-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EChe7C5wsPbKfqtnBDVvzWFBTpjY3ub1a53xCXxRZXAsPcRAbebJLtrmrf8UzcUk gAx48rJEg7hh813+dRj2vA== 0001193805-03-000645.txt : 20030731 0001193805-03-000645.hdr.sgml : 20030731 20030731121338 ACCESSION NUMBER: 0001193805-03-000645 CONFORMED SUBMISSION TYPE: SC TO-I PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 20030731 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: RADISYS CORP CENTRAL INDEX KEY: 0000873044 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 930945232 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I SEC ACT: 1934 Act SEC FILE NUMBER: 005-49160 FILM NUMBER: 03813722 BUSINESS ADDRESS: STREET 1: 5445 NE DAWSON CREEK DR CITY: HILLSBORO STATE: OR ZIP: 97124 BUSINESS PHONE: 5036461800 MAIL ADDRESS: STREET 1: 5445 NE DAWSON CREEK DRIVE CITY: HILLSBORO STATE: OR ZIP: 97124 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: RADISYS CORP CENTRAL INDEX KEY: 0000873044 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 930945232 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I BUSINESS ADDRESS: STREET 1: 5445 NE DAWSON CREEK DR CITY: HILLSBORO STATE: OR ZIP: 97124 BUSINESS PHONE: 5036461800 MAIL ADDRESS: STREET 1: 5445 NE DAWSON CREEK DRIVE CITY: HILLSBORO STATE: OR ZIP: 97124 SC TO-I 1 e300526_radisys-sctoi.htm SCHEDULE TO Untitled Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE TO
Tender Offer Statement Under Section 14(d)(1) or 13(e)(1)
of the Securities Exchange Act of 1934

RADISYS CORPORATION
(Name of Subject Company (Issuer) and Filing Person (Offeror))

Options to Purchase Common Stock, No Par Value
(Title of Class of Securities)

750459109
(CUSIP Number of Class of Securities of Underlying Common Stock)

Julia A. Harper
Chief Financial Officer, Vice President of Finance and Administration and Secretary
RadiSys Corporation
5445 NE Dawson Creek Drive
Hillsboro, Oregon 97124
(503) 615-1100
(Name, address and telephone number of person authorized to
receive notices and communications on behalf of filing person)

Copies to:
Daniel W. Rabun
Baker & McKenzie
2001 Ross Avenue, Suite 2300
Dallas, Texas 75201

  CALCULATION OF FILING FEE  
Transaction Valuation*   Amount of Filing Fee*
$43,241,974
  
$3,498.28

* Calculated solely for purposes of determining the filing fee. This amount assumes that options to purchase 809,722 shares of common stock of RadiSys Corporation having an aggregate value of $43,241,974 as of July 30, 2003 will be exchanged or cancelled pursuant to this offer. The aggregate value of such options was calculated based on the Black-Scholes option pricing model. The amount of the filing fee, calculated in accordance with the Securities Exchange Act of 1934, as amended, equals $80.90 for each $1,000,000 of the value of the transaction.

o Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid: Not applicable   Filing party: Not applicable
Form or Registration No.: Not applicable   Date filed: Not applicable

o Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates:

o third party tender offer subject to Rule 14d-1.
þ issuer tender offer subject to Rule 13e-4.
o going-private transaction subject to Rule 13e-3.
o amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer: o

 

 

     This Tender Offer Statement on Schedule TO relates to an offer (the “Exchange Offer”) by RadiSys Corporation, an Oregon corporation (“RadiSys” or the “Company”), to exchange options to purchase an aggregate of 809,722 shares of the Company’s common stock, no par value, whether vested or unvested, that have been granted under the RadiSys Corporation 1995 Stock Incentive Plan or the RadiSys Corporation 2001 Nonqualified Stock Option Plan (collectively, the “Incentive Plans”) with an exercise price of $20.00 per share or higher (the “Eligible Options”) that are held by eligible employees. These Eligible Options may be exchanged for new options (the “New Options”) that will be granted under the RadiSys Corporation 2001 Nonqualified Stock Option Plan upon the terms and subject to the conditions set forth in the (i) Stock Option Exchange Program Tender Offer Statement, dated July 31, 2003 (the “Offer to Exchange”), (ii) Stock Option Exchange Program Overview, (iii) Stock Option Exchange Program Frequently Asked Questions, (iv) Web Site Election Forms and (v) Hard Copy Election Agreement. These documents, and the RadiSys Human Resources Department presentation materials, as each may be amended or supplemented from time to time, together constitute the “Disclosure Documents” and are attached to this Schedule TO as Exhibits (a)(1)(A) through (a)(1)(F), respectively. An “eligible employee” refers to all persons who are employees of the Company or one of its subsidiaries employed and residing in Germany, Japan, the United Kingdom or the United States on July 31, 2003 who hold Eligible Options. Members of RadiSys’ Board of Directors and RadiSys’ vice-presidents and executive officers, as well as employees of the Company or one of its subsidiaries who reside in Israel or The Netherlands, are ineligible to participate in the Exchange Offer.

     The information in the Disclosure Documents, including all schedules and annexes to the Disclosure Documents, is incorporated by reference in answer to the items required in this Schedule TO.

Item 1. Summary Term Sheet.

     The information set forth under the caption “Summary Term Sheet” in the Offer to Exchange is incorporated herein by reference.

Item 2. Subject Company Information.

(a) Name and Address.

     RadiSys is the issuer of the securities subject to the Exchange Offer. The address and telephone number of the Company’s principal executive offices is 5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124, 503-615-1100. The information set forth in the Offer to Exchange under the caption “The Offer to Exchange—Information concerning RadiSys” is incorporated herein by reference.

(b) Securities.

     The subject class of securities consists of the Eligible Options. Options to purchase 4,337,513 shares of common stock were outstanding on July 30, 2003. The actual number of shares of common stock subject to the New Options to be issued in the Exchange Offer will depend on the number of shares of common stock subject to the unexercised options tendered by eligible employees and accepted for exchange and cancelled. The information set forth in the Offer to Exchange under the captions “Summary Term Sheet,” “Risks of Participating in the Offer to Exchange” and the sections under the caption “The Offer to Exchange” entitled “—Number of options; Expiration Date,” “—Withdrawal Rights,” “—Acceptance of options for exchange and issuance of new options” and “—Source and amount of consideration; terms of new options” is incorporated herein by reference.

(c) Trading Market and Price.

     The information set forth in the Offer to Exchange under the caption “The Offer to Exchange—Price range of shares underlying the options” is incorporated herein by reference.

 

 

Item 3. Identity and Background of Filing Person.

(a) Name and Address.

     The filing person is the issuer. The information set forth under Item 2(a) above is incorporated herein by reference. The information set forth on Schedule A to the Offer to Exchange is incorporated herein by reference.

Item 4. Terms of the Transaction.

(a) Material Terms.

     The information set forth in the Offer to Exchange under the caption “Summary Term Sheet,” the captions “The Offer to Exchange—Eligibility,” “—Number of options; Expiration Date,” “—Procedures for electing to exchange options,” “—Withdrawal rights,” “—Acceptance of options for exchange and issuance of new options,” “—Conditions of the offer to exchange,” “—Price range of shares underlying the options,” “—Source and amount of consideration; terms of new options,” “—Status of options acquired by us in the offer to exchange; accounting consequences of the offer to exchange,” “—Legal matters; regulatory approvals,” “—Material U.S. federal income tax consequences; material non-U.S. tax consequences” and “—Extension of offer; termination; amendment,” and Schedule B to the Offer to Exchange is incorporated herein by reference.

(b) Purchases.

     The information set forth in the Offer to Exchange under the caption “The Offer to Exchange—Interests of directors, vice-presidents and officers; transactions and arrangements concerning the options” is incorporated herein by reference.

Item 5. Past Contacts, Transactions, Negotiations and Arrangements.

(e) Agreements Involving the Subject Company’s Securities.

     The information set forth in the Offer to Exchange under the caption “The Offer to Exchange—Interests of directors, vice-presidents and officers; transactions and arrangements concerning the options” is incorporated herein by reference. The eligible option plans and related option agreements attached hereto as Exhibits (d)(1) through (d)(4) contain information regarding the subject securities.

Item 6. Purposes of the Transaction and Plans or Proposals.

(a) Purposes.

     The information set forth in the Offer to Exchange under the captions “Summary Term Sheet” and “The Offer to Exchange—Purpose of the offer to exchange” is incorporated herein by reference.

(b) Use of Securities Acquired.

     The information set forth in the Offer to Exchange under the captions “The Offer to Exchange—Acceptance of options for exchange and issuance of new options” and “—Status of options acquired by us in the offer to exchange; accounting consequences of the offer to exchange” is incorporated herein by reference.

(c) Plans.

     The information set forth in the Offer to Exchange under the caption “The Offer to Exchange—Purpose of the offer to exchange” is incorporated herein by reference.

 

 

Item 7. Source and Amount of Funds or Other Consideration.

(a) Source of Funds.

     The information set forth in the Offer to Exchange under the caption “The Offer to Exchange—Source and amount of consideration; terms of new options” is incorporated herein by reference.

(b) Conditions.

     Not applicable.

(d) Borrowed Funds.

     Not applicable.

Item 8. Interest in Securities of the Subject Company.

(a) Securities Ownership.

     The information set forth in the Offer to Exchange under the caption “The Offer to Exchange—Interests of directors, vice-presidents and officers; transactions and arrangements concerning the options” is incorporated herein by reference.

(b) Securities Transactions.

     The information set forth in the Offer to Exchange under the caption “The Offer to Exchange—Interests of directors, vice-presidents and officers; transactions and arrangements concerning the options” is incorporated herein by reference.

Item 9. Persons/Assets, Retained, Employed, Compensated or Used.

(a) Solicitations or Recommendations.

     Not applicable.

Item 10. Financial Statements.

(a) Financial Information.

     The information set forth in the Offer to Exchange under the captions “The Offer to Exchange—Information concerning RadiSys,” “—Summary Financial Data” and “—Additional information” is incorporated herein by reference. The Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q can also be accessed electronically on the Securities and Exchange Commission’s website at http://www.sec.gov.

(b) Pro Forma Information.

     Not applicable.

Item 11. Additional Information.

(a) Agreements, Regulatory Requirements and Legal Proceedings.

     The information set forth in the Offer to Exchange under the caption “The Offer to Exchange—Legal matters; regulatory approvals” is incorporated herein by reference.

 

 

(b) Other Material Information.

      Not applicable.

Item 12. Exhibits.

  (a)(1)(A)   Stock Option Exchange Program Tender Offer Statement, dated July 31, 2003.
  (B)   Stock Option Exchange Program Overview.
  (C)   Stock Option Exchange Program Frequently Asked Questions.
  (D)   Web Site Election and Confirmation Forms.
  (E)   Hard Copy Election Agreement.
  (F)   RadiSys Human Resources Department presentation materials.
  (G)   Email from Glenn Splieth dated July 31, 2003.
  (H)   Letter from Glenn Splieth to eligible RadiSys employees on leave of absence.
  (I)   Letter from Glenn Splieth to eligible RadiSys employees in Japan.
  (J)   PIN Email for Eligible Employees.
  (K)   Stock Option Exchange Program Significant Events Calendar.
  (L)   Form of Option Exchange Reminder Emails.
  (M)   Form of Confirmation of Cancellation of Tendered Options and Commitment to Grant New Options.
  (N)   Form of Notice of No Election.
  (b)   Not applicable.
  (d)(1)   RadiSys Corporation 1995 Stock Incentive Plan, as amended through May 13, 2003.
  (2)   RadiSys Corporation 2001 Nonqualified Stock Option Plan, as amended through May 13, 2003.
  (3)   Form of stock option agreement for the RadiSys Corporation 1995 Stock Incentive Plan.
  (4)   Form of stock option agreement for the RadiSys Corporation 2001 Nonqualified Stock Option Plan.
  (g)   Not applicable.
  (h)   Not applicable.

Item 13. Information Required by Schedule 13E-3.

(a) Not applicable.

 

 

SIGNATURE

     After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct.

  RADISYS CORPORATION
   
  /s/     Julia A. Harper                    
  Name: Julia A. Harper
Title: Chief Financial Officer, Vice President of
Finance and Administration and
Secretary

Date: July 31, 2003

 

 

INDEX TO EXHIBITS

  (a)(1)(A)   Stock Option Exchange Program Tender Offer Statement, dated July 31, 2003.
  (B)   Stock Option Exchange Program Overview.
  (C)   Stock Option Exchange Program Frequently Asked Questions.
  (D)   Web Site Election and Confirmation Forms.
  (E)   Hard Copy Election Agreement.
  (F)   RadiSys Human Resources Department presentation materials.
  (G)   Email from Glenn Splieth dated July 31, 2003.
  (H)   Letter from Glenn Splieth to eligible RadiSys employees on leave of absence.
  (I)   Letter from Glenn Splieth to eligible RadiSys employees in Japan.
  (J)   PIN Email for Eligible Employees.
  (K)   Stock Option Exchange Program Significant Events Calendar.
  (L)   Form of Option Exchange Reminder Emails.
  (M)   Form of Confirmation of Cancellation of Tendered Options and Commitment to Grant New Options.
  (N)   Form of Notice of No Election.
  (b)   Not applicable.
  (d)(1)   RadiSys Corporation 1995 Stock Incentive Plan, as amended through May 13, 2003.
  (2)   RadiSys Corporation 2001 Nonqualified Stock Option Plan, as amended through May 13, 2003.
  (3)   Form of stock option agreement for the RadiSys Corporation 1995 Stock Incentive Plan.
  (4)   Form of stock option agreement for the RadiSys Corporation 2001 Nonqualified Stock Option Plan.
  (g)   Not applicable.
  (h)   Not applicable.

 

