carolina manufacturing support office.

The following table summarizes the changes to the fourth quarter 2006 restructuring costs (in thousands):

	Employee Termination and Related Costs			Facilities
Restructuring and other costs	$	329		$	—
Balance accrued as of December 31, 2006		329			—
Additions		61			—
Expenditures		(50	)		—
Reversals		(100	)		—
Balance accrued as of March 31, 2007		240			—
Additions		52			—
Expenditures		(30	)		—
Reversals		(97	)		—
Balance accrued as of June 30, 2007		165			—
Additions		14			64
Expenditures		(172	)		(2	)
Reversals		(7	)		—
Balance accrued as of September 30, 2007	$	—		$	62

During the three months ended September 30, 2007, the Company incurred $14 thousand of additional severance and other employee-related separation costs and $64 thousand of facility-related costs to close the Charlotte, North Carolina manufacturing support office. As of September 30, 2007, all employee-related separation activities have been completed.

First Quarter 2007 Restructuring

During the first quarter of 2007, the Company incurred employee-related expenses associated with certain engineering realignments. The costs incurred in this restructuring event are associated with employee termination benefits, including severance and medical benefits. All restructuring activities were completed by September 30, 2007.

The following table summarizes the changes to the first quarter 2007 restructuring costs (in thousands):

	Employee Termination and Related Costs
Restructuring and other costs	$	120
Additions		7
Expenditures		(115	)
Balance accrued as of March 31, 2007		12
Additions		38
Balance accrued as of June 30, 2007		50
Expenditures		(43	)
Reversals		(7	)
Balance accrued as of September 30, 2007	$	—

10

Second Quarter 2007 Restructuring

During the second quarter of 2007, the Company incurred employee-related expenses associated with skill set changes for approximately 20 employees. The changes involved creating an integrated structure with our media server business along with some skill set changes in certain selling, general and administrative and engineering groups. The costs incurred in this restructuring event include employee severance and medical benefits, and associated legal costs.

The following table summarizes the changes to the second quarter 2007 restructuring costs (in thousands):

	Employee Termination and Related Costs
Restructuring and other costs	$	1,451
Expenditures		(19	)
Balance accrued as of June 30, 2007		1,432
Additions		59
Expenditures		(807	)
Reversals		(264	)
Foreign exchange loss		26
Balance accrued as of September 30, 2007	$	446

During the three months ended September 30, 2007, the Company incurred $59 thousand of additional severance and other employee-related separation costs offset by $264 thousand of reversals primarily related to lower severance costs than originally anticipated. All restructuring activities are anticipated to be completed by December 31, 2007.

Note 8 — Short-Term Borrowings

During the quarter ended March 31, 2006, the Company transferred its $20.0 million line of credit facility from its commercial bank to an investment bank. This line of credit facility has an interest rate based on the 30-day London Inter-Bank Offered Rate (“LIBOR”) plus 0.75%. The line of credit is collateralized by the Company’s non-equity investments. The market value of non-equity investments must exceed 125.0% of the borrowed facility amount. At September 30, 2007, the Company had a standby letter of credit outstanding required by one of its medical insurance carriers for $105 thousand.

As of September 30, 2007 and December 31, 2006, there were no outstanding balances on the standby letter of credit or line of credit.

Note 9 — Long-Term Liabilities

Convertible Senior Notes

During November 2003, the Company completed a private offering of $100 million in aggregate principal amount of 1.375% convertible senior notes due November 15, 2023 to qualified institutional buyers. The discount at issuance on the convertible senior notes amounted to $3 million.

Convertible senior notes are unsecured obligations convertible into the Company’s common stock and rank equally in right of payment with all existing and future obligations that are unsecured and unsubordinated. Interest on the convertible senior notes accrues at 1.375% per year and is payable semi-annually on May 15 and November 15. The notes are convertible, at the option of the holder, at any time on or prior to maturity under certain circumstances unless previously redeemed or repurchased, into shares of the Company’s common stock at a conversion price of $23.57 per share, which is equal to a conversion rate of 42.4247 shares per $1,000 principal amount of notes. The notes are convertible if (i) the closing price of the Company’s common stock on the trading day prior to the conversion date reaches 120% or more of the conversion price of the notes on such trading date, (ii) the trading price of the notes falls below 98% of the conversion value or (iii) certain other events occur. Upon conversion, the Company will have the right to deliver, in lieu of common stock, cash or a combination of cash and common stock. The Company may redeem all or a portion of the notes at its option on or after November 15, 2006 but before November 15, 2008 provided that the closing price of the Company’s common stock exceeds 130% of the conversion price for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date of the notice of the provisional redemption. On or after November 15, 2008, the Company may redeem the notes at any time. On November 15, 2008, November 15, 2013, and November 15, 2018, holders of the convertible senior

11

notes will have the right to require the Company to purchase, in cash, all or any part of the notes held by such holder at a purchase price equal to 100% of the principal amount of the notes being purchased, together with accrued and unpaid interest and additional interest, if any, up to but excluding the purchase date. The accretion of the discount on the notes is calculated using the effective interest method.

As of September 30, 2007 the Company had outstanding convertible senior notes with a face value of $100 million and a book value of $97.5 million, net of unamortized discount of $2.5 million. As of December 31, 2006, the Company had outstanding convertible senior notes with a face value of $100 million and a book value of $97.4 million, net of unamortized discount of $2.6 million. Amortization of the discount on the convertible senior notes was $34 thousand and $33 thousand for the three months ended September 30, 2007 and 2006, respectively. Amortization of the discount on the convertible senior notes was $101 thousand and $100 thousand for the nine months ended September 30, 2007 and 2006, respectively. The estimated fair value of the convertible senior notes was $93.0 million and $96.6 million at September 30, 2007 and December 31, 2006, respectively.

On October 23, 2007, the Board of Directors approved the repurchase of the $100 million principal amount of the convertible senior notes. The Company will consider the purchase of the notes on the open market or through privately negotiated transactions from time to time subject to market conditions.

Convertible Subordinated Notes

During August 2000, the Company completed a private offering of $120 million in aggregate principal amount of 5.5% convertible subordinated notes due to qualified institutional buyers. The discount at issuance on the convertible subordinated notes amounted to $3.6 million. The remaining outstanding notes of $2.4 million were paid at maturity on August 15, 2007.

The aggregate amounts payable of long-term liabilities for each of the years in the five year period ending December 31, 2011 and thereafter are as follows (in thousands):

For the Years Ending December 31,	Convertible Senior Notes
2007 (remaining three months)	$	—
2008 (A)		100,000
2009		—
2010		—
2011		—
Thereafter		—
		100,000
Less: unamortized discount		(2,487	)
Less: current portion		—
Long-term liabilities	$	97,513

(A) The Company may redeem the convertible senior notes at any time on or after November 15, 2008. On November 15, 2008, November 15, 2013, and November 15, 2018, holders of the convertible senior notes will have the right to require the Company to purchase, in cash, all or any part of the notes held by such holder at a purchase price equal to 100% of the principal amount of the notes being purchased, together with accrued and unpaid interest and additional interest, if any, up to but excluding the purchase date.

Note 10 — Commitments and Contingencies

Adverse Purchase Commitments

The Company is contractually obligated to reimburse its contract manufacturers for the cost of excess inventory used in the manufacture of the Company’s products, if there is no alternative use. This liability, referred to as adverse purchase commitments, is provided for in other accrued liabilities in the accompanying balance sheets. Estimates for adverse purchase commitments are derived from reports received on a quarterly basis from the Company’s contract manufacturers. Increases to this liability are charged to cost of goods sold. When and if the Company takes possession of inventory reserved for in this liability, the liability is transferred from other liabilities to our excess and obsolete inventory valuation allowance. Adverse purchase commitments amounted to $2.1 million and $1.9 million at September 30, 2007 and December 31, 2006, respectively. For the nine months ended September 30, 2007 and 2006, the Company recorded a net provision for adverse purchase commitments of $1.0 million.

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Guarantees and Indemnification Obligations

FASB FIN No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” (“FIN 45”) an interpretation of SFAS No. 5, 57, and 107 and rescission of FASB Interpretation No. 34, requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken by issuing the guarantee and requires additional disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees it has issued. The following is a summary of the agreements that the Company has determined are within the scope of FIN 45.

As permitted under Oregon law, the Company has agreements whereby it indemnifies its officers, directors and certain finance employees for certain events or occurrences while the officer, director or employee is or was serving in such capacity at the request of the Company. The term of the indemnification period is for the officer’s, director’s or employee’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that limits its exposure and enables the Company to recover a portion of any future amounts paid. As a result of the Company’s insurance policy coverage, management believes the estimated fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of September 30, 2007.

The Company enters into standard indemnification agreements in its ordinary course of business. Pursuant to these agreements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally our business partners or customers, in connection with patent, copyright or other intellectual property infringement claims by any third party with respect to our current products, as well as claims relating to property damage or personal injury resulting from the performance of services by us or our subcontractors. The maximum potential amount of future payments we could be required to make under these indemnification agreements is generally limited. Historically, our costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal and accordingly management believes the estimated fair value of these agreements is negligible.

The Company provides for the estimated cost of product warranties at the time it recognizes revenue. Products are generally sold with warranty coverage for a period of 12 to 24 months after shipment. Parts and labor are covered under the terms of the warranty agreement. The workmanship of our products produced by contract manufacturers is covered under warranties provided by the contract manufacturer for a specific period of time ranging from 12 to 15 months. The warranty provision is based on historical experience by product family. The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers; however, ongoing failure rates, material usage and service delivery costs incurred in correcting product failure, as well as specific product class failures out of the Company’s baseline experience affect the estimated warranty obligation. If actual product failure rates, material usage or service delivery costs differ from estimates, revisions to the estimated warranty liability would be required.

The warranty liability balance is included in other accrued liabilities in the accompanying consolidated balance sheets as of September 30, 2007 and December 31, 2006. The following is a summary of the change in the Company’s warranty liability for the nine months ended September 30, 2007 and 2006 (in thousands):

	For the Nine Months Ended September 30,
	2007			2006
Warranty liability balance, beginning of the period	$	2,000		$	2,124
Product warranty accruals		2,368			2,887
Utilization of accrual		(2,465	)		(2,940	)
Warranty liability balance, end of the period	$	1,903		$	2,071

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Note 11 — Basic and Diluted Income (Loss) per Share

A reconciliation of the numerator and the denominator used to calculate basic and diluted loss per share is as follows (in thousands, except per share amounts):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2007			2006			2007			2006
Numerator — Basic
Net loss, basic	$	(2,446	)	$	(13,330	)	$	(15,162	)	$	(7,545	)
Numerator — Diluted
Net loss, basic		(2,446	)		(13,330	)		(15,162	)		(7,545	)
Interest on convertible notes, net of tax benefit (A)		—			—			—			—
Net loss, diluted	$	(2,446	)	$	(13,330	)	$	(15,162	)	$	(7,545	)
Denominator — Basic
Weighted average shares used to calculate loss per share, basic		21,937			21,336			21,808			21,019
Denominator — Diluted
Weighted average shares used to calculate loss per share , basic		21,937			21,336			21,808			21,019
Effect of convertible notes (A)		—			—			—			—
Effect of dilutive stock options, ESPP, and unvested restricted stock (B)		—			—			—			—
Weighted average shares used to calculate loss per share, diluted		21,937			21,336			21,808			21,019
Net loss per share:
Basic	$	(0.11	)	$	(0.62	)	$	(0.70	)	$	(0.36	)
Diluted (A)	$	(0.11	)	$	(0.62	)	$	(0.70	)	$	(0.36	)

(A) For the three and nine months ended September 30, 2007 and 2006, interest on the convertible senior notes and as-if converted shares associated with the convertible senior notes and convertible subordinated notes were excluded from the calculation if the effect would be anti-dilutive. For the three and nine months ended September 30, 2007 and 2006, the total number of as-if converted shares associated with the convertible senior notes was 4.2 million.

(B) For the three and nine months ended September 30, 2007, options amounting to 3.3 million shares were excluded from the calculation as the Company was in a loss position. For the three and nine months ended September 30, 2006, options amounting to 3.1 million shares were excluded from the calculation as the Company was in a loss position.

Note 12 — Income Taxes

The Company’s effective tax rate for the three and nine months ended September 30, 2007 and 2006 differs from the statutory rate primarily due to the benefits of lower tax rates on earnings of foreign subsidiaries, the federal research and development tax credit, stock-based compensation, the amortization of goodwill for tax purposes, the increase in valuation allowance related to certain deferred tax assets, the discrete item related to the additional accrual of interest and penalties for uncertain tax positions and the revaluation of certain net deferred tax assets due to changes in foreign currency exchange rates. The tax rate is subject to change depending on fluctuations in foreign currency exchange rates.

The expensing of stock options will create differences in net income and taxable income on both a permanent and temporary basis. We are projecting a tax effected permanent difference of approximately $1.8 million attributable to statutory options and stock option expense related to all non U.S. employees for the year ending 2007. The annual effective tax rate impact for this permanent difference is projected to be approximately 7.6%.

In September 2006, the FASB issued FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109” (“FIN 48”). FIN 48 establishes a single model to address accounting for uncertain tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted the provisions of FIN 48, on January 1, 2007. Upon adoption, the Company increased its reserves for uncertain tax positions by $146 thousand. The adoption adjustment was recorded as a cumulative effect adjustment to shareholders’ equity. This increase was accounted for as a decrease of $288 thousand to the beginning balance of retained earnings partially offset by a decrease of $142 thousand to goodwill related to the acquisition of Convedia Corporation (“Convedia”). As of the date of adoption, the Company’s unrecognized tax benefits totaled $2.0 million. Of this total, $1.5 million represents the amount of unrecognized tax benefits that, if recognized, will favorably affect the effective tax rate. The remaining $474 thousand, if recognized, will result in the reduction of goodwill. During the three months ended September 30, 2007, there was an increase of $0.9 million in the uncertain tax positions related to foreign subsidiaries.

The Company and its subsidiaries are subject to federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company’s statute of limitations is closed for all federal and state income tax years before 2004 and 2002,

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respectively. The statute of limitations for the Company’s foreign subsidiaries is closed for all income tax years before 2000. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses and credits were generated and carried forward, and make adjustments up to the net operating loss and credit carryforward amounts.

The Company is not currently under Internal Revenue Service (IRS) examination. During 2005, the Company settled an IRS tax examination related to the 1996 through 2002 tax years. In the fourth quarter of 2006, the German tax authorities commenced audits of 2002 through 2004 years. To date, there are no proposed adjustments that will have a material impact on the Company’s position or results of operations. In the first quarter of 2007, the state of Texas tax authorities commenced audits of the 2002 through 2005 years. The audits were finalized in the third quarter with no additional income taxes assessed to the Company. The Company is not currently under examination in any other states or foreign jurisdictions.

The Company’s ongoing practice is to recognize potential accrued interest and penalties related to unrecognized tax benefits within its global operations in income tax expense. In conjunction with the adoption of FIN 48, the Company increased the accrual for interest and penalties by an additional $40 thousand to $511 thousand on January 1, 2007 which is included as a component of the $2.0 million unrecognized tax benefit noted above. To the extent that interest and penalties are not assessed with respect to the uncertain tax positions, $404 thousand of this total will be reflected as a reduction of the overall income tax provision. The remaining $107 thousand, if not assessed, will result in the reduction of goodwill. During the nine months ended September 30, 2007, the Company recognized approximately $134 thousand in potential interest and penalties associated with uncertain tax positions.

The Company does not anticipate that the total unrecognized tax benefits will significantly change due to the settlement of examinations prior to December 31, 2007 or September 30, 2008. The unrecognized tax benefits anticipated to be recognized due to the expiration of statute of limitations within twelve months of the date of FIN 48 adoption are $0.1 million. The unrecognized tax benefits anticipated to be recognized within twelve months primarily relates to foreign subsidiaries operations. Additionally, the unrecognized tax benefits anticipated to be recognized due to the expiration of statute of limitations prior to September 30, 2008 are $0.3 million.

During the quarter ended June 30, 2007, we recorded a reduction to goodwill of $9.0 million as a purchase accounting adjustment to establish a deferred tax asset for acquired net operating losses related to the acquisition of Convedia Corporation.

Note 13 — Segment Information

The Company has adopted SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (SFAS 131”). SFAS 131 establishes standards for the reporting by public business enterprises of information about operating segments, products and services, geographic areas, and major customers. The method for determining what information to report is based upon the way that management organizes the segments within the Company for making operating decisions and assessing financial performance.

The Company is one operating segment according to the provisions of SFAS 131.

Revenues on a product and services basis are as follows (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2007		2006		2007		2006
Hardware	$	79,513	$	78,471	$	214,807	$	223,967
Software royalties and licenses		1,937		1,322		6,511		3,532
Software maintenance		1,307		270		2,060		1,209
Engineering and other services		873		1,367		2,635		3,072
Total revenues	$	83,630	$	81,430	$	226,013	$	231,780

Generally, the Company’s customers are not the end-users of its products. The Company ultimately derives its revenues from two end markets as follows (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2007		2006		2007		2006
Communications Networking	$	64,134	$	61,185	$	168,076	$	175,430
Commercial Systems		19,496		20,245		57,937		56,350
Total revenues	$	83,630	$	81,430	$	226,013	$	231,780

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Information about the Company’s geographic revenues and long-lived assets by geographical area is as follows (in thousands):

Geographic Revenues

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2007		2006		2007		2006
United States	$	20,350	$	23,459	$	70,470	$	64,744
Other North America		3,024		2,693		6,836		8,407
North America		23,374		26,152		77,306		73,151
Europe, the Middle East and Africa (“EMEA”)		36,385		42,530		91,679		113,766
Asia Pacific		23,871		12,748		57,028		44,863
Total	$	83,630	$	81,430	$	226,013	$	231,780

Long-lived assets by Geographic Area

	September 30, 2007		December 31, 2006
Property and equipment, net
United States	$	7,953	$	7,881
Other North America		957		1,096
EMEA		111		143
Asia Pacific		1,717		1,955
Total	$	10,738	$	11,075
Goodwill
United States	$	37,545	$	27,463
Other North America		30,528		39,720
Total		68,073		67,183
Intangible assets, net
United States		15,884		1,434
Other North America		12,006		18,416
EMEA		17,202		23,085
Total	$	45,092	$	42,935

For the three and nine months ended September 30, 2007 and 2006, only one customer, Nokia, accounted for more than 10% of total revenues. This customer accounted for 52.0% and 43.3% of total revenues for the three months ended September 30, 2007 and 2006, respectively. For the nine months ended September 30, 2007 and 2006, this customer accounted for 42.1% and 44.9% of total revenues, respectively.

As of September 30, 2007 and December 31, 2006, the following two customers accounted for more than 10% of accounts receivable:

	September 30, 2007		December 31, 2006
Nokia Siemens Networks	53.0	%	24.4	%
Nortel	—		10.2	%

Note 14 — Acquisition

On September 12, 2007, RadiSys completed its acquisition (the “Acquisition”) of certain assets of the Modular Communications Platform Division (“MCPD”), including products in the Advanced Telecommunications Architecture (ATCA) and compact PCI lines, of Intel Corporation (“Intel”) for $31.8 million in cash at closing. The total preliminary purchase price of the acquisition which consists of the cash paid at closing and the estimated direct acquisition-related expenses of $282 thousand is currently estimated to be $32.0 million and has been accounted for as a purchase business combination under Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS 141”). Any additional direct expenses will be recorded as additional goodwill.

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Preliminary Purchase Price Allocation

In accordance with the purchase method of accounting as prescribed by SFAS 141 the Company allocated the Purchase Price to the net tangible and identifiable intangibles assets, based on their estimated fair values as follows (in thousands):

Prepaid inventory		6,580
Fixed assets		170
Identifiable intangible assets		15,200
Goodwill		10,082
Total preliminary purchase price	$	32,032

Identifiable intangible assets

The fair value of the acquired identifiable intangible assets, which are subject to amortization, was determined using the income approach. The following table sets forth the components of these other intangible assets and their estimated useful lives (in thousands):

	Preliminary Fair Value		Remaining Useful Life (in years)
Royalty-free technology license – 1.0 Gigabit ATCA		7,000	3.0
Royalty-free technology license – Next Generation		3,600	5.2
Royalty-free technology license – compact PCI/Legacy		1,100	1.0
Customer-related intangible		2,600	2.3
Backlog		900	0.5
Total acquired identifiable intangible assets	$	15,200

Revenue Recognition

MCPD recognizes net revenue when the earnings process is complete, as evidenced by an agreement with the customer, transfer of title, and acceptance, if applicable, as well as fixed pricing and reasonable assurance of collectibility. Pricing allowances, including discounts based on contractual arrangements with customers, are recorded when revenue is recognized as a reduction to both accounts receivable and revenue. Because of frequent sales price reductions and rapid technology obsolescence in the industry, sales made to distributors under agreements allowing price protection and/or right of return are deferred until the distributors sell the merchandise. During the transition period, the Company will continue to recognize revenue in accordance with historical MCPD practice.

Transition Period

In connection with the Asset Purchase Agreement, the Intel and RadiSys entered into a Transition Services Agreement (the “TSA”). Pursuant to the terms of the TSA, Intel intends to manufacture, assemble, and test and supply products that are sold by MCPD. This arrangement is expected to continue through the first quarter of 2008 while RadiSys arranges other resources. Intel will also provide certain transition services to RadiSys, including financial services, supply chain support, data extraction, conversion services, facilities and site computing support, and office space services.

Pro forma financial information

The pro forma financial information for the three and nine months ended September 30, 2007 and 2006 combine the historical RadiSys and MCPD statements of operations as if the Acquisition had been completed at the beginning of each fiscal year being presented. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of each of the periods presented. The pro forma financial information for the three and nine months ended September 30, 2007 includes adjustments to amortization on acquired intangibles and adjustments to tax related effects on the acquisition

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Total revenues	$	96,898		$	103,693		$	271,884		$	291,004
Net loss	$	(7,824	)	$	(38,153	)	$	(49,639	)	$	(75,701	)
Basic net loss per share	$	(0.36	)	$	(1.79	)	$	(2.28	)	$	(3.60	)
Diluted net loss per share	$	(0.36	)	$	(1.79	)	$	(2.28	)	$	(3.60	)

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Note 15 — Legal Proceedings

In the normal course of business, the Company periodically becomes involved in litigation. As of September 30, 2007, in the opinion of management, RadiSys had no pending litigation that would reasonably be expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Note 16 — Subsequent Events

On October 23, 2007, the Board of Directors approved the repurchase of the $100 million principal amount of the convertible senior notes. The Company will consider the purchase of the notes on the open market or through privately negotiated transactions from time to time subject to market conditions.

On October 26, 2007, the Company filed an unallocated shelf registration statement on Form S-3 for the offering from time to time of up to $150 million in securities consisting of common stock, preferred stock, depositary shares, warrants, debt securities or units consisting of one or more of these securities. Except as may be stated in a prospectus supplement for any particular offering, the Company intends to use the net proceeds from the sale of any securities for general corporate purposes, which may include acquiring companies in the industry and related businesses, repaying existing debt, providing additional working capital and procuring capital assets.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, or as otherwise indicated, “we,” “us,” “our” and similar terms, as well as references to the “Company” and “RadiSys” refer to RadiSys Corporation, and unless the context requires otherwise, include all of our consolidated subsidiaries.

Introduction and Overview

We are a leading provider of advanced embedded solutions for the communications networking and commercial systems markets. Through innovative product planning, intimate customer collaboration, and combining innovative technologies and industry leading architecture, we help original equipment manufacturers (“OEMs”), systems integrators and solution providers bring better products to market faster and more economically. Our products include embedded boards, application-enabling platforms and turn-key systems, which are used in today’s complex computing, processing and network intensive applications.

Our Strategy

Our strategy is to provide customers with standards-based advanced embedded solutions in our target markets. We believe this strategy enables our customers to focus their resources and development efforts on their key areas of competency allowing them to provide higher value systems with a time-to-market advantage and a lower total cost of ownership. Historically, system makers had been largely vertically integrated, developing most, if not all, of the functional building blocks of their systems. System makers are now more focused on their core expertise, such as specific application software, and are looking for partners like RadiSys to provide them with standards-based, merchant-supplied building blocks for a growing number of processing and networking functions.

Our Markets

We provide application enabling solutions to the following two distinct markets:

• Communications Networking — The communications networking market consists primarily of networking infrastructure and applications for deployment within our wireless and Internet Protocol (IP) networking and messaging markets. Applications in these markets include 2, 2.5 and 3G wireless infrastructure products, IP media server platforms, packet based switches, unified messaging solutions, IP-based Private Branch Exchange (PBX) systems, voice messaging, multimedia conferencing, data centers, network probes, Wimax infrastructure, IPTV, network access, security and switching applications.

• Commercial Systems — The commercial systems market includes the following sub-markets: medical systems, test and measurement equipment, transaction terminals and industrial automation equipment. Examples of products which incorporate our commercial embedded solutions include ultrasound equipment, X-Ray, Magnetic Resonance Imaging (MRI), immunodiagnostics and hematology systems, CAT Scan (CT) imaging equipment, network and production test equipment, consumer transaction terminals, semiconductor manufacturing equipment and electronics assembly equipment.

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Our Market Drivers

We believe there are a number of fundamental drivers for growth in the embedded solutions market, including:

• Increasing desire by OEMs to utilize standards-based, merchant-supplied modular building blocks and platforms to develop their new systems. We believe OEMs are combining their internal development efforts with merchant-supplied building blocks and platforms from partners like RadiSys to deliver a larger number of more valuable new products to market faster at a lower total cost of ownership.

• Increasing usage levels of widely adopted technologies such as Ethernet, IP, Linux, media processing and CPU, GPU and NPU processors to provide programmable, intelligent and networked functionality to a wide variety of applications, including wireless, wireline and data communications, network security, image processing, transaction and monitoring and control.

• Increasing demand for standards-based solutions, such as Advanced Telecommunications Architecture (“ATCA”), Session Initiation Protocol (“SIP”), IP Multimedia Subsystem (“IMS”) and Computer-on-Module Express (“COM Express”), that motivates system makers to take advantage of proven and validated standards-based products.

In the following discussion of our financial condition and results of operations, we intend to provide information that will assist in understanding our consolidated financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes. This discussion should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this filing and in our Annual Report on Form 10-K for the year ended December 31, 2006.

Certain statements made in this section of the report are forward-looking statements. Please see the information contained herein under the sections entitled “Forward-looking Statements” and “Risk Factors.”

Overview

Promentum^® — During the first quarter of 2007, we and Aricent, a full-service, full-spectrum communications software company, demonstrated an ATCA hardware and software platform designed specifically for WiMAX networks. The solution features the Aricent SigASN WiMAX Gateway software running on the Promentum^® ATCA SYS 6010, which is the industry’s first and only generally available 10 Gigabit common managed platform for high-bandwidth network element and data plane applications. Our 10 Gigabit ATCA platforms are invaluable to equipment manufacturers developing complex network elements such as WiMAX ASN Gateways, 3G Radio Network and Base Station Controllers, IP television (IPTV) infrastructure and IP IMS compliant media gateways, application servers and media servers.

In the second quarter of 2007, we announced the Promentum^® ATCA-9100, a Digital Signal Processing (“DSP”) blade that offers telecommunications equipment manufacturers (TEMs) a way to achieve a low cost per port approach for next-generation VoIP, media processing and media gateway solutions. The Promentum^® ATCA-9100 extends the award-winning 10-Gigabit SYS-6010 ATCA platform for applications requiring high performance media processing. In the third quarter of 2007, we announced the availability of our Promentum^® ATCA-9100 based on Texas Instruments’ DSP and Telogy Software™.

In the second quarter of 2007, we also announced the introduction of a MicroTCA platform development kit aimed at helping TEMs develop network elements geared toward a smaller and more cost effective form factor than existing products.

In the third quarter of 2007, we completed the acquisition of certain assets of the Modular Communications Platform Division (“MCPD”), including products in the ATCA and compact PCI lines, of Intel Corporation (“Intel”) for $31.8 million in cash at closing. This acquisition further solidifies our leadership position in ATCA and communication platforms, broadens our base of customers and enhances our global operations and market penetration.

Procelerant^® — During the first quarter of 2007, we announced the availability of two new PCI Industry Computer Manufacturers Group (PICMG) Compatible COM Express modules and a quad core embedded server that delivers unsurpassed performance and functionality. The Intel Core 2 Duo processor-based COM Express module coupled with dual channel memory brings maximum

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computing performance to imaging, gaming, and test and measurement devices that require the smallest COM Express form factor on the market. The second COM Express module that was announced features an extended temperature range COM Express module and fills a highly desired need for in-flight infotainment, industrial and military applications. The quad core server with Intel Core microarchitecture increases the performance of imaging and signaling applications five to seven-fold compared to servers available just 12 months ago.

We also announced, in the first quarter of 2007, a partnership with VirtualLogix, the Real-Time Virtualization company, to deliver a real-time development kit that enables embedded systems designers to combine Linux and our OS-9 real-time operating system onto a single platform. This will enable our customers to improve performance, reduce power consumption and consolidate multiple single core designs onto a single, integrated platform.

In the second quarter of 2007, we introduced a new COM Express module aimed at supporting high performance communications applications. When incorporated with our Promentum^® 2210, system designers gain a switch and control module well suited for Radio Network Controller, Media Gateway, IMS and IPTV applications. The CE3100 utilizes a Core 2 Duo L7400 processor and offers flexible storage in an effort to meet reliability and cost requirements of both equipment manufacturers and service providers.

Media Server — In the third quarter of 2006, we completed the acquisition of Convedia and entered the media server market with a portfolio of media server products. Included in this portfolio are our newest media servers, the CMS-3000 and CMS-9000, which are optimized for IMS network deployments. These solutions are based on a modular hardware platform, which incorporates the latest DSPs and processor chipsets and utilize our eXtended Media Processing™ (eXMP™) technology. During the second quarter of 2007, we announced the general availability of these two products. And during the third quarter of 2007, we introduced a new media processing blade for the CMS-9000. The new MPC-IV blade delivers the telecommunication industry’s highest capacity for conferencing, video and low bitrate codec applications.

In the first quarter of 2007, we announced that we are working closely with Huawei Technologies to deliver IMS solutions that reduce the cost and increase the performance of next generation networks. The Huawei Next Generation Network (NGN) solution and the fixed and mobile convergent IMS solutions incorporate MRS products based on our Media Servers. These solutions are now being marketed and sold into Huawei’s extensive global customer base.

In the second quarter of 2007, we announced the introduction of the Convedia^® Software Media Server. This solution provides an economical IP audio and video media processing solution for ATCA and Linux-based platforms. This advance marks the first product based on integrated technology from RadiSys and Convedia since the acquisition.

Financial Results — Total revenue was $83.6 million and $81.4 million for the three months ended September 30, 2007 and 2006, respectively. Total revenue was $226.0 million and $231.8 million for the nine months ended September 30, 2007 and 2006, respectively. Backlog was approximately $43.6 million and $21.7 million at September 30, 2007 and December 31, 2006, respectively. Backlog includes all purchase orders scheduled for delivery within 12 months. The increase in revenues for the three months ended September 30, 2007 compared to the same period in 2006 was primarily due to the addition of media server revenues as well as increased wireless revenues partially offset by decreases in the IP networking and messaging market. The decrease in revenues for the nine months ended September 30, 2007 compared to the same period in 2006 was primarily due to lower wireless revenues partially offset by the addition of media server as well as higher revenues in the commercial systems market.

Net loss was $2.4 million and $13.3 million for the three months ended September 30, 2007 and 2006, respectively. Net loss per share was $0.11 and $0.62 for the three months ended September 30, 2007 and 2006, respectively. Net loss was $15.2 million and $7.5 million for the nine months ended September 30, 2007 and 2006, respectively. Net loss per share was $0.70 and $0.36 for the nine months ended September 30, 2007 and 2006, respectively. For the three and nine months ended September 30, 2006, net loss attributable to Convedia was $16.8 million and included a charge for in-process research and development of $14 million and amortization of acquired intangibles of $1.4 million. For the nine-months ended September 30, 2007, net loss includes lower gross margins and higher operating expenses including purchase accounting charges incurred in connection with the acquisition of Convedia resulting in $12.4 million of intangible amortization and $1.3 million of deferred compensation expenses. The decrease is also due to increased stock-based compensation expense of $3.0 million, for the nine months ended September 30, 2007, attributable to the diminishing benefit associated with the 2004 acceleration of employee stock options.

Cash and cash equivalents and investments amounted to $110.2 million and $136.0 million at September 30, 2007 and December 31, 2006, respectively. The decrease in cash and cash equivalents and investments during the nine months ended September 30, 2007, was primarily due to the purchase of MCPD during the third quarter of 2007 for $31.8 million at closing. This is partially offset by cash provided by operating activities.

Shelf Registration Statement — On October 26, 2007, we filed an unallocated shelf registration statement on Form S-3 for the offering from time to time of up to $150 million in securities consisting of common stock, preferred stock, depositary shares, warrants, debt securities or units consisting of one or more of these securities. The SEC declared the shelf registration effective on November 7, 2007. Except as may be stated in a prospectus supplement for any particular offering, we intend to use the net proceeds from the sale of any securities for general corporate purposes, which may include acquiring companies in our industry and related businesses, repaying existing debt, providing additional working capital and procuring capital assets.

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Recent Developments

As discussed above, on September 12, 2007 we completed the acquisition of certain assets of MCPD, including products in the ATCA and compact PCI lines, of Intel. The acquisition will further our global leadership position in ATCA platforms and solutions for telecommunication equipment manufacturers worldwide.

We have added Intel’s MCPD assets to our product portfolio and we are committed to ensuring our new customers needs are well serviced both in the short and long term. The addition of the Intel modular communication assets to our award winning Promentum^® product family helps us accelerate our ATCA product strategy, broadens our customer base and expands our addressable market.

Critical Accounting Policies and Estimates

We reaffirm our critical accounting policies and use of estimates as reported in our Annual Report on Form 10-K for the year ended December 31, 2006. There have been no significant changes during the three and nine months ended September 30, 2007 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

Results of Operations

The following table sets forth certain operating data as a percentage of revenues for the three and nine months ended September 30, 2007 and 2006.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2007		2006		2007		2006
Revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales:
Cost of sales	72.9		74.6		73.2		73.2
Amortization of purchased technology	4.2		0.0		4.4		0.0
Total cost of sales	77.1		74.6		77.6		73.2
Gross margin	22.9		25.4		22.4		26.8
Research and development	14.1		12.7		15.1		13.0
Selling, general, and administrative	14.2		12.8		15.5		12.1
Intangible assets amortization	1.3		1.9		1.4		0.9
In-process research and development charge	0.0		17.2		0.0		6.1
Restructuring and other charges (reversals)	(0.2	)	0.0		0.6		(0.1	)
Income (loss) from operations	(6.5	)	(19.2	)	(10.2	)	5.2
Interest expense	(0.5	)	(0.5	)	(0.6	)	(0.6	)
Interest income	2.0		3.2		2.2		3.2
Other (expense) income, net	(0.0	)	0.0		(0.1	)	0.2
Loss before income tax provision (benefit)	(5.0	)	(16.5	)	(8.7	)	(2.4	)
Income tax provision (benefit)	(2.1	)	(0.1	)	(2.0	)	0.9
Net loss	(2.9	)%	(16.4	)%	(6.7	)%	(3.3	)%

Comparison of Three and Nine Months Ended September 30, 2007 and 2006

Revenues. Revenues increased by $2.2 million or 2.7%, from $81.4 million in the three months ended September 30, 2006 to $83.6 million in the three months ended September 30, 2007. Revenues decreased by $5.8 million or 2.5%, from $231.8 million in the nine months ended September 30, 2006 to $226.0 million in the nine months ended September 30, 2007.

The increase in revenues for the three months ended September 30, 2007 compared to the same period in 2006 is primarily due to an increase in the communication networking market of $2.9 million partially offset by a slight decrease in the commercial systems market of $749 thousand. The decrease in revenues for the nine months ended September 30, 2007 compared to the same period in 2006 is primarily due to a decrease in the communication networking market of $7.4 million partially offset by an increases in the commercial systems market of $1.6 million.

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For the three months ended September 30, 2007 compared to the same period in 2006, revenues in the communications networking market increased primarily due to the addition of media server revenues as well as increased wireless revenues partially offset by decreases in the IP networking and messaging market. For the nine months ended September 30, 2007 compared to the same period in 2006, revenues in the communications networking market decreased primarily due to lower wireless revenues offset by the addition of media server revenues.

For the three months ended September 30, 2007 compared to the same period in 2006, revenues in the commercial systems market decreased primarily due to decreases in our transaction terminal and medical submarkets. The decrease in revenues attributable to the transaction terminal market was primarily due to design wins nearing the end of their life cycle. For the nine months ended September 30, 2007 compared to the same period in 2006, revenues in the commercial systems market increased primarily due to increases within the test and measurement submarket partially offset by declines in our transaction terminal submarket. The increase in revenues from the test and measurement submarket was attributable to design wins that have ramped into production in the latter half of 2006. The decrease in revenues attributable to the transaction terminal market was primarily due to design wins nearing the end of their life cycle.

Given the dynamics of these markets, we may experience general fluctuations in the percentage of revenue attributable to each market and, as a result, the quarter to quarter comparisons of our markets often are not indicative of overall economic trends affecting the long-term performance of our markets. We currently expect that both markets will continue to represent a significant portion of total revenues. Currently, our standards-based products do not make up a significant percentage of our total revenues, however, we believe design wins associated with these products will begin to ramp into production in 2008 based on the timing of our customers’ next generation system deployments.

From a geographic perspective, for the three months ended September 30, 2007 compared to the same period in 2006, revenues as measured by destination in the EMEA and North America regions decreased by $6.1 million and $2.8 million, respectively, offset by increased revenues in the Asia Pacific region of $11.1 million. For the nine months ended September 30, 2007 compared to the same period in 2006, revenues as measured by destination in the EMEA decreased by $22.1 million, offset by increased revenues in the North American and Asia Pacific regions of $4.2 million and $12.2 million, respectively.

The increase in the North American region is primarily due to the addition of media server revenues. The net increase in the Asia Pacific region is primarily due to existing multinational customers requesting the delivery of products directly into the Asia Pacific region. The decrease in the EMEA region revenues is primarily due to lower wireless revenues. We currently expect continued fluctuations in the percentage of revenue from each geographic region. Additionally, we expect revenues outside of the US to remain a significant portion of our revenues.

Gross Margin. Gross margins as a percentage of revenues were 22.9% and 25.4% for the three months ended September 30, 2007 and 2006, respectively. Gross margins as a percentage of revenues were 22.4% and 26.8% for the nine months ended September 30, 2007 and 2006, respectively. The decrease in gross margin as a percentage of revenues for the three and nine months ended September 30, 2007 compared to the same periods in 2006 was primarily attributable to amortization of purchased technology of $3.5 million and $10.0 million for the three and nine months ended September 30, 2007, respectively. We reclassified this amortization to cost of sales based on our view that the intangibles are associated with product costs and our revenue-generating process. For the three months ended September 30, 2007, this decrease is partially offset by product mix in our communications market and reduced manufacturing costs including lower manufacturing spending, lower excess and obsolescence inventory accruals and decreased costs associated with transitioning out of our North Carolina manufacturer. For the nine months ended September 30, 2007, the decrease is also due to product mix in our communications and commercial markets, increased excess and obsolescence inventory charges and costs associated with the remaining transitions from our North Carolina manufacturer. We currently expect our gross margin percent to be lower in the fourth quarter of 2007 compared to the third quarter of 2007 primarily due to the amortization of a full quarter’s worth of MCPD amortization of purchased technology.

Research and Development. Research, development and engineering (“R&D”) expenses consist primarily of salaries, bonuses and benefits for product development staff and cost of design and development supplies and equipment, net of reimbursements for nonrecurring engineering services. R&D expenses increased $1.4 million, or 13.4%, from $10.4 million for the three months ended September 30, 2006 to $11.8 million for the three months ended September 30, 2007. R&D expenses increased $3.9 million, or 12.8%, from $30.2 million for the nine months ended September 30, 2006 to $34.1 million for the nine months ended September 30, 2007. This increase is primarily due to the addition of our media server business, as well as an additional $264 thousand and $827 thousand of stock-based compensation expense for the three and nine months ended September 30, 2007 compared to the same

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periods in 2006, respectively. This increase is also due to the timing of engineering project expenses for new development programs. We currently anticipate increasing spending on R&D during the fourth quarter of 2007 compared to spending in the third quarter of 2007 primarily related to the newly acquired MCPD operating expenses.

Selling, General, and Administrative. Selling, general and administrative (“SG&A”) expenses consist primarily of salaries, commissions, bonuses and benefits for sales, marketing, executive and administrative personnel, as well as professional services and costs of other general corporate activities. SG&A expenses increased by $1.5 million or 14.2%, from $10.4 million for the three months ended September 30, 2006 to $11.9 million for the three months ended September 30, 2007. SG&A expenses increased by $7.0 million or 25.1%, from $28.1 million for the nine months ended September 30, 2006 to $35.1 million for the nine months ended September 30, 2007. This increase is primarily due to the addition of our media server business, as well as an additional $535 thousand and $2.0 million of stock-based compensation expense for the three and nine months ended September 30, 2007 compared to the same periods in 2006, respectively. We currently anticipate increasing spending on SG&A during the fourth quarter of 2007 compared to spending in the third quarter of 2007 primarily related to the newly acquired MCPD operating expenses.

Stock-based Compensation Expense. Stock-based compensation expense consists of amortization of stock-based compensation associated with stock options, unvested restricted shares and shares issued to employees as a result of the employee stock purchase plan (“ESPP”). Stock-based compensation expense increased by $770 thousand or 43.4%, from $1.8 million for the three months ended September 30, 2006 to $2.5 million for the three months ended September 30, 2007. Stock-based compensation expense increased by $3.0 million or 66.3%, from $4.5 million for the nine months ended September 30, 2006 to $7.4 million for the nine months ended September 30, 2007. The increase is primarily due to the diminishing benefit associated with the 2004 acceleration of employee stock options as well as increased ESPP expense. We currently anticipate stock-based compensation expense to increase slightly in the fourth quarter of 2007.

We recognized stock-based compensation expense as follows (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2007		2006		2007		2006
Cost of sales	$	195	$	224	$	727	$	640
Research and development		716		452		2,030		1,203
Selling, general and administrative		1,633		1,098		4,668		2,622
Total		2,544		1,774		7,425		4,465

Deferred Compensation Expense. On September 1, 2006, all outstanding Convedia stock options vested and were considered exercised immediately. The proceeds of which were distributed as follows: 75% of the purchase price per share less the exercise price was paid to the option holder at closing and the remaining 25% will be paid in full to those Convedia employees still employed by RadiSys after one year of service. The 75% paid at the time of the acquisition is included in the purchase price and is allocated to goodwill. The remaining 25% is recorded as deferred compensation and amortized over the period of required service (one year). Pursuant to the purchase agreement, any forfeitures are reallocated to the remaining Convedia shareholders and option holders. During the three months ended September 30, 2007 we paid the remaining 25% of the proceeds calculated on September 30, 2006.

We recognized deferred compensation expense as follows (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2007		2006		2007		2006
Cost of sales	$	17	$	8	$	67	$	8
Research and development		106		53		426		53
Selling, general and administrative		193		95		757		95
Total		316	$	156		1,250	$	156

Intangible Assets Amortization. Intangible assets consist of purchased technology, patents and other identifiable intangible assets. Intangible assets amortization expense was $1.1 million and $1.5 million for the three months ended September 30, 2007 and 2006, respectively. Intangible assets amortization expense was $3.1 million and $2.0 million for the nine months ended September 30, 2007 and 2006, respectively. Intangible assets amortization increased due to intangible assets acquired with the purchase of Convedia and MCPD. We perform reviews for impairment of the purchased intangible assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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Restructuring and Other Charges. We evaluate the adequacy of the accrued restructuring and other charges on a quarterly basis. As a result, we record certain reclassifications and reversals to the accrued restructuring and other charges based on the results of the evaluation. The total accrued restructuring and other charges for each restructuring event are not affected by reclassifications. Reversals are recorded in the period in which we determine that expected restructuring and other obligations are less than the amounts accrued. Tables summarizing the activity in the accrued liability for each restructuring event are contained in Note 7 of the notes to the unaudited consolidated financial statements.

Second Quarter 2007 Restructuring. During the second quarter of 2007, we incurred employee-related expenses of $1.4 million associated with skill set changes for approximately 20 employees. The changes involved creating an integrated structure with our media server business along with some skill set changes in certain selling, general and administrative and engineering groups. The costs incurred in this restructuring event include employee severance and medical benefits. All restructuring activities are expected to be completed by December 31, 2007. During the three and nine months ended September 30, 2007, we incurred $59 thousand and $1.5 million of employee-related expenses, respectively. These amounts were offset by reversals, during the third quarter of 2007, of $264 thousand related to lower severance costs than originally anticipated

First Quarter 2007 Restructuring. During the first quarter of 2007, we incurred employee-related expenses associated with certain engineering realignments. The costs incurred in this restructuring event are associated with employee termination benefits, including severance and medical benefits. All restructuring activities were completed by September 30, 2007. During the nine months ended September 30, 2007, we incurred $165 thousand offset by reversals of $7 thousand of employee-related expenses, respectively.

Fourth Quarter 2006 Restructuring. During the fourth quarter of 2006, we initiated a restructuring plan that included the elimination of 12 positions primarily supporting our contract manufacturing operations as a result of the termination of our relationships with one of our contract manufacturers in North America. The restructuring plan also included closing our Charlotte office. During the nine months ended September 30, 2007, we incurred additional severance and other employee-related separation costs of $127 thousand offset by reversals of $204 thousand, respectively, associated with three employees that found new positions within the Company. In addition, we incurred a cost of $64 thousand associated with the closing of the Charlotte office during the third quarter of 2007.

Interest Expense. Interest expense includes interest incurred on the convertible senior and the convertible subordinated notes. Interest expense decreased $16 thousand, or 3.7%, from $432 thousand for the three months ended September 30, 2006 to $416 thousand for the three months ended September 30, 2007. Interest expense decreased $22 thousand, or 1.7%, from $1.3 million for the nine months ended September 30, 2006 to $1.3 million for the nine months ended September 30, 2007. The decrease in the interest expense for the three and nine months ended September 30, 2007 compared to the same period in 2006 is primarily due to the payment of the remaining principal amount of the convertible subordinated notes in August of 2007.

Interest Income. Interest income decreased $940 thousand, or 35.7%, from $2.6 million for the three months ended September 30, 2006 to $1.7 million for the three months ended September 30, 2007. Interest income decreased $2.6 million, or 34.1%, from $7.5 million for the nine months ended September 30, 2006 to $4.9 million for the nine months ended September 30, 2007. Interest income decreased as a result of a lower average balance of cash, cash equivalents and investments for the three months ended September 30, 2007 compared to the same period in 2006 due primarily to the purchase of Convedia. This decrease was offset by increasing interest rates and a shift in our investment portfolio towards higher yielding auction rate securities. We anticipate further decreases to interest income due to the acquisition of MCPD.

Other Income (Expense), Net. Other income (expense), net, primarily includes foreign currency exchange gains and losses. Other expense, net, was $30 thousand for the three months ended September 30, 2007 compared to other expense, net of $32 thousand for the three months ended September 30, 2006. Other expense, net, was $151 thousand for the nine months ended September 30, 2007 compared to other income, net of $443 thousand for the nine months ended September 30, 2006.

Foreign currency exchange rate fluctuations resulted in a net loss of $22 thousand and $19 thousand for the three months ended September 30, 2007 and 2006, respectively. Foreign currency exchange rate fluctuations resulted in a net loss of $93 thousand for the nine months ended September 30, 2007 compared to a net gain of $58 thousand for the nine months ended September 30, 2006.

In addition to foreign currency exchange rate fluctuations, other expense, net, for the three and nine months ended September 30, 2007 includes losses associated with our executive deferred compensation plan. In addition to foreign currency exchange rate fluctuations, other income, net, for the nine months ended September 30, 2006 included $362 thousand associated with an insurance gain.

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Income Tax Provision (Benefit). We recorded a tax benefit of $1.7 million and $121 thousand for the three months ended September 30, 2007 and 2006, respectively. We recorded a tax benefit of $4.4 million and a tax provision of $2.1 million for the nine months ended September 30, 2007 and 2006, respectively. We expect the effective tax rate for the year ending December 31, 2007 to be between 20% and 25% compared to 5.4% for the year ended December 31, 2006. The increase in the effective tax rate between the 2007 and the year ended December 31, 2006 is primarily due to the impact of stock compensation, in-process R&D, taxes on foreign income that differ from the U.S. tax rate and the revaluation of certain net deferred tax assets due to changes in foreign currency exchange rates.