 EX-99.(A)(1)(A) 3 e300526_ex99-a1a.txt STOCK OPTION EXCHANGE PROGRAM Exhibit (a)(1)(A) ----------------- RADISYS CORPORATION STOCK OPTION EXCHANGE PROGRAM TENDER OFFER STATEMENT ("OFFER TO EXCHANGE") ----------------- THE OFFER TO EXCHANGE AND WITHDRAWAL RIGHTS EXPIRE AT 9:00 P.M., PACIFIC TIME (U.S.), ON AUGUST 27, 2003, UNLESS THE OFFER TO EXCHANGE IS EXTENDED BY RADISYS CORPORATION ----------------- July 31, 2003 [LOGO] RADISYS CORPORATION STOCK OPTION EXCHANGE PROGRAM TENDER OFFER STATEMENT ("OFFER TO EXCHANGE") ----------------- This offer to exchange and withdrawal rights expire at 9:00 p.m., Pacific Time (U.S.), on August 27, 2003, unless we extend the offer to exchange. ----------------- You may exchange your outstanding vested and unvested eligible options to purchase shares of RadiSys' common stock, no par value, granted under our 1995 Stock Incentive Plan or our 2001 Nonqualified Stock Option Plan, which we refer to collectively herein as our Incentive Plans, for new nonqualified stock options that we will grant under the 2001 Nonqualified Stock Option Plan. Eligible options for purposes of this offer to exchange consist of options that have been granted under the Incentive Plans with an exercise price of $20.00 per share or higher that are held by eligible employees. You are eligible to participate in the offer to exchange only if you are an employee of RadiSys or one of our subsidiaries and reside in Germany, Japan, the United Kingdom or the United States on July 31, 2003 and hold eligible options. In order to participate in the offer to exchange, you must remain continuously employed through the date exchanged options are cancelled and you must remain an employee through the date of the new option grant to receive the new options. Members of our board of directors and the vice-presidents and executive officers listed on Schedule A - Information Concerning the Directors, Vice-Presidents and Executive Officers of RadiSys Corporation attached hereto, as well as employees of RadiSys or one of our subsidiaries who reside in Israel or The Netherlands, are ineligible to participate in this offer to exchange. Exchanged options are any eligible options that you elect to exchange pursuant to the offer to exchange that are accepted by us for exchange. Subject to the terms of the exchange program and upon our acceptance of your properly tendered eligible options, the number of new options you receive will be based on the exercise price of such options, as follows: Exchange Ratio Exercise Price (Eligible Option : New Option) $20.00-34.99 1.40 : 1 $35.00 or higher 2.00 : 1 The exchange ratios were calculated based upon the closing price of shares of our common stock on July 30, 2003. The exercise price per share of the new options will be equal to the closing price of shares of our common stock as reported by the Nasdaq National Market on the date of grant. We will grant the new options on a date that is at least six months and one day after the date on which we cancel the eligible options accepted for exchange. We refer to this date as the new option grant date. We expect the new option grant date to be no earlier than March 1, 2004. Each new option will be subject to a new vesting schedule that will begin on the new option grant date. 1 Our common stock is traded on the Nasdaq National Market under the symbol "RSYS." On July 30, 2003, the closing sale price of our common stock as reported by the Nasdaq National Market was $15.46 per share. We recommend that you evaluate current market quotes for our common stock, among other factors, before deciding whether to elect to exchange your eligible options. See "Risks of Participating in the Offer to Exchange" beginning on page 10 for a discussion of risks that you should consider before tendering your eligible options. IMPORTANT The information in this overview is not complete. You should carefully read this entire Offer to Exchange, the Stock Option Exchange Program Overview, the Stock Option Exchange Program Frequently Asked Questions and the Election Agreement, which we collectively refer to as the exchange program documents. The offer to exchange is made subject to the terms and conditions of these documents as they may be amended. Additional important information is contained in the remainder of this Offer to Exchange and the other exchange program documents. The offer to exchange ends at 9:00 p.m., Pacific Time (U.S.), on August 27, 2003, unless we extend the offer to exchange. We refer to this date and time as the "Expiration Date." If we extend the offer to exchange, the term Expiration Date will refer to the time and date at which the extended offer to exchange expires. Manner of Election If you wish to exchange your eligible options, your properly completed election agreement ("Election Agreement") must be RECEIVED in accordance with the instructions in this Offer to Exchange by no later than the Expiration Date. In order to make your election, you will need to access the Mellon Investor Services' web site (web site address: www.corporate-action.net/RadiSys). RadiSys has engaged Mellon to assist it in administering the stock option exchange program. In order to access the web site, you will need a Personal Identification Number ("PIN"). All RadiSys employees (except those on inactive status or in Japan) are receiving a PIN at their RadiSys e-mail address. Employees who are on inactive status (such as a leave of absence) are receiving their PIN by mail with the exchange program documents. Radisys employees who reside in Germany will be making their election on a paper Election Agreement; however, Radisys employees who reside in Germany will be receiving a PIN so that they can access the Mellon Investor Services' web site. RadiSys employees who reside in Japan will be making their election on a paper Election Agreement and are not receiving a PIN. Employees who do not have eligible options will have access to the Mellon web site; however, their stock options will be displayed as ineligible to exchange. We have different election processes depending on the country where you are employed and reside. If you reside and are employed in the United Kingdom or the United States and receive a PIN via e-mail, you should elect online, with no paper submission necessary. If you reside and are employed in Germany or Japan, you must return a signed copy of your Election Agreement to Mellon. If you do not have access to a fax machine, you may use the mailing address below. However, please allow sufficient time for any mailed documents to arrive. By Facsimile: By Mail: By Overnight Courier: 201-329-8456 Mellon Investor Services LLC Mellon Investor Services LLC Attn: Reorganization Dept. Attn: Reorganization Dept. P.O. Box 3301 85 Challenger Road South Hackensack, NJ 07606 Mail Drop - Reorg Ridgefield Park, NJ 07660- If you are on inactive status (such as leave of absence), you may make your election either online or by returning a signed copy of your Election Agreement to Mellon. 2 In order for your election to be valid, your Election Agreement must be RECEIVED by Mellon in accordance with these instructions by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003, unless extended by RadiSys. Withdrawal of Election To withdraw the eligible options that you previously elected to exchange, if you reside and are employed in the United Kingdom or the United States, you must log on to the Mellon web site at www.corporate-action.net/RadiSys and follow the instructions on the web site. Please note that if you log back into the web site and click any boxes, your previous election may not change and, accordingly, you should follow all of the instructions to ensure your election is completed. If you reside and are employed in Germany or Japan, or if you are on inactive status (such as leave of absence) and do not have access to the Internet, you must submit a correctly completed new Election Agreement by fax or mail as discussed above. In order to withdraw your eligible options previously elected for exchange, your election to withdraw must be RECEIVED by Mellon in accordance with these instructions by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003. If we extend the offer to exchange beyond that time, you may withdraw your eligible options at any time until the extended Expiration Date. Neither the Securities and Exchange Commission nor any state securities commission or non-U.S. regulatory authority has approved or disapproved of these securities or passed upon the accuracy or adequacy of this Offer to Exchange. Any representation to the contrary is a criminal offense. You should direct questions about the offer to exchange or requests for additional copies of this Offer to Exchange and the other exchange program documents to a customer service representative at Mellon Investor Services, Monday through Friday between the hours of 5:00 a.m. and 4:00 p.m., Pacific Time (U.S.), telephone number 888-256-2709 from within the U.S. and 201-329-8905 from outside the U.S., or by writing to Mellon Investor Services LLC, Attn: Reorganization Department, P.O. Box 3301, South Hackensack, NJ 07606. Offer to Exchange dated July 31, 2003. You should rely only on the information contained in this Offer to Exchange and the other exchange program documents. We have not authorized anyone to provide you with different information. We are not making an offer of the new options in any jurisdiction where the offer is not permitted. However, we may, at our discretion, take any actions necessary for us to make the Offer to Exchange to option holders in any of these jurisdictions. You should not assume that the information provided in this Offer to Exchange is accurate as of any date other than the date as of which it is shown, or if no date is otherwise indicated, the date of this Offer to Exchange. This Offer to Exchange summarizes various documents and other information. Those summaries are qualified in their entirety by reference to the documents and information to which they relate. 3 TABLE OF CONTENTS SUMMARY TERM SHEET.............................................................1 RISKS OF PARTICIPATING IN THE OFFER TO EXCHANGE...............................10 THE OFFER TO EXCHANGE.........................................................12 1. Eligibility......................................................12 2. Number of options; Expiration Date...............................12 3. Purpose of the offer to exchange.................................13 4. Procedures for electing to exchange options......................14 5. Withdrawal rights................................................16 6. Acceptance of options for exchange and issuance of new options...17 7. Conditions of the offer to exchange..............................18 8. Price range of shares underlying the options.....................20 9. Source and amount of consideration; terms of new options.........20 10. Information concerning RadiSys..................................24 11. Interests of directors and officers; transactions and arrangements concerning the options.............................24 12. Status of options acquired by us in the offer to exchange; accounting consequences of the offer to exchange................26 13. Legal matters; regulatory approvals.............................26 14. Material U.S. federal income tax consequences; material non-U.S. tax consequences.......................................26 15. Extension of offer; termination; amendment......................27 16. Fees and expenses...............................................28 17. Additional information..........................................28 18. Financial information...........................................29 19. Factors that may affect future results..........................30 20. Miscellaneous...................................................32 SCHEDULE A INFORMATION CONCERNING THE DIRECTORS, VICE-PRESIDENTS AND EXECUTIVE OFFICERS OF RADISYS CORPORATION......................A-1 SCHEDULE B GUIDE TO INTERNATIONAL ISSUES..................................B-1 i SUMMARY TERM SHEET The following are answers to some of the questions that you may have about the offer to exchange. You should carefully read this entire Offer to Exchange, the Stock Option Exchange Program Overview, the Stock Option Exchange Program Frequently Asked Questions and the Election Agreement. The offer to exchange is made subject to the terms and conditions of these documents as they may be amended. The information in this summary is not complete. Additional important information is contained in the remainder of this Offer to Exchange and the other exchange program documents. We have included in this summary references to other sections in this Offer to Exchange to help you find a more complete description of these topics. Q1. What is the offer to exchange? A1. The offer to exchange is a voluntary opportunity for eligible option holders to exchange vested and unvested eligible options for new options covering a smaller number of shares following a six month and one day waiting period. Eligible options are options granted under our Incentive Plans with an exercise price of $20.00 per share or higher. Unless extended by us, the offer to exchange expires at 9:00 p.m., Pacific Time (U.S.), on August 27, 2003. We then intend to cancel the exchanged options no later than the first business day following the Expiration Date. The six month and one day waiting period will commence after the cancellation date. We expect to make the new grants on a date no earlier than March 1, 2004. The new options will have an exercise price equal to the closing price of shares of our common stock as reported by the Nasdaq National Market on the new option grant date. (See Sections 1 and 9) Q2. Why are we making the offer to exchange? A2. Stock options are an important component of our reward strategy for employees. They allow you to share in any appreciation in our stock, facilitate a sense of ownership and align your interests and those of our stockholders. From our point of view, stock options help us to retain and motivate the talent we already have and encourage new recruits to the business. However, due to the sharp decline in our stock price, a substantial number of our stock options granted have exercise prices higher than the current trading price of our common stock (commonly referred to as "underwater" options). This offer to exchange is designed to provide our employees the opportunity to replace "underwater" options with options that will generally have an exercise price equal to the fair market value of the shares on the new option grant date (commonly referred to as "at-the-money" options) and that may have greater potential to increase in value over time. We believe this exchange will create better performance incentives for eligible employees and, as a result, maximize stockholder value. (See Section 3) Q3. What securities are we offering to exchange? A3. We are offering to exchange all outstanding, unexercised, eligible options, regardless of whether they are vested or unvested, held by eligible employees. Eligible options for purposes of the offer to exchange consist of options that have been granted under the Incentive Plans with an exercise price of $20.00 per share or higher. In exchange for eligible options, we will grant new options covering a smaller number of shares under our 2001 Nonqualified Stock Option Plan following a six month and one day waiting period. If you elect to participate in the offer to exchange, then you must exchange all of your eligible options. (See Sections 2 and 9) Q4. Who is eligible to participate? A4. You are eligible to participate in the offer to exchange if you are an employee of RadiSys or one of our subsidiaries, own eligible options and reside in Germany, Japan, the United Kingdom or the United States on July 31, 2003, and you remain an employee through the date we cancel the eligible options exchanged pursuant to the offer to exchange. We refer to the date we cancel the eligible options exchanged pursuant to the offer to exchange as the cancellation date. Members of our Board of Directors and the vice-presidents and executive officers listed on Schedule A - Information Concerning the Directors, Vice-Presidents and Executive Officers of RadiSys Corporation attached hereto, as well as employees of RadiSys or one of our subsidiaries who reside in Israel or The Netherlands, are ineligible to participate in the offer to exchange. (See Section 1) 1 To receive a new option, you must remain an employee of RadiSys or one of our subsidiaries through the date on which the new options are granted, which will be a date that is at least six months and one day after the cancellation date. We refer to this date as the new option grant date. If we do not extend the offer to exchange, we currently expect the new option grant date will be no earlier than March 1, 2004. (See Section 1) Q5. Are employees outside of the United States eligible to participate? A5. Yes, in part. Employees of RadiSys or any of our subsidiaries on July 31, 2003 who are residents of Germany, Japan or the United Kingdom are eligible to participate, other than members of our Board of Directors and the vice-presidents and executive officers listed on Schedule A - Information Concerning the Directors, Vice-Presidents and Executive Officers of RadiSys Corporation. (See Section 1) However, employees of RadiSys or one of our subsidiaries who reside in Israel or The Netherlands are ineligible to participate in the offer to exchange. If you are a tax resident of, or subject to tax laws of, a country other than the United States, please be sure to read Schedule B - Guide to International Issues of this Offer to Exchange dealing with the applicable tax consequences of the exchange in certain countries. (See Section 14) Q6. If you are on an approved leave of absence or go on an approved leave of absence before the offer to exchange expires, can you still exchange eligible options? A6. Yes. If you are an eligible employee on an approved leave of absence or plan to go on an approved leave of absence for any reason before the Expiration Date, you may participate in this program and exchange your eligible options. You must be employed by RadiSys or one of our subsidiaries through the new option grant date in order to receive a new option. If you are on an approved leave of absence and still employed by RadiSys or one of our subsidiaries on the new option grant date, you will receive a new option. Q7. When does this offer to exchange end? A7. This offer to exchange ends at 9:00 p.m., Pacific Time (U.S.), on August 27, 2003. We refer to this date and time as the Expiration Date, unless we extend the period during which the offer to exchange will remain open. If we extend the offer to exchange, the term Expiration Date will refer to the time and date at which the extended offer to exchange expires. If we extend the offer to exchange, we will issue a public announcement regarding the extension. (See Section 2) Q8. How many new options will you receive in exchange for your eligible options that you elect to exchange? A8. Subject to the terms of the exchange program and upon our acceptance of your properly tendered eligible options, the number of new options you receive will be based on the exercise price of such options, as follows: Exchange Ratio Exercise Price (Eligible Option : New Option) $20.00-34.99 1.40 : 1 $35.00 or higher 2.00 : 1 The exchange ratios were calculated based upon the closing price of shares of our common stock on July 30, 2003. The number of option shares that you receive will be rounded up to the nearest whole share, and will be subject to adjustment for any stock splits, subdivisions, combinations, stock dividends and similar events that occur after the cancellation date but before the new option grant date. (See Section 2) 2 New options will be granted under our 2001 Nonqualified Stock Option Plan. All new options will be nonqualified options for U.S. federal income tax purposes. (See Sections 2 and 9) Q9. How were the exchange ratios determined and why are they different for options with different exercise prices? A9. We used an option pricing model to estimate the theoretical value of each option. Using this model, we assigned a value to eligible options and to new options. We then determined the ratio of old to new options that would make the exchange approximately equivalent in value. (See Section 3) Q10. Why is the exchange ratio not simply one-for-one? A10. The exchange ratios have been developed to be fair to you and responsible to our stockholders. Our stock option program must balance the interests of both employees and stockholders. As an employee, you may benefit by replacing your underwater options with new options that are at-the-money on the new option grant date. Stockholders may also benefit because this program will give us the potential to significantly reduce the total number of options outstanding. (See Section 3) Q11. What are the conditions to the offer to exchange? A11. Participation in the offer to exchange is completely voluntary. The completion of the offer to exchange is subject to a number of customary conditions that are described in Section 7 of this Offer to Exchange. If any of these conditions are not satisfied, we will not be obligated to accept and exchange any properly tendered eligible options. Prior to the Expiration Date and subject to applicable law, we reserve the right to amend the offer to exchange for any reason. (See Section 7) Q12. Are there any eligibility requirements that you must satisfy after the Expiration Date to receive the new options? A12. To receive a grant of new options under the terms of the offer to exchange, you must be employed by us or one of our subsidiaries through the new option grant date. (See Section 1) As discussed further below, we will grant new options to you on a date that is at least six months and one day after the cancellation date. We currently expect that the new option grant date will be no earlier than March 1, 2004. If for any reason you do not remain employed by us or one of our subsidiaries or a successor entity through the new option grant date, you will not receive any new options or other compensation in exchange for the eligible options that you tendered and that we accepted for exchange and subsequently cancelled. Unless otherwise expressly provided by the applicable laws of a non-U.S. jurisdiction, your employment with us or one of our subsidiaries remains "at-will" and can be terminated by you or us or one of our subsidiaries at any time, with or without cause or notice. (See Section 1) Q13. When will you receive your new options? A13. We will grant the new options on the new option grant date, which we currently expect to be no earlier than March 1, 2004. The new option grant date will be a date that is at least six months and one day after the date on which we cancel the eligible options accepted for exchange. We will not grant the new options before the new option grant date. We will send you notification that we have accepted your tendered eligible options for exchange and that we will issue to you the new options in accordance with and subject to the terms and conditions of the offer to exchange promptly after the Expiration Date. (See Section 6) 3 Q14. When will the eligible options you elect to exchange be cancelled? A14. The eligible options you elect to exchange will be cancelled no later than the first business day following the Expiration Date. We refer to this date as the cancellation date. If we do not extend the offer to exchange, we currently expect that the cancellation date will be August 28, 2003. Accordingly, we expect that the new options will be granted on a date no earlier than March 1, 2004. (See Section 6) Q15. Why will you not receive your new options immediately after the Expiration Date? A15. By deferring the grant of the new options for at least six months and one day, we believe that we will avoid the impact of certain non-cash accounting charges that would be calculated based on fluctuations in our stock price. (See Section 12) Q16. If you elect to participate in the offer to exchange, will you be eligible to receive other option grants before you receive your new options? A16. No. If you accept the offer to exchange, you cannot receive any other option grants before you receive your new options. We will defer granting additional options to current Radisys employees until, at the earliest March 1, 2004, to avoid incurring compensation expense against our earnings because of accounting rules that could apply to these interim option grants as a result of the offer to exchange. (See Section 6) Q17. Is this a repricing? A17. No. The Financial Accounting Standards Board has adopted rules that result in unfavorable accounting consequences for companies that reprice options. If we repriced your options, our potential for profitability in the future could be significantly reduced because we would be required to record a charge against earnings with respect to any future appreciation of the repriced options. (See Section 12) Q18. Why can we not just grant you additional options? A18. Because of the large number of underwater options outstanding, granting additional options covering the same aggregate number of shares of common stock as the outstanding eligible options would have a severe negative impact on our potential dilution, outstanding shares and earnings per share. Additionally, we have a limited number of options that we may grant without stockholder approval, and our current reserves must be conserved for ongoing grants and new hires. (See Section 3) Q19. Will you be required to give up all of your rights under the cancelled options? A19. Yes. Once we have accepted eligible options that you tender for exchange, your exchanged options will be cancelled and you will no longer have any rights under those exchanged options. We intend to cancel all eligible options accepted for exchange on the cancellation date, which will be no later than the first business day following the Expiration Date. We currently expect the cancellation date to be August 28, 2003. (See Section 6) Q20. What will be the exercise price of the new options? A20. The exercise price per share of the new options will be the closing price of shares of our common stock as reported by the Nasdaq National Market on the new option grant date, which is currently expected to be no earlier than March 1, 2004. (See Section 9) 4 We cannot predict the exercise price of the new options. Because we will grant new options on a date that is at least six months and one day after the date on which we cancel the eligible options accepted