Our net deferred tax assets in Canada are denominated in Canadian dollars. We revalue those net deferred tax assets using the applicable foreign currency exchange rate at the end of each period. Those foreign currency gains and losses are included in income tax expense. We recorded tax benefits of $657 thousand and $1.0 million due to the revaluation of the net deferred tax assets for the three and nine months ended September 30, 2007, respectively.

On December 20, 2006, President Bush signed the Tax Relief and Health Care Act of 2006 (the “Tax Relief Act”), which extended the research and development tax credit. Under the Tax Relief Act, the research and development tax credit was retroactively reinstated to January 1, 2006 and is available through December 31, 2007. We expect to record a federal research and development credit of approximately $550 thousand for the year ending December 31, 2007.

The 2007 estimated effective tax rate is based on current tax law and the current expected income and assumes that we continue to receive the tax benefits associated with certain income associated with foreign jurisdictions. The tax rate may be affected by potential acquisitions, restructuring events or divestitures, the jurisdictions in which profits are determined to be earned and taxed and the ability to realize deferred tax assets.

Liquidity and Capital Resources

The following table summarizes selected financial information as of the dates indicated and for each of the three months ended on the dates indicated:

	September 30, 2007		December 31, 2006		September 30, 2006
	(Dollar amounts in thousands)
Cash and cash equivalents	$	30,245	$	23,734	$	36,912
Short-term investments	$	70,000	$	102,250	$	105,100
Long-term investments	$	10,000	$	10,000	$	9,997
Cash and cash equivalents and investments	$	110,245	$	135,984	$	152,009
Working capital	$	142,722	$	161,575	$	160,863
Accounts receivable, net	$	60,255	$	42,549	$	53,905
Inventories, net	$	26,381	$	35,184	$	21,329
Accounts payable	$	42,924	$	36,699	$	53,280
Convertible senior notes	$	97,513	$	97,412	$	97,379
Convertible subordinated notes	$	—	$	2,410	$	2,407
Days sales outstanding (A)		66		53		60
Days to pay (B)		64		68		80
Inventory turns (C)		9.2		7.5		11.4
Inventory turns — days (D)		40		73		32
Cash cycle time — days (E)		42		58		12

(A) Based on ending net trade receivables divided by daily revenue (quarterly revenue, annualized and divided by 365 days).

(B) Based on ending accounts payable divided by daily cost of sales excluding amortization of purchased technology (quarterly cost of sales, annualized and divided by 365 days).

(C) Based on quarterly cost of sales excluding amortization of purchased technology (annualized and divided by ending inventory).

(D) Based on ending inventory divided by quarterly cost of sales excluding amortization of purchased technology (annualized and divided by 365 days).

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(E) Days sales outstanding plus inventory turns - days, less days to pay.

Cash and cash equivalents increased by $6.5 million from $23.7 million at December 31, 2006 to $30.2 million at September 30, 2007. Activities impacting cash and cash equivalents are as follows (in thousands):

Cash Flows

	For the Nine Months Ended September 30,
	2007			2006
Cash provided by operating activities	$	5,983		$	25,870
Cash used in investing activities		(615	)		(90,144	)
Cash provided by financing activities		897			10,831
Effects of exchange rate changes		246			300
Net increase (decrease) in cash and cash equivalents	$	6,511		$	(53,143	)

On September 12, 2007, we completed the acquisition of MCPD, paying cash of $31.8 million at closing and estimated direct acquisition-related expenses of $282 thousand.

During the nine months ended September 30, 2007 and 2006, we used $3.8 million and $4.1 million, respectively, for capital expenditures. During the nine months ended September 30, 2007, capital expenditures were primarily associated with integrating the media server business, upgrading our internal infrastructure as well as increasing manufacturing capabilities in our Hillsboro facility. During the nine months ended September 30, 2006, capital expenditures were primarily associated with our increased investment in our development and marketing of our standards-based solutions.

During the nine months ended September 30, 2007 and 2006, we received $3.6 million and $10.9 million, respectively, in proceeds from the issuance of common stock through our stock compensation plans.

Changes in foreign currency rates impacted beginning cash balances during the nine months ended September 30, 2007 by $246 thousand. Due to our international operations where transactions are recorded in functional currencies other than the U.S. Dollar, the effects of changes in foreign currency exchange rates on existing cash balances during any given period result in amounts on the consolidated statements of cash flows that may not reflect the changes in the corresponding accounts on the consolidated balance sheets.

As of September 30, 2007 and December 31, 2006 working capital was $142.7 million and $161.6 million, respectively. Working capital decreased by $18.9 million due primarily to the purchase of MCPD for $31.8 million partially offset by positive cash flow generated from operating activities as well as from proceeds from sales of investments generated during the nine months ended September 30, 2007.

Investments

Investments consisted of the following (in thousands):

	September 30, 2007		December 31, 2006
Short-term investments, classified as available-for-sale	$	70,000	$	102,250
Long-term held-to-maturity investments	$	10,000	$	10,000

We invest excess cash in debt instruments of the U.S. Government and its agencies, high-quality corporate issuers and municipalities. As of September 30, 2007, we had $70.0 million investments classified as available-for-sale. As of September 30, 2007, we had $10.0 million long-term held-to-maturity investments. During 2006, we shifted our investments to auction rate securities as we were actively evaluating potential acquisitions and partnership opportunities. Our investment policy requires that the total investment portfolio, including cash and investments, not exceed a maximum weighted-average maturity of 18 months. In addition, the policy mandates that an individual investment must have a maturity of less than 36 months, with no more than 20% of the total portfolio exceeding 24 months. As of September 30, 2007, we were in compliance with our investment policy.

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Line of Credit

During the quarter ended March 31, 2006, we transferred our $20.0 million line of credit facility from our commercial bank to an investment bank. This line of credit facility has an interest rate based on the 30-day London Inter-Bank Offered Rate (“LIBOR”) plus 0.75%. The line of credit is collateralized by our non-equity investments. The market value of non-equity investments must exceed 125% of the borrowed facility amount. At September 30, 2007, we had a standby letter of credit outstanding as required by one of our medical insurance carriers for $105 thousand.

As of September 30, 2007 and December 31, 2006, there were no outstanding balances on the standby letter of credit or line of credit.

Convertible Senior Notes

During November 2003, we completed a private offering of $100 million in aggregate principal amount of 1.375% convertible senior notes due November 15, 2023 to qualified institutional buyers. The discount at issuance on the convertible senior notes amounted to $3 million.

The convertible senior notes are unsecured obligations convertible into our common stock and rank equally in right of payment with all existing and future obligations that are unsecured and unsubordinated. Interest on the convertible senior notes accrues at 1.375% per year and is payable semi-annually on May 15 and November 15. The notes are convertible, at the option of the holder, at any time on or prior to maturity under certain circumstances unless previously redeemed or repurchased, into shares of our common stock at a conversion price of $23.57 per share, which is equal to a conversion rate of 42.4247 shares per $1,000 principal amount of notes. The notes are convertible if (i) the closing price of our common stock on the trading day prior to the conversion date reaches 120% or more of the conversion price of the notes on such trading date, (ii) the trading price of the notes falls below 98% of the conversion value or (iii) certain other events occur. Upon conversion, we will have the right to deliver, in lieu of common stock, cash or a combination of cash and common stock. We may redeem all or a portion of the notes at our option on or after November 15, 2006 but before November 15, 2008 provided that the closing price of our common stock exceeds 130% of the conversion price for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date of the notice of the provisional redemption. On or after November 15, 2008, we may redeem the notes at any time. On November 15, 2008, November 15, 2013, and November 15, 2018, holders of the convertible senior notes will have the right to require us to purchase, in cash, all or any part of the notes held by such holder at a purchase price equal to 100% of the principal amount of the notes being purchased, together with accrued and unpaid interest and additional interest, if any, up to but excluding the purchase date. The accretion of the discount on the notes is calculated using the effective interest method.

As of September 30, 2007 we had outstanding convertible senior notes with a face value of $100 million and a book value of $97.5 million, net of unamortized discount of $2.5 million. As of December 31, 2006, we had outstanding convertible senior notes with a face value of $100 million and a book value of $97.4 million, net of unamortized discount of $2.6 million. The estimated fair value of the convertible senior notes was $93.0 million and $96.6 million at September 30, 2007 and December 31, 2006, respectively.

On October 23, 2007, the Board of Directors approved the repurchase of the $100 million principal amount of the convertible senior notes. We may elect to use a portion of our cash and cash equivalents and investment balances to buy back amounts of the convertible senior notes.

Convertible Subordinated Notes

During August 2000, we completed a private offering of $120 million in aggregate principal amount of 5.5% convertible subordinated notes due to qualified institutional buyers. From 2000 to 2006, we repurchased $117.7 million in aggregate principal amount of the convertible subordinated notes, with an associated unamortized discount of $2.4 million. We repurchased the notes for $106.7 million and, as a result, recorded a gain of $8.5 million. We paid the remaining balance of $2.4 million at maturity on August 15, 2007.

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Contractual Obligations

The following summarizes our contractual obligations at September 30, 2007 and the effect of such on our liquidity and cash flows in future periods (in thousands).

	2007*		2008		2009		2010		2011		Thereafter
Future minimum lease payments	$	915	$	3,703	$	3,082	$	2,740	$	1,635	$	—
Purchase obligations(A)		30,661		1,069		—		—		—		—
Interest on convertible notes		688		1,375		1,375		1,375		1,375		16,500
Convertible senior notes(B)		—		100,000		—		—		—		—
Total	$	32,264	$	106,147	$	4,457	$	4,115	$	3,010	$	16,500

* Remaining three months.

(A) Purchase obligations include agreements or purchase orders to purchase goods or services that are enforceable and legally binding and specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty.

(B) The convertible senior notes are shown at their face values, gross of unamortized discount amounting to $2.5 million at September 30, 2007. On or after November 15, 2008, we may redeem the convertible senior notes at any time. On November 15, 2008, November 15, 2013, and November 15, 2018, holders of the convertible senior notes will have the right to require us to purchase, in cash, all or any part of the notes held by such holders at a purchase price equal to 100% of the principal amount of the notes being purchased, together with accrued and unpaid interest and additional interest, if any, up to but excluding the purchase date.

In addition to the above, as discussed in Note 12 to our consolidated financial statements, we have approximately $1.9 million associated with unrecognized tax benefits and related interest and penalties. These liabilities are primarily included as a component of “other long-term liabilities” in our consolidated balance sheet as we do not anticipate that settlement of the liabilities will require payment of cash within the next twelve months. We are not able to reasonably estimate when we would make any cash payments required to settle these liabilities, but do not believe that the ultimate settlement of our obligations will materially affect our liquidity.

Off-Balance Sheet Arrangements

We do not engage in any activity involving special purpose entities or off-balance sheet financing.

Shelf Registration Statement

On October 26, 2007, we filed an unallocated shelf registration statement on Form S-3 for the offering from time to time of up to $150 million in securities consisting of common stock, preferred stock, depositary shares, warrants, debt securities or units consisting of one or more of these securities. The SEC declared the shelf registration statement effective on November 7, 2007. Except as may be stated in a prospectus supplement for any particular offering, we intend to use the net proceeds from the sale of any securities for general corporate purposes, which may include acquiring companies in our industry and related businesses, repaying existing debt, providing additional working capital and procuring capital assets.

Liquidity Outlook

We believe that our current cash and cash equivalents and investments, net, amounting to $110.2 million at September 30, 2007 and the cash generated from operations and, if we elect to conduct an offering under our shelf registration statement, the proceeds of any such securities offering will satisfy our short and long-term expected working capital needs, capital expenditures, and other liquidity requirements associated with our existing business operations. Capital expenditures are expected to range from $1.5 million to $2.0 million per quarter as we make additional R&D and IT capital investments.

FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements. Some of the forward-looking statements contained in this Quarterly Report include:

• our statements concerning our beliefs about the success of our shift in business strategy from perfect fit solutions to standards-based solutions;

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• the adoption by our customers of standards-based solutions, Media Server and ATCA and the size of the addressable market for ATCA;

• expectations and goals for revenues, gross margin, R&D expenses, selling, general, administrative expenses and profits;

• estimates of anticipated revenue from design wins;

• estimates and impact of stock-based compensation expense;

• expectations about the benefits from and integration of the operations, technologies, products or personnel from the acquisition of Convedia and MCPD;

• estimates and impact of the costs of the acquisition of Convedia and MCPD;

• statements concerning certain strategic partnerships;

• currency exchange rate fluctuations, changes in tariff and trade policies and other risks associated with foreign operations;

• our projected liquidity; and

• matters affecting the computer manufacturing industry including changes in industry standards, changes in customer requirements and new product introductions, as well as other risks described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006 and as updated in our quarterly reports on Form 10-Q.

All statements that relate to future events or to our future performance are forward-looking statements. In some cases, forward-looking statements can be identified by terms such as “may,” “will,” “should,” “expect,” “plans,” “seeks,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “seek to continue,” “intends,” or other comparable terminology. These forward-looking statements are made pursuant to safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or our industries’ actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements.

Forward-looking statements in this Quarterly Report on Form 10-Q include discussions of our goals, including those discussions set forth in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We cannot provide assurance that these goals will be achieved.

Although forward-looking statements help provide additional information about us, investors should keep in mind that forward-looking statements are only predictions, at a point in time, and are inherently less reliable than historical information. In evaluating these statements, you should specifically consider the risks outlined above and those listed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006 and as updated in our quarterly reports on Form 10-Q. These risk factors may cause our actual results to differ materially from any forward-looking statement.

We do not guarantee future results, levels of activity, performance or achievements and we do not assume responsibility for the accuracy and completeness of these statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made and based on information as of the date of this report. We assume no obligation to update any of these statements based on information after the date of this report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in interest rates, foreign currency exchange rates, and equity trading prices, which could affect our financial position and results of operations.

Interest Rate Risk. We invest excess cash in debt instruments of the U.S. Government and its agencies, high-quality corporate issuers and municipalities. We attempt to protect and preserve our invested funds by limiting default, market, and reinvestment risk. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities

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may have their fair value adversely affected due to a rise in interest rates while floating rate securities may produce less income than expected if interest rates decline. Due to the short duration of most of the investment portfolio, an immediate 10% change in interest rates would not have a material effect on the fair value of our investment portfolio. Additionally, the interest rate changes affect the fair market value but do not necessarily have a direct impact on our earnings or cash flows. Therefore, we would not expect our operating results or cash flows to be affected, to any significant degree, by the effect of a sudden change in market interest rates on the securities portfolio. The estimated fair value of our debt securities that we have invested in at September 30, 2007 and December 31, 2006 was $83.4 million and $112.5 million, respectively. The effect of an immediate 10% change in interest rates would not have a material effect on our operating results or cash flows.

Foreign Currency Risk. We pay the expenses of our international operations in local currencies, namely, the Euro, British Pound Sterling, New Shekel, Japanese Yen, Chinese Renminbi and Canadian Dollar. The international operations are subject to risks typical of an international business, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, foreign exchange rate volatility and other regulations and restrictions. Accordingly, future results could be materially and adversely affected by changes in these or other factors. We are also exposed to foreign exchange rate fluctuations as the balance sheets and income statements of our foreign subsidiaries are translated into U.S. Dollars during the consolidation process. Because exchange rates vary, these results, when translated, may vary from expectations and adversely affect overall expected profitability. Foreign currency exchange rate fluctuations resulted in a net loss of $22 thousand and $19 thousand for the three months ended September 30, 2007 and 2006, respectively. Foreign currency exchange rate fluctuations resulted in a net loss of $92 thousand and a net gain of $58 thousand for the nine months ended September 30, 2007 and 2006, respectively.

Convertible Notes. The fair value of the convertible senior notes is sensitive to interest rate changes. Interest rate changes would result in an increase or decrease in the fair value of the convertible notes, due to differences between market interest rates and rates in effect at the inception of the obligation. Unless we elect to repurchase our senior convertible notes in the open market, changes in the fair value of senior convertible notes have no impact on our cash flows or consolidated financial statements. The estimated fair value of the convertible senior notes was $93.0 million and $96.6 million at September 30, 2007 and December 31, 2006, respectively.

On October 23, 2007, the Board of Directors approved the repurchase of the $100 million principal amount of the convertible senior notes. We may elect to use a portion of our cash and cash equivalents and investment balances to buy back amounts of the convertible senior notes.

Item 4. Controls and Procedures

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission’s rules and forms, and that information we are required to disclose in our SEC reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

In connection with the evaluation described above, we identified no change in our internal control over financial reporting that occurred during the three months ended September 30, 2007, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

During the third quarter of 2007, we completed the process of incorporating our controls and procedures into Convedia, which was acquired effective September 1, 2006, and have included such in our assessment of our internal control over financial reporting as of September 30, 2007.

PART II. OTHER INFORMATION

Item 1A. Risk Factors

There are many factors that affect our business and the results of our operations, many of which are beyond our control. In addition to the other information set forth in our Form 10-Q for the quarterly periods ended March 31, 2007, June 30, 2007 and this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors and Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended

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December 31, 2006, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K for the year ended December 31, 2006, as updated in our quarterly reports on Form 10-Q, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The failure to successfully integrate MCPD’s business into our operations in the expected time frame, or at all, may adversely affect our future results.

We believe that the acquisition of MCPD, completed in September 2007 will result in certain benefits, including expanded global reach and increased product offerings. However, to realize these anticipated benefits, MCPD’s business must be successfully integrated into RadiSys’ operations by focusing on general and administrative, manufacturing and marketing and sales cooperation. The success of the MPCD acquisition will depend on our ability to realize these anticipated benefits from integrating MCPD’s business into our operations. We may fail to realize the anticipated benefits of the MCPD acquisition on a timely basis, or at all, for a variety of reasons, including the following:

• failure to effectively coordinate sales and marketing efforts to communicate the capabilities of the Company;

• potential difficulties integrating and harmonizing financial reporting or other critical systems; and

• the loss of key employees.

We may need to raise additional capital in the future to repay our convertible senior notes, and existing or future resources may not be available to us in sufficient amounts or on acceptable terms.

During November 2003, we completed a private offering of $100 million in aggregate principal amount of convertible senior notes due November 15, 2023 to qualified institutional buyers. The notes are convertible prior to maturity into shares of our common stock at a conversion price of $23.57 per share under certain circumstances that include but are not limited to (i) conversion due to the closing price of our common stock on the trading day prior to the conversion date reaching 120% or more of the conversion price of the notes on such trading date and (ii) conversion due to the trading price of the notes falling below 98% of the conversion value. Upon conversion we will have the right to deliver, in lieu of common stock, cash or a combination of cash and common stock. We may redeem all or a portion of the notes at our option on or after November 15, 2006 but before November 15, 2008 provided that the closing price of our common stock exceeds 130% of the conversion price for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date of the notice of the provisional redemption. As of September 30, 2007, the convertible senior notes were not redeemable at our option. On or after November 15, 2008, we may redeem the notes at any time. On November 15, 2008, November 15, 2013, and November 15, 2018, holders of the convertible senior notes will have the right to require us to purchase, in cash, all or any part of the notes held by such holder at a purchase price equal to 100% of the principal amount of the notes being purchased, together with accrued and unpaid interest and additional interest, if any, up to but excluding the purchase date.

On October 23, 2007, the Board of Directors approved the repurchase of the principal amount of the convertible senior notes. As of September 30, 2007, we had outstanding convertible senior notes with a face value of $100 million. While we cannot predict whether or when holders of the convertible senior notes will choose to exercise their repurchase rights, we believe that they would become more likely to do so in the event that the price of our common stock is not greater than certain levels or if interest rates increase, or both. Therefore, if a substantial portion of the convertible senior notes were to be submitted for repurchase on any of the repurchase dates, we might need to use a substantial amount of our available sources of liquidity for this purpose. Consequently, such repurchase could have the effect of restricting our ability to fund new acquisitions or to meet other future working capital needs, as well as increasing our costs of borrowing. We may seek other means of refinancing or restructuring our obligations under the convertible senior notes, but this may result in terms less favorable than those under the existing convertible senior notes.

Because of our dependence on certain customers, the loss of, or a substantial decline in sales to, a top customer could have a material adverse effect on our revenues and profitability.

During 2006, we derived 66.7% of our revenues from five customers. These five customers were Nokia Siemens Networks, Nortel, Comverse, Philips Medical Systems and Avaya. During 2006, revenues attributable to Nokia and Nortel were 39.4% and 10.3%, respectively. During the three and nine months ended September 30, 2007, we derived 52.0% and 42.1% of our revenues from Nokia Siemens Networks, respectively. A financial hardship experienced by, or a substantial decrease in sales to any one of our top

31

customers could materially affect revenues and profitability. Generally, these customers are not the end-users of our products. If any of these customers’ efforts to market the end products we design and manufacture for them or the end products into which our products are incorporated are unsuccessful in the marketplace our design wins, sales and/or profitability will be significantly reduced. Furthermore, if these customers experience adverse economic conditions in the markets into which they sell our products (end markets), we would expect a significant reduction in spending by these customers. Some of the end markets that these customers sell our products into are characterized by intense competition, rapid technological change and economic uncertainty. Our exposure to economic cyclicality and any related fluctuation in demand from these customers could have a material adverse effect on our revenues and financial condition.

Other Risk Factors Related to Our Business

Other risk factors include, but are not limited to, changes in the mix of products sold, changes in regulatory and tax legislation, changes in effective tax rates, inventory risks due to changes in market demand or our business strategies, potential litigation and claims arising in the normal course of business, credit risk of customers and other risk factors. Additionally, proposed changes to accounting rules could materially affect what we report under GAAP and adversely affect our operating results.

Item 5. Other Events

On November 6, 2007, the Compensation Committee of the Board of Directors of our Company, in recognition of Mr. Brian Bronson’s services and his performance in connection with the acquisition of certain assets of MCPD, approved an award to Mr. Bronson of a cash bonus in the aggregate amount of $40 thousand.

Item 6. Exhibits

(a) Exhibits

Exhibit No	Description
4.1	RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.4 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
4.2	Form of Notice of Option Grant for United States employees for RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.5 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
4.3	Form of Notice of Option Grant for Canada employees for RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.6 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
4.4	Form of Notice of Option Grant for China employees for RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.7 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
4.5	Form of Notice of Option Grant for international employees for RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.8 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
4.6	Form of Restricted Stock Unit Grant Agreement for RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.9 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
10.1	Amended and Restated Asset Purchase Agreement, dated September 12, 2007, by and between the Company and Intel Corporation. Incorporated by reference from Exhibit 2.1 in the Company’s Amended Current Report of Form 8-K/A, filed on November 1, 2007, SEC File No. 000-26844.
10.2*	Transition Services Agreement, dated September 12, 2007, by and between the Company and Intel Corporation (portions of the exhibit have been omitted pursuant to a request for confidential treatment to the Commission).
10.3*	Warranty Services Agreement, dated September 12, 2007, by and between the Company and Intel Corporation (portions of the exhibit have been omitted pursuant to a request for confidential treatment to the Commission).
10.4*	Description of the Revisions of the Company’s Directors Compensation Arrangements.
31.1*	Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32

31.2*	Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		RADISYS CORPORATION
Dated:	November 8, 2007	By:	/s/ SCOTT C. GROUT
			Scott C. Grout
			President and Chief Executive Officer
Dated:	November 8, 2007	By:	/s/ BRIAN BRONSON
			Brian Bronson
			Chief Financial Officer

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EXHIBIT INDEX

Exhibit No	Description
4.1	RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.4 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
4.2	Form of Notice of Option Grant for United States employees for RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.5 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
4.3	Form of Notice of Option Grant for Canada employees for RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.6 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
4.4	Form of Notice of Option Grant for China employees for RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.7 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
4.5	Form of Notice of Option Grant for international employees for RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.8 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
4.6	Form of Restricted Stock Unit Grant Agreement for RadiSys Corporation 2007 Stock Plan. Incorporated by reference from Exhibit 4.9 to the Company’s Registration Statement on Form S-8, filed on May 15, 2007, SEC Registration No. 333-142968.
10.1	Amended and Restated Asset Purchase Agreement, dated September 12, 2007, by and between the Company and Intel Corporation. Incorporated by reference from Exhibit 2.1 in the Company’s Amended Current Report of Form 8-K/A, filed on November 1, 2007, SEC File No. 000-26844.
10.2*	Transition Services Agreement, dated September 12, 2007, by and between the Company and Intel Corporation (portions of the exhibit have been omitted pursuant to a request for confidential treatment to the Commission).
10.3*	Warranty Services Agreement, dated September 12, 2007, by and between the Company and Intel Corporation (portions of the exhibit have been omitted pursuant to a request for confidential treatment to the Commission).
10.4*	Description of the Revisions of the Company’s Directors Compensation Arrangements.
31.1*	Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

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EX-10.2

Exhibit 10.2

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT (the “Agreement”), dated as of September 12, 2007 (the “Effective Date”), is by and between Intel Corporation, a Delaware corporation (the “Seller”) and RadiSys Corporation, an Oregon corporation (the “Buyer”). Seller and Buyer are sometimes referred to as the “Parties” and each individually as a “Party”.

WHEREAS, Buyer and Seller have entered into the Asset Purchase Agreement and certain Acquisition Documents, dated as of September 7, 2007, pursuant to which Seller agreed to sell to Buyer, and Buyer agreed to acquire from Seller, the Transferred Assets, and Buyer agreed to assume the Assumed Liabilities; and

WHEREAS, during a transitional period following the Closing Date, Seller will perform Seller Transition Services, and Buyer will perform the Buyer Transition Services and certain other obligations with respect thereto, each as required by the terms of this Agreement, in order to transition the production, sale and support of the Products from Seller to Buyer and to facilitate the transactions contemplated by the Asset Purchase Agreement, and Buyer will compensate Seller for such services.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements and covenants contained herein, the Parties hereto agree as follows:

1. Definitions. Capitalized terms used, but not defined, in this Agreement shall have the meanings ascribed to such terms in the Asset Purchase Agreement. The definitions set forth in this Agreement shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” All references herein to Sections and Exhibits shall be deemed to be references to Sections of, and Exhibits to, this Agreement unless the context shall otherwise require. Unless the context shall otherwise require, any reference to any contract, instrument, statute, rule or regulation is a reference to it as amended and supplemented from time to time (and, in the case of a statute, rule or regulation, to any successor provision). Any reference in this Agreement to a “day” or a number of “days” (without the explicit qualification of “Business”) shall be interpreted as a reference to a calendar day or number of calendar days. The following terms, as used herein, have the following meanings:

1.1. “Acquisition Documents” has the meaning set forth in the Asset Purchase Agreement.

1.2. “Affiliate” has the meaning set forth in the Asset Purchase Agreement.

1.3. “Applicable Law” has the meaning set forth in the Asset Purchase Agreement.

1.4. “Asset Purchase Agreement” means the Asset Purchase Agreement entered into by the Seller and Buyer concurrently with this Agreement and effective as of the Closing Date.

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

1.5. “Assigned Matters” mean those modifications to Buyer’s Products that (a) do not use and are not based on or developed from Seller Confidential Information or Seller Proprietary Products; and (b) which are created solely and exclusively in the performance of the Transition Services during the Term of this Agreement; and (c) that are exclusively embodied in the Products; and (d) used exclusively in the Business; and (e) not embodied or used in or with any other current product or service or planned product or service of Seller or its Subsidiaries.

1.6. “Business” has the meaning set forth in the Asset Purchase Agreement.

1.7. “Business Day” has the meaning set forth in the Asset Purchase Agreement.

1.8. “Buyer Matters” means all software, Buyer Confidential Information and other materials created solely by Buyer or supplied directly to Seller by Buyer and any copies of the foregoing, including, but not limited to, all inventions, works of authorship, discoveries, processes, techniques, methods, technical data, specifications, policies, plans, designs, coding, software, source code, object code, program materials, programming aids, tools, reports, data, information, drawings, formulae, algorithms, ideas, designs, concepts, know-how, documentation and other written materials, as well as the patents, patent applications, copyrights, copyright applications and other intellectual property rights attendant thereto.

1.9. “Buyer Transition Services” means the sharing of certain information and the provision of certain services and support by Buyer to Seller for a limited period of time, all as more fully described in Exhibit 3, which is attached hereto and incorporated herein by reference.

1.10. “Changeover Date” means the date on which Buyer is able to perform supply chain management tasks on its own, including production asset management, Product repair services, order fulfillment services, manufacturing and support thereof, and inventory management services for the Products. With regard to the various product lines included among the Products (the “Product Lines”), upon the completion of the changeover for each Product Line, Seller shall no longer be obligated to perform Seller Transition Services related to those transitioned Product Lines. For purposes of clarity, the Changeover Date occurs when the mutually agreed verification and validation of the product build for each Product Line has been completed.

1.11. “Confidentiality Agreement” has the meaning set forth in the Asset Purchase Agreement.

1.12. “Cost of Service” means the price for each Seller Transition Service that Buyer agrees to pay Seller as more fully described in Exhibits 1 and 2.

1.13. “Deliverable” means only those items specifically identified as deliverables in a statement of work agreed to in writing by Seller and Buyer (the “Statement of Work”).

2

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

1.14. “Dollars” has the meaning set forth in the Asset Purchase Agreement.

1.15. “End of Phase 1” means ninety (90) days from the Closing Date or such earlier date as mutually agreed upon by the Parties.

1.16. “End of Phase 2” means the earlier of (a) the date Seller completes the Seller Transition Services or (b) one hundred eighty (180) days from the Closing Date.

1.17. “Engineering Services Agreement” means that separate Engineering Services Agreement under which Buyer will obtain from Seller certain engineering development service related to New Products pursuant to a mutually agreed upon development plan. The Engineering Services Agreement will be subject to the mutual agreement and consent of the Parties in accordance with the terms set forth in Exhibit 7.

1.18. “Equipment” has the meaning set forth in the Asset Purchase Agreement.

1.19. “Fees” means (a) the fees associated with the Transition Services that Buyer agrees to pay Seller as more fully described in Section 6 and Exhibits 1 and 2 hereto, which shall include expenditures for required materials and supplies, reasonable travel and temporary living expenses; and (b) charges for licenses, royalties and third party services.

1.20. “Finished Inventory” has the meaning set forth in the Asset Purchase Agreement.

1.21. “Fiscal Month” means a month in accordance with Seller’s fiscal calendar which is set forth in Exhibit 4 hereto.

1.22. “Intellectual Property Agreement” has the meaning set forth in the Asset Purchase Agreement.

1.23. “Inventory” has the meaning set forth in the Asset Purchase Agreement.

1.24. “Monthly Financial Report” means a monthly financial report submitted by either Party to the other Party in a form substantially similar to Exhibit 5 (which is attached hereto and incorporated herein by reference).

1.25. “Net Proceeds” means the proceeds per Product after deducting the Phase 1 Product Prices or Phase 2 Product Prices, as appropriate, from the Net Revenue.

1.26. “Net Revenue” means the Seller's Fiscal Month net revenue for the Products shipped by Seller on behalf of Buyer calculated by taking into account the sales volume, sales returns, adjustments, and costs of sale for the distribution and production of the Products, consistent with Seller’s past practices. For purposes of clarity, Net Revenue shall include any revenue for the Products shipped by Seller to distributors prior to the Closing Date to the extent such distributors have not notified Seller that such Products have been shipped by such distributors to their customers as of the Closing Date and does not include revenue associated with Products shipped by Seller to its end customers prior to the Closing Date.

3

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

1.27. “New Products” has the meaning set forth in the Asset Purchase Agreement.

1.28. “Person” has the meaning set forth in the Asset Purchase Agreement.

1.29. “Phase 1” means the period commencing as of the Closing Date and expiring at the End of Phase 1, during which time Seller and Buyer shall perform certain transition obligations, as more fully described in this Agreement.

1.30. “Phase 1 Product Prices” means the prices set forth on Exhibit 6.

1.31. “Phase 2” means the period commencing as of the End of Phase I and expiring at the End of Phase 2, during which time Seller and Buyer shall perform certain transition obligations, as more fully defined in this Agreement.

1.32. “Phase 2 Product Prices” means the prices that will be jointly established by the Parties and set forth on Exhibit 6. The Parties agree that the principal difference in pricing between Phase 1 Product Prices and Phase 2 Product Prices will be based on the treatment or burdening of Seller’s manufacturing costs and internally manufactured products and components.

1.33. “Products” has the meaning set forth in the Asset Purchase Agreement.

1.34. “Product Lines” means the various product lines included among the Products.

1.35. “Seller Materials” means all Seller Deliverables, Seller Confidential Information, software and other materials created or supplied by Seller before or during the performance of the Services under this Agreement and any copies of the foregoing, including, but not limited to, all inventions, works of authorship, discoveries, processes, techniques, methods, technical data, specifications, policies, plans, designs, coding, software, source code, object code, program materials, programming aids, tools, reports, data, information, drawings, formulae, algorithms, ideas, designs, concepts, know-how, documentation and other written materials, as well as the patents, patent applications, copyrights, copyright applications and other intellectual property rights attendant thereto.

1.36. “Seller Transition Services” means the sharing of certain information and the provision of certain services and support by Seller to Buyer for a limited period of time, all as more fully described in Exhibit 2, which is attached hereto and incorporated herein by reference. For the avoidance of doubt, during Phase 1, Seller Transition Services will include the services specifically described in Exhibit 2 and those related services that were performed by Seller in its conduct of the Business at the Closing Date.

1.37. “Subsidiary” has the meaning set forth in the Asset Purchase Agreement.

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1.38. “Taxes” has the meaning set forth in the Asset Purchase Agreement.

1.39. “Term” means the effective period of this Agreement commencing with the Effective Date and ending on the End of Phase 2 unless earlier cancelled or terminated pursuant to the terms of this Agreement. This Agreement will be of no force and effect in the event the Closing of the transactions contemplated by the Asset Purchase Agreement does not occur.

1.40. “Third Party Inventory” means certain raw materials, work-in-progress, parts, finished goods, supplies, returned materials, packaging materials and other inventories owned by third parties and used or held for use by such third parties exclusively for the benefit of Seller and related to Seller’s sale and support of the Products and New Products.

1.41. “Trademarks” has the meaning set forth in the Asset Purchase Agreement.

1.42. “Transition Services” means the Buyer Transition Services and Seller Transition Services.

1.43. “Unfinished Inventory” has the meaning set forth in the Asset Purchase Agreement.

1.44. “Warranty Services Agreement” has the meaning set forth in the Asset Purchase Agreement.

2. Transition.

2.1. Seller’s Obligations. Seller’s performance of the Seller Transition Services is subject to (a) the assignment to Buyer of the Assumed Contracts, and (b) the ongoing transactions contemplated by the Asset Purchase Agreement, i.e., the Seller may not be able to perform such services to the extent that the services have been transitioned to Buyer or Seller’s performance of such services is dependent on Seller being a party to an Assumed Contract that has been assigned to Buyer. Subject to the foregoing, Seller will perform or cause to be performed the Seller Transition Services set forth in Exhibit 2 to this Agreement for either the term for such services set forth in Exhibit 1 or for such other period as described in Section 2.4 hereto, in accordance with Seller’s standard practices as of the Closing Date and using at least commercially reasonable efforts. Seller Transition Services may be provided by Seller or a Seller Affiliate, at Seller’s sole discretion. In addition, Seller may, at its sole discretion, upon prior notice to Buyer, cause any Seller Transition Service it is required to provide hereunder to be provided, in whole or in part, by any third party contractor engaged by Seller; provided that Seller shall remain responsible for performance of any Seller Transition Services it causes to be provided by any such third party.

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2.1.1 Seller will use commercially reasonable efforts to continue to manage, utilizing its standard processes and policies until such time as each item of Equipment that is included in the Transferred Assets is transferred to the Buyer, the Equipment that is (1) valued at Fifty Thousand Dollars ($50,000) original capitalized amount (as set forth on the Transferred Asset list attached to the Asset Purchase Agreement) or higher and (2) are transitioned to Buyer under this Agreement pursuant to the Asset Purchase Agreement. Seller will provide to Buyer at the End of Phase 2 a report regarding the transfer of such Equipment that Seller continued to manage pursuant to this Section 2.1.1.

2.1.2 During the Term, Seller will not accept new customers (distributor or direct customer) and will instead refer direct customers and distributors to Buyer. In addition, Seller shall have no obligation under this Agreement to modify its practices with regard to shipping or invoicing documentation and/or labeling related to the Products.

2.1.3 During Phase 2, Seller will have no obligation to supply and sell Products or New Products to distributors and customers. During Phase 2, Seller will, using commercially reasonable efforts, supply and sell (at the Phase 2 Product Prices) the Products solely to Buyer for the period of time that is agreed upon by the Parties and set forth in mutually agreed upon schedules; provided, however, that in no event will such schedule extend beyond the End of Phase 2.

2.1.4 Upon the Changeover Date for each Product, Seller shall no longer be obligated to perform any of the Seller Transition Services related to that transitioned Product.

2.1.5 Prior to the End of Phase 2, Buyer shall be granted a right of first refusal to purchase additional equipment in accordance with the Asset Purchase Agreement. During Phase 2, Seller will prepare and provide to Buyer a list of additional equipment (the “Additional Equipment”) each item of which is valued at Fifty Thousand Dollars ($50,000) original capitalized amount (as set forth on the Transferred Asset list attached to the Asset Purchase Agreement) or higher. At any time within thirty (30) days after receipt of the list of Additional Equipment, Buyer may, by giving written notice to Seller, elect to purchase all or any portion of the Additional Equipment as set forth in the Acquisition Agreement.

2.2. Buyer’s Obligations. Buyer is responsible for the transition of the manufacture, sales and support of the Products and New Products from Seller to Buyer. Buyer also shall facilitate the efficient and timely delivery of all Buyer Transition Services and pay the Fees to Seller for Seller Transition Services pursuant to the terms and conditions of this Agreement. Buyer agrees to perform or cause to be performed the Buyer Transition Services set forth in Exhibit 3 to this Agreement for the Term, or for such other period as described in Section 2.4 hereto. Buyer

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shall not interfere with Seller’s control and supervision of the personnel that Seller, in its sole discretion, chooses to assign to perform the Transition Services. Buyer shall return to Seller any and all assets utilized by Transferred Employees that are not expressly included as part of the Transferred Assets, including information technology equipment and laptops. In addition, Buyer shall perform any and all other actions not specifically performed by Seller under Exhibit 2 which must or should be performed during the Term for the transition of the sale and support of the Products and New Products from Seller to Buyer.

2.3. Transfer of Responsibility. During the Term and subject to Seller’s timely performance of its material obligations hereunder, Buyer shall use commercially reasonable efforts to assume the responsibility for the Transition Services as promptly as practicable, but in no event later than the dates set forth in this Agreement for the completion of the transition to Buyer of such services. Buyer shall use commercially reasonable efforts to assume the responsibility for the Products, including the manufacturing, sales and support of the Products by the Changeover Date, but in no event later than the End of Phase 2. Buyer’s inability to completely perform the manufacturing, sales and support of the Products or the design and development of the New Products by the End of Phase 2 shall not obligate Seller to continue performance under this Agreement after the End of Phase 2. Buyer shall assume responsibility for the design and development of the New Products as soon as practicable, but in no event later than the agreed upon schedule for transition of the design and development of the New Products as set forth in Exhibits 2 and 3.

2.4. Service Duration; Early Termination. The Transition Services (and the obligations of each Party with respect thereto) shall commence as of the Effective Date and continue for the duration set forth for such Transition Service in Exhibits 1, 2 and 3, but no later than the End of Phase 2. The Parties agree that the duration of specific Transition Services may be shortened depending upon the needs of Buyer and its capability to provide such services internally or to procure them from other service providers. Accordingly, specific Transition Services shall be provided by Seller only until the earliest of: (a) the duration specified in Exhibit 1 or 2, (b) the End of Phase 2; (c) the expiration of Seller’s rights under agreements with third parties that are necessary for Seller to provide such Transition Services hereunder; or (d) such time as specified in a written notice to Seller of Buyer’s early termination of such Transition Service, which shall be provided at least thirty (30) days in advance of the desired date of such termination. If any specific Transition Service is terminated prior to the stated duration pursuant to clause (c) or (d) above, the Parties shall promptly take all necessary actions to phase out such Transition Service, including cancellation of third party obligations and transfer of responsibility to Buyer for such services, and Buyer shall promptly assume the responsibilities for such services. Buyer shall reimburse Seller for any third party cancellation charges that Seller incurs by reason of any early termination by Buyer under subparagraph (d) above; provided that such cancellation charges will not be deemed to have been incurred as a result of Buyer’s exercise of its rights under subparagraph (d) above to the extent that such exercise is a direct result of Buyer’s obligation to phase out such Transition Service, including cancellation of third party obligations and assumption for such services.

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2.5. License of Buyer’s Brand Name and Mark. As of the Closing Date, Buyer grants to Seller a non-exclusive, royalty-free, revocable, worldwide license to use Buyer's brand name or Trademark to mark any Product as required by and in accordance with the terms and conditions under this Agreement. Buyer also hereby grants to Seller a non-exclusive, royalty-free, revocable, worldwide license, under its Copyrights, to reproduce, display, perform, and distribute any and all instructions or accompanying documentation to the Buyer-provided trade name or Trademark in order for Seller to mark the Products in accordance with the terms and conditions of this Agreement. Buyer and Seller agree to maintain quality control standards that are at least as high as Seller’s quality control standards currently in place and utilized by Seller in connection with the manufacture and sale of the Products that are sold under Seller’s trade names or Trademarks as of the Closing Date. In addition, Buyer hereby grants to Seller a non-exclusive, royalty-free, revocable, worldwide Trademark license, to use and disclose any instructions or documentation to the extent necessary to mark the Products and New Products in accordance with the terms and conditions of this Agreement solely for such purpose and duration as agreed upon in writing by the Parties with regard to identified Buyer brand names or Trademarks. Buyer further grants to Seller the right to sublicense to Seller’s subcontractors, suppliers or distributors the rights described herein and granted to Seller for the sole purpose of marking the Products and New Products with Buyer’s brand name or marks as described herein.

2.6. No Acceptance of Any Purchase Orders Beyond the Term. During Phase 1, Seller may accept purchase orders from Seller's distributors, direct customers and Buyer. Seller shall not accept purchase orders from any party other than Buyer during Phase 2. For any existing orders that have delivery dates after the End of Phase 2, Seller will refer the direct customers or distributors to Buyer and suggest that they re-book such orders with Buyer (and shall not in any way impede such customers and distributors from doing so). If a direct customer or distributor re-books such orders, Buyer shall be solely responsible for such orders. Notwithstanding the foregoing, Seller shall not be, in any manner whatsoever, responsible if the direct customers or distributors fail to re-book such orders with Buyer.

2.7. Additional Services. If Buyer notifies Seller that Buyer desires to obtain different or additional services or resources from Seller beyond those set forth in Exhibit 2, the Parties shall negotiate mutually agreeable terms and conditions for such Services (the “Additional Services”); provided, however, that this Section 2.7 shall not require Seller to provide any Additional Services absent any such agreement and the provision of Additional Services will remain at the sole discretion of Seller. If Seller and Buyer mutually agree upon the provision of any Additional Services, this Agreement and Exhibits, as applicable, shall be amended

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pursuant to Section 16.13. Seller will be reimbursed by Buyer for the cost of any such Additional Services as calculated by Seller based upon Seller’s costs plus a fee of ***, and expenditures for reasonable travel and temporary living expenses related to such Additional Services.

2.8. Transition Services Provided Following Term; Term Extension. Except as otherwise agreed to by the Parties in writing, Seller is under no obligation, express or implied, to provide any of the Seller Transition Services after the End of Phase 2 unless, and solely to the extent that, Seller’s material failure in its performance of the Seller Transition Services directly and proximately causes a delay in the Changeover Date that requires the performance of Seller Transition Services after the End of Phase 2. In the event Buyer requests Seller to continue providing Transition Services after the end of the Term, Seller, in its sole discretion, shall determine whether and to what extent it is willing to provide any such services. If Seller and Buyer mutually agree to extend the Transition Services beyond the Term, this Agreement and the Exhibits hereto as applicable, shall be amended pursuant to Section 16.13. The Parties acknowledge that Fees payable in respect of any Transition Services that Seller, in its sole discretion, agrees to provide after the end of the Term may be higher than those established during the Term for such extension. Buyer acknowledges and agrees that, following the end of the Term, Seller shall have no further responsibilities or obligations to Buyer under this Agreement.

2.9. Third Party Consents and Agreements Required to Perform the Transition Services. The Parties agree that Seller’s ability to provide certain Transition Services to Buyer may be conditioned upon Seller's ability to obtain, on reasonable terms, third party consents and agreements reasonably necessary for Seller to perform such Transition Services or to use certain third party software or hardware licensed to Seller. Seller shall use its commercially reasonable efforts, and Buyer shall reasonably cooperate with Seller, to obtain any Seller Contractual Consent; provided, however, that commercially reasonable efforts by Seller and its Subsidiaries shall not include (a) the payment of any amounts or provision of any other consideration by Seller or (b) the amendment of any provision of, or waiver of any rights under any Assumed Contract. Buyer shall promptly reimburse Seller for all such costs incurred in obtaining such consents and agreements. Notwithstanding the foregoing, Seller shall have no obligation to expend any funds to obtain such third party consents and shall not be in breach of its obligations hereunder in the event that Seller is unable to obtain such third party consents and agreements.

2.10. Government Permits Required to Perform the Transition Services. The Parties agree that Seller’s ability to provide certain Transition Services to Buyer may be conditioned upon Seller's ability to obtain, in a timely manner, Governmental Authority permits and approvals reasonably necessary for Seller to perform such Seller Transition Services. Buyer and Seller, and their relevant Subsidiaries, shall

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cooperate with one another in taking any reasonable actions by or in respect of, or making any filings with, or obtaining any consents, approvals, authorizations from, Governmental Authorities as are necessary for the consummation of the transactions contemplated by this Agreement. Buyer shall promptly reimburse Seller for all such costs incurred in obtaining such Governmental Authority permits and approvals.

2.11. Staffing Required to Perform Transition Services. The provision of Seller Transition Services by Seller to Buyer is contingent upon the availability of qualified Seller staff to perform such services, including those personnel who may be hired by Buyer during the Term. As set forth above, it is the intent of the Parties to migrate Transition Services to Buyer as soon as practical, but in no event longer than the dates set forth in Exhibits 1 or 2. If Seller staff performing a specific Seller Transition Service are hired by Buyer in accordance with the terms of the Asset Purchase Agreement or this Agreement so that in the reasonable judgment of Seller, qualified staff are not available to perform a specific Seller Transition Service on a commercially feasible basis, Seller may, upon thirty (30) days written notice to Buyer, terminate such Seller Transition Service.

2.12. Standard of Performance. Seller will use commercially reasonable efforts to perform the Seller Transition Services in a professional and workmanlike manner and consistent with Seller’s standard business practices in operating the Business, including, without limitation, maintaining such consents and approvals as have been obtained by Seller during the Term and may be necessary to perform a Seller Transition Service prior to transfer of such service to Buyer.

2.13. Training. With regard to the training services to be performed by Seller as set forth in Exhibit 2, Seller, in its sole discretion, will assign the appropriate personnel to perform such training.

3. Removal of Seller’s Brand Name and Trademarks.

Unless otherwise agreed to in writing by the Parties, by the earlier of the End of Phase 2 or Changeover, Buyer shall use commercially reasonable efforts to remove or have removed all Seller branded or Trademarked information from the Products and New Products (including without limitation, any packaging or electronic documentation for the Products and New Products and any datasheets, specifications, websites or other documentation related to the Products and New Products). The removal of brand name and Trademarks pursuant to this Section 3 is not in any way related to, and nothing herein requires, the removal of brand names and marks which are physically placed or marked onto the finished Products and New Products by or for Seller. Seller will not be obligated to remove Seller’s or Buyer’s brand name or marks on any marked, finished Products and New Products at any time. In the event that, through the use of commercially reasonable efforts, Buyer is unable to meet its removal obligation(s) under this Section 3 by the earlier of (a) the End of Phase 2 or (b) the Changeover Date, upon Buyer’s reasonable request the Parties will enter into good faith negotiations regarding an the appropriate extension of time for Buyer’s obligations(s) under this Section 3.