for exchange, the new options may have a higher exercise price than some or all of your eligible options. (See Section 9) Q21. When will the new options vest? A21. All new options granted in exchange for eligible options will not be exercisable for six months after the date of the grant, after which the options will be exercisable for 33.33% of the total option shares, and become exercisable in monthly increments equal to approximately 2.78% of the total option shares, cumulatively, each month thereafter, becoming fully exercisable two and one-half years after the date of the grant. This means that all new options would be completely unvested at the time of the new grant, regardless of whether the options exchanged were partially or wholly vested. You will have the choice to exercise your new options at any time after they have vested. Options will only vest if you remain a company employee and they may only be exercised by you. Options that are not vested at termination of employment cannot be exercised and will be forfeited. (See Section 9) Q22. What if another company acquires us in a merger or stock acquisition? A22. Although we are not anticipating any such merger or acquisition, if we merge or consolidate with or are acquired by another entity between the Expiration Date and the new option grant date, then the resulting entity will be obligated to grant the new options under the same terms as provided in this Offer to Exchange. This would apply in the event of a merger or consolidation of RadiSys but not to a merger, divestiture, outsourcing or consolidation of only a business unit or product line. However, the type of security and the number of shares covered by each new option would be adjusted based on the consideration per share given to holders of options to acquire our common stock that are outstanding at the time of the acquisition. Such new option will have an exercise price at least equal to the fair market value of the acquiror's stock on the new option grant date. As a result of this adjustment, you may receive options for more or fewer shares of the acquiror's common stock than the number of shares subject to the eligible options that you exchange or than the number you would have received pursuant to a new option if no acquisition had occurred. Regardless of any such merger, consolidation or acquisition, the new option grant date will be the first business day that is at least six months and one day after the cancellation date, except where prohibited under local law. Consequently, you may not be able to exercise your new options until after the effective date of the merger, consolidation or acquisition. If you elect to exchange your options pursuant to the offer to exchange and the merger, consolidation or acquisition occurs after the Expiration Date but before the new option grant date, you will not be able to exercise your option to purchase our common stock before the effective date of the merger, consolidation or acquisition. (See Section 9) You should be aware that these types of transactions could significantly affect our stock price, including potentially substantially increasing the price of our shares. Depending on the timing and structure of a transaction of this type, you might lose the benefit of any price appreciation in our common stock resulting from a merger or acquisition. The exercise price of any new options granted to you after the announcement of a merger, consolidation or acquisition of RadiSys would reflect any appreciation in our stock price resulting from the announcement, and could therefore exceed the exercise price of your eligible options. This could result in option holders who do not participate in this offer to exchange receiving a greater financial benefit than option holders who do participate. In addition, your new options may be exercisable for stock of the acquiror, not RadiSys common stock, while option holders who decide not to participate in this offer to exchange could exercise their eligible options before the effective date of the merger or acquisition and sell their RadiSys common stock before the effective date. (See Section 9) Finally, if another company acquires us, that company may, as part of the transaction or otherwise, decide to terminate some or all of our employees before the grant of the new options under this stock option exchange program. Termination of your employment for this or any other reason before the new options are granted means that you will receive neither new options nor any other compensation for your cancelled eligible options. (See Section 9) 5 Q23. Are there circumstances under which you would not be granted new options? A23. Yes. If for any reason you are no longer an employee of us or one of our subsidiaries on the new option grant date, you will not receive any new options. Unless otherwise expressly provided by the applicable laws of a non-U.S. jurisdiction, your employment with us or one of our subsidiaries will remain "at-will" regardless of your participation in the offer to exchange and can be terminated by you or us or one of our subsidiaries at any time, with or without cause or notice. (See Section 1) Moreover, even if we accept your eligible options, we will not grant new options to you if we are prohibited from doing so by applicable law. For example, we could become prohibited from granting new options as a result of changes in SEC rules, regulations or policies, Nasdaq National Market listing requirements or the laws of a non-U.S. jurisdiction. We do not currently anticipate any such prohibitions. (See Section 13) Q24. If you elect to exchange an eligible option, do you have to elect to exchange all of your eligible options? A24. Yes. You must elect to exchange all of your eligible options if you want to participate in the offer to exchange. In other words, you may not elect to exchange some of your eligible options and keep the balance of your eligible options. (See Section 2) Q25. What happens if you elect not to exchange your eligible options, or if your options are not accepted for exchange? A25. Remember, you must elect to exchange all of your eligible options if you want to participate in the offer to exchange. If you choose not to exchange your options, or if we do not accept your options for exchange, they will remain outstanding until they expire by their terms and retain their current exercise price and vesting schedule. (See Section 6) Q26. Will you have to pay taxes if you exchange your eligible options in the offer to exchange? A26. If you exchange your eligible options for new options, you should not be required under current law to recognize income for U.S. federal income tax purposes either at the time you agree to exchange the option or at the time the new option is granted to you pursuant to the offer to exchange. All new options will be granted as nonqualified stock options. When an option holder exercises a new option, the difference between the exercise price of the new option and the fair market value of the shares subject to the new option on the date of exercise will be compensation income for U.S. federal income tax purposes taxable to the option holder. (See Section 14) If you are a tax resident of, or subject to tax laws of, a country other than the United States, the tax consequences of participating in the offer to exchange may be different for you. Please be sure to read the discussion in this Offer to Exchange regarding the potential tax consequences in the country in which you are subject to tax. (See Section 14 and Schedule B - Guide to International Issues) For all employees, we recommend that you consult with your own tax advisor to determine the personal tax consequences to you of participating in the offer to exchange. If you are a resident of, or subject to the tax laws of, more than one country, you should be aware that there may be other tax and social insurance consequences which may apply to you. 6 Q27. Will your new options be incentive stock options or nonqualified stock options for U.S. tax purposes? A27. Your new options will be nonqualified stock options for U.S. tax purposes. We recommend that you read the tax discussion in this Offer to Exchange and discuss the personal tax consequences to you with your financial advisor. (See Sections 9 and 14 and Schedule B - Guide to International Issues) Q28. When will your new options expire? A28. Each new option granted in exchange for eligible options will have a term of seven years from the date of grant. (See Section 9) Q29. Can the offer to exchange be extended, and if so, how will we notify you if the offer to exchange is extended? A29. The offer to exchange expires at 9:00 p.m., Pacific Time (U.S.), on August 27, 2003, unless extended by us. We may, in our discretion, extend the offer to exchange at any time, but we do not currently expect to do so. If we extend the offer to exchange, we will issue a press release or other public announcement disclosing the extension no later than 9:00 a.m., Pacific Time (U.S.), on the next business day following the previously scheduled Expiration Date. (See Section 2) Q30. How do you elect to exchange your eligible options? A30. We have different election processes: the one you must follow depends on where you reside and are employed. You will generally need to access the Mellon Investor Services' web site (web site address: www.corporate-action.net/RadiSys ). RadiSys has engaged Mellon to assist it in administering the stock option exchange program. In order to access the web site, you will need a PIN. RadiSys employees who are on inactive status (such as a leave of absence) are receiving their PIN by mail with the exchange program documents. RadiSys employees who reside in Japan will not receive a PIN. All other RadiSys employees are receiving their PIN by e-mail. If you reside and are employed in the United Kingdom or the United States, to elect to exchange options you must: o use your PIN to access the Mellon web site; o read the election terms and conditions on the election screen; o make your elections online by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003; o print a copy of your election confirmation for your records; and o not send a fax to Mellon or to RadiSys, as it is not necessary. If you are an employee in one of the above countries, you must elect to exchange your eligible options via the web site unless you are on inactive status (such as a leave of absence), in which case you may submit your Election Agreement by faxing it to Mellon at the number below or sending it in the mail. If you reside and are employed in Germany or Japan, you must return a signed copy of your Election Agreement to Mellon to validly exchange your options. You must: o sign your Election Agreement and fax it to Mellon at the number below; and o keep a signed copy of your Election Agreement and the fax confirmation for your records. 7 If you do not have access to a fax machine, you may use the mailing address below. However, please allow sufficient time for any mailed documents to arrive. Please see the information elsewhere in this Offer to Exchange for instructions on how to ensure we have received your signed Election Agreement. By Facsimile: By Mail: By Overnight Courier: 201-329-8456 Mellon Investor Services LLC Mellon Investor Services LLC Attn: Reorganization Dept. Attn: Reorganization Dept. P.O. Box 3301 85 Challenger Road South Hackensack, NJ 07606 Mail Drop - Reorg Ridgefield Park, NJ 07660- In order for your election to be valid, your signed Election Agreement must be RECEIVED by Mellon in accordance with these instructions by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003, unless the offer to exchange is extended by us. Q31. How should I confirm that my election was received? A31. If you are an employee in a country that is required to return a written signature on the Election Agreement, or an employee who received a paper packet of election materials because you are on leave of absence, your election is not valid unless your signed Election Agreement is received by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003. Mellon will receive signature pages sent by facsimile or by mail. You should save a copy of your Election Agreement, and where applicable, your fax confirmation. You should call Mellon at the number below after a reasonable period of time has passed to confirm that your Election Agreement was received. Please call a customer service representative at Mellon Investor Services, Monday through Friday between the hours of 5:00 a.m. and 4:00 p.m., Pacific Time (U.S.), telephone number 888-256-2709 from within the U.S., and 201-329-8905 from outside the U.S. (there will be no charge to the caller). (See Section 4) Q32. During what period of time may I withdraw eligible options that I previously elected to exchange? A32. You may withdraw the eligible options that you previously elected to exchange at any time before the offer to exchange expires at 9:00 p.m., Pacific Time (U.S.), on August 27, 2003. If we extend the offer to exchange beyond August 27, 2003, you may withdraw the eligible options that you previously elected to exchange at any time before the extended Expiration Date. Although we intend to accept all eligible options validly elected to be exchanged promptly after the Expiration Date, if we have not accepted your eligible options by 8:59 p.m., Pacific Time (U.S.), on September 25, 2003, you may withdraw the eligible options that you previously elected to exchange. (See Section 5) Q33. What do I have to do to withdraw eligible options that I previously elected to exchange? A33. To withdraw the eligible options that you previously elected to exchange, if you reside and are employed in the United Kingdom or the United States, you must log on to the Mellon web site at www.corporate-action.net/RadiSys and follow the instructions described on the web site. Please note that if you log back into the web site and click any boxes, your previous election may not change, and accordingly, you should follow all of the instructions to ensure your election is completed. If you reside and are employed in Germany or Japan, if you are on inactive status (such as a leave of absence) and have received a paper election packet, you may withdraw by completing a new Election Agreement and returning it by facsimile or mail at the fax number or address listed in Answer 30 above. In order to withdraw your eligible options previously elected for exchange, your election to withdraw must be RECEIVED by Mellon in accordance with these instructions by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003. If we extend the offer to exchange beyond that time, you may withdraw your eligible options at any time until the extended Expiration Date. (See Section 5) 8 Q34. Are we making any recommendation as to whether you should exchange your eligible options? A34. No. We are not making any recommendation as to whether you should accept the offer to exchange your eligible options. You must make your own decision as to whether or not to accept the offer to exchange. For questions regarding personal tax implications or other investment-related questions, you should talk to your own legal counsel, accountant and/or financial advisor. (See Section 3) Q35. Who can you talk to if you have questions about the offer to exchange or if you need additional copies of the offer to exchange documents? A35. For additional information or assistance, you should contact: Mellon Investor Services Customer Service Representatives Available Monday through Friday 5:00 a.m. and 4:00 p.m., Pacific Time (U.S.) 888-256-2709 (Calling from within the U.S.) 201-329-8905 (Calling from outside the U.S.) There will be no charge to the caller for the call. (See Section 10) 9 RISKS OF PARTICIPATING IN THE OFFER TO EXCHANGE Participation in the offer to exchange involves a number of risks, including those described below. This section briefly highlights some of these risks. This list does not include certain risks that may apply to you if you live or work outside the United States. If you live or work outside the United States, we strongly urge you to read Schedule B - Guide to International Issues attached to this Offer to Exchange. You should carefully consider these and other risks discussed elsewhere in this Offer to Exchange, and you are encouraged to speak with an investment and tax advisor as necessary before deciding to participate in the offer to exchange. In addition, before deciding to participate in the offer to exchange, we strongly urge you to read the sections in this Offer to Exchange discussing tax consequences as well as the rest of this Offer to Exchange for a more in-depth discussion of risks that may apply to you. Economic Risks If the price of our common stock increases after the date on which your options are cancelled, your cancelled options might have been worth more than the new options that you have received in exchange. For example, if you exchange eligible options with an exercise price of $25.00 per share and the price of our common stock increases to $30.00 per share when the new options are granted, your new option will have a higher exercise price than the cancelled option. Additionally, your new option will represent a smaller number of shares than the eligible options you exchanged. If you participate in the offer to exchange, you will be ineligible to receive any additional option grants until, at the earliest, March 1, 2004. We will defer granting additional options to current Radisys employees until, at the earliest March 1, 2004. Employees generally are eligible to receive option grants at any time that we choose to make such grants. However, if you participate in the offer to exchange, you will not be eligible to receive any additional option grants until, at the earliest, March 1, 2004. If we are acquired by or merge with another company, your cancelled options might have been worth more than the new options that you receive in exchange for them. A transaction involving us, such as a merger, consolidation or other acquisition, could have a substantial effect on our stock price, including significantly increasing the price of our common stock. Depending on the structure and terms of this type of transaction, eligible employees who elect to participate in the offer to exchange might be deprived of the benefit of the appreciation in the price of our common stock resulting from the merger or acquisition. This could result in a greater financial benefit for those option holders who did not participate in the offer to exchange and retained their original options. If you submit your options in the offer to exchange and the merger, consolidation or acquisition occurs after the Expiration Date but before the new option grant date, you will not be able to exercise your option to purchase our common stock before the effective date of the merger, consolidation or acquisition and the new option that you receive could be for shares of the acquiror's stock, not RadiSys' stock. If your employment terminates before we grant the new options, including as the result of a reduction-in-force or another company's acquisition of us, you will neither receive a new option nor have any of your cancelled options returned to you. Once we cancel the eligible options that you elect to exchange, all of your rights under the eligible options terminate. Accordingly, if your employment with us or our subsidiaries terminates for any reason, including as the result of a reduction-in-force or another company acquiring RadiSys, before the grant of the new options, you will not have the benefit of either the cancelled option or any new option. Our revenues depend in part on the health of the economy and the growth of our customers and potential customers. If the economic conditions in the United States remain stagnant or worsen or if a wider or global economic slowdown occurs, we may experience a material adverse impact on our business, operating results and financial condition and may undertake various measures to reduce our expenses including, but not limited to, a reduction-in-force. Should your employment be terminated as part of any such reduction-in-force, you will not have the benefit of either the cancelled option or any new option. 10 If another company acquires us, that company may, as part of the transaction or otherwise, decide to terminate some or all of our employees before the new option grant date. If your employment terminates for this or any other reason before the new option grant date you will not receive a new option, nor will you receive any other compensation for your eligible options that were cancelled. Tax Related Risks For Non-U.S. Residents If you are an eligible employee residing outside of the United States and you take advantage of the offer to exchange, you may be liable for tax and social insurance contributions on the fair market value of the new options. Additionally, you may lose the ability to claim preferential tax treatment in connection with your new options. Further, you may have exchange control reporting obligations associated with the transfer of funds in connection with the new options or the ownership of foreign shares of stock. Attached as Schedule B - Guide to International Issues to this Offer to Exchange are brief summaries of the general tax consequences of the offer to exchange. You should review the information carefully and consult your own tax advisor regarding your personal situation before deciding whether or not to participate in the offer to exchange. Tax-Related Risks For Tax Residents of Multiple Jurisdictions If you are a resident of or are otherwise subject to the tax laws of more than one country, you should be aware that there may be other tax and social insurance consequences that may apply to you. We urge you to consult your own tax advisor to discuss these consequences. Business-Related Risks For a description of certain risks related to RadiSys' business, please see "Factors that may affect future results" in Section 19 of this Offer to Exchange. 11 THE OFFER TO EXCHANGE 1. Eligibility. You are an "eligible employee" if you are an employee of RadiSys or one of our subsidiaries and reside in Germany, Japan, the United Kingdom or the United States on July 31, 2003 and you remain an employee through the date on which we cancel the eligible options exchanged pursuant to the offer to exchange. We refer to the date we cancel the eligible options you elect to exchange pursuant to the offer to exchange as the cancellation date. Members of our Board of Directors, vice-presidents and the executive officers listed on Schedule A - Information Concerning the Directors, Vice-Presidents and Executive Officers of RadiSys Corporation, as well as employees of RadiSys or one of our subsidiaries who reside in Israel or The Netherlands, are ineligible to participate in the offer to exchange. In order to receive a new option, you must remain employed by us or one of our subsidiaries through the new option grant date, which is the date on which the new options are granted, and will be a date that is at least six months and one day after the cancellation date. If we do not extend the offer to exchange, we currently expect the new option grant date to be no earlier than March 1, 2004. If for any reason you do not remain an employee of RadiSys, one of our subsidiaries or a successor entity through the new option grant date, you will not receive any new options or other compensation in exchange for your eligible options that have been accepted for exchange. This means that if you quit or die, or we terminate your employment, with or without cause, before the new option grant date, you will not receive anything for the eligible options that you elected to exchange and that we cancelled. Unless expressly provided by the applicable laws of a non-U.S. jurisdiction, your employment with us or one of our subsidiaries will remain "at-will" and can be terminated by you or us or one of our subsidiaries at any time, with or without cause or notice. 2. Number of options; Expiration Date. Subject to the terms and conditions of the offer to exchange, we will accept outstanding, unexercised options granted under our Incentive Plans with an exercise price of $20.00 per share or higher that are held by eligible employees and that are properly elected to be exchanged, and are not validly withdrawn before the Expiration Date, and we will exchange them for new options. To participate in the offer to exchange, you must elect to exchange all of your eligible options. In other words, you may not elect to exchange some of your eligible options and keep the balance of your eligible options. Exchanged options are any eligible options that you elect to exchange pursuant to this offer to exchange that are accepted for exchange by us. Subject to the terms of the exchange program and upon our acceptance of your properly tendered eligible options, the number of new options you receive will be based on the exercise price of such options, as follows: Exchange Ratio Exercise Price (Eligible Option : New Option) $20.00-34.99 1.40 : 1 $35.00 or higher 2.00 : 1 The exchange ratios were calculated based upon the closing price of shares of our common stock on July 30, 2003. The number of option shares that you receive will be rounded up to the nearest whole share, and will be subject to adjustment for any stock splits, subdivisions, combinations, stock dividends and similar events that occur after the cancellation date but before the new option grant date. New options will be granted under our 2001 Nonqualified Stock Option Plan. All new options will be nonqualified options for U.S. federal income tax purposes. The Expiration Date for the offer to exchange will be 9:00 p.m., Pacific Time (U.S.), on August 27, 2003, unless we extend the offer to exchange. We may, in our discretion, extend the period of time during which the offer to exchange will remain open, in which event the Expiration Date shall refer to the latest time and date at which the extended offer to exchange expires. See Section 15 of this Offer to Exchange for a description of our rights to extend, terminate and amend the offer to exchange. 