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As further set forth on Exhibit 2, Seller shall create web-site redirects on each web page on which the Products or New Products had been referenced, which redirect shall include a notice (agreed upon by the Parties in writing) with respect to the availability of such Products and New Products from Buyer (and such other matters as the Parties so agree). Except as otherwise agreed to in writing by the Parties, and Seller’s obligations with respect to website redirects and notices therefore, Seller shall have no obligation under this Agreement to place Buyer's Trademarks on the Products or New Products, including without limitation, any packaging, electronic documentation, data sheets, specifications, websites, or other documentation related to the Products or New Products

Seller shall have no obligation under this Agreement to place Buyer's brand name or marks on the Products or New Products, including without limitation, any packaging, electronic documentation, data sheets, specifications, websites, or other documentation related to the Products or New Products. In addition, Seller shall have no obligation under this Agreement to modify any packaging, electronic documentation, data sheets, specifications, websites, or other documentation related to the Products and New Products No license or other right is granted by Seller to Buyer to any Seller Trademark, brand name or logo under this Agreement, expressly or by implication, estoppel, statute or otherwise. Any and all Trademark or other Intellectual Property rights in and to Seller’s Trademarks, brand names and logos inure to the benefit of Seller.

Notwithstanding any other provision, no interest in or right to use the name “Intel” or any derivation thereof, or any other Trademarks, service marks or tradenames of Seller (the “Retained Marks”) is being transferred. Buyer agrees (a) not to use, and agrees to cause each of its Affiliates and Subsidiaries not to use any materials bearing Retained Marks and (b) not to sell, transfer or ship, and agrees to cause each of its Affiliates and Subsidiaries not to sell, transfer or ship any products bearing Retained Marks, except as permitted under this Section 3. The foregoing rights set forth in this Section 3 are subject to Seller's standard Trademark usage guidelines, a copy of which will be provided to Buyer, and Seller reserves the right to practice quality control with regard to its marks. In the event that Buyer sells Products or New Products bearing Seller’s brand name or Trademarks, Buyer agrees to make a truthful, fair, and non-misleading reference to the Retained Marks. Buyer acknowledges Seller’s rights in the Retained Marks and agrees that any and all use thereof by Buyer shall inure to the sole benefit of Seller. Buyer agrees not to (a) challenge Seller’s ownership or use of the Retained Marks, or (b) apply to register any of the Retained Marks or any marks confusingly similar thereto. If Buyer acquires any rights in, or registration or application for the Seller’s Retained Marks by operation of law or otherwise, it will immediately upon request by Seller and at no expense to Seller, assign such rights, registrations, right of priority, and/or applications to Seller, along with all associated goodwill. Buyer shall (i) not alter the Retained Marks and (ii) use the retained Marks only in a positive manner and not in any manner that may disparage Seller, its products or services, or for promotional goods or products which, in Seller’s reasonable judgment, may diminish or otherwise damage Seller’s goodwill in the Retained Marks.

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4. Warranty Services.

4.1 Seller shall be responsible for the product warranty services and returns for Products shipped by Seller to Seller’s end customers, distributors or other third party customers prior to the Closing Date (including all costs associated therewith). Except as provided herein, to the extent that Seller is responsible for product warranty services and returns for Products during the Term or thereafter (for Products shipped by Seller prior to the Closing Date), and those Products have already been transferred to Buyer (i.e., for which the Changeover Date has occurred), Buyer shall promptly provide to Seller those Products as requested by Seller in order to meet the third party’s warranty or return requests and Buyer shall be reimbursed by Seller at cost.

4.2 Buyer shall be responsible for product warranty services and returns for Products and New Products shipped or sold by Buyer and its distributors to end customers or other third party customers and for Products and New Products shipped or sold by Seller on behalf of Buyer to Buyer’s or Seller’s distributors, end customers or other third party customers on or after the Closing Date. Until the Changeover Date or such other date as mutually agreed upon by the Parties, Seller shall perform such warranty services (and handle such returns) for Buyer as part of the Seller Transition Services. The Parties acknowledge and agree that Seller’s compensation for the performance of such service is included within the Phase 1 Product Prices and will be included within the Phase 2 Product Prices.

4.3 No later than the Changeover Date, Buyer will begin to perform certain product warranty services for Products shipped by Seller to Seller’s end customers, distributors or other third party customers prior to the Closing Date in accordance with the Warranty Services Agreement.

5. Transition Services.

5.1 The Parties will cooperate with the other Party, its employees, agents, and representatives, in the performance of the Transition Services to facilitate timely performance of the Transition Services, including, without limitation, working together to identify any documents, data or information exclusively related to the Products and New Products, including, but not limited to, developing bills of material for the software, firmware, and hardware utilized in the active Products and New Products.

5.2 Access to Facilities.

5.2.1 At no cost to Seller, Buyer shall provide to Seller appropriate access to the facilities or locations of Buyer, its Subsidiaries, suppliers, contract manufacturers, and subcontractors at which Seller requests access in order to facilitate the performance of Seller Transition Services during Buyer’s regular business hours, or such other hours as Seller may reasonably require for purposes of performing the Seller Transition Services. For the avoidance of doubt, the Parties contemplate that the Seller Transition Services will be performed principally at Seller facilities and that access to Buyer facilities may be appropriate for the

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performance of certain Seller Transition Services. In addition, Buyer shall provide the following services and other items, as applicable, to Seller at each facility or location of Buyer, its Subsidiaries, suppliers and subcontractors at which Seller is performing Seller Transition Services: (i) reasonable access to and use of ordinary office equipment; (ii) reasonable access to and use of telephone, internet and fax equipment and services (including voicemail services, if applicable); and (ii) such other routine or minor items, services and resources as the Parties may agree are reasonably necessary for Seller to perform its obligations under this Agreement.

5.2.2 At no cost to Buyer, Seller shall provide to Buyer appropriate access to the facilities or locations of Seller and its Subsidiaries and, to the extent such third party agrees, its suppliers, contract manufacturers, and subcontractors at which Buyer requests access in order to facilitate the performance of Buyer Transition Services during Seller’s regular business hours, or such other hours as Seller may reasonably require for purposes of performing the Buyer Transition Services. For the avoidance of doubt, the Parties contemplate that the Buyer Transition Services will be performed principally at Buyer facilities and that access to Seller facilities may be appropriate for the performance of certain Buyer Transition Services. In addition, Seller shall provide the following services and other items, as applicable, to Buyer at Seller’s facilities at which Buyer is performing Buyer Transition Services: (i) reasonable access to and use of ordinary office equipment; (ii) reasonable access to and use of telephone, internet and fax equipment and services (including voicemail services, if applicable); and (ii) such other routine or minor items, services and resources as the Parties may agree are reasonably necessary for Seller to perform its obligations under this Agreement.

5.2.3 In the event employees, agents and representatives of either Party (the “Visiting Party”) need access to the other Party’s facility in connection with the Seller’s performance of Seller Transition Services, the Visiting Party shall ensure that such access (a) shall not be disruptive to the other Party’s business and operations and (b) shall be at the sole expense of the Visiting Party. The Visiting Party shall, and shall cause its employees to, comply in all material respects with applicable workplace security, administrative, environmental, safety and other laws and policies and procedures applicable to the performance of services at the other Party’s facility.

5.3 Use of Buyer Resources. In the event that Buyer and Seller agree that Seller may need to provide Seller Transition Services at Buyer’s facility, the Agreement will be amended by the mutual agreement of the Parties to include such Transition Services and the applicable fees for such Seller Transition Services to be performed at Buyer’s facility.

5.4 Books and Records; Access to Information. During the Term and within five (5) Business Days of receipt of a written request from Seller, Buyer shall, in accordance with its company policies, provide Seller with access during regular business hours to business records owned and held by Buyer relating to the

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Transition Services or under their control that are reasonably necessary to enable Seller to perform the Seller Transition Services. Seller shall be entitled to make copies of, and extracts from, such business records solely as may be reasonably necessary to perform the Seller Transition Services, at its own expense. During the Term, Seller, in its sole discretion, may provide to Buyer information in addition to the documents, reports and data that Seller is required to provide under Exhibit 2 upon receipt of a request for such additional information from Buyer. Each Party may only use such information obtained from the other Party, and copies thereof, solely as necessary to perform the applicable Transition Services and may not disclose such information or provide copies to any third party without the other Party’s prior written consent. Without limiting the foregoing, such information shall be subject to the confidentiality obligations of Seller under Section 16.8 of this Agreement.

5.5 Service Coordinator. Each Party will appoint one individual (the “Service Coordinators”) who will be responsible for general coordination of all Transition Services. The Service Coordinators will act as the primary liaison between the two organizations and will coordinate the Transition Services to be provided. The Service Coordinators will be generally knowledgeable in respect of the operations of each organization and shall be responsible for: (a) the efficient coordination of the Transition Services and (b) approval of all changes to Transition Services that the Parties may mutually agree to. Each Party’s Service Coordinator and related contact information may be updated upon written notice to the other Party. Each Party within five (5) days after the Closing Date will provide to the other Party an organizational chart with the names and contact information for the individuals responsible for the day-to-day performance of the Transition Services, as well as the appropriate escalation path for each functional area included on the organizational chart.

5.6 Transition of New Products. The Parties acknowledge that during Phase 1, Buyer may determine that certain of the New Products are ready for introduction into the commercial marketplace. The Agreement will be amended in writing in the event that Buyer decides to introduce any of the New Products into the commercial marketplace and Seller agrees to treat such New Product as a Product for purposes of providing services under this Agreement.

6. Seller Remuneration and Buyer Reimbursement.

6.1 Fees. As part of the remuneration due Seller, Buyer shall remit to Seller the Fees associated with the Seller Transition Services as set forth in Exhibit 2 by no later than thirty (30) days from the date of invoice of Seller subject to the terms of this Section 6. Exhibit 1 provides a summary of the Seller Transition Services and fees.

6.1.1 Seller will invoice Buyer on a monthly basis in arrears for: (a) the Phase 1 Product Prices and Phase 2 Product Prices, as more expressly defined on Exhibit 6 hereto, for any Seller Transition Services performed during the

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previous month or quarter, as expressly defined in Exhibit 2 hereto, together with (b) expenditures for reasonable, actual travel and temporary living expenses related to such Seller Transition Services (the “Expenditures”) to the extent authorized or approved and incurred on a basis consistent with Seller’s normal reimbursement policies and past practices. There shall be proration of Fees with respect to the performance of any Transition Services. Such invoices shall: (a) provide a summary description of the Seller Transition Services to which the invoice relates; (b) provide reasonable detail of the components of the Cost of Services for each such Seller Transition Service; (c) provide reasonable detail of any Expenditure; (d) specify the separately reimbursable charges for licenses fees, royalties or third party services; and (e) specify the total amount of Fees to be paid by Buyer. Seller shall include, as separate items on the invoice, all expenditures, including any reimbursable travel, living or other expenses incurred in accordance with the terms of this Agreement and reimbursable charges for license fees, royalties or third party services, as applicable.

6.1.2 Seller shall submit to Buyer a Monthly Financial Report on or before the tenth (10th) Business Day of each Seller Fiscal Month. By no later than thirty (30) days from the date that Seller submits to Buyer an invoice associated with a Monthly Financial Report, Buyer shall remit to the Seller the Net Proceeds for the Products sold by Seller to its direct customers and distributors during the Term of this Agreement. Seller shall not be required to realize, or be held responsible for realizing, any Net Revenue of a Product until a distributor of Seller (as of the Closing Date) sells a Product (originally purchased from Seller) to its customer and the Product is therefore no longer in the distribution channel. Only after Seller receives a written report from the distributor showing that the Product (originally purchased from Seller) has been sold by the distributor is Seller required to claim any revenue for the Product for the purpose of calculating the Net Revenue and, ultimately, the Net Proceeds.

6.2 Adjustments. If the nature, extent or duration of the Transition Services changes as permitted in accordance with the terms of this Agreement, or if Buyer elects to terminate a specific Transition Service pursuant to Section 2.4, then the Parties will agree upon an equitable adjustment for the Cost of Services and/or Fees to reflect such change in the manner specified herein.

6.3 Payment Terms. All amounts owed under this Agreement are stated, calculated and shall be paid in Dollars. Except as otherwise specified in this Agreement, Buyer shall pay Seller for the undisputed amounts due, owing, and duly invoiced under this Agreement within thirty (30) days following delivery of such invoice therefor in immediately available funds to such place as Seller may reasonably direct therein. Seller may charge and Buyer shall pay upon demand the lesser of one and one-half percent (1  ¹/2%) per month or the highest lawful monthly rate on overdue amounts. If Buyer disputes the amount reflected on any invoice, it shall

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pay the undisputed portion (if any) of such invoice as provided in this Section 6.3 and in connection with such payment shall specify in writing the portion that it disputes and the basis for that dispute.

6.4 Prior to the Changeover Date, with regard to the finished goods that are shipped by Seller on Buyer’s behalf to direct customers and distributors of Seller as of the Closing Date and for finished goods which were in Seller’s distributors’ inventory at the Closing Date: (a) Seller will manage the financial services for the calculation of the cost of sales and Net Revenue related to such finished goods utilizing Seller’s designated cost; (b) Seller shall provide to Buyer monthly, following Seller’s Fiscal Month end, information that Seller prepares utilizing Seller’s standard accrual-based accounting methodologies regarding the Net Revenue received by Seller in that Fiscal Month for such finished goods; (c) Seller will invoice Buyer; and (d) Buyer will remit payment of the invoiced amount as soon as commercially reasonable, but in no event later than thirty (30) days from the date of Seller’s invoice to Buyer. Seller shall have no obligation to remit to Buyer any revenues associated with finished goods sold by Seller to its end customers or sold by Seller’s distributors prior to the Closing Date.

7. Marketing Support.

Seller will use commercially reasonable efforts to work with Buyer to ensure that the transition of web and marketing materials which are directly and exclusively associated with the Products and New Products or the conduct of the Business is complete by the End of Phase 1. Seller shall use commercially reasonable efforts to refer to Buyer all inquiries made to Seller after the Closing Date which relate to sale and distribution of the Products.

8. Purchase of Products By Seller From Buyer.

8.1 If, for any reason, Seller is obligated to accept a purchase order from a direct customer or distributor (as of the Closing Date) during the Term and the Inventory no longer has any such Products or New Products (that are unmarked or marked with Seller’s brand name or marks), Buyer shall use commercially reasonable efforts to sell un-marked Products and New Products to Seller in a timely manner and in quantities sufficient to fulfil that purchase order, provided that acceptance of the purchase order does not negatively impact the committed delivery date of Buyer’s existing purchase orders for such Products and New Products.

8.2 For the purchase of such unmarked Products and New Products, Buyer shall (a) charge no more than the “Buyer Total Product Cost” of the Product or New Product and (b) sell to Seller such Products and New Products under its normal terms and conditions of sale. Seller shall then sell the Products and New Products in accordance with Section 8.1. For the purposes of this Section 8.2, “Buyer Total Product Cost” shall mean, without limitation, (i) the amounts paid to Seller for such Product, if any, and (ii) an allocation of Buyer’s maintenance, storage, distribution costs and other Buyer costs associated with such Product, in accordance with Buyer’s standard accounting practices).

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9. Intellectual Property Rights.

9.1 Ownership. Except as otherwise expressly set forth herein, each of the Buyer and Seller shall retain all right, title and interest in and to their respective Intellectual Property, and no other license (except as expressly set forth herein) or other right, express or implied, is granted under this Agreement by either Party to its Intellectual Property. In this regard, all Copyright and Trade Secret rights in Seller Materials, shall be owned by Seller and Seller shall be afforded all rights of ownership attendant thereto. All Copyright and Trade Secret rights in Buyer Materials, shall be owned by Buyer and Buyer shall be afforded all rights of ownership attendant thereto. Neither party shall remove any copyright, proprietary or other notices appearing on such materials. Buyer shall own all rights, title and interest in the Trade Secrets and Copyrights embodied in the Assigned Matters. Seller shall own all rights, title and interest in all other Intellectual Property developed, created, or invented by Seller or its Affiliates under this Agreement.

9.2 Buyer’s License to Seller. Buyer grants to Seller a non-exclusive, perpetual, worldwide, royalty-free license (with the right to grant sublicenses) under Buyer’s Copyrights and Trade Secrets embodied within the Assigned Matters to make, have made, use (including to provide services), market, distribute (directly or indirectly), sell (directly or indirectly), offer to sell, reproduce, import, display, perform, create derivative works or otherwise dispose of or exploit any product that Seller makes, has made, uses, imports or sells that, if sold or distributed, is sold or distributed by Seller, its Subsidiaries or its Affiliates as its own product.

9.3 Seller’s License to Buyer. The Parties do not anticipate that the Seller Transition Services provided under this Agreement will result in any Deliverables or Product modifications (or other activities likely to result in the creation of material, new technology or intellectual property). In the event the Parties agree that Seller will perform services that will result in a Deliverable or Product modification, the Parties will mutually agree in writing upon the Statement of Work for such services before Seller begins performance of such services. Such Statement of Work may, among other things, specify an allocation of rights in that is different than the allocation set forth in this Section 9, but only if such Statement of Work is executed by a representative of each Party that is at the level of Vice President or above. Unless otherwise agreed to in writing by the Parties, the following license provisions will apply with regard to such Product modification or Deliverable:

9.3.1 Product Modifications: Subject to the terms and conditions of this Agreement, in the event and only to the extent that Seller, in its sole discretion, creates at Buyer’s direction modifications to the Products during performance of the Seller Transition Services, Seller shall grant to

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Buyer a license under Seller Licensed Copyrights and Seller Licensed Trade Secrets in accordance with the provisions of Section 2.4 of the Intellectual Property Agreement solely in connection with the manufacture, sale, use, and distribution of the Products and only to the extent such Seller Licensed Copyrights and Seller Licensed Trade secrets of Seller are essential for the Buyer’s continued use and marketing of the Products.

9.3.2 Deliverables License: If and solely to the extent that any Seller Materials are incorporated into a Deliverable, Seller grants to Buyer a non-exclusive, non-transferable, worldwide, royalty-free license (without the right to sublicense), under Seller’s Copyrights and Trade Secrets, to reproduce, modify, perform and display Seller’s Materials internally, only for Buyer’s internal business purposes of completing the Transition Services, but not to distribute.

9.4 No Other Rights. Except as expressly provided in this Section 9, no other rights are granted or licensed to Buyer or Seller under this Agreement, by implication, estoppel, statute or otherwise. Specifically, this Agreement does not provide Buyer with any rights or license whatsoever under any Patent. Notwithstanding any provision of this Agreement to the contrary, the Parties acknowledge and agree that: (a) Seller is not transferring to Buyer hereunder, or purporting to transfer to Buyer hereunder, ownership of any Intellectual Property rights that are owned or controlled by any third party; (b) Seller is not licensing to Buyer hereunder, or purporting to license to Buyer hereunder, any Intellectual Property rights that are owned by any third party; and (c) Seller is not agreeing to disclose to Buyer any Trade Secret of any third party. Notwithstanding the foregoing, the provisions of this Section 9 shall have no affect on the provisions of the Intellectual Property Agreement.

10. Inventory.

10.1 The Parties acknowledge and agree that the net value of Inventory (“Inventory Value”), purchased as an Asset under the Asset Purchase Agreement was Six Million Five Hundred Thousand Dollars ($6,500,000), which constitutes a Six Million Five Hundred Thousand Dollars ($6,500,000) pre-payment (“Pre-payment”) to be applied to the Phase 1 Product Prices and Phase 2 Product Prices for Products and New Products shipped following the Closing Date. Until this Pre-payment is exhausted, Seller will not deduct the Phase 1 Product Prices and Phase 2 Product Prices from the monthly Net Proceeds paid to Buyer.

10.1.1 Buyer acknowledges and agrees that the amount of Inventory will be based upon the demand plans developed by one of the Parties. To the extent that the Inventory or a portion thereof is acquired based upon a demand plan developed by Buyer, Buyer agrees to purchase from Seller any and all such Inventory. To the extent that the Inventory or a portion thereof is acquired based upon a demand plan developed by Seller, Seller agrees to offer to Buyer the option to purchase any and all such Inventory prior to the End of Phase 2.

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(a) At the Changeover Date on a Product Line by Product Line basis, the Parties agree to assess the net value of Finished Inventory. Buyer will issue a purchase order to Seller for the remaining Finished Inventory to which Seller holds title and which Buyer is obligated to or elects to purchase in accordance with Section 10.1.1. To the extent the Pre-payment has not been exhausted, the amount of this purchase order would be applied to the Pre-payment with any uncovered portion included in the monthly Net Proceeds calculation.

(b) At the End of Phase 2, the Parties agree to assess the net value of the Unfinished Inventory. Buyer will issue a purchase order to Seller for the Unfinished Inventory to which Seller holds title and which Buyer is obligated to or elects to purchase in accordance with Section 10.1.1. To the extent the Pre-payment has not been exhausted, the amount of this purchase order would be applied to the Pre-payment with any uncovered portion included in the monthly Net Proceeds calculation.

10.1.3 To the extent Pre-payment has not been exhausted by the End of Phase 2 and the combined value of the purchase orders for the Finished Inventory transferred at the End of Phase 1 and the Unfinished Inventory transferred at End of Phase 2, as contemplated above, plus the total value of cost of sales for products shipped during both Phases 1 and 2 (collectively “Final Inventory Value”), is greater or less than Six Million Five Hundred Dollars ($6,500,000), then there will be a true-up payment for the difference (i) in Buyer’s favor, if the Final Inventory Value is less than Six Million Five Hundred Dollars ($6,500,000) and (ii) in Seller’s favor, if the Final Inventory Value is more than Six Million Five Hundred Dollars ($6,500,000). The Party receiving such true-up payment shall invoice the other Party for the amount of such true-up payment and such Party receiving such invoice shall pay it to the other Party within thirty (30) days of the date of such invoice; provided, however, that if the Final Inventory Value is less than Six Million Five Hundred Dollars ($6,500,000), Seller will have no obligation to remit to Buyer a true-up payment unless and until all transition fees invoiced by Seller under this Agreement have been paid by Buyer.

10.2 On or before the Changeover Date, with regard to the finished goods in a Seller's distributor inventory at the Closing Date, Seller will use commercially reasonable efforts to have the remaining Seller's distributor inventory transferred to Buyer at Buyer’s sole expense. Buyer shall purchase such inventory at distributor's cost or Seller's cost, as applicable.

10.3 On or before the Changeover Date for a Product, Seller will use commercially reasonable efforts to have the Third Party Inventory related to such Product that is not subject to restrictions on transferability assigned to Buyer at Buyer's sole expense.

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10.4 Within five (5) Business Days after the Closing Date, Seller shall provide to Buyer a report of the backlog of purchase orders for all Products that Seller had at the Closing Date. The report shall include customers, units, products, pricing and expected shipment dates to the extent that Seller is not under a confidentiality obligation with regard to such data. For purposes of clarity, such report will exclude any data such as specific confidential subcontractor pricing and pricing associated with third party contracts that are not being assigned to Buyer under the Asset Purchase Agreement or the Acquisition Documents where such pricing is confidential information of such third party.

10.5 Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Transferred Asset or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without the consent of a party thereto or the receipt of an approval of a Governmental Authority, would constitute a breach or other contravention thereof or in any way adversely affect the rights of Buyer, Seller or their respective Subsidiaries thereunder.

10.6 Seller shall maintain all Inventory in accordance with this Agreement and with Seller’s standard practices. Prior to the assignment to Buyer of any Inventory, Seller shall notify Buyer in writing of any material Inventory loss, damage or defect of which it is aware.

11. Indemnification.

11.1 Each Party (the “Indemnitor”) shall, at its election, either settle or defend any lawsuit, legal action, or legal proceeding brought against the other Party, its agents, affiliates and employees (the “Indemnitee”) that is based upon third party claims, losses, damages, costs (including attorneys’ fees), and expenses on account of the injury or death of any person and for damage to or loss of any personal property owned by any person that is caused, in whole or in part, by the gross negligence or willful misconduct of such Party or its agents, contractors, or employees in connection with the performance or receipt of performance under this Agreement (“Covered Claim”). Under no circumstances will either Party have any liability to the other Party for any claims, losses, damages, costs (including attorneys’ fees), and expenses to the extent caused by the other Party.

11.2 Indemnitor will pay all damages, costs and expenses (including reasonable attorneys’ fees and costs) finally awarded against Indemnitee on any Covered Claim, provided that: (a) Indemnitor has been notified of such lawsuit, legal action or legal proceeding in writing no later than seven (7) days after Indemnitee first receives notice of the lawsuit, legal action, or legal proceeding (provided that any such delay shall only excuse the Indemnitor’s obligations hereunder to the extent such delay has materially prejudiced the Indemnitor’s ability to satisfy its indemnification obligations hereunder); (b) Indemnitor has the right, at its election, to solely control the defense or settlement of the lawsuit, legal action, or legal proceeding, or to settle or defend against only the Covered Claims; and (c)

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Indemnitee shall provide such information and assistance in the defense or settlement of the claim as may be reasonably requested by Indemnitor at Indemnitor’s expense. Indemnitor shall not be responsible for any costs, expenses, or compromise incurred or made by Indemnitee in relation to a defense or settlement entered into without Indemnitor’s prior written consent. Indemnitee shall not be precluded from participating in the action (at its own expense), including providing assistance to Indemnitor, provided that Indemnitor consents to such participation after good faith consultation between the Parties. Such consent shall not be unreasonably withheld or delayed.

11.3 The foregoing indemnity as defined in this Section 11 is personal to the Indemnitee and shall under no circumstance be assignable, transferable or subject to pass-through to Indemnitee’s customers.

12. NO CONSEQUENTIAL DAMAGES. EXCEPT FOR CLAIMS FOR DAMAGES THAT ARE DIRECTLY AND PROXIMATELY CAUSED BY THE OTHER PARTY’S BREACH OF CONFIDENTIALITY OBLIGATIONS OF THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL, PUNITIVE, OR SPECIAL DAMAGES WHATSOEVER, INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, AND THE LIKE, ARISING OUT OF THIS AGREEMENT OR SERVICES PROVIDED OR RECEIVED, AS APPLICABLE, HEREUNDER, WHETHER OR NOT FORESEEABLE, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF THE SAME.

13. Limitation of Liability.

13.1 The parties acknowledge that Seller is not in the business of providing services such as the Seller Transition Services to third parties and is entering into this Agreement to provide such Seller Transition Services on a commercially reasonable basis as an accommodation to Buyer in connection with the Asset Purchase Agreement.

13.2 Except with respect to Buyer’s payment obligations hereunder and claims arising from breach of the nondisclosure obligations pursuant to the Confidentiality Agreement, in no event shall either Party’s liability under this Agreement for any cause whatsoever, and regardless of the form of action, whether in contract or in tort, exceed the aggregate amount of Two Hundred Seventy Thousand U.S. Dollars ($270,000). In no event will Seller be liable to Buyer for any loss or destruction of data or degradation in network performance or computing services related to or resulting from the Transition Services provided under this Agreement. The provisions of this Section shall apply to the fullest extent of the law, whether in contract, statute, tort (including, without limitation, negligence) or otherwise.

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14. Insurance. Each Party shall maintain any facility, office or other space which is provided under this Agreement in compliance in all material respects with all Applicable Laws and regulations and in reasonable repair consistent with past practice, and shall maintain all material licenses and permits reasonably necessary with respect to such properties. Each Party shall also maintain appropriate property, casualty and general liability insurance with respect to any such space occupied or shared by Seller and Buyer, including coverage for damage to or destruction of any personal property located on such premises.

15. DISCLAIMER OF WARRANTIES.

15.1 EXCEPT WITH RESPECT TO ANY WARRANTIES AND REPRESENTATIONS SPECIFICALLY SET FORTH IN THIS AGREEMENT, ALL SERVICES TO BE PERFORMED BY SELLER HEREUNDER ARE PROVIDED ON AN “AS-IS” BASIS AND SELLER HEREBY DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, ORAL OR WRITTEN, INCLUDING ANY REPRESENTATION AND WARRANTY AS TO SUCCESS, SUFFICIENCY OR COMPLETENESS OF THE SERVICES TO BE PROVIDED HEREUNDER AND ANY IMPLIED WARRANTIES OF MERCHANTABILITY, SUITABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR QUALITY AS TO THE SERVICES OR WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR OTHERWISE.

15.2 ALL OF THE ASSETS AND INVENTORY THAT ARE TRANSITIONED TO BUYER UNDER THIS AGREEMENT ARE TRANSFERRED "AS IS, WHERE IS," AND SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WHETHER OF MERCHANTABILITY, SUITABILITY, NONINFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY AS TO SUCH ASSETS, INVENTORY, OR ANY PART OR ITEM THEREOF, OR AS TO THE CONDITION, DESIGN, OBSOLESCENCE, WORKING ORDER OR WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR OTHERWISE AND BUYER HAS RELIED ON ITS OWN EXAMINATION THEREOF IN ELECTING TO ACQUIRE THE ASSETS AND INVENTORY ON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THIS AGREEMENT.

15.3 SELLER ASSUMES NO LIABILITY WHATSOEVER AND SELLER DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY RELATING TO SALE AND/OR USE OF PRODUCTS, INCLUDING LIABILITY AND/OR WARRANTIES RELATING TO FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, AND INFRINGEMENT OF ANY PATENT, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHT.

15.4 The Parties acknowledge and agree that the provisions of this Section 15 are not intended to modify the provisions of the Asset Purchase Agreement.

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16. General Provisions.

16.1 Relationship of the Parties. Neither Party nor its employees are agents or representatives of, nor have authority to bind, the other Party hereto by contract or otherwise. Nothing contained in this Agreement shall be deemed or construed to create a partnership or a joint venture between Seller and Buyer or any of their Affiliates, or to cause either Party to be responsible in any way for the debts or other obligations of any Party hereto or any other party or be deemed affiliated with any other party. Each Party shall be responsible for the acts of its employees, agents, independent contractors and vendors in connection with providing or receiving, as applicable, the services described in this Agreement.

16.2 Property Ownership. Each Party acknowledges that all items, including without limitation, all machinery, equipment, and furniture owned by any other Party or any of their Affiliates and used in connection with the services hereunder shall remain the property of such Party or respective Affiliate, as the case may be, and no other party shall have any lien thereon or other rights therein.

16.3 Costs. The Parties acknowledge and agree that any amounts payable by either Party pursuant to this Agreement will be in addition to any purchase price and any other amounts payable under the Asset Purchase Agreement.

16.4 Dispute Resolution. The Parties shall promptly attempt to resolve all disputes arising under this Agreement at the working level, if possible. The Service Coordinators shall meet within five (5) Business Days of either Party’s written request for a dispute resolution meeting and attempt in good faith to resolve any dispute. If such dispute is not resolved by discussions between the Service Coordinators within five (5) days after the Parties meet in response to a Party’s written request, either Party may request that the dispute be further escalated to the general manager of the applicable business unit of each Party. Within five (5) Business Days after receipt of such request to escalate the dispute, the general managers shall meet to resolve the dispute. If unsuccessful, such disputes will be resolved in accordance with the procedures set forth below:

16.4.1 All disputes arising directly under the express terms of this Agreement or the grounds for termination thereof shall be resolved as follows: The business representatives of all Parties to the dispute, together with, upon the mutual agreement of the Parties, their respective legal representatives, shall meet to attempt to resolve such disputes. If the disputes cannot be resolved by such senior management, any Party may make a written demand for formal dispute resolution and specify therein the scope of the dispute. Within thirty (30) days after such written notification, the Parties agree to meet for one (1) day with an impartial mediator and consider dispute resolution alternatives other than litigation. If an alternative method of dispute resolution is not agreed upon within thirty (30) days after the one (1) day mediation, either Party may begin litigation proceedings.

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16.4.2 Notwithstanding the provisions of Section 16.4.1 above, each Party shall have the right, without the requirement of first seeking a remedy through the alternate dispute resolution mechanism, to seek preliminary injunctive or other equitable relief in any proper court in the event that such Party determines that eventual redress through arbitration will not provide a sufficient remedy for any violation of this Agreement by the other Party.

16.4.3 In the event a proceeding is brought to enforce or interpret any provision of this Agreement, the prevailing party shall be entitled to recover reasonable attorney's fees and costs in an amount to be fixed by the court or arbitrator, as applicable.

16.5 Governing Law. This Agreement shall be construed in accordance with, and this Agreement and any disputes or controversies related hereto shall be governed by the internal laws of the State of New York without giving effect to any conflicts of laws principles thereof that would apply the laws of any other jurisdiction. The Parties hereby irrevocably submit to the jurisdiction of the courts of the State of New York and the federal courts of the United States of America located in the State of New York solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the Parties hereto irrevocably agree that all claims with respect to such proceeding shall be heard and determined in such a New York state or federal court. The Parties hereby consent to and grant any such court jurisdiction over such Parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 16.7 or in such other manner as may be permitted by Applicable Law, shall be valid and sufficient service thereof.

The Parties agree that irreparable damage may occur and that the Parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Federal court located in the State of New York or in New York state court, this being in addition to any other remedy to which they are entitled at law or in equity.

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND

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UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (a) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (b) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (c) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (d) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION 16.5.

16.6 Compliance With Laws Relating to Import and Export. The Parties shall comply with all Applicable Laws governing export and import of Products and information related thereto. In particular, the Parties shall not export or re-export, directly or indirectly, separately or as part of a system, the Products, or information relating thereto, to any country for which an export license or other approval is required without first obtaining such license or other approval. To the extent required by Applicable Law, Buyer shall obtain a controlled country import and/or export license and provide to Seller documentation demonstrating that it is in compliance with all applicable export control laws and regulations.

16.7 Notices. All notices and other communications pursuant to this Agreement shall be in writing and shall be deemed given if delivered personally, telecopied, sent by nationally-recognized overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the Parties at the addresses set forth below or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice or communication shall be deemed to have been delivered and received (a) in the case of personal delivery, on the date of such delivery; (b) in the case of telecopier, on the date sent if confirmation of receipt is received and such notice is also promptly mailed by registered or certified mail (return receipt requested); (c) in the case of a nationally-recognized overnight courier in circumstances under which such courier guarantees next Business Day delivery, on the next Business Day after the date when sent and (d) in the case of mailing, on the third Business Day following that on which the piece of mail containing such communication is posted:.

if to Seller, to:

Intel Corporation

2200 Mission College Boulevard

Santa Clara, CA 95054

Attention: Treasurer

Telephone: (408) 765-8080

Facsimile: (408) 765-6038

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with copies to:

Intel Corporation

2200 Mission College Boulevard

Santa Clara, CA 95054

Attention: General Counsel

Telephone: (408) 765-8080

Facsimile: (408) 653-8050

and

Gibson, Dunn & Crutcher LLP

1881 Page Mill Road

Palo Alto, CA 94304

Attention: Russell C. Hansen, Esq.

Telephone: (650) 849-5383

Fax: (650) 849-5333

if to Buyer, to:

RadiSys Corporation

5445 N.E. Dawson Creek Drive

Hillsboro, OR 97124

Attention: Chief Financial Officer

Telephone: (503) 615-1100

Fax: (503) 615-1114

with a copy to:

Baker & McKenzie LLP

2300 Trammell Crow Center

2001 Ross Avenue

Dallas, TX 75201

Attention: Roger W. Bivans, Esq.

Telephone: (214) 978-3000

Fax: (214) 978-3099

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or to such other address as the Person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. Any Party hereto may give any notice, request, demand, claim or other communication hereunder using any other means (including ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the individual for whom it is intended. .

16.8 Confidentiality. Parties understand and agree that this Agreement is subject to the terms and conditions of the Confidentiality Agreement and that the terms and conditions of this Agreement, and the confidential or proprietary information and materials to which a Party obtains access pursuant to this Agreement or as a result of the relationship of the Parties established under the performance of this Agreement shall be considered confidential information (“Confidential Information”) subject to the Confidentiality Agreement, notwithstanding any contrary terms in Section 1 of the Confidentiality Agreement. Notwithstanding any contrary provision in the Confidentiality Agreement, the Parties’ rights and obligations under the Confidentiality Agreement shall apply fully to Confidential Information that is disclosed by either Party to the other Party at any time during the Term of this Agreement, even if such disclosure occurs after termination of the Confidentiality Agreement. Notwithstanding any other provision of this Agreement, Seller shall have no obligation to provide to Buyer any data (such as specific confidential subcontractor pricing and pricing) associated with third party contracts that are not being assigned to Buyer under the Asset Purchase Agreement or the Acquisition Documents where such information is confidential information of such third party.

16.9 Term of Agreement. This Agreement shall become effective on the Effective Date and unless earlier cancelled or terminated pursuant to the terms of this Agreement, continue for the Term.

16.10 Termination. This Agreement shall terminate at the end of the Term. Seller or Buyer may, in its discretion, (a) terminate all of its obligations under this Agreement by written notice to the other Party in the event that the other Party breaches any material obligation under this Agreement, which breach continues without cure for a period of ten (10) days after written notice thereof; or (b) terminate this Agreement by written notice to the other Party in the event that the other Party enters into any bankruptcy proceeding (whether voluntary or involuntary), reorganization, arrangement for the appointment of a receiver or trustee to take possession of such Party's assets, or any other proceeding under any law for the relief of creditors, or makes an assignment for the benefit of its creditors. In the event that Buyer determines that it will not need Seller to provide any or all of the Seller Transition Services listed in Exhibit 1, Buyer shall provide to Seller written notice identifying those Seller Transition Services that Buyer does not require Seller to provide under this Agreement (the “Terminated

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Services”) at least thirty (30) days prior to the requested termination date for such services. Promptly following Seller’s receipt of such notice, Seller shall advise Buyer in writing whether there are any other Seller Transition Services that cannot be performed in whole or in part due to its reliance of such Terminated Services, and cannot be performed as a result of the termination of such Terminated Services. The Parties shall promptly discuss whether the termination notice should be withdrawn or modified. If Buyer does not withdrawal or modify its termination notice, it shall not be considered a breach of this Agreement in the event Seller fails to perform such Seller Transition Services. Following receipt of Buyer's timely notice regarding termination of the Terminated Services, Seller will not be obligated to provide the Terminated Services and Buyer will not be obligated to pay Seller for the Fees associated with the Terminated Services; provided, however, that Buyer shall compensate Seller for the Fees associated with the Terminated Services performed prior to the receipt of the termination notice from Buyer and any reasonable, actual costs associated with preparation for performance of the Terminated Services that Seller incurs prior to the receipt of Buyer’s termination notice.

16.11 Survival. The following sections shall survive any termination or expiration of this Agreement: (a) any payment obligation with respect to amounts accrued prior to termination of this Agreement; (b) Intellectual Property Rights (Section 9); (c) Indemnification (Section 11); (d) No Consequential Damages (Section 12); (e) Limitations of Liability (Section 13); (f) Disclaimer of Warranties (Section 15), and (g) General Provisions (Section 16).

16.12 Force Majeure. Neither Party shall be liable for delay in performance of any of its obligations under this Agreement if such delay is due to causes beyond its reasonable control, including without limitation, acts of God, fires, strikes, terrorist acts, acts of war, or intervention of any government or authority. Any such delay or failure shall be remedied by such Party as soon as reasonably practicable, and the extent of any such delay shall be added to the Term of this Agreement.

16.13 Amendments; Waivers.

16.13.1 Any provision of this Agreement may be amended or waived, including changes, modifications or supplements to the Transition Services, if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by all Parties, or in the case of a waiver, by the Party against whom the waiver is to be effective.

16.13.2 No waiver by a Party of any default, misrepresentation or breach of a warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of a warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence. No failure or delay by a Party hereto in exercising any right, power or

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privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

16.14 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs, personal representatives and permitted assigns. No Party hereto may transfer or assign either this Agreement or any of its rights, interests or obligations hereunder, whether directly or indirectly, by operation of law, merger or otherwise, without the prior written approval of each other Party. No such transfer or assignment shall relieve the transferring or assigning Party of its obligations hereunder if such transferee or assignee does not perform such obligations.

16.15 Entire Agreement. This Agreement constitutes the entire agreement by and between the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, and negotiations, both written and oral, by and between the Parties with respect to the subject matter of this Agreement. No representation, warranty, promise, inducement or statement of intention has been made by either Party that is not embodied in this Agreement, and neither Party shall be bound by, or be liable for, any alleged representation, warranty, promise, inducement or statement of intention not embodied herein or therein. Neither this Agreement nor any provision hereof is intended to confer upon any Person other than the Parties any rights or remedies hereunder.

16.16 Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

16.17 Taxes. Fees and prices payable under this Agreement do not include Taxes. In addition to the fees and prices payable under this Agreement, the paying Party shall pay the amount of any present or future customs duties or sales, use, excise, or other similar Tax applicable to the sale of goods or performance of services covered by this Agreement, or in lieu thereof, the paying Party shall supply the other Party with an appropriate Tax exemption certificate or provide sufficient proof of Tax exemption. In the event that the paying Party is prohibited by law from making payments to the other Party unless the paying Party deducts or withholds Taxes therefrom and remits such Taxes to the local taxing jurisdiction, then the paying Party shall duly withhold and remit such Taxes and shall pay to the other Party the remaining net amount after the Taxes have been withheld. The paying Party shall promptly furnish the other Party with a copy of an official tax receipt or other appropriate evidence of any Taxes imposed on payments made under this Agreement. When property is delivered and/or services are provided or the benefit of services occurs within jurisdictions in which the other Party’s collection and remittance of Taxes is required by law, the other Party shall have sole responsibility for payment of said Taxes to the appropriate tax authorities. In the event the other Party does not collect Tax from the paying Party, and is subsequently audited by any tax authority, liability of the paying Party will be limited to the tax assessment, with no reimbursement for penalty or interest

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charges. Each Party is responsible for its own income taxes or Taxes based upon gross revenues, including but not limited to business and occupation taxes. The Parties understand that the Transition Services will be performed by the Parties and/or their Affiliates, and therefore, they contemplate that, to the extent the Transition Services are performed by one or more Affiliates of a Party for the benefit of the other Party and/or its Affiliates, purchase orders and invoices will be issued and processed between the Party and/or its Affiliates and the other Party and/or its Affiliates, as may be appropriate. The Parties will cause their Affiliates to cooperate with each other in order to minimize Taxes subject to this Section 16.17 and to carry out the intent of this Agreement.

16.18 Specific Performance. Notwithstanding the provisions of Section 16.4 above, the Parties hereby acknowledge and agree that the failure of any Party to perform its agreements and covenants hereunder, including its failure to take all actions as are necessary on its part to the consummation of the transactions contemplated herein, may cause irreparable injury to the other Party, for which damages, even if available, may not be an adequate remedy. Accordingly, each Party hereby consents to the issuance of injunctive relief by any court of competent jurisdiction to compel performance of such Party’s obligations and to the granting by any court of the remedy of specific performance of its obligations hereunder.

16.19 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts and the signatures delivered by telecopy, each of which shall be an original, with the same effect as if the signatures were upon the same instrument and delivered in person. This Agreement shall become effective when each Party hereto shall have received a counterpart hereof signed by the other Party.

16.20 Severability. If any provision of this Agreement, or the application thereof to any Person, place or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable or void, the remainder of this Agreement and such provisions as applied to other Persons, places and circumstances shall remain in full force and effect only if, after excluding the portion deemed to be unenforceable, the remaining terms shall provide for the consummation of the transactions contemplated hereby in substantially the same manner as originally set forth at the later of the date this Agreement was executed or last amended.

16.21 Third Party Beneficiaries. No provision of this Agreement shall create any third party beneficiary rights in any other Person, including any employee or former employee of Seller or Buyer or any of their respective Affiliates (including any beneficiary or dependent thereof).

16.22 No Presumption against Drafting Party. Buyer and Seller acknowledge that Buyer and Seller have been represented by counsel in connection with the negotiation and execution of this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting Party has no application and is expressly waived.

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16.23 Order of Precedence. In the case of conflict or ambiguity and only to the extent of such between any provision contained in this Agreement and a purchase order issued by Buyer to Seller for Products, the provisions of this Agreement shall take precedence.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the Parties hereto have caused this Transition Services Agreement to be duly executed and delivered as of the date set forth above.

SELLER:
INTEL CORPORATION,
a Delaware corporation
By:	/s/ RAVI JACOB
Name:	Ravi Jacob
Title:	Vice President and Treasurer
Date:	September 12, 2007
BUYER:
RADISYS CORPORATION,
an Oregon corporation
By:	/s/ BRIAN BRONSON
Name:	Brian Bronson
Title:	Chief Financial Officer
Date:	September 12, 2007

[SIGNATURE PAGE TO TRANSITION SERVICES AGREEMENT

BETWEEN INTEL CORPORATION AND RADISYS CORPORATION]

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EXHIBIT 1

SUMMARY OF SERVICES

Exhibit 1 Seller Transition Services

Service Category	Category Description	Expiration	Cost of Services (One Time Charge –To be invoiced monthly in six (6) equal amounts.)
I	Financial Services	End of Phase 2	***
II	Supply Chain Support Services	Earlier of End of Phase 2 or the Changeover Date	***
III	Global Sourcing and Procurement	Earlier of End of Phase 2 or the Changeover Date	***
IV	Data Extraction Services	End of Phase 2	***
V	Information Technology Support Service	End of Phase 2	***
VI	Support for Changeover Plan	Earlier of End of Phase 2 or the Changeover Date	***
VII	Engineering Services Agreement	See Exhibit 7	See Exhibit 7

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*** CONFIDENTIAL MATERIALS REDACTED AND FILED SEPARATELY WITH THE COMMISSION.

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EXHIBIT 2

Seller shall use commercially reasonable efforts to transition the sale and support of the Products from Seller’s sites to Buyer’s designated sites prior to the End of Phase 1. Any changes, modifications or adjustments to the services and fees set forth in this Exhibit 2 shall be made in accordance with the terms of the Agreement.

Seller shall perform the following Seller Transition Services if and to the extent such services were performed by Seller prior to the Closing Date. In this regard, the Parties agree that Seller is not required to hire additional employees or purchase additional hardware, software or systems to perform the Seller Transition Services. The Seller Transition Services will be performed in accordance with Seller’s standard practices as of the Closing Date and commercially reasonable efforts.

Seller will not transfer, and this Agreement excludes, the transfer of any and all external cost data, including customer pricing and pricing associated with third party contracts that are not being assigned to Buyer under the Asset Purchase Agreement or the Acquisition Documents. The Parties acknowledge and agree that the Seller Transition Services will be performed by Seller subject to third party rights and licenses. Seller has no obligation to perform any such services that require the consent by or license grant from a third party, unless and until such consent or license is obtained by Seller and Buyer. The Seller Transition Services schedules are as follows:

I.	Service Category:	Financial Services.
	Maximum Term:	Commencing on the Closing Date and for a period ending at the End of Phase 2.
	Termination Notice:	Buyer may terminate these services prior to the end of the Maximum Term for this service category upon not less than thirty (30) days prior written notice to Seller.

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	Service Items:	Seller will perform the following transitional accounting services related to the development, distribution, marketing and sale of the Products:
		•        General ledger •        Accounts receivable •        Revenue accounting •        Accounts payable •        Valuation and support of the transfer of the Equipment •        Valuation and support of inventory •        Support of post-sales support inventory
	Cost of Service:	***
II.	Service Category:	Supply Chain Support Services.
	Maximum Term:	Commencing on the Closing Date and for a period ending on the earlier of (a) the Changeover Date or (b) the End of Phase 2.
	Termination Notice:	Buyer may terminate these services prior to the end of the Maximum Term for this service category upon not less than thirty (30) days prior written notice to Seller.
	Service Items:	Supply Chain support services related to the development, distribution, marketing and sale of the Products in accordance with Seller’s standard business practices and in the manner in which Seller conducted the Business as of the Closing Date:
		•        Order Management: Seller will perform the following order management services as they are performed by Seller as of the Closing Date: (i) acceptance and processing of purchase orders (including the delivery of the Products), customer invoicing, payment collection; (ii) Product return acceptance; and (iii) the performance of other actions as routinely performed by Seller prior to the Closing Date to sell the Products to Buyer and to third parties that are distributors or direct customers of Seller as of the Closing Date. Any purchase orders accepted by Seller during Phase 1 shall be processed and handled through Seller’s representative or distribution channel in existence as of the Closing Date. To the extent that there are purchase orders accepted by Seller prior to Phase 1 which have not been cancelled, order management shall include the transition by Seller to Buyer of these direct customers’ or distributors’

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orders, using reasonable commercial efforts and to the extent that the customers consent and cooperate. At the End of Phase 1, Buyer will place orders with Seller and Buyer will be responsible for order fulfillment to its distributors and direct customers. •        Post-Sales Support: Seller will perform the following post-sales support services as they are performed by Seller through or on behalf of the Business as of the Closing Date: (i) first line customer support (such as answering telephone calls, reading initial e-mails from customers requesting support, creating a “trouble ticket” describing the requested support and providing such a “trouble ticket” to Seller employees for resolution) and purchase order management support; (ii) second line customer technical support (such as the resolution of technical problems which have been identified during the first line customer support) for the Products; and (iii) Seller will provide warranty services in accordance with Seller’s then-effective product warranty during Phase 1. •        Supply Chain Planning: Seller will perform production management, planning control, inventory management and inventory management support. Seller will also provide monthly supply, demand and quality metrics to Buyer. •        Transportation: Delivery of Products using Seller’s standard policies and practices to those third parties that are distributors or direct customers of Seller as of the Closing Date for which the delivery dates fall during Phase 1. After the End of Phase 1, delivery of Products to Buyer using Seller’s standard policies and procedures until the earlier of (a) the Changeover Date or (b) the End of Phase 2. •        Equipment Management: Identification, control and management of Equipment in accordance with Section 2.1.1. •        Sustaining Engineering: Subject to access to facilities, material, and equipment at Buyer or third party facilities, and cooperation from Buyer and third parties, Seller will perform certain mutually agreed upon sustaining engineering tasks. •        Inventory: Identification, control and management of Inventory.