12 3. Purpose of the offer to exchange. Stock options are an important component of our reward strategy for employees. They allow you to share in any appreciation in our stock, facilitate a sense of ownership and align your interests and those of our stockholders. From RadiSys' point of view, stock options help us to retain and motivate the talent we already have and encourage new recruits to the business. However, due to the sharp decline in our stock price, a substantial number of our stock options granted have exercise prices higher than the current trading price of our common stock (commonly referred to as "underwater" options). This offer to exchange is designed to provide our employees the opportunity to replace "underwater" options with options that will generally have an exercise price equal to the fair market value of the shares on the new option grant date (commonly referred to as "at-the-money" options) and that may have greater potential to increase in value over time. We believe this will create better performance incentives for eligible employees and, as a result, maximize stockholder value. However, because we will not grant new options any earlier than a date that is at least six months and one day after the date on which we cancel the options accepted for exchange, the new options may have a higher exercise price than some or all of your eligible options. The exchange ratios have been developed to be fair to you and responsible to our stockholders. We used the Black-Scholes stock option pricing model to determine the appropriate exchange ratios. We chose to make this offer instead of simply granting more options for a number of reasons. Because of the large number of outstanding underwater options, granting additional options covering the same number of shares of common stock as the outstanding eligible options would have a severe negative impact on our potential dilution, outstanding shares and earnings per share. Additionally, we have a limited number of options that we may grant without stockholder approval, and therefore our current reserves must be conserved for ongoing grants and new hires. In the ordinary course of business, we will continue to evaluate the composition of our Board of Directors. Subject to the above, and except as otherwise disclosed in this Offer to Exchange or in our filings with the SEC, we presently have no plans or proposals that relate to or would result in: o any extraordinary transaction, such as a merger, reorganization or liquidation involving us or any of our subsidiaries; o any purchase, sale or transfer of a material amount of our assets or any of our subsidiaries; o any material change in our present dividend rate or policy or our indebtedness or capitalization; o any change in our present management, or to change the material terms of any executive officer's employment; o any other material change in our corporate structure or business; o our common stock being delisted from a national securities exchange or not being authorized for quotation in an automated quotation system operated by a national securities association; o our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); o the suspension of our obligation to file reports pursuant to Section 15(d) of the Exchange Act; o the acquisition by any person of an amount of our securities or the disposition of an amount of any of our securities; or 13 o any change in our charter or bylaws, or any actions which may impede the acquisition of control of us by any person. We anticipate changes in our Board of Directors over the next six months. Neither we nor our Board of Directors makes any recommendation as to whether you should accept this offer and elect to exchange your eligible options, nor have we authorized any person to make any such recommendation. You are urged to evaluate carefully all of the information in this Offer to Exchange and to consult your own investment and tax advisors. You must make your own decision whether or not to elect to exchange your eligible options. 4. Procedures for electing to exchange options. If you wish to elect to exchange your eligible options, you must complete and sign the Election Agreement by following the instructions at the Mellon web site or the instructions in your paper election packet, if one is sent to you. We have different election processes: the one you must follow depends on where you reside and are employed. You will generally need to access the Mellon Investor Services' web site (web site address: www.corporate-action.net/RadiSys). RadiSys has engaged Mellon to assist it in administering the stock option exchange program. In order to access the web site, you will need a PIN. RadiSys employees who are on inactive status (such as a leave of absence) are receiving their PIN by mail with the exchange program documents. RadiSys employees who reside in Japan are receiving a paper election packet and will not receive a PIN. All other RadiSys employees are receiving their PIN by e-mail. Regardless of the country where you reside and are employed, if you are an eligible employee who does not have a RadiSys e-mail address or you are on an inactive status (such as a leave of absence), you will receive a paper election packet with instructions to follow. You must fill out your Election Agreement and fax or mail it to Mellon in time for it to arrive by the Expiration Date. If you reside and are employed in the United Kingdom or the United States, to elect to exchange options you must: o use your PIN to access the Mellon web site; o read the election terms and conditions on the election screen; o make your elections online by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003; o print a copy of your election confirmation for your records; and o not send a fax to Mellon or to RadiSys, as it is not necessary. If you are an employee in the United Kingdom or the United States, you must elect to exchange your eligible options via the web site unless you are on inactive status (such as leave of absence), in which case you may submit your Election Agreement by faxing it to Mellon at the number below or sending it in the mail. If you reside and are employed in Germany or Japan, you must return a signed copy of your Election Agreement to Mellon to validly exchange your options. You must: o sign your Election Agreement and fax it to Mellon at the number below; and o keep a signed copy of your Election Agreement and the fax confirmation for your records. In order for your election to be valid, Mellon must RECEIVE your signed Election Agreement by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003. If you do not have access to a fax machine, you may use the mailing address below. However, please allow sufficient time for any mailed documents to arrive. 14 By Facsimile: By Mail: By Overnight Courier: 201-329-8456 Mellon Investor Services LLC Mellon Investor Services LLC Attn: Reorganization Dept. Attn: Reorganization Dept. P.O. Box 3301 85 Challenger Road South Hackensack, NJ 07606 Mail Drop - Reorg Ridgefield Park, NJ 07660- The delivery of all documents, including Election Agreements or any election on the web site, is at your own risk. It is your responsibility to ensure that your election has been received by Mellon in accordance with these instructions by the Expiration Date. You should be sure to keep any confirmations or receipts that you obtain when you send in your Election Agreement, such as a fax confirmation sheet or a print out of the web site election confirmation page. If the election procedure that you must follow requires you to submit a paper copy of your Election Agreement (via fax or mail) to Mellon, your election is not valid unless your signed Election Agreement is RECEIVED by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003. Mellon will receive signature pages sent by facsimile or mail. You should save a copy of your Election Agreement and, if applicable, fax confirmation and call Mellon at the number below after a reasonable period of time has passed to confirm that your signed Election Agreement was received. Please call a customer service representative at Mellon Investor Services, Monday through Friday between the hours of 5:00 a.m. and 4:00 p.m., Pacific Time (U.S.), telephone number 888-256-2709 from within the U.S., and 201-329-8905 from outside the U.S. (there will be no charge to the caller). To participate in the offer to exchange, you must elect to exchange all of your eligible options. In other words, you may not elect to exchange some of your eligible options and keep the balance of your eligible options. However, our receipt of your election through Mellon's web site is not by itself an acceptance of the eligible options tendered for exchange. For purposes of the offer to exchange, we will be deemed to have accepted eligible options tendered for exchange that are validly elected to be exchanged and are not properly withdrawn as of the time when we give oral or written notice to the option holders generally of our acceptance of eligible options for exchange. We may issue this notice by e-mail or other method of communication. Eligible options accepted for exchange will be cancelled on the cancellation date, which we presently expect to be August 28, 2003. Determination of Validity; Rejection of Eligible Options; Waiver of Defects; No Obligation to Give Notice of Defects. We will determine, in our discretion, all questions as to the form of documents and the validity, form, eligibility, including time of receipt, and acceptance of any options. Our determination of these matters will be final and binding on all parties. We reserve the right to reject any election or any options elected to be exchanged that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept all properly tendered eligible options that are not validly withdrawn. We also reserve the right to waive any of the conditions of the offer to exchange or any defect or irregularity in any tender of any particular options or for any particular option holder, provided that if we grant any such waiver, it will be granted with respect to all option holders and tendered options in a similar situation. No tender of eligible options will be deemed to have been properly made until all defects or irregularities have been cured by the tendering option holder or waived by us. Neither we nor any other person is obligated to give notice of any defects or irregularities in tenders, nor will anyone incur any liability for failure to give any notice. This is a one-time offer, and we will strictly enforce the election period, subject only to an extension that we may grant in our sole discretion. Our Acceptance Constitutes an Agreement. Your election to exchange eligible options through the procedures described above constitutes your acceptance of the terms and conditions of the offer to exchange. Our acceptance of your eligible options elected to be exchanged by you through the offer to exchange will constitute a binding agreement between us and you upon the terms and subject to the conditions of the offer to exchange. In order to administer the offer to exchange, we must collect, use and transfer certain information regarding you and your option grants, and may have to pass that information on to Mellon or other third parties who are assisting with the offer to exchange. By submitting an election, you agree to such collection, use and transfer of your personal data by us, our subsidiaries and 15 the third parties assisting us with the offer to exchange, but only for the purpose of administering your participation in the offer to exchange. By submitting an election, you also acknowledge and agree that: o the parties receiving this data may be located outside of your country, and the recipient's country may have different data privacy laws and protections than yours; o the data will be held only as long as necessary to administer and implement the stock option exchange program; o you can request from us a list of the parties that may receive your data; o you can request additional information about how the data is stored and processed; and o you can request that the data be amended if it is incorrect. You can withdraw your consent to the collection, use and transfer of your data by contacting us. You should note, however, that if you withdraw your consent, it may affect your ability to participate in the stock option exchange program. Please contact us, or your local human resources representative, if you have any questions. 5. Withdrawal rights. You may withdraw the eligible options that you previously elected to exchange only in accordance with the provisions of this section. You may withdraw the eligible options that you previously elected to exchange at any time before the offer to exchange expires at 9:00 p.m., Pacific Time (U.S.), on August 27, 2003. If we extend the offer to exchange beyond that time, you may withdraw your eligible options at any time until the extended Expiration Date. In addition, although we intend to accept all validly tendered eligible options promptly after the Expiration Date, if we have not accepted your eligible options by 8:59 p.m., Pacific Time (U.S.), on September 25, 2003, you may withdraw your eligible options at any time thereafter. To withdraw the eligible options that you previously elected to exchange, you must follow the procedures as explained in this Section 5 while you still have the right to withdraw the eligible options. To withdraw your eligible options that you previously elected to exchange, you must submit a new Election Agreement to Mellon before the Expiration Date by following the instructions applicable to your country of residence and employment, as described on the web site or in your paper election packet. If you log back into the web site, click any box to change your election and submit your new election, your previous election will be voided. You must then follow all of the instructions to complete your new election. This is true even if the end result is the same choice as your previous election. If you make a new election choice on the web site and do not properly complete the Election Agreement process, your previous election choice will not change. If you reside and are employed in Germany or Japan, you must return a signed copy of your new Election Agreement to Mellon via facsimile or mail at the fax number or address in Section 4 above. If you have received a paper election packet, you must withdraw by completing a new Election Agreement and returning it by facsimile or mail at the fax number or address listed in Section 4 above. If you make a new election to withdraw your options via mail, please allow sufficient time for your new Election Agreement to arrive at Mellon before the Expiration Date. In order to withdraw your eligible options previously elected for exchange, your election to withdraw must be RECEIVED by Mellon in accordance with these instructions by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003. If we extend the offer to exchange beyond that time, you may withdraw your eligible options at any time until the extended Expiration Date. 16 You may not rescind any withdrawal, and any eligible options that you withdraw will be deemed not properly tendered for purposes of the offer to exchange, unless you properly re-elect to exchange those eligible options before the Expiration Date. To re-elect to exchange your withdrawn eligible options, you must submit a new election to Mellon before the Expiration Date by following the procedures described in Section 4 above. This new election must be properly completed and submitted, with a signature if required by your country of residence and employment, and dated after your original Election Agreement and after your withdrawal. Neither we nor any other person is obligated to give you notice of any defects or irregularities in your withdrawal or any new election to exchange, nor will anyone incur any liability for failure to give such notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of withdrawal and new elections to exchange. Our determination of these matters will be final and binding. The delivery of all documents, including any withdrawal on the web site or in hard copy and any other required documents, is at your own risk. It is your responsibility to ensure that Mellon has received your withdrawal or any other documents you have submitted in accordance with these instructions by the Expiration Date. You should be sure to keep any confirmations or receipts that you obtain when you submit your withdrawal, such as a printout of the web site election confirmation page or a fax confirmation sheet. If the election procedure that you must follow requires you to submit a paper copy of your Election Agreement (via fax or mail) to Mellon, your election is not valid unless your signed Election Agreement is received by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003. Mellon will receive signature pages sent by facsimile or mail. You should save a copy of your Election Agreement and, if applicable, fax confirmation and call Mellon at the number below after a reasonable period of time has passed to confirm that your signature page was received. Please call a customer service representative at Mellon Investor Services, Monday through Friday between the hours of 5:00 a.m. and 4:00 p.m., Pacific Time (U.S.), telephone number 888-256-2709 from within the U.S., and 201-329-8905 from outside the U.S. (there will be no charge to the caller). 6. Acceptance of options for exchange and issuance of new options. Upon the terms and conditions of the offer to exchange and promptly following the Expiration Date, we will accept for exchange and cancel eligible options properly elected for exchange and not validly withdrawn before the Expiration Date. Once the eligible options are cancelled, you will no longer have any rights with respect to those eligible options. Subject to the terms and conditions of the offer to exchange, if your eligible options are properly tendered by you for exchange and accepted by us, these eligible options will be cancelled as of the date of our acceptance, which we currently anticipate to be August 28, 2003. For purposes of the offer to exchange, we will be deemed to have accepted eligible options for exchange that are validly tendered and are not properly withdrawn as of the time when we give oral or written notice to the option holders generally, or individually, of our acceptance for exchange of the eligible options. This notice may be made by press release, e-mail or other method of communication. Subject to our rights to terminate the offer to exchange, discussed in Section 15 of this Offer to Exchange, we currently expect that we will accept promptly after the Expiration Date all properly tendered eligible options that are not validly withdrawn. You will be granted a new option on a date that is at least six months and one day after the date on which we cancel the eligible options accepted for exchange. All new options will be nonqualified stock options for U.S. federal income tax purposes. We will grant the new options under our 2001 Nonqualified Stock Option Plan. Therefore, subject to the terms and conditions of the offer to exchange, if your eligible options are properly elected to be exchanged by 9:00 p.m., Pacific Time (U.S.), on August 27, 2003, the scheduled Expiration Date of the offer to exchange, and are accepted for exchange by us and cancelled on August 28, 2003, you will be granted a new option on a date no earlier than March 1, 2004. If we accept and cancel eligible options properly tendered for exchange after August 28, 2003, the date on which the new options will be granted will be similarly delayed. Promptly after the Expiration Date, we will send you notification as to whether we have accepted your tendered eligible options for exchange, and if so accepted that we will issue to you the new options in accordance with and subject to the terms and conditions of the offer to exchange. 17 Exchanged options are any eligible options that you elect to exchange pursuant to the offer to exchange that are accepted for exchange by us. Subject to the terms of the exchange program and upon our acceptance of your properly tendered eligible options, the number of new options you receive will be based on the exercise price of such options, as follows: Exchange Ratio Exercise Price (Eligible Option : New Option) $20.00-34.99 1.40 : 1 $35.00 or higher 2.00 : 1 The exchange ratios were calculated based upon the closing price of shares of our common stock on July 30, 2003. The exercise price per share of the new options will be equal to the closing price of shares of our common stock as reported by the Nasdaq National Market on the date of grant. The number of option shares that you receive will be rounded up to the nearest whole share, and will be subject to adjustment for any stock splits, subdivisions, combinations, stock dividends and similar events that occur after the cancellation date but before the new option grant date. Fractional shares will be rounded up to the nearest whole share. All new options will be nonqualified options granted under, and subject to, the terms of our 2001 Nonqualified Stock Option Plan. The form of option grant certificate for the new options and the 2001 Nonqualified Stock Option Plan are attached as exhibits to the Schedule TO with which this Offer to Exchange has been filed. If for any reason you are not an employee of us, one of our subsidiaries or a successor entity through the new option grant date, you will not receive any new options or other compensation in exchange for your eligible options that have been cancelled pursuant to the offer to exchange. If we accept eligible options you elect to exchange in the offer to exchange, we will defer granting to you any other options for which you otherwise may be eligible before the new option grant date. Consequently, we will not grant you any new options until at least six months and one day after any of your options have been cancelled. We will defer granting you these other options in order to avoid incurring compensation expense against our earnings as a result of accounting rules that could apply to these interim option grants as a result of the offer to exchange. Options that you do not elect to exchange or that we do not accept for exchange will remain outstanding until they expire by their terms and retain their current grant price and vesting schedule. 7. Conditions of the offer to exchange. Notwithstanding any other provision of this Offer to Exchange, we will not be required to accept any eligible options tendered for exchange, and we may terminate the offer to exchange, or postpone our acceptance and cancellation of any eligible options tendered for exchange, in each case, subject to Rule 13e-4(f)(5) under the Exchange Act, if at any time on or after the date the offer to exchange begins, and before the Expiration Date, any of the following events has occurred, or has been determined by us to have occurred: o there shall have been threatened or instituted or be pending any action, proceeding or litigation seeking to enjoin, make illegal or delay completion of the offer to exchange or otherwise relating, in any manner, to the offer to exchange; o any order, stay, judgment or decree is issued by any court, government, governmental authority or other regulatory or administrative authority and is in effect, or any statute, rule, regulation, governmental order or injunction shall have been proposed, enacted, enforced or deemed applicable to the offer to exchange, any of which might restrain, prohibit or delay completion of the offer to exchange or impair the contemplated benefits of the offer to exchange to us; o there shall have occurred: 18 - any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States; - the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States; - any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any event that, in our reasonable judgment, might affect the extension of credit to us by banks or other lending institutions in the United States; - in our reasonable judgment, any extraordinary or material adverse change in U.S. financial markets generally, including a decline of at least 10% in either the Dow Jones Industrial Average, the NASDAQ Index or the Standard & Poor's 500 Index from the date of commencement of the offer to exchange; - the commencement of a war or other national or international calamity directly or indirectly involving the United States, which would reasonably be expected to affect materially or adversely, or to delay materially, the completion of the offer to exchange; or - if any of the situations described above existed at the time of commencement of the offer to exchange and that situation, in our reasonable judgment, deteriorates materially after commencement of the offer to exchange; o as the term "group" is used in Section 13(d)(3) of the Exchange Act: - any person, entity or group acquires more than 5% of our outstanding shares of common stock, other than a person, entity or group which had publicly disclosed such ownership with the SEC prior to the date of commencement of the offer to exchange; - any such person, entity or group which had publicly disclosed such ownership prior to such date shall acquire additional common stock constituting more than 2% of our outstanding shares; or - any new group shall have been formed that beneficially owns more than 5% of our outstanding shares of common stock that in our judgment in any such case, and regardless of the circumstances, makes it inadvisable to proceed with the offer to exchange or with such acceptance for exchange of eligible options; o there shall have occurred any change, development, clarification or position taken in generally accepted accounting standards that could or would require us to record for financial reporting purposes compensation expense against our earnings in connection with the offer to exchange; o a tender or exchange offer, other than the offer to exchange by us, for some or all of our shares of outstanding common stock, or a merger, acquisition or other business combination proposal involving us, shall have been proposed, announced or made by another person or entity or shall have been publicly disclosed; o any event or events occur that have resulted or may result, in our reasonable judgment, in a material adverse change in our business or financial condition; or o any event or events occur that have resulted or may result, in our reasonable judgment, in a material impairment of the contemplated benefits of the offer to exchange to us (see Section 3 above for a description of the contemplated benefits of the offer to exchange to us). 19 If any of the above events occur, we may: o terminate the offer to exchange and promptly return all tendered eligible options to tendering holders; o complete and/or extend the offer to exchange and, subject to your withdrawal rights, retain all tendered eligible options until the extended offer to exchange expires; o amend the terms of the offer to exchange; or o waive any unsatisfied condition and, subject to any requirement to extend the period of time during which the offer to exchange is open, complete the offer to exchange. The conditions to the offer to exchange are for our benefit. We may assert them in our discretion regardless of the circumstances giving rise to them before the Expiration Date. We may waive any condition, in whole or in part, at any time and from time to time before the Expiration Date, in our discretion, whether or not we waive any other condition to the offer to exchange. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this Section 7 will be final and binding upon all persons. 8. Price range of shares underlying the options. The shares underlying your options are traded on the Nasdaq National Market under the symbol "RSYS." The following table shows, for the periods indicated, the high and low closing prices per share of our common stock as reported by the Nasdaq National Market. Calendar Year High Low ------------- ----------- ---------- 2001 First Quarter $ 28.88 $ 16.63 Second Quarter 26.99 16.19 Third Quarter 22.55 12.00 Fourth Quarter 20.00 11.48 2002 First Quarter $ 21.54 $ 16.76 Second Quarter 18.41 11.42 Third Quarter 12.40 3.41 Fourth Quarter 10.21 3.73 2003 First Quarter $ 8.10 $ 5.99 Second Quarter 13.54 5.35 Third Quarter (through July 30) 15.80 13.30 On July 30, 2003, the last reported sale price of our common stock as reported by the Nasdaq National Market was $15.46 per share. We recommend that you evaluate current market quotes for our common stock, among other factors, before deciding whether or not to accept the offer to exchange. 9. Source and amount of consideration; terms of new options. Consideration. We will issue new options to purchase shares of our common stock under our 2001 Nonqualified Stock Option Plan in exchange for the eligible outstanding options properly elected to be exchanged by you and accepted by us that will be cancelled. Exchanged options are any options that you elect to exchange pursuant to the offer to exchange that are accepted for exchange by us. Subject to any 20 adjustments for stock splits, subdivisions, combinations, stock dividends and similar events that occur after the cancellation date but before the new option grant date and subject to the other terms and conditions of the offer to exchange, the number of new options you receive will be based on the exercise price of such options, as follows: Exchange Ratio Exercise Price (Eligible Option : New Option) $20.00-34.99 1.40 : 1 $35.00 or higher 2.00 : 1 The exercise price per share of the new options will be equal to the closing price of shares of our common stock as reported by the Nasdaq National Market on the date of grant. Fractional shares shall be rounded up to the nearest whole share. If we receive and accept tenders from eligible employees of all options eligible to be tendered subject to the terms and conditions of the offer to exchange, new options to purchase a total of 506,723 shares of our common stock, or approximately 2.8% of the total shares of our common stock outstanding as of July 30, 2003, will be issued. Terms of New Options. The new options will be nonqualified stock options for United States tax purposes and will be granted under our 2001 Nonqualified Stock Option Plan. The terms and conditions of the new options will vary from the terms and conditions of the options that you tendered for exchange, but such changes generally will not be substantially different, except that (1) the new options will be granted on a date that is at least six months and one day after the date the eligible options are accepted for exchange and cancelled; (2) the exercise price per share of the new options will be the closing price of shares of our common stock as reported by the Nasdaq National Market on the date the new options are granted; and (3) the number of shares underlying the new options and their vesting and exercise periods will be determined as described below. You should note that because we will not grant new options until a date that is at least six months and one day after the date on which we cancel the eligible options accepted for exchange, your new option may have a higher exercise price than some or all of the eligible options that you elect to exchange. If you are a resident of Germany, Japan or the United Kingdom, some additional terms or restrictions may apply to you. Please be sure to see the appropriate portion of Schedule B - Guide to International Issues for any special terms or conditions which may apply to you. Incentive Plans. The following descriptions summarize the material terms of our Incentive Plans. Our statements in this Offer to Exchange concerning our Incentive Plans and the new options are merely summaries and do not purport to be complete. The statements are subject to, and are qualified in their entirety by reference to, all provisions of our Incentive Plans and the form of option grant certificate under each plan. Please contact us at RadiSys Corporation, 5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124, Attention: Marlene Barclay (telephone: 503-615-1100), to receive a copy of our Incentive Plans and the form of option grant certificate thereunder. We will promptly furnish you copies of these documents at our expense. The maximum number of shares available for issuance through the exercise of options granted under our Incentive Plans is 2,181,949 shares. The Incentive Plans are administered by the Compensation Committee of our Board of Directors, which we refer to as the administrator. The administrator has the authority to interpret the Incentive Plans and to adopt, amend or rescind such rules, regulations and guidelines for carrying out the Incentive Plans as it may deem necessary or proper. The administrator determines the employees to whom grants of options to acquire our common stock are made based on such factors as the administrator may deem relevant. The administrator also determines, subject to the terms and conditions of the Incentive Plans, the terms and conditions of the options, including the number of options, the effective date of grant and the option exercise period and vesting schedule. 21 General Terms of the Incentive Plans. Terms of New Options. Historically, options granted under the Incentive Plans generally have a term of 5 - 10 years. However, each new option granted under our 2001 Nonqualified Stock Option Plan in exchange for eligible options will have a term of seven years from the new option grant date. Termination of Employment Before the New Option Grant Date. If for any reason you are not an employee of us, one of our subsidiaries or a successor entity from the date on which you elect to exchange your eligible options through the date on which we grant the new options, you will not receive any new options or any other compensation in exchange for your eligible options that have been accepted for exchange. This means that if you quit, or die, or we terminate your employment, with or without cause, before the date on which we grant the new options, you will not receive anything for the eligible options that you elected to exchange and which we cancelled. Termination of Employment After the New Option Grant Date. In the event that either you or we terminate your employment after receiving a new option grant for any reason other than your death or permanent disability, you may exercise your option at any time prior to the expiration date of the option or within 30 days after termination, whichever is the shorter period, but only if and to the extent that you are entitled to exercise it at termination. If you had been an employee since the date of your option grant and your employment terminates because of your death or permanent disability, you or your personal representatives, heirs or legatees may exercise any option held by you until the earlier of 12 months after your termination and the expiration of the option, but only if and to the extent that it was exercisable at the date of termination. Exercise Price. Generally, the administrator determines the exercise price at the time the option is granted. The exercise price per share of the new options will be equal to the closing price of shares of our common stock as reported by the Nasdaq National Market on the date new options are granted. Accordingly, we cannot predict the market price of the new options. Your new options may have a higher exercise price than some or all of your current options. Vesting. Each stock option grant specifies the date on which the option becomes exercisable. The administrator determines the terms of vesting. The new options granted in exchange for eligible options will not be exercisable for six months after the date of the grant, after which the options will be exercisable for 33.33% of the total option shares, and become exercisable in monthly increments equal to approximately 2.78% of the total option shares, cumulatively, each month thereafter, becoming fully exercisable two and one-half years after the date of the grant. This means that all replacement options would be completely unvested at the time of the new grant, regardless of whether the options exchanged were partially or wholly vested. Employees will have the choice to exercise their new options at any time after they have vested. Options will only vest if the optionee remains a company employee and may only be exercised by a company employee. Options that are not vested at termination of employment cannot be exercised and will be forfeited. Any prior or scheduled future vesting of eligible options will be disregarded. Adjustments Upon Certain Events. Events Occurring before the New Option Grant Date. Although we are not anticipating any such merger or acquisition, if we merge or consolidate with or are acquired by another entity between the Expiration Date and the new option grant date, then the resulting entity will be obligated to grant the new options under the same terms as provided in this Offer to Exchange. However, the type of security and the number of shares covered by each new option would be adjusted based on the consideration per share given to holders of options to acquire our common stock that are outstanding at the time of the acquisition. As a result, you may receive options for more or fewer shares of the acquiror's common stock than the number of shares subject to the eligible options that you exchange or than the number you would have received pursuant to a new option if no acquisition had occurred. 22 The new options for the purchase of an acquiror's stock will have an exercise price at least equal to the fair market value of the acquiror's stock on the new option grant date. If the acquiror's stock is not traded on a public market, the fair market value of the acquiror's stock may be determined in good faith by the acquiror's board of directors, and the exercise price of the new options would reflect that determination. If we merge or consolidate with or are acquired by another entity, options that are not tendered for exchange may receive a lower or higher exercise price, depending on the terms of the transaction, than those options that are tendered for exchange. Regardless of any such merger, consolidation or acquisition, the new option grant date will be no earlier than a date that is at least six months and one day after the cancellation date. Consequently, you may not be able to exercise your new options until after the effective date of the merger, consolidation or acquisition. If you submit your options in the exchange and the merger, consolidation or acquisition occurs after the Expiration Date but prior to the new option grant date, you will not be able to exercise your option to purchase RadiSys common stock prior to the effective date of the merger, consolidation or acquisition. You should be aware that these types of transactions could significantly affect our stock price, including potentially substantially increasing the price of our shares. Depending on the timing and structure of a transaction of this type, you might lose the benefit of any price appreciation in our common stock resulting from a merger or acquisition. The exercise price of any new options granted to you after the announcement of a merger, consolidation or acquisition of RadiSys would reflect any appreciation in our stock price resulting from the announcement, and could therefore exceed the exercise price of your eligible options. This could result in option holders who do not participate in the offer to exchange receiving a greater financial benefit than option holders who do participate. In addition, your new options may be exercisable for stock of the acquiror, not RadiSys common stock, while option holders who decide not to participate in the offer to exchange could exercise their eligible options before the effective date of the merger or acquisition and sell their RadiSys common stock before the effective date. Finally, if another company acquires us, that company may, as part of the transaction or otherwise, decide to terminate some or all of our employees before the grant of the new options under this option exchange program. Termination of your employment for this or any other reason before the new options are granted means that you will receive neither new options nor any other compensation for your cancelled eligible options. If a change in our capitalization, such as a stock split, reverse stock split, subdivision, combination, stock dividend, reclassification or other similar event occurs after the cancellation date but before the new option grant date, an appropriate adjustment will be made to the number of shares subject to each option, without any change in the aggregate purchase price. Events Occurring after the New Option Grant Date. If a change in our capitalization, such as a stock split, reverse stock split, subdivision, combination, stock dividend, reclassification or other similar event, occurs after the new option grant date, an appropriate adjustment will be made to the number of shares subject to each option, without any change in the aggregate purchase price. The Incentive Plans provide that if we merge or are consolidated with another corporation, or if our property or stock is acquired by another corporation, our Board of Directors may, in its discretion, provide that (i) outstanding options will remain in effect in accordance with their terms, (ii) outstanding options will be converted into options to purchase stock in the corporation that is the surviving or acquiring corporation, or (iii) outstanding options will become fully vested and exercisable for a 30-day period prior to the consummation of such transaction. Transferability of Options. New options may not be transferred, other than by will or the laws of descent and distribution. In the event of your death, issued options may be exercised by any person who acquires the right to exercise the option by bequest or inheritance. 23 Registration of Option Shares. All of the 2,181,949 shares of common stock issuable under the Incentive Plans have been registered under the Securities Act of 1933, as amended (the "Securities Act"), on registration statements on Form S-8 filed with the SEC. All the shares issuable upon exercise of all new options to be granted pursuant to the offer to exchange will be registered under the Securities Act. Unless you are one of our affiliates, you will be able to sell the shares issuable upon exercise of your new options free of any transfer restrictions under applicable U.S. securities laws. U.S. Federal Income Tax Consequences. You should refer to Section 14 of this Offer to Exchange for a discussion of the material U.S. federal income tax consequences of the new options and the options tendered for exchange, as well as the consequences of accepting or rejecting the new options under the offer to exchange. If you are a resident of or are otherwise subject to the tax laws of the United States, but are also subject to the tax laws of another country, you should be aware that there may be other tax and social insurance consequences which may apply to you. We strongly recommend that you consult with your own advisors to discuss the consequences to you of participating in the offer to exchange. Income Tax Consequences Outside the United States. If you are a resident of or are otherwise subject to the tax laws of Germany, Japan or the United Kingdom, you should refer to Schedule B - Guide to International Issues attached to this Offer to Exchange for a discussion of the income tax consequences of electing to exchange eligible options and the new options, as well as the consequences of accepting or rejecting the new options under the offer to exchange. If you are subject to the tax laws of one of these countries, but also are subject to the tax laws of another country, you should be aware that there may be other tax and social insurance consequences which may apply to you. We strongly recommend that you consult with your own advisors to discuss the consequences to you of participating in the offer to exchange. 10. Information concerning RadiSys. The address and telephone number of our principal executive office is 5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124, 503-615-1100. Our Internet address on the worldwide web is http://www.radisys.com. Information contained on our web site does not constitute a part of this Offer to Exchange. RadiSys is a leading global provider of embedded systems for computer, data processing and network-intensive applications to the commercial systems, enterprise systems, and service provider systems markets. Using its extensive expertise in a wide variety of technologies, RadiSys focuses on industry-leading architecture while working in a close "virtual division" relationship with its customers. RadiSys' value proposition to its customers is improving their time-to-market advantage and reducing costs. The broad range of RadiSys offerings includes board-level embedded computers, blade servers, motherboards, network interfaces and packet processing engines, communications middleware and software such as SS7/IP internetworking and protocol stacks, platforms based on PCI, CompactPCI, CompactPCI 2.16 and ATCA turnkey gateway systems and professional services. The financial information included in our annual report on Form 10-K for the fiscal year ended December 31, 2002, and our quarterly report on Form 10-Q for the quarter ended March 31, 2003 is incorporated herein by reference. Please see Section 17 of this Offer to Exchange for instructions on how you can obtain copies of our SEC filings, including filings that contain our financial statements. 11. Interests of directors, vice-presidents and officers; transactions and arrangements concerning the options. A list of our directors, vice-presidents and executive officers is attached to this Offer to Exchange as Schedule A. As of July 30, 2003, our executive officers, vice-presidents and directors as a group (16 persons) beneficially owned options outstanding under all of our stock option plans to purchase a total of 1,524,001 shares of our common stock, which represented approximately 35.1% of all options outstanding as of that date. The options held by members of our Board of Directors, vice-presidents and the executive officers listed on Schedule A - Information Concerning Directors, Vice-Presidents and Executive Officers of RadiSys Corporation are not eligible to be tendered in the offer to exchange. 24 The following table sets forth the beneficial ownership of our executive officers, vice-presidents and directors of options outstanding as of July 30, 2003.
Number of Options to Purchase Common Stock on Name and Principal Position July 30, 2003 - ------------------------------------------------------------------- --------------------------- Scott C. Grout 350,000 President and Chief Executive Officer, Director Ronald A. Dilbeck 247,741 Chief Operating Officer Julia A. Harper 122,500 Chief Financial Officer Keith Lambert 109,875 Vice-President of Manufacturing Operations Ted Ridgway 90,000 Vice-President of Business Development George Shenoda 75,000 Chief Technical Officer Richard Smith 97,300 Vice-President of Quality and International Business Development Fred Yentz 124,085 Vice-President of Marketing, Business Development and Sales C. Scott Gibson 80,000 Chairman of the Board James F. Dalton 27,500 Director Richard J. Faubert 50,000 Director Dr. William W. Lattin 20,000 Director Kevin C. Melia 15,000 Director Carl W. Neun 30,000 Director Jean-Pierre D. Patkay 50,000 Director Jean-Claude Peterschmitt 35,000 Director
The following is a list of the stock and stock option transactions involving our executive officers, vice-presidents and directors during the 60 days prior to and including July 30, 2003:
Grants Exercises ---------------------------------- -------------------------------------- Number of Shares Exercise Number of Underlying Price per Shares Value Name Options Granted Share ($) Acquired on Exercise Realized ($) - ------------------------- ---------------- --------- -------------------- ------------ Kevin C. Melia 15,000 $ 14.09 James Dalton (A) 10,000 $141,000 Ronald A. Dilbeck (B) 5,000 $ 77,300
(A) On July 21, 2003, Mr, Dalton exercised 10,000 options with an exercise price of $10.00 per share. The fair market value of Radisys Common Stock on July 21, 2003 was $14.10 per share. Mr. Dalton sold these shares on July 21, 2003 in the open market. (B) On July 30, 2003, Mr. Dilbeck exercised 5,000 options with an exercise price of $12.46 per share. The fair market value of RadiSys Common Stock on July 30, 2003 was $15.46 per share. Mr. Dilbeck sold these shares on July 30, 2003 in the open market. 25 Except as otherwise described above, there have been no transactions in options to purchase our shares or in our shares which were affected during the 60 days prior to and including July 30, 2003 by RadiSys or, to the best of our knowledge, by any executive officer, vice-president, director or affiliate of RadiSys. 12. Status of options acquired by us in the offer to exchange; accounting consequences of the offer to exchange. Eligible options we accept for exchange and acquire pursuant to the offer to exchange will be cancelled, and the shares subject to those options will be returned to the pool of shares available under the Incentive Plans. The new options will be granted under our 2001 Nonqualified Stock Option Plan. To the extent the shares underlying the cancelled eligible options granted under our Incentive Plans are not used in connection with the offer to exchange to grant the new options, they will be available for future grants. If we were to grant the new options under a traditional stock option repricing, in which an employee's eligible options would be immediately repriced, or on any date that is earlier than six months and one day after the date on which we cancel the eligible options accepted for exchange, we would be required, for financial reporting purposes to record, the non-cash accounting impact of fluctuations in our stock price as compensation expense for the new options issued under this offer to exchange until they were exercised, forfeited or terminated. By deferring the grant of the new options for at least six months and one day, we believe that we will avoid these accounting charges. As a result, we believe that we will not incur any compensation expense solely as a result of the transactions contemplated by the offer to exchange. 13. Legal matters; regulatory approvals. We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our exchange of options and issuance of new options as contemplated by the offer to exchange, or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of our options as contemplated herein. Should any additional approval or other action be required, we presently contemplate that we will seek such approval or take such other action. We cannot assure you that any such approval or other action, if needed, could be obtained or taken or what the conditions imposed in connection with such approvals or actions would entail or whether the failure to obtain any such approval or take such other action would result in adverse consequences to our business. Our obligation under the offer to exchange to accept tendered eligible options for exchange and to issue new options for tendered eligible options is subject to the conditions described in Section 7 of this Offer to Exchange. Employees residing in Israel and The Netherlands are not eligible to participate in the offer to exchange. In addition, if we are prohibited by applicable laws or regulations from granting new options on the new option grant date, we will not grant any new options. We are unaware of any such prohibition at this time, and we will use reasonable efforts to effect the grant, but if the grant is prohibited on the new option grant date we will not grant any new options and you will not receive any other compensation for the eligible options you tendered. The new option grant date is expected to be a date no earlier than March 1, 2004. 14. Material U.S. federal income tax consequences; material non-U.S. tax consequences. Material U.S. federal income tax consequences. The following is a general summary of the material U.S. federal income tax consequences of the exchange of eligible options pursuant to the offer to exchange. This discussion is based on the Internal Revenue Code, its legislative history, treasury regulations thereunder and administrative and judicial interpretations as of the date of this Offer to Exchange, all of which are subject to change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of option holders. If you are an eligible employee resident in Germany, Japan or the United Kingdom, we recommend that you consult with your own tax advisor to determine the tax and social insurance consequences of the offer to exchange under the laws of the country in which you reside. 