Cost of Service:

***

*** CONFIDENTIAL MATERIALS REDACTED AND FILED SEPARATELY WITH THE COMMISSION.

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III.	Service Category	Global Sourcing and Procurement
	Maximum Term	Commencing on the Closing Date and for a period ending on the earlier of (a) the Changeover Date or (b) the End of Phase 2.
	Termination Notice	Buyer may terminate these services prior to the end of the Maximum Term for this service category upon not less than thirty (30) days prior written notice to Seller.
	Service Items	•        Direct Material Management. To the extent such suppliers and supply chain are required to continue conducting business with Seller after the Closing Date under any written agreement with Seller, Seller shall use commercially reasonable efforts to request that such parties do the following actions: (i) subcontract management of existing suppliers and supply chain (as of the Closing Date) related to the Products; (ii) inventory management, issuance of purchase orders for, and receiving, supplies; and (iii) communication with existing suppliers as of the Closing Date regarding assembly and finished units related to the Products. •        Supplier Management: Seller will manage Seller’s material suppliers and subcontractors that support or provide manufacturing services for the Products until the earlier of the Changeover Date or the End of Phase 2. Seller will manage contractual agreements between Seller and third parties that are related to the manufacture of each Product until such time as the Product is transferred to Buyer. •        Equipment Management: Seller will manage Equipment related to manufacturing of the Products until such time as the Equipment is transferred to the Buyer. For the avoidance of doubt, the management of Equipment under this Agreement includes performing or causing to be performed prior to the transfer of such Equipment any material repairs or maintenance with respect to such Equipment in accordance with Seller’s past practices. •        Sustaining Engineering: Seller will provide engineering support as agreed upon in writing by Seller and Buyer and required to manufacture the Products until the earlier of the Changeover Date or the End of Phase 2.

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		•        Inventory: Identification, control and management of Third Party Inventory. Seller will provide Buyer with a written report summarizing the status of Inventory on a monthly basis.
	Cost of Service:	***
IV.	Service Category:	Data Extraction Services.
	Maximum Term:	Commencing on the Closing Date and for a period ending on the earlier of (a) the End of Phase 2 or (b) the completion of data extraction services by Seller.
	Termination Notice:	Buyer may not terminate the data extraction services prior to completion.
	Service Items:	Data extraction services consists of the maintenance and management of data and information related to the Business (whether created by Seller before or after the Closing Date) and the transfer of such data to Buyer, all in accordance with Seller’s standard business practices (including security, back-up, and disaster recovery practices) and the schedules to be mutually agreed upon by Seller and Buyer. Seller has no obligation to provide to Buyer any data that are not solely owned by Seller. Seller will take commercially reasonable effort to identify for Buyer data that is exclusively related to the Business that is not solely owned by Seller. Seller shall take commercially reasonable efforts to obtain the consent of the third party owner of such data to disclose and transfer such data to Buyer. Subject to the mutual agreement of the Parties, Seller in its sole discretion may provide to Buyer data not set forth before that are owned by Seller without any restriction or transferability and is used in the sales and support of the Products or new Products.
		The transfer of information is limited to current data, transferred to Buyer in a flat file format as it appears in Seller’s systems. Buyer is fully and solely responsible for any conversion or reformatting of the data.
		Seller will provide reasonable training and knowledge transfer related to the marketing support information, design engineering support information and supply chain information that is transferred to Buyer in accordance with this data extraction services category at times and locations reasonably agreed upon by the Parties.

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To the extent feasible, Seller will provide to Buyer the following data extraction services:

Marketing support information to transfer marketing and support information solely for the Products in accordance with Seller’s standard business practices as follows:

•        Customer support collateral (such as data sheets, design guides and demonstration/evaluation boards).

•        Current customer product issues under investigation.

•        Customer engagement information (past product issues, business development activities, key contact transfer for current and prospective customers to the extent that such information is consistent with past practices of Seller).

•        Business data, including demand and backlog with ship history.

•        The transfer of marketing support information is limited to historical data for the preceding twelve (12) months from the Closing Date, transferred to Buyer in a flat file format as it appears in Seller’s systems.

•        The use of scripts or applications that will redirect third parties from certain pages on Seller’s website related to the Products or New Products to Buyer’s website. For the purposes of this data transfer, the Seller’s website at the Closing Date shall be the basis for any such redirects.

•        Delivery of customer technical support data.

Design Engineering Support information transfer services for the Products in accordance with Seller’s standard business practices as follows:

•        Design data, including front-end/back-end physical databases as well as certain simulation models, RTLs, synthesis files, layout files and product validation decks.

•        Delivery of documentation of design tools, their revisions and any associated developed scripts.

•        Delivery of documentation of the design flow.

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

•        Delivery of device collaterals, including specifications, and test plans.

•        Transfer of certain data related to the software developed for use in evaluating the Products, which includes software architecture documents, code, test plans and all available API/GUI releases.

•        Transfer of necessary plans, scripts and documentation associated with the characterization and validation of the Products, which shall include certain test plans, scripts, validation reports, and validation procedures.

•        Transfer of those test benches and associated verification scripts/plans that are identified as Transferred Assets in the Asset Purchase Agreement.

•        Transfer of necessary information related to the design and development of evaluation hardware used in the validation of products and customer demonstration, including, for example, gerbers, bills of materials, schematics, layout, users guide, test plans and manufacturing information.

•        Transfer of information required for product set-up.

•        To the extent such information is available and can be obtained by Seller through commercially reasonable means, transfer of necessary information related to the production and manufacture of certain current hardware Products including, for example, gerbers, bills of materials, schematics, layout, users guide, test plans and manufacturing information.

•        Design engineering support information may include Product architecture, front and back end silicon design, software, hardware, circuit design, models engineering and system validation.

•        Design engineering support information may be transferred to Buyer in a flat file format as it appears in Seller’s systems.

Supply chain information transfer services for the Products in accordance with Seller’s standard business practices for the transfer of certain information that is used exclusively in the Business as follows:

•        Transfer of certain information related to RMA/DRAs.

•        Delivery of existing and necessary SAP information related exclusively to the Business.

Transfer of customer order data regarding customer orders and purchase order for the Products.

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

	Cost of Service:	***
V.	Service Category:	Information Technology Support Services.
	Maximum Term:	Commencing on the Closing Date and ending on the End of Phase 2.
	Termination Notice:	Buyer may terminate these services prior to the end of the Maximum Term for this service category upon not less than thirty (30) days prior written notice to Seller.
	Service Items:	Information technology support services if and solely to the extent performed by Seller prior to the Closing Date and in accordance with Seller’s standard business practices as follows:
		•        Seller shall forward external e-mails to Transferred Employees for a period of thirty (30) days from the date they commence employment with Buyer. Due to Seller’s standard security control policies, an auto-reply notification will not be sent by Seller to the author of external messages. Buyer shall provide to Seller the new email addresses of these employees within twenty-four (24) hours of their transfer. •        Seller will reclaim from its former employees all information technology equipment, including laptop computers, and other business equipment and supplies that are not included in the Transferred Assets under the Asset Purchase Agreement and terminate such employees’ login accounts in accordance with Seller’s policies and procedures related to the last day office termination process. •        Seller will remove from personal computers, workstations and servers that are Transferred Assets any software that is not being transferred to Buyer and provide Buyer with clean hard drives prior to transferring any such Transferred Asset to Buyer.

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		•        Seller shall use commercially reasonable efforts to ensure that any data needed or applications files identified by Buyer are backed-up in a reasonable manner so that Buyer can retrieve and reload such data. None of the software and design tools shall be transferred or available for use by Buyer after the Closing Date. Buyer shall make its own arrangement for the purchase and installation of software and design tools as it deems appropriate to continue the business operations. •        Buyer shall not have access to Seller’s information technology network and resources (e.g., systems, servers, applications etc.). Buyer is solely responsible for providing all its own computing assets, business systems, IP Address ranges, design tools, facilities and capabilities it deems necessary to its business operations. •        Seller will terminate all third party support maintenance contracts and remove all the software on the computing equipment and systems transferring to the Buyer under the Asset Purchase Agreement at the Closing Date. Buyer is responsible for obtaining and installing the software and data and making arrangements for the third Party support maintenance contracts as deemed necessary by Buyer for operation of its business.
	Cost of Services:	***
VI.	Service Category	Support of Changeover Plan
	Maximum Term	Commencing on the Closing Date and for a period ending on the earlier of (a) the Changeover Date or (b) the End of Phase 2.
	Termination Notice	Buyer may not terminate the support of Changeover Plan prior to completion.
	Service Items	The Parties will jointly develop a Changeover Plan. After development of the Changeover Plan, as mutually agreed to by the Parties, Seller will perform such Seller Transition Services identified in the agreed-upon Changeover Plan in accordance with its customary business practices.
		•        Development of Changeover Plan •        Support during implementation of Changeover Plan
	Cost of Service:	***

*** CONFIDENTIAL MATERIALS REDACTED AND FILED SEPARATELY WITH THE COMMISSION.

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EXHIBIT 3

Buyer shall transition the sale and support of the Products from Seller’s sites to Buyer’s designated sites by the End of Phase 1. Buyer acknowledges and agrees that Seller’s responsibility for the transition of New Products is limited to those Seller Transition Services that are agreed to by the Parties and expressly set forth in writing in the Engineering Design and Development Services Agreement. To the extent that transition, sale and support of New Products is requested by Buyer and agreed upon by Seller, Buyer shall transition the sale and support of the New Products in accordance with the completion milestones that may be agreed upon by the Parties.

Buyer shall perform of any and all actions not specifically performed by Seller under Exhibit 2 which must or should be performed during the Term for the transition of the supply chain, sales and support for the Products and New Products from Seller to Buyer. Buyer also shall perform any and all actions not expressly agreed upon in writing to be performed by Seller under the agreed upon Changeover Plan. In the event that Buyer’s performance of any of the Buyer Transition Services results in a delay, Buyer will pay Seller a Delay Fee in accordance with Section 9 of the Agreement.

The Buyer transition services schedules are as follows:

I.	Service Category:	Buyer Transition Support Services.
	Maximum Term:	Commencing on the Closing Date and for a period ending on the later of (a) one hundred eighty (180) days or (b) the End of Phase 2.
	Termination Notice:	Seller may not terminate these services.
	Service Items:	Buyer Transition Support Services, including:
		To the extent that a distributor or direct customer does not wish to cancel a purchase order placed with Seller prior to the Closing Date, Buyer shall not prevent Seller from delivering such distributor or direct customer their order during Phase 1, subject to Seller compensating Buyer for such order in accordance with this Agreement.
		Establishment and completion of its own product distribution chain (which shall be completed by no later than the End of Phase 1).
		To the extent that a direct customer or distributor of Seller cancels a purchase order that had been accepted by Seller prior to the Closing Date, as a result of Seller’s suggestion to re-order with Buyer, and seeks to re-book such purchase order with Buyer, Buyer agrees to accept such purchase order.

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

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Performance of any other actions not specifically required to be performed by Seller under Exhibit 2 which must be performed prior to the End of Phase 2 for the transition of the sale, manufacturing and support of the Products from Seller to Buyer.

By the Closing Date, Buyer will have begun the transition planning for the transition of all of the Transferred Assets and Inventory from Seller. Buyer shall have implemented that transition completely by the End of Phase 2 or the Changeover Date, with the manner and timing of the transition to be mutually agreed to by Seller and Buyer.

Buyer shall be responsible for the Buyer Transition Services, including those tasks set forth below as needed, to transition the sales, support and manufacture of the Products and New Products from Seller to Buyer.

To the extent the transition plan agreed to by the Parties (the “Transition Plan”), this Agreement or the Changeover Plan requires delivery to Buyer of Equipment, Inventory or Third Party Inventory, Buyer shall provide Seller with thirty (30) days prior notice of the date of the planned transfer and will provide Seller with the name of its chosen Seller-certified carrier for removing the Transferred Assets from the Seller’s, its Subsidiaries or other third party facilities, and the address for delivery of all Transferred Assets by such chosen carrier. Buyer and Seller shall mutually agree upon the arrangements for packaging and shipping, as well as auditing, related to such transfer and delivery.

To the extent the transition plan agreed to by the Parties (the “Transition Plan”), this Agreement or the Changeover Plan requires delivery to Buyer of Equipment, Inventory or Third Party Inventory, Buyer shall provide Seller with thirty (30) days prior notice of the date of the planned transfer and will provide Seller with the name of its chosen Seller-certified carrier for removing the Transferred Assets from the Seller’s, its Subsidiaries or other third party facilities, and the address for delivery of all Transferred Assets by such chosen carrier.

Buyer will, within one day of the Closing Date, provide Seller with the name of Buyer’s Service Coordinator. Buyer’s Service Coordinator shall work with Seller's Coordinator, in accordance with Section 5.4 of this Agreement, to facilitate the orderly transition of the sale and support services for the Products and New Products during the Term.

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

	Cost of Service:	***
II.	Service Category:	Changeover Plan Services.
	Maximum Term:	Commencing on the Closing Date and for a period ending on the later of (a) ninety (90) days or (b) the End of Phase 1.
	Termination Notice:	Seller may terminate not these services.
	Service Items:	Changeover Plan Services, including:
		•        Development of a Changeover Plan that includes all of the tasks necessary for the establishment and completion of its supply chain for manufacturing of the Products and New Products and procurement of piece parts required to manufacture the Products and New Products, including execution of original design manufacturing agreements. •        The Parties will jointly develop a Changeover Plan. After development of the Changeover Plan, Buyer will perform such Buyer Transition Services identified in the agreed-upon Changeover Plan. For the avoidance of doubt, Seller is obligated to participate in the development of the Changeover Plan in accordance with the Seller Transition Services set forth in Exhibit 2.
	Cost of Service:	***
III.	Service Category:	Management and Implementation of Changeover Plan Services.
	Maximum Term:	Commencing on the Closing Date and for a period ending on the End of Phase 2.
	Termination Notice:	Seller may terminate these services upon not less than one (1) month prior written notice to Buyer.

*** CONFIDENTIAL MATERIALS REDACTED AND FILED SEPARATELY WITH THE COMMISSION.

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

Service Items:	Management and Implementation of Changeover Plan Services, including:
	•        Implementation and support of the Changeover Plan and Transition Plan that are mutually agreed upon by Buyer and Seller to ensure that Buyer is able to perform asset management, product repair services, order fulfillment services, and inventory management services for the Products and New Products on or before the End of Phase 2. •        Performance of any and all actions identified in Changeover Plan and Transition Plan, that are not expressly required to be performed by Seller under this Agreement, to ensure that Buyer is able to perform asset management, Product repair services, order fulfillment services, and inventory management services for the Products and New Products on or before, but in any event no later than, the End of Phase 2. •        Management of Changeover Plan. •        The Parties will jointly develop a Changeover Plan. After development of the Changeover Plan, as mutually agreed to by the Parties, Buyer will perform such Buyer Transition Services identified in the agreed-upon Changeover Plan.
Cost of Service:	***

*** CONFIDENTIAL MATERIALS REDACTED AND FILED SEPARATELY WITH THE COMMISSION.

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

EXHIBIT 4

Seller Fiscal Year Calendar

Seller Close Dates

(Highlighted text indicates Close dates for prior month)

2007 WORK WEEK CALENDAR
(WW)	SUN	MON	TUES	WED	THUR	FRI	SAT
JANUARY
(01)	31	1	2	3	4	5	6
(02)	7	8	9	10	11	12	13
(03)	14	15	16	17	18	19	20
(04)	21	22	23	24	25	26	27
FEBRUARY
(05)	28	29	30	31	1	2	3
(06)	4	5	6	7	8	9	10
(07)	11	12	13	14	15	16	17
(08)	18	19	20	21	22	23	24
MARCH
(09)	25	26	27	28	1	2	3
(10)	4	5	6	7	8	9	10
(11)	11	12	13	14	15	16	17
(12)	18	19	20	21	22	23	24
(13)	25	26	27	28	29	30	31
APRIL
(14)	1	2	3	4	5	6	7
(15)	8	9	10	11	12	13	14
(16)	15	16	17	18	19	20	21
(17)	22	23	24	25	26	27	28
MAY
(18)	29	30	1	2	3	4	5
(19)	6	7	8	9	10	11	12
(20)	13	14	15	16	17	18	19
(21)	20	21	22	23	24	25	26
JUNE
(22)	27	28	29	30	31	1	2
(23)	3	4	5	6	7	8	9
(24)	10	11	12	13	14	15	16
(25)	17	18	19	20	21	22	23
(26)	24	25	26	27	28	29	30

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

JULY
(27)	1	2	3	4	5	6	7
(28)	8	9	10	11	12	13	14
(29)	15	16	17	18	19	20	21
(30)	22	23	24	25	26	27	28
AUGUST
(31)	29	30	31	1	2	3	4
(32)	5	6	7	8	9	10	11
(33)	12	13	14	15	16	17	18
(34)	19	20	21	22	23	24	25
SEPTEMBER
(35)	26	27	28	29	30	31	1
(36)	2	3	4	5	6	7	8
(37)	9	10	11	12	13	14	15
(38)	16	17	18	19	20	21	22
(39)	23	24	25	26	27	28	29
OCTOBER
(40)	30	1	2	3	4	5	6
(41)	7	8	9	10	11	12	13
(42)	14	15	16	17	18	19	20
(43)	21	22	23	24	25	26	27
NOVEMBER
(44)	28	29	30	31	1	2	3
(45)	4	5	6	7	8	9	10
(46)	11	12	13	14	15	16	17
(47)	18	19	20	21	22	23	24
DECEMBER
(48)	25	26	27	28	29	30	1
(49)	2	3	4	5	6	7	8
(50)	9	10	11	12	13	14	15
(51)	16	17	18	19	20	21	22
(52)	23	24	25	26	27	28	29

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

EXHIBIT 5

MONTHLY FINANCIAL REPORT

Month/Year

Volume by Product

Revenue by Product

Returns/Adjustments

Net Revenue

Total Product Transition Cost

TOTAL NET PROCEEDS DUE BUYER:

OR

TOTAL PRODUCT TRANSITION COST TO SELLER

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

EXHIBIT 6

PHASE 1 PRODUCT PRICES*

* Pricing Note: Prices set forth below for products with the Family Names “Glenfield”, “Whippany”, and “WhippanyRTM” are provided for informational purposes only and will be finalized by the Parties following product ship release authorization (“SRA”).

***

PHASE 2 PRODUCT PRICES

To be determined in accordance with Section 1.32.

Product	Description	Product Cost of Sales
=
=
=
=
=
=

*** CONFIDENTIAL MATERIALS REDACTED AND FILED SEPARATELY WITH THE COMMISSION [3PAGES].

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF

THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

EXHIBIT 7

OVERVIEW OF ENGINEERING SERVICES AGREEMENT

• Seller has offered to perform for Buyer certain engineering services related to the development of (a) the designs for those single board computer products code-named “Barwick”; and (b) the designs for those single board computer products code-named “Heinsburg”; provided that the Parties reach mutual agreement on the schedule, scope of work and pricing no later than one (1) week following the Closing Date. Notwithstanding the foregoing, Buyer shall have no obligation to perform such engineering services if the Parties do not reach mutual agreement on the schedule, scope of work and pricing for such engineering services within one (1) week following the Closing Date.

EX-10.3

Exhibit 10.3

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

WARRANTY SERVICES AGREEMENT

This WARRANTY SERVICES AGREEMENT (the “Agreement”), dated as of September 12 2007, is by and between Intel Corporation, a Delaware corporation (the “Seller”) and RadiSys Corporation, an Oregon corporation (the “Buyer”). Seller and Buyer are sometimes referred to as the “Parties” and each individually as a “Party.”

WHEREAS, Buyer and Seller have entered into an Asset Purchase Agreement dated as of September 7, 2007, as amended (the “Asset Purchase Agreement”) pursuant to which Buyer shall acquire the Transferred Assets and assume the Assumed Liabilities; and

WHEREAS, it is a condition to the closing of the transactions contemplated by the Asset Purchase Agreement that Buyer and Seller will enter into this Agreement under which Buyer will provide certain warranty services and support to assist Seller in fulfilling its Product warranty obligations and Seller will compensate Buyer for such services, all in accordance with the terms of this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements and covenants contained herein, the Parties hereto agree as follows:

1. Definitions. Capitalized terms used, but not defined, in this Agreement shall have the meanings ascribed to such terms in the Asset Purchase Agreement. The definitions set forth in this Agreement shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. All references herein to Sections and Exhibits shall be deemed to be references to Sections of, and Exhibits to, this Agreement unless the context shall otherwise require. Unless the context shall otherwise require, any reference to any contract, instrument, statute, rule or regulation is a reference to it as amended and supplemented from time to time (and, in the case of a statute, rule or regulation, to any successor provision). Any reference in this Agreement to a “day” or a number of “days” (without the explicit qualification of “Business”) shall be interpreted as a reference to a calendar day or number of calendar days. The following terms, as used herein, have the following meanings:

1.1. “Buyer’s Cost of Sales” means the total sum of the Buyer’s Product Cost and Buyer’s OCOS per Product. Buyer’s Cost of Sales shall be calculated based on Buyer’s standard costing model consistent with past practices.

1.2. “Buyer’s OCOS” means the cost of sales for the distribution and production of the Products which are necessary, but have not been included as part of Buyer’s Product Cost, as calculated based on Buyer’s standard costing model consistent with past practices. In addition, Buyer’s OCOS includes costs associated with product warranty and bad debt.

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

1.3. “Buyer’s Product Cost” means any and all production costs per Product directly associated with, attributable to and readily identifiable with the production and distribution of the Product, including the costs associated with manufacturing, validating and testing, and storing and delivering the Product, as calculated and based on Buyer’s standard costing model consistent with past practices.

1.4. “Buyer’s Repair Costs” shall include any and all costs directly associated with, attributable to and readily identifiable with the repair and return of the Product, including reasonable and customary labor and materials costs for incoming inspection, evaluation, repair, refurbishing, repackaging testing, storing, acceptance test and return of the Products to the customer.

1.5. “Changeover Date” shall have the meaning given such term in the Transition Services Agreement.

1.6. “Products” shall have the meaning given such term in the Asset Purchase Agreement; provided, however, that, for the avoidance of doubt, Products shall include New Products (as defined in the Asset Purchase Agreement) in the event that the Transition Services Agreement is amended as contemplated under Section 5.6 of the Transition Services Agreement. “Product” shall have its correlative meaning.

1.7. “Product Lines” shall have the meaning given such term in the Transition Services Agreement.

1.8. “Repair Services Capability” means, with respect to a Product Line, the ability to perform all necessary warranty repair and services for such Product Line. For purposes of clarity, the Repair Services Capability for a Product Line has been attained when the mutually agreed verification and validation of Buyer’s repair services capability for such Product Line has been completed.

1.9. “Seller’s Cost of Sales” means the total sum of the Seller’s Product Cost and Seller’s OCOS per Product. Seller’s Cost of Sales shall be calculated based on Seller’s standard costing model consistent with past practices.

1.10. “Seller’s OCOS” means the cost of sales for the distribution and production of the Products which are necessary, but have not been included as part of Seller’s Product Cost, as calculated based on Seller’s standard costing model consistent with past practices. In addition, Seller’s OCOS includes costs associated with product warranty and bad debt.

1.11. “Seller’s Product Cost” means any and all production costs per Product directly associated with, attributable to and readily identifiable with the production and distribution of the Product, including the costs associated with manufacturing, validating and testing, and storing and delivering the Product, as calculated and based on Seller’s standard costing model consistent with past practices.

2

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

1.12. “Seller’s Repair Costs” shall include any and all costs directly associated with, attributable to and readily identifiable with the repair and return of the Product, including reasonable and customary labor and materials costs for incoming inspection, evaluation, repair, refurbishing, repackaging, testing, storing, acceptance test and return of the Products to the customer.