26 Option holders who exchange eligible options for new options should not be required to recognize income for U.S. federal income tax purposes either at the time the option holder agrees to exchange the option or at the time the new option is granted pursuant to the offer to exchange. We believe that the exchange will be treated as a non-taxable exchange. All new options will be granted as nonqualified stock options. When an option holder exercises the new option, the difference between the grant price of the option and the fair market value of the shares subject to the option on the date of exercise will be compensation income taxable to the option holder. We will be entitled to a compensation deduction equal to the amount of compensation income taxable to the option holder if we comply with eligible reporting requirements. We recommend that all option holders considering exchanging their eligible options meet with their own tax advisers with respect to the federal, state and local tax consequences of participating in the offer to exchange. If you are a resident of or are otherwise subject to the tax laws of more than one country, you should be aware that there may be other tax and social insurance consequences that may apply to you. We urge you to consult your own tax advisor to discuss these consequences. Material non-U.S. tax consequences. Schedule B - Guide to International Issues provides general information regarding material non-U.S. tax consequences of the exchange of options pursuant to the offer to exchange. These summaries are based on each jurisdiction's current tax laws and regulations, all of which are subject to change, possibly on a retroactive basis. These summaries do not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor are they intended to be applicable in all respects to all categories of option holders. We recommend that all option holders considering exchanging their eligible options meet with their own tax advisers with respect to the tax consequences of participating in the offer to exchange. If you are a resident of or are otherwise subject to the tax laws of more than one country, you should be aware that there may be other tax and social insurance consequences that may apply to you. We urge you to consult your own tax advisor to discuss these consequences. 15. Extension of offer; termination; amendment. We expressly reserve the right, in our discretion, at any time and regardless of whether or not any event listed in Section 7 of this Offer to Exchange has occurred or is deemed by us to have occurred, to extend the period of time during which the offer to exchange is open and delay the acceptance for exchange of any options. If we elect to extend the period of time during which the offer to exchange is open, we will give you oral or written notice of the extension and delay, as described below. If we extend the Expiration Date, we will also extend your right to withdraw tenders of eligible options until such extended Expiration Date. In the case of an extension, we will issue a press release or other public announcement no later than 9:00 a.m., Pacific Time (U.S.), on the next business day after the previously scheduled Expiration Date. We also expressly reserve the right, in our reasonable judgment, before the Expiration Date to terminate or amend the offer to exchange and to postpone our acceptance and cancellation of any options elected to be exchanged if any of the events listed in Section 7 of this Offer to Exchange occurs, by giving oral or written notice of the termination or postponement to you or by making a public announcement of the termination. Our reservation of the right to delay our acceptance and cancellation of options elected to be exchanged is limited by Rule 13e-4(f)(5) under the Exchange Act which requires that we must pay the consideration offered or return the options promptly after termination or withdrawal of a tender offer. 27 Subject to compliance with applicable law, we further reserve the right, in our discretion, and regardless of whether any event listed in Section 7 of this Offer to Exchange has occurred or is deemed by us to have occurred, to amend the offer to exchange in any respect, including, without limitation, by decreasing or increasing the consideration offered in the offer to exchange to option holders or by decreasing or increasing the number of options being sought in the offer to exchange. The minimum period during which the offer to exchange will remain open following material changes in the terms of the offer to exchange or in the information concerning the offer to exchange, other than a change in the consideration being offered by us or a change in the number of eligible options being sought, will depend on the facts and circumstances of such change, including the relative materiality of the terms or information changes. If we modify the number of eligible options being sought in the offer to exchange or the consideration being offered by us for the eligible options in the offer to exchange, the offer to exchange will remain open for at least 10 business days from the date of notice of such modification. If any term of the offer to exchange is amended in a manner that we determine constitutes a material change adversely affecting any holder of eligible options, we will promptly disclose the amendments in a manner reasonably calculated to inform holders of eligible options of such amendment, and we will extend the offer to exchange period so that at least five business days, or such longer period as may be required by the tender offer rules, remain after such change. For purposes of the offer to exchange, a "business day" means any day other than a Saturday, Sunday or a U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Time (U.S.). 16. Fees and expenses. We will not pay any fees or commissions to any broker, dealer or other person for soliciting options to be exchanged through the offer to exchange. 17. Additional information. This Offer to Exchange is part of a Tender Offer Statement on Schedule TO that we have filed with the SEC. This Offer to Exchange does not contain all of the information contained in the Schedule TO and the exhibits to the Schedule TO. We recommend that you review the Schedule TO, including its exhibits, and the following materials that we have filed with the SEC before making a decision on whether to elect to exchange your eligible options: o our annual report on Form 10-K for our fiscal year ended December 31, 2002; o our quarterly report on Form 10-Q for our fiscal quarter ended March 31, 2003; and o our Form 8-K dated July 16, 2003, reporting Item 9; containing press release dated July 16, 2003 "Radisys Announces Q2 Results" and text of conference call held July 16, 2003. We hereby incorporate by reference additional documents that we may file with the SEC between the date of this Offer to Exchange and the Expiration Date of the offer to exchange. These include annual reports on Form 10-K, periodic reports on Form 10-Q and current reports on Form 8-K, as well as proxy statements. These filings, our other annual, quarterly and current reports, our proxy statements and our other SEC filings may be examined, and copies may be obtained, at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the public on the SEC's web site at http://www.sec.gov. Each person to whom a copy of this Offer to Exchange is delivered may obtain a copy of any or all of the documents to which we have referred you, other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into such documents, at no cost, by writing to us at RadiSys Corporation, 5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124, Attention: Brian Bronson, or telephoning Mr. Bronson at telephone number 503-615-1100. 28 As you read the documents listed above, you may find some inconsistencies in information from one document to another. If you find inconsistencies between the documents, or between a document and this Offer to Exchange, you should rely on the statements made in the most recent document. The information contained in this Offer to Exchange about us should be read together with the information contained in the documents to which we have referred you, in making your decision as to whether or not to participate in the offer to exchange. 18. Summary Financial Data . The following summary financial data should be read in conjunction with our historical financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the annual, quarterly and other reports filed by RadiSys Corporation. See "Additional information." The information for the two fiscal years in the period ended December 31, 2002 was derived from the audited consolidated financial statements included in RadiSys Corporation's Annual Report on Form 10-K. The RadiSys Corporation information for the three months ended March 31, 2003 was derived from the unaudited consolidated financial statements included in RadiSys Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003. More complete financial information may be obtained by accessing our public filings with the SEC by following the instructions in Section 17 of this Offer to Exchange. On March 14, 2003, Radisys completed the sale of its Savvi business resulting in a loss of $4.3 million. As a result of this transaction, Radisys recorded $4.1 million in write-offs of goodwill and intangibles. The total $4.7 million loss from discontinued operations recorded for the three months ended March 31, 2003 includes the $4.3 million loss on the sale of the Savvi business as well as $393 thousand of net losses incurred by the business unit during the quarter, before the business unit was sold. The following summary historical financial data has been restated to reflect the effect of the discontinued operations. 29 (In thousands, except per share data)
Three months ended March 31, Years Ended December 31, ------------------ -------------------------- 2003 2002 2001 ---- ---- ---- Statement of Operations Data: Revenues...................................... $ 48,404 $200,087 $227,713 Gross margin.................................. 15,197 59,444 35,155 Income (loss) income from operations.......... 515 (3,740) (57,852) Income (loss) before taxes and discontinued operations................................. 442 (4,481) (59,989) Income (loss) from continuing operations...... 433 (1,759) (33,117) Discontinued operations, including tax benefit.................................... (4,679) (1,546) (1,369) Net (loss) income............................. (4,246) (3,305) (34,486) Net income (loss) from continuing operations per common share: Basic .................................. 0.02 (0.10) (1.92) Diluted ................................ 0.02 (0.10) (1.92) Net (loss) income per common share: Basic .................................. (0.24) (0.19) (2.00) Diluted ................................ (0.24) (0.19) (2.00) Weighed average shares outstanding: Basic .................................. 17,673 17,495 17,249 Diluted ................................ 17,840 17,495 17,249 Balance Sheet Data: Working capital........................... $115,377 $132,474 $141,940 Total assets.............................. 262,763 274,086 305,201 Convertible notes and other long term obligations........................... 73,939 83,954 104,180 Total liabilities......................... 113,392 121,285 154,490 Total shareholders' equity................ 149,371 152,801 150,711 Book value per share...................... $ 8.48 $ 8.68 $ 8.69
19. Factors that may affect future results. The statements in this Offer to Exchange and the SEC reports referred to herein that are not historical statements contain "forward-looking statements." The company's statements concerning our expectations and goals for revenues, gross margin, research and development expenses, selling, general, and administrative expenses, the impact of our restructuring events on future revenues, the anticipated cost savings effects of our restructuring activities, and our projected liquidity are some of the forward-looking statements contained in this Offer to Exchange and the SEC reports referred to herein. In some cases, forward-looking statements can be identified by terms such as "may," "will," "should," "expect," "plans," "anticipate," "believe," "estimate," "predict," "potential," "continue," "the company's future success depends," "seek to continue," "its intent," "intends," the negative of these terms, or other comparable terminology. The 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 the company's or its 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. Although forward-looking statements help provide complete information about the company, you should keep in mind that forward-looking statements are only predictions and are inherently less reliable than historical information. Actual events or results may differ materially. In evaluating these statements, you should specifically consider the risks outlined above under "Risks of Participating in the Offer to Exchange" and those listed under "Risk Factors" below and subsequently and previously filed reports. These risk factors may cause our actual results to differ materially from any forward-looking statement. 30 Risk Factors. o We depend on the commercial systems, service provider systems and enterprise systems market in which demand can be cyclical and any inability to sell products to these markets could have a material adverse effect on our revenues. o Because of our dependence on certain customers, the loss of a top customer could have a material adverse effect on our revenues and profitability. o We derive a majority of our revenue from design wins which may be canceled or delayed, or could perform below original expectations which could have a substantial negative impact on our revenues and profitability. o Because of our dependence on a few suppliers or, in some cases, one supplier for some of the components we use in the manufacture of our products, a loss of a supplier or a shortage of any of these components could have a material adverse effect on our business or our financial performance. o Competition in the market for embedded systems is intense, and if we lose our competitive position, our revenues and profitability could decline. o Our international operations expose us to additional political, economic, and regulatory risks not faced by businesses that operate only in the United States. o If we are unable to generate sufficient income in the future, we may not be able to fully utilize our net deferred tax assets or support our current levels of goodwill and intangibles on our balance sheet. o Because we have material levels of customer specific inventory, a financial hardship experienced by our customers could have a material adverse impact on our profitability. o Our products for embedded computing applications are based on industry standards, which are continually evolving, and any failure to conform to these standards could have a substantial negative impact on our revenues and profitability. o If we are unable to protect our intellectual property, we may lose a valuable competitive advantage or be forced to incur costly litigation to protect our rights. o Our period-to-period revenues and operating results fluctuate significantly which may result in volatility in the price of our common stock. o Other risk factors include but are not limited to changes in the mix of products sold, 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. We do not guarantee future results, levels of activity, performance or achievements and do not assume responsibility for the accuracy and completeness of these statements. We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by law. 31 20. Miscellaneous. We are not aware of any jurisdiction where the making of the offer to exchange is not in compliance with applicable law. If we become aware of any jurisdiction where the making of the offer to exchange is not in compliance with any applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, the offer to exchange will not be made to, nor will options be accepted from, the option holders residing in such jurisdiction. We have not authorized any person to make any recommendation on our behalf as to whether you should elect to exchange your eligible options through the offer to exchange. You should rely only on the information in this document or documents to which we have referred you. We have not authorized anyone to give you any information or to make any representations in connection with the offer to exchange other than the information and representations contained in this Offer to Exchange and in the related stock option exchange program documents. If anyone makes any recommendation or representation to you or gives you any information, you must not rely upon that recommendation, representation or information as having been authorized by us. RadiSys Corporation July 31, 2003 32 SCHEDULE A INFORMATION CONCERNING THE DIRECTORS, VICE-PRESIDENTS AND EXECUTIVE OFFICERS OF RADISYS CORPORATION The executive officers, vice-presidents and directors of RadiSys Corporation and their positions and offices as of July 31, 2003, are set forth in the following table:
Name Position - ------------------------ ---------------------------------------------------------------- Scott C. Grout President and Chief Executive Officer, Director Ronald A. Dilbeck Chief Operating Officer Julia A. Harper Chief Financial Officer Keith Lambert Vice-President of Manufacturing Operations Ted Ridgway Vice-President of Business Development George Shenoda Chief Technical Officer Richard Smith Vice-President of Quality and International Business Development Fred Yentz Vice-President of Marketing, Business Development and Sales C. Scott Gibson Chairman of the Board James F. Dalton Director Richard J. Faubert Director Dr. William W. Lattin Director Kevin C. Melia Director Carl W. Neun Director Jean-Pierre D. Patkay Director Jean-Claude Peterschmitt Director
The address and telephone number of each director, vice-president and executive officer is c/o RadiSys Corporation, 5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124, 503-615-1100. A-1 SCHEDULE B GUIDE TO INTERNATIONAL ISSUES RadiSys Corporation Option Exchange: A Guide to Issues in Germany The following is a summary of the tax consequences of the cancellation of outstanding options in exchange for the grant of new options for individuals subject to tax in Germany. This summary is general in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of option holders. Please note that tax laws change frequently and occasionally on a retroactive basis. If you are a citizen or resident of another country for local law purposes, the information contained in this summary may not be applicable to you. This summary also includes other country specific requirements that may affect your participation in the option exchange program. You are advised to seek appropriate professional advice as to how the tax and other laws in your country apply to your specific situation. Option Exchange It is unlikely that you will be subject to tax as a result of the exchange of an eligible option for a new option. Grant of New Option You will not be subject to tax when the new option is granted to you. Exercise of New Option When you exercise your new option, you will be subject to income tax on the difference between the fair market value of the shares on the date of exercise and the option price. You also will be subject to social insurance contributions to the extent you have not already exceeded the applicable contribution ceiling. Pursuant to Section 19a of the German Income Tax Act (Einkommensteuergesetz), you may be able to deduct (euro)154 per calendar year from the taxable amount because this income results from the purchase of stock in your employer's parent company. You should consult with your tax advisor to determine if this deduction applies to your specific situation. Sale of Shares You will not be subject to tax when you subsequently sell shares provided you own the shares for at least 12 months, do not own 1% or more of RadiSys' stated capital (and have not owned 1% or more at any time in the last five years) and the shares are not held as business assets (this requirement should be met since you purchased the shares as an employee). However, please note that proposed legislation in Germany may require you to pay tax upon any gain realized from the sale of shares (calculated as the sale proceeds less the fair market value of the underlying shares at exercise), regardless of your ownership of RadiSys' stated capital and how long the shares are held. If you are subject to tax upon sale, you will be subject to tax on one-half of the gain as capital gain (less one-half of the sales related expenses). Furthermore, you will only be subject to tax if your total capital gain exceeds (euro)512 in the relevant tax year. If this threshold is exceeded, you will be taxed on the full gain (and not only the gain in excess of (euro)512). B-1 Withholding and Reporting Your employer is required to withhold and report income tax and social insurance contributions (to the extent that you have not exceeded the applicable contribution ceiling) when you exercise the new options. If your actual tax liability differs from the amount withheld, it is your responsibility to pay the additional tax. It is your responsibility to report and pay any taxes due as a result of the sale of shares. Exchange Control Information Cross-border payments in excess of (euro)12,500 must be reported monthly. If you use a German bank to carry out the cross-border payment in excess of (euro)12,500 in connection with the purchase or sale of RadiSys shares, the bank will make the report. In addition, you must report any receivables or payables or debts in foreign currency exceeding an amount of (euro)5,000,000 on a monthly basis. Finally, you must report your holding annually in the unlikely event that you hold shares representing 10% or more of the total or voting capital of RadiSys. B-2 RadiSys Corporation Option Exchange: A Guide to Issues in Japan - -------------------------------------------------------------------------------- The following is a summary of the tax consequences of the cancellation of outstanding options in exchange for the grant of new options for individuals subject to tax in Japan. This summary is general in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of option holders. Please note that tax laws change frequently and occasionally on a retroactive basis. If you are a citizen or resident of another country for local law purposes, the information contained in this summary may not be applicable to you. This summary also includes other country specific requirements that may affect your participation in the option exchange program. You are advised to seek appropriate professional advice as to how the tax and other laws in your country apply to your specific situation. Option Exchange You may be subject to income tax as a result of the exchange of an eligible option for a new option, although this result is not certain. Grant of New Option You will not be subject to tax when the new option is granted to you. Exercise of New Option When you exercise the new option, you will be subject to tax on the difference between the fair market value of the shares on the date of exercise and the option price. This gain likely will be treated as "remuneration income" (although the proper classification is currently being litigated in Japanese courts) and will be taxed at your marginal tax rate. Social insurance contributions will not be due on gain at exercise. Sale of Shares If you acquire shares upon exercise, you will be subject to tax when you subsequently sell the shares. You will be taxed on the difference between the sale proceeds and the fair market value of the shares on the date of exercise. You may be eligible for a reduced tax rate, depending on the circumstances of the sale (e.g., whether you sell shares though a broker licensed in Japan). Please consult with your tax advisor regarding whether you will be eligible for a reduced tax rate. Withholding and Reporting Your employer will likely not be required to withhold income tax contributions when you exercise your option. It is your responsibility to file a personal tax return and to report and pay any taxes resulting from the exchange, the exercise of your option and the sale of shares. Exchange Control Information If you intend to acquire shares whose value exceeds (Y)100,000,000 in a single transaction, you must file a report with the Ministry of Finance through the Bank of Japan within 20 days of the purchase of the shares. Please note that the reporting requirements vary depending on whether or not the relevant payment is made through a bank in Japan. B-3 RadiSys Corporation Option Exchange: A Guide to Issues in the United Kingdom - -------------------------------------------------------------------------------- The following is a summary of the tax consequences of the cancellation of outstanding options in exchange for the grant of new options for individuals subject to tax in the United Kingdom. This summary is general in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of option holders. Please note that tax laws change frequently and occasionally on a retroactive basis. If you are a citizen or resident of another country for local law purposes, the information contained in this summary may not be applicable to you. This summary also includes other country specific requirements that may affect your participation in the option exchange program. You are advised to seek appropriate professional advice as to how the tax and other laws in your country apply to your specific situation. Option Exchange You will not be subject to tax or National Insurance Contributions ("NICs") as a result of the exchange of an eligible option for the grant of a new option. Grant of New Option You will not be subject to tax or NICs when the new option is granted to you. Exercise of New Option You will be subject to tax when you exercise your new option. Income tax will be charged on the difference between the fair market value of the stock on the date of exercise and the option price (the "Spread"). Your employer will be responsible for tax withholding under the Pay As You Earn system in relation to the tax due on the gain realized on exercise of your option and, therefore, for paying the income tax withheld to the UK Inland Revenue on your behalf. Your employer will inform you of how it intends to recoup the income tax that it pays on your behalf. If you fail to pay to your employer the income tax due within 90 days of the date of exercise of your option, you will be deemed to have received a further taxable benefit equal to the amount of income tax due. This will give rise to a further income tax charge. Subject to comments in the next paragraph, you will also be subject to the employees' portion of NICs on the Spread at exercise of your new option. With effect from 6 April 2003 employees' NICs are payable at the rate of 11% up to the upper earnings limit set for employees' NICs purposes and, in addition, 1% NICs will apply on earnings in excess of the upper earnings limit without limit. If you were granted eligible options between 6 April 1999 and 19 May 2000 inclusive, which were underwater on 7 November 2000, you may be exempt (either entirely or in part) from NICs liability on the exercise of new options granted to replace those options. You should consult your tax advisor regarding whether favorable NICs treatment will apply to your new option. Sale of Shares When you sell your shares, you will be subject to capital gains tax. Your taxable gain will be calculated as the difference between (i) the sale proceeds and (ii) the exercise price paid for the shares plus the amount (if any) that was subject to tax at the time of exercise less any applicable costs of acquisition or disposal. Please note that an annual exemption is available to set against total gains of (pound)7,900 for the tax year 6 April 2003 to 5 April 2004 and you may also be able to benefit from taper relief to reduce your chargeable gain. The rate of taper relief is dependant upon the number of years that the shares are held and whether the shares qualify as business assets (which in turn depends on whether you continue to be employed by a RadiSys group company). B-4 Withholding and Reporting Your employer is required to withhold and report income tax and NICs on the Spread at exercise. If the amount withheld is not sufficient to cover your actual liability, you will be responsible for paying the deficiency. In addition, you will be responsible for paying any taxes owed as a result of the sale of the shares. You will also be required to report the exercise of your options and the subsequent disposal of your shares on your annual UK Tax Return. B-5 RadiSys Corporation Option Exchange: A Guide to Issues in the United States - -------------------------------------------------------------------------------- The following is a summary of the material federal income tax consequences of the cancellation of outstanding options in exchange for the grant of new options for individuals subject to tax in the United States. This summary is general in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of option holders. This summary is based on the Internal Revenue Code, its legislative history, treasury regulations thereunder and administrative and judicial interpretations, as of the date of the offer to exchange, all of which are subject to change. Please note that tax laws change frequently and occasionally on a retroactive basis. If you are a citizen or resident of another country for local law purposes, the information contained in this summary may not be applicable to you. You are advised to seek appropriate professional advice as to how the federal, state and local tax and other laws in your country apply to your specific situation. Option Exchange You will not be subject to U.S. federal income tax as a result of the exchange of an eligible option for a new option. Grant of New Option You will not be subject to U.S. federal income tax when the new option is granted to you. Exercise of New Option Your new option will be granted as a non-qualified stock option for U.S. tax purposes. When you exercise the new option, you will be subject to U.S. federal income tax on the difference between the exercise price of the option and the fair market value of the shares subject to the option on the date of exercise. Sale of Shares If you acquire shares upon exercise, you will be subject to tax when you subsequently dispose of the shares. Any gain or loss at disposition of the shares is treated as a capital gain or loss. Withholding and Reporting Any income recognized upon exercise of the new options will constitute wages for which withholding will be recognized. Your employer will be entitled to compensation deductions in the same amount as the income recognized by the optionee at exercise of the new options. Possible Effect of Not Participating There is a risk that any qualified stock options that you hold will be affected, even if you do not participate in the offer to exchange. We believe that you will not be subject to current U.S. federal income tax if you do not elect to participate in the offer to exchange. We also believe that the offer to exchange will not change the U.S. federal income tax treatment of subsequent grants and exercises of your qualified stock options (called "incentive stock options" by the IRS) (and sales of shares acquired upon exercise of such options) if you do not participate. However, the IRS may characterize this offer to exchange options as a "modification" of those incentive stock options, even if you decline to participate. In 1991, the IRS issued a private letter ruling in which another company's option exchange program was characterized as a "modification" of all of the incentive stock options that could be exchanged. This does not necessarily mean that our offer to exchange options will be viewed the same way. Private letter rulings given by the IRS contain the IRS's opinion regarding only the specific facts presented by a specific person or company. The person or company receiving the letter may rely on it, but no other person or company may rely on the letter ruling, nor may they assume the same opinion would apply to their situation, even if the facts at issue are similar. While such letters do not provide certainty, they may indicate how the IRS will view a similar situation. We do not know, therefore, if the IRS will assert the position that B-6 our offer to exchange constitutes a "modification" of incentive stock options eligible for tender. A successful assertion by the IRS of this position could extend the options' holding period to qualify for favorable tax treatment. Accordingly, to the extent you dispose of your incentive stock option shares prior to the lapse of the new extended holding period, your incentive stock option could be taxed similarly to a non-qualified stock option. B-7 EX-99.(A)(1)(B) 4 e300526_ex99-a1b.txt STOCK OPTION EXCHANGE PROGRAM OVERVIEW. Exhibit (a)(1)(B) The Stock Option Exchange Program Overview RadiSys Corporation is pleased to announce the Stock Option Exchange Program (the "Exchange Program"), which offers you the choice to replace your "underwater" options with options that, over time, may have a greater potential to increase in value. Because many of the outstanding stock options held by employees have an exercise price greater than the current market price of our common stock, employees would not realize any value if they exercised their vested stock options. To help restore value to the options, RadiSys is offering eligible employees the opportunity to exchange eligible stock options for a lesser number of new options. How the Exchange Program Works During the offering period, you may elect to surrender your outstanding RadiSys stock options with an exercise price of $20.00 or more in exchange for a lesser number of new options. On the first business day after the offer expires, your surrendered stock options will be cancelled. At least six months and one day from the cancellation date, we will grant the new options; we expect this date to be no earlier than March 1, 2004. The new option grant will have an exercise price equal to the closing price of shares of RadiSys' common stock on the new option grant date. Following are some of the key terms of the Exchange Program: o Offering Period: This is the time period during which you may elect to participate and it runs from Thursday, July 31, through Wednesday, August 27, 2003, at 9:00 p.m. Pacific Time (U.S.). o Cancellation Date: The first business day after the offering period expires: currently anticipated to be Thursday, August 28, 2003. o Exchange Ratio: The number of options you will receive in exchange for the eligible options you surrender depends on the exercise price of your current option grant(s), as follows: Exchange Ratio Exercise Price (Eligible Option: New Option) $20.00-34.99 1.40 : 1 $35.00 or higher 2.00 : 1 o New Option Grant Date: The date on which your new options are granted. This date must be at least six months and one day after the cancellation date to comply with U.S. accounting rules. We currently expect this date to be no earlier than March 1, 2004. o Exercise Price of New Option Grant: The exercise price of the new option grant will be the closing price of shares of our common stock as reported by the Nasdaq National Market on the new option grant date. o Conditions of the Program: Your decision to participate in this program is entirely voluntary. If you choose to participate in the Exchange Program, you must: - Surrender all your eligible option grants for exchange; and - Surrender all the options within a grant (except those you have previously exercised); and - Be continuously employed by RadiSys or one of its subsidiaries through the new option grant date to receive your new options. All new options will be subject to the terms and conditions as described in the Offer to Exchange, Stock Option Exchange Program Overview, and Frequently Asked Questions documents. From the Mellon web site, the majority of eligible employees can authorize the cancellation of all eligible options in accordance with the terms and conditions of the Exchange Program. (If you reside and are employed in Germany or Japan, you may only authorize the cancellation of all eligible options using a hard-copy, paper Election Agreement. See "Employees in Germany and Japan" below for details.) o Vesting: The new option shares will not be vested or exercisable during the six-month period after the new option grant date. After six months, approximately 33.33%* of the total option shares will become vested and exercisable. From that point on, approximately 2.78%* of your total option shares granted will vest each month and become exercisable. Your option shares will be fully vested two and one-half years (30 months) after the new option grant date. This applies even if the eligible options that you surrender are partially or fully vested. * Shares do not vest fractionally. EquitEase, RadiSys' stock administrator, applies a rounding factor at the first vesting date (six months following the grant date) and during the subsequent 24-month period. Each month, the number of shares that vest each month will vary slightly. However, at the end of the 30-month period, you will be vested in the exact number of shares granted to you (assuming continued employment with RadiSys). o Term of New Option Grant: The term (or "life") of the new option grant will be seven years from the new option grant date. o Type of New Option: The new options will be nonqualified stock options ("NSOs"), even if you surrender incentive stock options ("ISOs") for exchange. o Tax Implications: U.S. residents should not be required to recognize income for U.S. federal income tax purposes at the time of the exchange--no taxes should result by participating in the Exchange Program. Residents outside of the U.S. may have varying tax consequences depending on the foreign jurisdiction (See Schedule B - Guide to International Issues of the Offer to Exchange for more information). Please consult your tax advisor for advice regarding your specific situation. If you choose not to participate in the Exchange Program, your existing options will not be affected by this offer; they will remain outstanding until you exercise them or they expire by their terms. They will retain their current exercise price and vesting schedule. Who Is Eligible to Participate in the Exchange Program To be eligible, you must: o Have eligible options (with an exercise price of $20.00 or more); and o Be an employee of RadiSys residing in Germany, Japan, the United Kingdom, or the United States; and o Remain employed by RadiSys or one of its subsidiaries continuously through the new option grant date. If your employment ends for any reason before the new option grant date (whether voluntarily or involuntarily), you will not receive any new options. Board of Directors, Vice-Presidents and Executive Officers, as well as those RadiSys employees who reside in Israel or The Netherlands, may not participate in the Exchange Program. How To Participate The election process you must follow depends on where you reside and are employed: Employees in the U.S. and the U.K. If you reside and are employed in the U.S. or the U.K., you must elect to exchange options on a Web site provided by Mellon, whom RadiSys has engaged to handle the administration of the Exchange Program. To access Mellon's Web site, you will need a personal identification number (PIN), which Mellon is e-mailing to employees based in the U.S. and U.K. The e-mail is being sent to your RadiSys e-mail address on July 31, 2003. If you are on an authorized leave of absence, Mellon is sending you your PIN by first-class mail to your home address. If you have not received your PIN by Friday, August 8, 2003, call Mellon at one of the phone numbers listed at the end of this overview. You must do the following by 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003: 1) Log onto the Mellon Web site at https://www.corporate-action.net/RadiSys, and press the "Continue" button. 2) Enter your 9-digit PIN, and press the "Continue" button. 3) On the following screen, enter your 3- or 4-digit employee ID number (without any leading zeros; for example, if your employee number is 001322, just enter 1322) and your birth date, and press the "Continue" button. 4) You should now be successfully logged in. You will see a page with your personal information, including all your eligible option grants. To participate, you must select the "Exchange My Options" button from the "Election Agreement" Web page. 5) Print a copy of the confirmation screen for your records. If you are on an authorized leave of absence, you may also make your election by submitting your signed, hard copy Election Agreement to one of the addresses below or by fax. You may withdraw all options that you previously elected to exchange any time before the offer expires. If you withdraw all of your options, you may re-elect to exchange them by following the steps outlined above. Please see the Frequently Asked Questions for an explanation of the withdrawal procedures. Employees in Germany and Japan If you are employed by RadiSys and reside in Germany or Japan, you must return a signed copy of your Election Agreement to Mellon to exchange your options. Even if you make an election online on Mellon's Web site, it will not be valid--only the election you make by mailing your hard copy Election Agreement will be valid. You must sign your Election Agreement and return to Mellon, using one of the following methods:
By Fax: By Mail: By Overnight Courier: Mellon Investor Services LLC Mellon Investor Services LLC Mellon Investor Services LLC +201-329-8456 Attn: Reorganization Dept. Attn: Reorganization Dept. P. O. Box 3301 85 Challenger Road South Hackensack, NJ 07606 Mail Drop-Reorg Ridgefield Park, NJ 07660
In order for your election to be valid, your election must be RECEIVED by Mellon in accordance with these instructions by 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003, unless extended by RadiSys. You are responsible for ensuring the successful delivery of your Election Agreement. Please allow for enough delivery time based on the method of delivery that you choose to ensure we receive your Election Agreement on time. This is a one-time offer, and we will strictly enforce the expiration date. Please keep a signed copy of your Election Agreement for your records You may withdraw all options that you previously elected to exchange any time before the offer expires. If you withdraw options, you may re-elect to exchange them by following the steps outlined above. Please see the Frequently Asked Questions for an explanation of the withdrawal procedures. Additional Resources There are risks involved with participating in the Exchange Program. The company and representatives of the company cannot help you determine whether to participate in the Exchange Program--you must make that decision yourself. However, we are providing you with the following information to help you make your decision: o The Offer to Exchange: The legal document that provides all the details, terms, and conditions of the program; and o Frequently Asked Questions ("FAQs"): A set of questions and answers about the Exchange Program; and o A Significant Events Calendar: A timeline of key events and dates related to the Exchange Program; and o A Guide to International Issues: A summary of the tax consequences, if any, of the cancellation of outstanding options in exchange for the grant of new options. We recommend that you carefully read all of these documents before you decide whether to participate in the Exchange Program. Also, we encourage you to seek advice from your own attorney, tax advisor, and/or financial advisor regarding personal tax implications or other investment-related questions. RadiSys has made arrangements to provide Internet access to those employees in Hillsboro who do not have this access at their work stations. Stations that include a computer and a printer will be set up on the date the Exchange Program begins, and will be available through the date the Exchange Program expires. A list of station locations is posted near the main entrance to the cafeteria. As an additional reference for you, we have revised the Plan Summary and Prospectus for the 2001 Nonqualified Stock Option Plan and the 1995 Stock Incentive Plan. You can find this on the HR Toolkit of the RadiSphere intranet at http://radisphere.radisys.com; select Communities > HR > HR Toolkit > Compensation > Stock Option Plan. For More Information For additional information or assistance, please contact Mellon. Mellon customer service representatives are available Monday through Friday from 5:00 a.m. to 4:00 p.m., Pacific Time (U.S.) at: o 1-888-256-2709 (Calling from within the U.S.) o +201-329-8905 (Calling from outside the U.S.) If you require a translator, a customer service representative will connect you with one and answer any questions you have over the phone. This and other educational tools related to the Exchange Program are provided as general information and do not take the place of the Offer to Exchange filed with the Securities and Exchange Commission as part of Schedule TO-I. Employees should consult the Offer to Exchange for specific details of the Exchange Program. EX-99.(A)(1)(C) 5 e300526_ex99-a1c.txt STOCK OPTION EXCHANGE PROGRAM FAQ. Exhibit (a)(1)(C) The Stock Option Exchange Program Frequently Asked Questions The following frequently asked questions ("FAQs") are designed to provide answers to questions you may have about RadiSys Corporation's Stock Option Exchange Program (the "Exchange Program"). We encourage you to carefully read these FAQs and corresponding answers, as well as the other Exchange Program documents: the Offer to Exchange, the Stock Option Exchange Program Overview, and the announcement from Glenn Splieth sent to you on July 31, 2003. The Exchange Program is made subject to the terms and conditions of these documents, as they may be amended. Additional important information is contained in the other Exchange Program documents, which you should review so that you can make an informed decision regarding participation. Program Design Q1. What is the Exchange Program? A1. The Exchange Program is a voluntary opportunity for employees to exchange eligible RadiSys stock options for a lesser number of new stock options with an exercise price equal to the closing price of shares of our common stock six months and one day after the date of cancellation of the old options. Eligible options are those options granted under our 1995 Stock Incentive Plan or our 2001 Nonqualified Stock Option Plan (collectively, the "Incentive Plans") with an exercise price of $20.00 per share or higher. Unless extended by the Company, the Exchange Program expires at 9:00 p.m. Pacific Time (U.S.), on Wednesday, August 27, 2003. We intend to cancel the surrendered options on Thursday, August 28, 2003, which is the first business day after the Exchange Program expires. The new options will be granted at least six months and one day after we cancel the options you have elected to exchange. We expect to make the new grants no earlier than March 1, 2004. The new options will have an exercise price equal to the closing price of shares of our common stock as reported by the Nasdaq National Market on the new option grant date. Q2. Why is RadiSys offering this exchange? A2. Stock options are an important component of RadiSys' Total Compensation strategy for employees. They allow you to share in any appreciation of our stock, facilitate a sense of ownership, and align your interests and those of our stockholders. Stock options help the Company retain and motivate the talent we already have and attract new recruits to RadiSys. However, due to the sharp decline in our stock price, some of our outstanding options, whether or not they are currently vested, have exercise prices that are higher than the current market price of our common stock. These options are commonly referred to as being "underwater." The Exchange Program is designed to provide our employees the opportunity to replace "underwater" options with options that will have an exercise price equal to the closing price of shares of our common stock on the new option grant date and that may have greater potential to increase in value over time. We hope that this offer will foster retention of our valuable employees and better align the interests of our employees and shareholders to maximize shareholder value. Q3. Are stock option exchange programs unusual? A3. No. Given the weak performance of the stock market, a number of companies have conducted or are considering similar programs. Q4. What option grants can I exchange? A4. If you choose to participate, all outstanding options granted under the Incentive Plans, whether or not they are vested, with an exercise price greater than $20.00 must be exchanged. Q5. How many new options will I receive in exchange for the options that I elect to exchange? A5. The exchange ratio (i.e., the ratio between the number of eligible options surrendered and the number of new options you will receive) depends on the exercise price of your current option grant(s), as follows: Exchange Ratio Exercise Price (Eligible Option: New Option) $20.00-34.99 1.40 : 1 $35.00 or higher 2.00 : 1 The number of options that you receive as a result of your decision to surrender and exchange your eligible options will be rounded up to the nearest whole share, and will be subject to adjustment for any stock splits, subdivisions, combinations, stock dividends and similar events that occur after the cancellation date but before the new option grant date. All new options will be subject to a new option agreement between you and RadiSys, the terms of which are described in this document, the Stock Option Exchange Program Overview, and the Offer to Exchange. New options will be granted under our 2001 Nonqualified Stock Option Plan. All new options will be nonqualified options for U.S. federal income tax purposes. (See Question 29 for more information). Q6. How were the exchange ratios determined, and why are they different for options with different exercise prices? A6. We used an option pricing model used by most companies to estimate the theoretical value of each option. Using this model, we assigned a value to eligible options and to new options. We then determined the ratio of old to new options that would make the exchange approximately equivalent in value. Q7. Why isn't the exchange ratio simply one-for-one? A7. The exchange ratio is designed to be "value-neutral," meaning that the number of surrendered options have the same value as the new options you will receive. We feel that the exchange ratios are fair to you and responsible to the shareholders. One of our goals of this offer is to align the interests of employees and shareholders. You have the opportunity to replace your underwater options with options that may have greater value in the future. In turn, the shareholders will benefit because the exchange ratio will decrease the total number of options outstanding, thus decreasing potential shareholder dilution. Eligibility Q8. Who is eligible to participate in the Exchange Program? A8. You are eligible to participate in the Exchange Program if you have eligible options that have been granted under our 1995 Stock Incentive Plan or our 2001 Nonqualified Stock Option Plan with an exercise price of $20.00 or more; you are a current employee of RadiSys or one of our subsidiaries; you reside in Germany, Japan, the United Kingdom (U.K.) or the United States (U.S.) on July 31, 2003; and you remain an employee through the option cancellation date, which we currently anticipate will be Thursday, August 28, 2003. Members of our Board of Directors and the vice-presidents and executive officers (listed in Schedule A - Information Concerning the Directors, Vice-Presidents and Executive Officers of the Offer to Exchange) are not eligible to participate in the Exchange Program. Also ineligible are employees of RadiSys or one of our subsidiaries who reside in Israel or The Netherlands, due to local tax, securities, and labor restrictions. Q9. Are employees outside of the U.S. eligible to participate? A9. Yes. Employees of RadiSys or any of our subsidiaries on July 31, 2003 who are residents of Germany, Japan or the U.K. are eligible to participate, except as noted in Question 8 above. If you are a tax resident of, or subject to tax laws of, a country other than the U.S., please be sure to read Schedule B - Guide to International Issues of the Offer to Exchange, which deals with the applicable tax consequences of the exchange in certain countries. Q10. Do I have to satisfy any other eligibility requirements to receive the new options? A10. Yes. To receive a new option, you must remain an employee of RadiSys or one of our subsidiaries through the new option grant date, which will be at least six months and one day after the cancellation date. If we do not extend the Exchange Program, we expect the new option grant date will be no earlier than March 1, 2004. This means that if you die, become disabled, resign, are subject to involuntary termination by RadiSys, or otherwise terminate your employment with RadiSys or one of our subsidiaries or a successor entity through the new option grant date, you will not receive any new options or other compensation in exchange for the eligible options that you surrendered. Unless otherwise expressly provided by the applicable laws of a non-U.S. jurisdiction, your employment with RadiSys or one of our subsidiaries remains "at-will" and can be terminated by you or RadiSys or one of our subsidiaries at any time, with or without cause or notice. Terms of the New Options Q11. What will the exercise price of my new options be? A11. The exercise price per share of the new options will be the closing price of shares of our common stock as reported by the Nasdaq National Market on the new option grant date, which is expected to be no earlier than March 1, 2004. Because