1.13. “Transition Services Agreement” means that certain Transition Services Agreement of even date herewith between Buyer and Seller.

2. Warranty Services.

2.1. Pre CD Product Warranty Responsibility. Seller shall be responsible for the product warranty services and returns for Products shipped by Seller to end customers, its distributors or other third party customers, prior to the Changeover Date associated with each such Product (each a “Pre-CD Product”). Seller shall perform warranty services and returns for Pre-CD Products pursuant to Article 4 of the Transition Services Agreement (and otherwise in accordance with the terms of the purchase and sale agreement then in effect between the Parties). As set forth below, Seller will compensate Buyer for the costs incurred by Buyer in the event that Buyer performs product warranty services on behalf of Seller with respect to Pre-CD Products.

2.2. Post-CD Product Warranty Responsibility. Buyer shall be responsible for product warranty services and returns for Products shipped or sold by Buyer and its distributors to end customers or other third party customers and for Products shipped or sold by Seller on behalf of Buyer to Buyer’s or Seller’s distributors, end customers or other third party customers on or after the Changeover Date (each a “Post CD Product”). Buyer shall use all of its commercially reasonable efforts (performing its respective obligations under the Transition Services Agreement and Changeover Plan) to ensure that, prior to the Changeover Date for any given Product Line, Buyer has Repair Services Capability with respect to such Product Line. In the event that the Buyer does not have Service Repair Capability with respect to a Product Line prior to the Changeover Date therefor, Seller shall continue to perform product warranty services with respect to Post-CD Products within such Product Line and Seller shall be reimbursed by Buyer at Seller’s Cost of Sales or Seller’s Repair Costs (depending on whether a Product has been replaced or repaired, respectively) plus *** of such costs for such Products.

2.3. Buyer’s Reimbursement for Pre-CD Product Replacements. To the extent that warranty services and return obligations must be fulfilled by Seller with respect to a Pre-CD Product, and the applicable Product Line has already been transferred to Buyer (i.e., the Changeover Date for such Product Line has already occurred), Buyer shall promptly provide to Seller the applicable replacement Product requested by Seller and Buyer shall be reimbursed by Seller at Buyer’s Cost of Sales plus *** of such costs for such Pre-CD Products (as further set

3

*** CONFIDENTIAL MATERIALS REDACTED AND FILED SEPARATELY WITH THE COMMISSION.

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

forth in Section 2.6). Any such replacement Product provided by Buyer shall be provided to Seller with Buyer’s standard warranty for such Products. In addition, if Buyer also has Repair Service Capability with respect to the applicable Product Lines, Seller may request, in lieu of such replacement Product, that Buyer provide warranty services in accordance with the provisions set forth below for such Pre-CD Product.

2.4. Buyer Warranty Processing of Pre-CD Products. After Buyer has achieved Repair Services Capability with respect to a given Product Line, Buyer agrees to accept all valid warranty claims for Pre-CD Products within such Product Line that are still under Seller’s warranty pursuant to the terms of such sales (the “Applicable Warranty Terms”); provided, however, that Seller has provided Buyer with appropriate information to enable Buyer to determine whether such Pre-CD Product (and the applicable warranty defect) is covered by the Applicable Warranty Terms (including, without limitation, any warranty registration information pertaining to such Product). Buyer will provide to Seller’s customer a return material authorization number in response to each such warranty claim. With respect to any valid warranty claim for a Pre-CD Product returned to Buyer in accordance with the Applicable Warranty Terms, Buyer will repair such Product, provide a replacement product (a “Buyer Replacement Product”), or credit Seller’s customer the amounts paid to Seller for such in warranty Pre-CD Product, in accordance with the Applicable Warranty Terms or Seller’s written instructions regarding the warranty services to be provided in accordance with the terms of this Agreement. For the avoidance of doubt, in the event that a specific Product cannot be repaired or replaced and there is a migration path to another Buyer product, Buyer may offer to customer such different Buyer product as a Buyer Replacement Product. For clarity, in the event that Seller has not provided written instructions with regard to the warranty services to be provided, Buyer may pursue any of the foregoing options (i.e., repair, replacement or credit) with respect to an in-warranty Pre-CD Product, in its sole discretion, provided Buyer does so pursuant to the Applicable Warranty Terms.

2.5. Quarterly Report.

(a) With respect to warranty services performed by Buyer under Section 2.3 and Section 2.4 above, subject to the terms above, Buyer shall submit to Seller a detailed quarterly report that includes, among other things, a list of Products within warranty that were returned along with serial numbers and confirmation that Buyer successfully repaired or replaced such Product. These quarterly reports will be delivered to:

Accounts Payable

Intel Corporation

PO Box 1000

Hillsboro, OR 97123

4

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

(b) With respect to warranty services performed by Seller under Section 2.2, subject to the terms above, Seller shall submit to Buyer a detailed quarterly report that includes, among other things, a list of Products within warranty that were returned along with serial numbers and confirmation that Seller successfully repaired or replaced such Product. These quarterly reports will be delivered to:

RadiSys Corporation

5445 N.E. Dawson Creek Drive

Hillsboro, OR 97124

Attention: Chief Financial Officer

Telephone: (503) 615-1100

Fax: (503) 615-1114

2.6. Warranty Service Invoices.

(a) Together with the quarterly reports set forth in Section 2.5(a), Buyer shall invoice Seller for the services provided under Section 2.3 and Section 2.4 of this Agreement on a quarterly basis at: (i) Buyer’s Cost of Sales plus *** for such Products that have been replaced (including the Cost of Sales for Buyer Replacement Products), (ii) Buyer’s Repair Costs plus *** for such Products that have been repaired; or (iii) the amount credited to customers, in accordance with Section 2.4.

(b) Together with the quarterly reports set forth in Section 2.5(b), Seller shall invoice Buyer for the services provided under Section 2.2 of this Agreement on a quarterly basis at: (i) Seller’s Cost of Sales plus *** for such Products that have been replaced (including the Cost of Sales for Seller Replacement Products), or (ii) Seller’s Repair Costs plus *** for such Products that have been repaired. In the event that the Parties agree that Seller shall issue a credit for such Products, Seller shall invoice Buyer for the amount credited to customers by Seller. The Parties acknowledge and agree that the foregoing shall only apply with respect to Post-CD Products and that Seller’s compensation with respect to Pre-CD Products shall be as set forth in Section 4.2 of the Transition Services Agreement.

2.7. Invoicing.

(a) Seller agrees to remit payment within thirty (30) days of Seller’s receipt of a proper invoice. Upon receipt of a written request from Seller, at least three weeks notice and no more frequently than once per year, Buyer shall permit Seller to examine the books and records of Buyer during standard working hours to the extent directly related to the Buyer’s Cost of Sales, Buyer’s Repair Costs or other costs charged to Seller under the terms of this Agreement.

5

*** CONFIDENTIAL MATERIALS REDACTED AND FILED SEPARATELY WITH THE COMMISSION

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

(b) Buyer agrees to remit payment within thirty (30) days of Buyer’s receipt of a proper invoice. Upon receipt of a written request from Buyer, at least three weeks notice and no more frequently than once per year, Seller shall permit Buyer to examine the books and records of Seller during standard working hours to the extent directly related to the Seller’s Cost of Sales, Seller’s Repair Costs or other costs charged to Buyer under the terms of this Agreement.

3. Term and Termination.

3.1. Term of Agreement. This Agreement shall become effective as of the date hereof and shall continue until the date thirty-six (36) months after the final Changeover Date under the Transition Services Agreement, unless earlier cancelled or terminated pursuant to the terms of this Agreement.

3.2. Termination. Seller or Buyer may, in its discretion, (a) terminate all of its obligations under this Agreement by written notice to the other Party in the event that the other Party breaches any material obligation under this Agreement, which breach continues without cure for a period of fifteen (15) days after written notice thereof (or such longer period (but in no event longer than thirty (30) days) as it takes to reasonably cure such breach provided that such breaching Party has actively attempted to cure such breach during such fifteen (15) day period), or (b) terminate this Agreement by written notice to the other Party in the event that the other Party enters into any proceeding, whether voluntary or involuntary, in bankruptcy, reorganization or arrangement for the appointment of a receiver or trustee to take possession of such Party’s assets or any other proceeding under any law for the relief of creditors, or makes an assignment for the benefit of its creditors.

4. Confidentiality.

4.1. The Parties understand and agree that this Agreement is subject to the terms and conditions of the Confidentiality Agreement, and that the terms and conditions of this Agreement, and the confidential or proprietary information and materials to which a Party obtains access pursuant to this Agreement or as a result of the relationship of the Parties established under the performance of this Agreement shall be considered Confidential Information (as such term is defined in the Confidentiality Agreement) subject to the Confidentiality Agreement, notwithstanding any contrary terms in Section 1 of the Confidentiality Agreement. Notwithstanding the foregoing, if any provision of this Agreement conflicts with any provision of the Confidentiality Agreement, the provision of this Agreement shall govern. Notwithstanding any contrary provision in the Confidentiality Agreement, the Parties’ respective rights and obligations under the Confidentiality Agreement shall apply fully to Confidential Information that is disclosed by either Party or its Affiliates to the other Party or its Affiliates at any time during the term of this Agreement, even if such disclosure occurs after termination of the Confidentiality Agreement. Neither of the Parties, nor any of

6

CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

their respective Affiliates, shall make any public statements relating to this Agreement or the terms and conditions hereof other than in accordance with Section 5.07 of the Asset Purchase Agreement or to state to end customers, distributors or other third party customers that Seller has engaged Buyer to provide warranty services for Products shipped by Seller prior to the Changeover Date.

5. Indemnification.

5.1. Each Party (the “Indemnitor”) shall, at its election, either settle or defend any lawsuit, legal action, or legal proceeding brought against the other Party (the “Indemnitee”) that is based upon Losses on account of the injury or death of any Person or for damage to or loss of any personal property owned by any Person to the extent caused by the gross negligence or willful misconduct of the Indemnitor or its agents, contractors, or employees in connection with the performance or receipt of performance under this Agreement (“Covered Claim”); provided that under no circumstances will either Party have any liability to the other Party for any Losses to the extent that they are caused by the other Party.

5.2. Indemnitor will pay all damages, costs and expenses (including reasonable attorneys’ fees and costs) finally awarded against Indemnitee on any Covered Claim, provided that: (a) Indemnitor has been notified of such lawsuit, legal action or legal proceeding in writing no later than seven (7) days after Indemnitee first receives notice of the lawsuit, legal action, or legal proceeding (provided that any such delay shall only excuse the Indemnitor’s obligations hereunder to the extent such delay has materially prejudiced the Indemnitor’s ability to satisfy its indemnification obligations hereunder) (b) Indemnitor has the right, at its election, to solely control the defense or settlement of the lawsuit, legal action, or legal proceeding, or to settle or defend against only the Covered Claims; and (c) Indemnitee shall provide such information and assistance in the defense or settlement of the claim as may be reasonably requested by Indemnitor at Indemnitor’s expense. Indemnitor shall not be responsible for any costs, expenses, or compromise incurred or made by Indemnitee in relation to a defense or settlement entered into without Indemnitor’s prior written consent. Indemnitee shall not be precluded from participating in the action (at its own expense), including providing assistance to Indemnitor, provided that Indemnitor consents to such participation after good faith consultation between the Parties. Such consent shall not be unreasonably withheld or delayed.

5.3. The foregoing indemnity as defined in this Section 5 is personal to the Indemnitee and shall under no circumstance be assignable, transferable or subject to pass-through to Indemnitee’s customers.

6. No Consequential Damages.

6.1. NO CONSEQUENTIAL DAMAGES. EXCEPT FOR CLAIMS FOR DAMAGES THAT ARE DIRECTLY AND PROXIMATELY CAUSED BY

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CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

THE OTHER PARTY'S BREACH OF CONFIDENTIALITY OBLIGATIONS OF THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL, PUNITIVE, OR SPECIAL DAMAGES WHATSOEVER, INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, AND THE LIKE, ARISING OUT OF THIS AGREEMENT OR SERVICES PROVIDED OR RECEIVED, AS APPLICABLE, HEREUNDER, WHETHER OR NOT FORESEEABLE, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF THE SAME.

7. Limitation of Liability.

7.1. Except for either Party’s obligations to pay any amounts hereunder and claims arising from breach of the nondisclosure obligations pursuant to the Confidentiality Agreement, in no event shall either Party’s liability under this Agreement for any cause whatsoever, and regardless of the form of action, whether in contract or in tort, exceed the aggregate amount of One Million Dollars ($1,000,000). In no event will either Party be liable to the other Party for any loss or destruction of data or degradation in network performance or computing services related to or resulting from the services provided under this Agreement. The provisions of this section shall apply to the fullest extent of the law, whether in contract, statute, tort (including, without limitation, negligence) or otherwise.

8. General Provisions.

8.1. Relationship of the Parties. Neither Party nor their respective employees are agents or representatives of, nor have authority to bind, the other Party hereto by contract or otherwise. Nothing contained in this Agreement shall be deemed or construed to create a partnership or a joint venture between Seller and Buyer or any of their respective Affiliates, or to cause either Party to be responsible in any way for the debts or other obligations of any Party hereto or any other Party or be deemed affiliated with any other Party. Each Party shall be responsible for the acts of its employees, agents, independent contractors and vendors in connection with providing or receiving, as applicable, the services described in this Agreement.

8.2. Property Ownership. Each Party acknowledges that all items, including without limitation, all machinery, equipment, and furniture owned by any other Party or any of their Affiliates and used in connection with the services hereunder shall remain the property of such Party or respective Affiliate, as the case may be, and no other party shall have any lien thereon or other rights therein.

8.3. Costs. The Parties acknowledge and agree that any amounts payable by either Party pursuant to this Agreement will be in addition to any purchase price and any other amounts payable under the Asset Purchase Agreement.

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CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

8.4. Dispute Resolution. The Parties shall promptly attempt to resolve all disputes arising under this Agreement at the working level, if possible. The Service Coordinators shall meet within five (5) Business Days of either Party’s written request for a dispute resolution meeting and attempt in good faith to resolve any dispute. If such dispute is not resolved by discussions between the Service Coordinators within five (5) days after the Parties meet in response to a Party’s written request, either Party may request that the dispute be further escalated to the general manager of the applicable business unit of each Party. Within five (5) Business Days after receipt of such request to escalate the dispute, the general managers shall meet to resolve the dispute. If unsuccessful, such disputes will be resolved in accordance with the procedures set forth below:

8.4..1.1. All disputes arising directly under the express terms of this Agreement or the grounds for termination thereof shall be resolved as follows: The business representatives of all Parties to the dispute, together with, upon the mutual agreement of the Parties, their respective legal representatives, shall meet to attempt to resolve such disputes. If the disputes cannot be resolved by such senior management, any Party may make a written demand for formal dispute resolution and specify therein the scope of the dispute. Within thirty (30) days after such written notification, the Parties agree to meet for one (1) day with an impartial mediator and consider dispute resolution alternatives other than litigation. If an alternative method of dispute resolution is not agreed upon within thirty (30) days after the one (1) day mediation, either Party may begin litigation proceedings.

8.4..1.2. Notwithstanding the provisions of Section 8.4.1.1 above, each Party shall have the right, without the requirement of first seeking a remedy through the alternate dispute resolution mechanism, to seek preliminary injunctive or other equitable relief in any proper court in the event that such Party determines that eventual redress through arbitration will not provide a sufficient remedy for any violation of this Agreement by the other Party.

8.4..1.3. In the event a proceeding is brought to enforce or interpret any provision of this Agreement, the prevailing party shall be entitled to recover reasonable attorney's fees and costs in an amount to be fixed by the court or arbitrator, as applicable.

8.5. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. This Agreement shall be construed in accordance with and this Agreement and any disputes or controversies related hereto shall be governed by the internal laws of the State of New York without giving effect to any conflicts of laws principles thereof that would apply the laws of any other jurisdiction. The Parties hereby irrevocably submit to the jurisdiction of the courts of the State of New York and the Federal courts of the United States of America located in the State of New York solely in respect of the interpretation and enforcement of the provisions of

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this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the Parties hereto irrevocably agree that all claims with respect to such proceeding shall be heard and determined in such a New York state or Federal court. The Parties hereby consent to and grant any such court jurisdiction over the person of such Parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 8.5 below or in such other manner as may be permitted by Applicable Law, shall be valid and sufficient service thereof. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.3.

8.6. Compliance With Laws Relating to Import and Export. The Parties shall comply with all Applicable Laws governing export and import of Products and New Products and information related thereto. In particular, the Parties shall not export or re-export, directly or indirectly, separately or as part of a system, the Products, New Products, or information relating thereto, to any country for which an export license or other approval is required without first obtaining such license or other approval. To the extent required by Applicable Law, Buyer shall obtain a controlled country import and/or export license and provide to Seller documentation demonstrating that it is in compliance with all applicable export control laws and regulations.

8.7. Notices. Any notice in connection with this Agreement shall be given in accordance with Section 9.01 of the Asset Purchase Agreement, which is hereby incorporated by reference.

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CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

8.8. Survival. The following sections shall survive any termination or expiration of this Agreement: any payment obligation sections, Confidentiality (Section 4) Indemnification (Section 5), No Consequential Damages (Section 6), Limitation of Liability (Section 7), and General Provisions (Section 8).

8.9. Force Majeure. Neither Party shall be liable for delay in performance of any of its obligations under this Agreement if such delay is due to causes beyond its reasonable control including, without limitation, acts of God, fires, strikes, terrorist acts, acts of war, or intervention of any government or authority, but any such delay or failure shall be remedied by such Party as soon as reasonably practicable, and the extent of any such delay shall be added to the term of this Agreement.

8.10. Amendments; Waivers.

8.10..1.1. Any provision of this Agreement may be amended or waived, including changes, modifications or supplements to the Transition Services, if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by all Parties, or in the case of a waiver, by the Party against whom the waiver is to be effective.

8.10..1.2. No waiver by a Party of any default, misrepresentation or breach of a warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation or breach of a warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence. No failure or delay by a Party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

8.11. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs, personal representatives and permitted assigns. No Party hereto may transfer or assign either this Agreement or any of its rights, interests or obligations hereunder, whether directly or indirectly, by operation of law, merger or otherwise, without the prior written approval of each other Party. No such transfer or assignment shall relieve the transferring or assigning Party of its obligations hereunder if such transferee or assignee does not perform such obligations.

8.12. Entire Agreement;. This Agreement, the Asset Purchase Agreement, and the Confidentiality Agreement constitute the entire agreement by and between the Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, and negotiations, both written and oral, by and between the Parties with respect to the subject matter of this Agreement. No representation, warranty, promise, inducement or statement of intention has been made by either Party that is not embodied in this Agreement,

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and neither Party shall be bound by, or be liable for, any alleged representation, warranty, promise, inducement or statement of intention not embodied herein or therein.

8.13. Headings and References; Interpretation. The division of this Agreement into sections, subsections, paragraphs, schedules and exhibits and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. All uses of the words “hereto”, “herein”, “hereof”, “hereby”, and “hereunder” and similar expressions refer to this Agreement as a whole, unless otherwise specifically stated in this Agreement.

8.14. Taxes. Fees and prices payable under this Agreement do not include Taxes. In addition to the fees and prices payable under this Agreement, the paying Party shall pay the amount of any present or future customs duties or sales, use, excise, or other similar Tax applicable to the sale of goods or performance of services covered by this Agreement, or in lieu thereof, the paying Party shall supply the other Party with an appropriate tax exemption certificate or provide sufficient proof of tax exemption. In the event that the paying Party is prohibited by law from making payments to the other Party unless the paying Party deducts or withholds Taxes therefrom and remits such Taxes to the local taxing jurisdiction, then the paying Party shall duly withhold and remit such Taxes and shall pay to the other Party the remaining net amount after the Taxes have been withheld. The paying Party shall promptly furnish the other Party with a copy of an official tax receipt or other appropriate evidence of any Taxes imposed on payments made under this Agreement. When property is delivered and/or services are provided or the benefit of services occurs within jurisdictions in which the other Party’s collection and remittance of Taxes is required by law, the other Party shall have sole responsibility for payment of said Taxes to the appropriate tax authorities. In the event the other Party does not collect Tax from the paying Party, and is subsequently audited by any tax authority, liability of the paying part will be limited to the tax assessment, with no reimbursement for penalty or interest charges. Each Party is responsible for its own respective income taxes or Taxes based upon gross revenues, including but not limited to business and occupation taxes. The Parties understand that the Warranty Services will be performed by the Parties and/or their Affiliates, and therefore, they contemplate that, to the extent the Warranty Services are performed by one or more Affiliates of a Party for the benefit of the other Party and/or its Affiliates, purchase orders and invoices will be issued and processed between the Party and/or its Affiliates and the other Party and/or its Affiliates, as may be appropriate. The Parties will cause their Affiliates to cooperate with each other in order to minimize taxes subject to this Section 8.12 and to carry out the intent of this Agreement.

8.15. Specific Performance. Notwithstanding the provisions of Section 8.4 above, the Parties hereby acknowledge and agree that the failure of any Party to perform its agreements and covenants hereunder, including its failure to take all actions as are necessary on its part to the consummation of the transactions contemplated herein, may cause irreparable injury to the other Party, for which damages, even if

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available, may not be an adequate remedy. Accordingly, each Party hereby consents to the issuance of injunctive relief by any court of competent jurisdiction to compel performance of such Party’s obligations and to the granting by any court of the remedy of specific performance of its obligations hereunder.

8.16. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts and the signatures delivered by telecopy, each of which shall be an original, with the same effect as if the signatures were upon the same instrument and delivered in person. This Agreement shall become effective when each Party hereto shall have received a counterpart hereof signed by the other Parties.

8.17. Severability. If any provision of this Agreement, or the application thereof to any Person, place or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable or void, the remainder of this Agreement and such provisions as applied to other Persons, places and circumstances shall remain in full force and effect only if, after excluding the portion deemed to be unenforceable, the remaining terms shall provide for the consummation of the transactions contemplated hereby in substantially the same manner as originally set forth at the later of the date this Agreement was executed or last amended.

8.18. Third Party Beneficiaries. No provision of this Agreement shall create any third party beneficiary rights in any other Person, including any employee or former employee of Seller or Buyer or any of their respective Affiliates (including any beneficiary or dependent thereof).

8.19. No Presumption against Drafting Party. Buyer and Seller acknowledge that Buyer and Seller have been represented by counsel in connection with the negotiation and execution of this Agreement. Accordingly, any rule of law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the drafting Party has no application and is expressly waived.

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THIS DOCUMENT HAVE BEEN FILED WITH THE COMMISSION.

IN WITNESS WHEREOF, the Parties hereto have caused this Warranty Services Agreement to be duly executed and delivered as of the date set forth above.

SELLER:
INTEL CORPORATION,
a Delaware corporation
By:	/s/ RAVI JACOB
Name: Ravi Jacob
Title: Vice President and Treasurer
Date: September 12, 2007
BUYER:
RADISYS CORPORATION,
an Oregon corporation
By:	/s/ BRIAN BRONSON
Name: Brian Bronson
Title: Chief Financial Officer
Date: September 12, 2007

[SIGNATURE PAGE TO INTEL CORPORATION/RADISYS CORPORATION

WARRANTY SERVICES AGREEMENT]

EX-10.4

Exhibit 10.4

RADISYS CORPORATION

DESCRIPTION OF REVISIONS TO DIRECTOR COMPENSATION ARRANGEMENTS

Effective January 1, 2008:

• The annual retainer for members of the board of directors (the “Board”) of RadiSys Corporation (excluding committee Chairs) will increase from $25,000 to $28,000;

• The annual retainer for the Chair of the Audit Committee of the Board will increase from $11,000 to $12,500; and

• The annual retainer for Chairs of each of the Compensation Committee of the Board and the Development Committee of the Board will increase from $9,000 to $10,000.

Effective October 23, 2007:

• Vesting schedule of initial stock grants for committee Chairs and Board members will increase from 1 year to 3 years.

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Scott C. Grout, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of RadiSys Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2007

/s/ SCOTT C. GROUT

Scott C. Grout

Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Brian Bronson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of RadiSys Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2007

/s/ BRIAN BRONSON

Brian Bronson

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RadiSys Corporation (the “Company”) on Form 10-Q for the fiscal quarter ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott C. Grout, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ SCOTT C. GROUT

Scott C. Grout

Chief Executive Officer

November 8, 2007

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RadiSys Corporation (the “Company”) on Form 10-Q for the fiscal quarter ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian Bronson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ BRIAN BRONSON

Brian Bronson

Chief Financial Officer

November 8, 2007