we will grant new options no earlier than the first business day that is at least six months and one day after the cancellation date, we cannot predict the exercise price of the new options. The new options may have a higher or lower exercise price than some or all of the eligible options that you surrender. Q12. When will the options that I surrender actually be cancelled? A12. The options you surrender for exchange will be cancelled no later than the first business day following the expiration date of the Exchange Program. As the offer expires on Wednesday, August 27, 2003, we expect the cancellation date to be Thursday, August 28, 2003. However, if the Company decides to extend the offer, we currently anticipate that the cancellation date will be the next business day after the extended offer expires. Q13. When will I receive my new options? A13. The new option grant date is currently expected to be a date that is at least six months and one day after the cancellation date, or March 1, 2004. We will not grant the new options before the new option grant date. Approximately one week after the offering period expiration date, RadiSys and Mellon will send you notification to your RadiSys e-mail address that we have accepted your surrendered eligible options for exchange and that we will issue to you the new options in accordance with and subject to the terms and conditions of the Exchange Program. If you reside and are employed in Japan, your notification will be mailed by first-class mail to your work office. If you are on a leave of absence, your notification will be mailed by first-class mail to your home. Q14. When will the new options vest? A14. None of the new options will be vested or exercisable during the six-month period after the new option grant date. After this time, approximately 33.33%* of the total number of options granted will become vested and exercisable. From that point on, approximately 2.78%* of the options will vest each month and become exercisable. Your options will be fully vested two and one-half years (30 months) after the new option grant date. This means that all your new options would be completely unvested at the time of the new grant, regardless of whether your surrendered options were partially or fully vested. Once your new options have vested, you may exercise them at any time. Options will only vest if you remain a Company employee, and only you may exercise them. Options that are not vested when your employment ends cannot be exercised and will be forfeited. To illustrate how vesting works, let's assume you receive a new stock option grant to purchase 1,000 shares in exchange for eligible options you surrendered. Six months after the new option grant date, you would be vested in approximately 33.33% of your new shares, or approximately 333 shares. After that, approximately 2.78%* of the total shares granted, or approximately 28, shares would vest each month until the option grant is fully vested two and one-half years following the grant date. * Shares do not vest fractionally. EquitEase, RadiSys' stock administrator, applies a rounding factor at the first vesting date (six months following the grant date) and during the subsequent 24-month period. The number of shares that vest each month will vary slightly. However, at the end of the 30-month period, you will be vested in the exact number of shares granted to you (assuming continued employment with RadiSys or one of our subsidiaries). Q15. What kind of options will the new options be? A15. All of the new options will be "nonqualified stock options," commonly referred to as "NSOs." Even if you surrender an incentive stock option ("ISO"), you will receive an NSO in exchange for it. Q16. When will the new options expire? A16. The new options will expire seven years from the new option grant date, or earlier if your employment with RadiSys terminates for any reason. Participation Q17. Do I have to participate in this Exchange Program? A17. No, participation in this offer is completely voluntary. Q18. How can I find out the details of my eligible option grants? A18. You can find out the details of all your option grants--whether eligible or ineligible--on your personalized Election Agreement. The majority of employees will access their personalized Election Agreements online on Mellon's web site. However, employees in Germany and Japan, as well as employees on an authorized leave of absence, will receive hard copy Election Agreements. All of your outstanding option grants will be listed on your Election Agreement, regardless of whether they are eligible for the Exchange Program. It is possible that none of your option grants will be eligible for the Exchange Program, but we are providing you with this information so you can keep track of your outstanding options. If you believe there is a discrepancy with your option grants listed on your Election Agreement, please contact Mellon from 5:00 a.m. to 4:00 p.m., Pacific Time (U.S.), Monday through Friday, at: o 1-888-256-2709 (Calling from within the U.S.) o +201-329-8905 (Calling from outside the U.S.) Q19. If I choose to participate, do I have to exchange all of my eligible option grants? A19. Yes. You cannot "pick and choose" from among your eligible option grants. For example, if you have option grants with exercise prices of $18.00, $20.00, $24.00, and $26.00, you must surrender all of the grants, except the one with an exercise price of $18.00, since it is not eligible for exchange. Furthermore, if you choose to exchange your eligible stock option grants, you must surrender the full number of outstanding shares subject to the option grants. We cannot accept partial surrenders of option grants. For example, if you have an eligible option grant with 2,000 shares outstanding, you could not surrender 1,000 shares--you must surrender all 2,000 shares. Because one of our objectives in offering the Exchange Program is to reduce the total number of outstanding options, which can dilute the value of our shares, you must exchange all of your eligible stock option grants in order to participate in the Exchange Program. Q20. When does the Exchange Program end? A20. This offer ends on Wednesday, August 27, 2003, at 9:00 p.m., Pacific Time. We refer to this date and time as the expiration date, unless we extend the period during which the Exchange Program will remain open. If we extend the Exchange Program offering period, the term "expiration date" will refer to the time and date at which the extended Exchange Program expires. If we extend the Exchange Program offering period, we will issue a public announcement regarding the extension. Q21. Can the offering period be extended, and will RadiSys let me know if this occurs? A21. We may, in our discretion, extend the Exchange Program offering period at any time, but we do not currently expect to do so. If we extend the Exchange Program offering period, we will issue a press release or other public announcement disclosing the extension no later than 9:00 a.m., Pacific Time (U.S.), on the next business day following the previously scheduled expiration date of the Exchange Program. Q22. I've decided to exchange my options. How I do participate? A22. We have two different election processes--the one you must follow depends on where you reside and are employed: Employees in the U.S. and the U.K. If you reside and are employed in the U.S. or the U.K., you must make your election on Mellon's web site to elect to exchange options. To access Mellon's web site, you will need a personal identification number ("PIN"), which Mellon is sending by e-mail (to your RadiSys e-mail address) to the majority of employees on July 31, 2003. If you are on an authorized leave of absence, Mellon is sending your PIN by first-class mail to your home address. If you have not received your PIN by August 8, 2003, call Mellon at: o 1-888-256-2709 (Calling from within the U.S.) o +201-329-8905 (Calling from outside the U.S.) You must do the following by 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003: 1) Log onto the Mellon web site at https://www.corporate-action.net/RadiSys, and press the "Continue" button. 2) Enter your 9-digit PIN, and press the "Continue" button. 3) On the following screen, enter your 3- or 4-digit employee ID number (without any leading zeros; for example, if your employee number is 001322, just enter 1322) and your birth date, and press the "Continue" button. 4) You should now be successfully logged in. You will see a page with your personal information, including all of your eligible stock option grants. To participate, you must select the "Exchange My Options" button from the "Election Agreement" web page space. Print a copy of the confirmation screen for your records. If you are on an authorized leave of absence, you may also make your election by submitting your signed, hard copy Election Agreement using one of the delivery methods listed below. Employees in Germany and Japan If you reside and are employed in Germany or Japan, you must return a signed copy of your Election Agreement to Mellon to validly exchange your options. (Employees in Germany: Even if you make an election online on Mellon's Web site, it will not be valid--only the election you make by mailing your hard copy Election Agreement will be valid). You must sign your Election Agreement and return to Mellon, using one of the following methods:
By Fax: By Mail: By Overnight Courier: Mellon Investor Services LLC Mellon Investor Services LLC Mellon Investor Services LLC +201-329-8456 Attn: Reorganization Dept. Attn: Reorganization Dept. P. O. Box 3301 85 Challenger Road South Hackensack, NJ 07606 Mail Drop-Reorg Ridgefield Park, NJ 07660
In order for your election to be valid, your election must be RECEIVED by Mellon in accordance with these instructions by 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003, unless extended by RadiSys. You are responsible for ensuring the successful delivery of your Election Agreement. Please allow for enough delivery time based on the method of delivery that you choose to ensure we receive your Election Agreement on time. This is a one-time offer, and we will strictly enforce the expiration date. Please keep a signed copy of your Election Agreement for your records. Q23. How should I confirm that my election was received? A23. If you used the Mellon Web site to elect to participate (see question 22 above), you will see a confirmation screen after you successfully elect to participate. You should print a copy of this screen and save it for your records. If you mailed a hard copy Election Agreement to elect to participate (see question 22 above), you should save a copy of your Election Agreement for your records. If you wish, you may call Mellon at the number below to confirm that your form was received. Mellon customer service representatives are available Monday through Friday between the hours of 5:00 a.m. and 4:00 p.m., Pacific Time (U.S.) at: o 1-888-256-2709 (Calling from within the U.S.) o +201-329-8905 (Calling from outside the U.S.) Approximately one week after the cancellation date, Mellon will send a "Confirmation of Cancellation of Tendered Options and Promise to Grant New Options" to all employees who elected to participate. Mellon will send a "Notice of No Election" to employees who did not elect to participate. These letters will be sent by e-mail to your RadiSys e-mail address. Employees who are on an authorized leave of absence will receive their notice by first-class mail at home. Employees who reside and are employed in Japan will receive this letter in their employee mailbox. Q24. If I choose not to participate, what do I have to do? Q24. Nothing. You do not have to submit an Election Agreement (either online or hard copy) if you do not want to participate in the Exchange Program (i.e., if you want to keep your outstanding options). Q25. What happens to my eligible options if I elect not to participate in the Exchange Program? A25. If you choose not to exchange your options, they will remain outstanding until you exercise your vested shares or they expire by their terms, and they will retain their current exercise price and vesting schedule. Q26. Can I withdraw previously surrendered options? A26. Yes, as long as you withdraw all of the eligible options that you previously elected to exchange before the Exchange Program expires at 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003. You may not withdraw options after the expiration date. If we extend the Exchange Program offering period beyond August 27, 2003, you may withdraw the eligible options that you previously elected to exchange at any time before the extended expiration date of the Exchange Program. Although we intend to promptly accept all eligible options validly elected to be exchanged, if we have not accepted your eligible options by 8:59 p.m., Pacific Time (U.S.), on September 25, 2003, you may withdraw the eligible options that you previously elected to exchange. To withdraw previously surrendered options, you must use the same method you used to elect to participate, as explained in question 22 above: o If you made your election using the Mellon web site, and you later withdraw your election, your previous election will be disregarded. The latest election that you make on the Mellon web site by the expiration date will be the one that we use to determine your participation in the Exchange Program. o If you made your election using a hard copy Election Agreement, you may withdraw your election by completing a new Election Agreement and returning it by mail to the address listed in question 22 above. The latest Election Agreement that Mellon receives by the expiration date will be the one that we use to determine your participation in the Exchange Program. If you wish to obtain a duplicate copy of the Election Agreement in order to change your election, call Mellon at the telephone number listed in Question 23 above. Whether you use the Mellon Web site or a hard copy Election Agreement, your election to withdraw must be RECEIVED by Mellon in accordance with these instructions by 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003. If we extend the Exchange Program offering period beyond that time, you may withdraw your eligible options at any time until the extended expiration date of the Exchange Program. If you withdraw options, you may re-elect to exchange them only by following the steps as outlined in question 22 above. If you wish to obtain a duplicate copy of the Election Agreement in order to change your election, call Mellon at the telephone number listed in Question 23 above. Q27. If I am on an approved leave of absence or go on an approved leave of absence before the Exchange Program expires, can I still exchange eligible options? A27. Yes. If you are an eligible employee on an approved leave of absence or plan to go on an approved leave of absence for any reason before the expiration date of the Exchange Program, you may participate in this program and exchange your eligible options. You must be employed by RadiSys or one of our subsidiaries through the new option grant date in order to receive a new option. If you are on an approved leave of absence and still employed by RadiSys or one of our subsidiaries on the new option grant date, you will receive a new option. (See question 28 below for more information.) Q28. What types of leaves of absence are considered "authorized"? A28. An authorized leave of absence is a leave of absence that has been approved in accordance with policy or practice by RadiSys. Authorized leaves include approved bereavement leave; family medical leave; personal medical leave; jury duty leave; maternity and paternity leave; personal leave; and military leave. Taxes Q29. Will I have to pay taxes if I exchange my options? A29. If you exchange your eligible options for new options, you will not be required under current law to recognize income for U.S. federal income tax purposes either at the time you agree to exchange the option or at the time the new option is granted to you pursuant to the Exchange Program. All new options will be granted as nonqualified stock options. When you exercise a new option, the difference between the exercise price of the new option and the fair market value of the shares subject to the new option on the date of exercise will be considered compensation income for U.S. federal income tax purposes taxable to you. If you are a tax resident of, or subject to tax laws of, a country other than the U.S., the tax consequences of participating in the Exchange Program may be different for you. If you are a resident of Germany, Japan, or the United Kingdom, you should read the discussion in the Offer to Exchange in Section 14 and Schedule B - Guide to International Issues regarding the potential tax consequences in the country in which you are subject to tax. We strongly recommend that all employees consult with their own tax advisor to determine their personal tax consequences of participating in the Exchange Program. If you are a resident of, or subject to the tax laws of, more than one country, you should be aware that there may be other tax and social insurance consequences that apply to you. Program Administration Q30. What happens to options that I surrender for exchange? A30. Options that are accepted for exchange will be cancelled on the cancellation date. Q31. What happens to my outstanding options that are not eligible to be exchanged? A31. The Exchange Program will have no effect on options that are not eligible. Those options will remain outstanding in accordance with, and subject to, their current terms. Q32. Why can't I receive my new options immediately after the cancellation date? A32. By deferring the grant of the new options for at least six months and one day, we believe that we will avoid the impact of certain non-cash accounting charges that would be calculated based on fluctuations in our stock price. (See Section 12) Q33. Is this a repricing? A33. No. The Financial Accounting Standards Board has adopted rules that result in unfavorable accounting consequences for companies that reprice options. If we repriced your options, our potential for profitability in the future could be significantly reduced because we would be required to record a charge against earnings with respect to any future appreciation of the repriced options. Q34. Why can't the Company just grant me more new options without canceling my old options? A34. Because of the large number of underwater options outstanding, a grant of additional options to all RadiSys employees holding underwater options could significantly dilute our stock, which could have a potentially negative impact on our outstanding shares, stock price and earnings per share. Additionally, we have a limited number of options that we may grant without stockholder approval, and our current reserves must be conserved for ongoing grants and new hires. Q35. Will the Company grant options to employees between the first day of the offering period and the cancellation date? A35. No. To avoid any possible adverse accounting consequences, we do not intend to grant options to any employees during the period between July 31, 2003 and March 1, 2004, regardless of whether an employee participates in the Exchange Program. Stock option grants will be made to new hires. Q36. If I elect to participate in the Exchange Program, will I be eligible to receive other option grants before I receive my new options? A36. No. If you elect to participate in the Exchange Program, you cannot receive any other option grants before you receive your new options. We will defer granting you any other options to avoid incurring a compensation expense against our earnings due to accounting rules that could apply to these interim option grants as a result of the Exchange Program. Risk and Other Issues Q37. What happens if I leave RadiSys after surrendering my options? A37. To receive a grant of new options, you must be employed by RadiSys through the new option grant date. RadiSys will grant new options at least six months and one day after the cancellation date. We expect that the new option grant date will be no earlier than March 1, 2004. If, for any reason, you are not employed by RadiSys or one of our subsidiaries on the new option grant date, you will not receive any new options or other compensation in exchange for the options that you surrendered and were subsequently cancelled. Unless otherwise expressly provided by the applicable laws of a non-U.S. jurisdiction, your employment with RadiSys remains "at-will", regardless of your participation in the Exchange Program and can be terminated by either you or RadiSys at any time, with or without cause or notice. Q38. Are there circumstances under which I would not be granted new options? A38. Yes. If for any reason you are no longer an employee of RadiSys or one of our subsidiaries on the new option grant date, you will not receive any new options. Unless otherwise expressly provided by the applicable laws of a non-U.S. jurisdiction, your employment with us or one of our subsidiaries will remain "at-will" regardless of your participation in the Exchange Program and can be terminated by you or RadiSys or one of our subsidiaries at any time, with or without cause or notice. Moreover, even if we accept your eligible options, we will not grant new options to you if we are prohibited from doing so by applicable law. For example, we could become prohibited from granting new options as a result of changes in SEC rules, regulations, or policies; Nasdaq National Market listing requirements; or the laws of a non-U.S. jurisdiction. We do not currently anticipate any such prohibitions. Q39. Will I be required to give up all of my rights under the cancelled options? A39. Yes. Once we have accepted eligible options that you surrender for exchange, your exchanged options will be cancelled and you will no longer have any rights under those surrendered options. We intend to cancel all eligible options accepted for exchange on the cancellation date, which will be no later than the first business day after the Exchange Program expires. We currently expect the cancellation date to be Thursday, August 28, 2003. Q40. What are the conditions of the Exchange Program? A40. Participation in the Exchange Program is completely voluntary. The completion of the Exchange Program is subject to a number of customary conditions that are described in Section 7 of the Offer to Exchange. If any of these conditions are not satisfied, we will not be obligated to accept and exchange any properly tendered eligible options. Prior to the expiration date of the Exchange Program and subject to applicable law, we reserve the right to amend the Exchange Program for any or no reason. Q41. What if another company acquires us in a merger or stock acquisition? A41. Although we are not anticipating any such merger or acquisition, if we merge or consolidate with or are acquired by another entity between the expiration date and the new option grant date, then the resulting entity will be obligated to grant the new options under the same terms as provided in the Offer to Exchange. This applies in the event of a merger or consolidation of RadiSys but not to a merger, divestiture, outsourcing, or consolidation of only a business unit or product line. However, the type of security and the number of shares covered by each new option would be adjusted based on the consideration per share given to holders of options to acquire our common stock that are outstanding at the time of the acquisition. Such new options will have an exercise price at least equal to the fair market value of the acquirer's stock on the new option grant date. As a result of this adjustment, you may receive options for more or fewer shares of the acquirer's common stock than the number of shares subject to the eligible options that you exchange or than the number you would have received pursuant to a new option if no acquisition had occurred. Regardless of any such merger, consolidation or acquisition, the new option grant date will be the first business day that is at least six months and one day after the cancellation date, except where prohibited under local law. Consequently, you may not be able to exercise your new options until after the effective date of the merger, consolidation, or acquisition. If you elect to exchange your options pursuant to the Exchange Program and the merger, consolidation or acquisition occurs after the expiration date but before the new option grant date, you will not be able to exercise your option to purchase our common stock before the effective date of the merger, consolidation, or acquisition. You should be aware that these types of transactions could significantly affect our stock price, including potentially substantially increasing the price of our shares. Depending on the timing and structure of a transaction of this type, you might lose the benefit of any price appreciation in our common stock resulting from a merger or acquisition. The exercise price of any new options granted to you after the announcement of a merger, consolidation or acquisition of RadiSys would reflect any appreciation in our stock price resulting from the announcement, and could therefore exceed the exercise price of your eligible options. This could result in option holders who do not participate in this Exchange Program receiving a greater financial benefit than option holders who do participate. In addition, your new options may be exercisable for stock of the acquirer, not RadiSys common stock, while option holders who decide not to participate in this Exchange Program could exercise their eligible options before the effective date of the merger or acquisition and sell their RadiSys common stock before the effective date. Finally, if another company acquires us, that company may, as part of the transaction or otherwise, decide to terminate some or all of RadiSys' employees before the grant of the new options under this stock option exchange program. Termination of your employment for this or any other reason before the new options are granted means that you will receive neither new options nor any other compensation for your cancelled eligible options. Q42. How should I decide whether to participate? A42. We understand that this will be an important decision for all eligible employees, as the Exchange Program involves risk. The decision to participate must be your personal decision, and will depend largely on your assessment of your existing stock option holdings and your assumptions about the future overall economic environment, performance of our business, and our stock price. Q43. Can RadiSys make any recommendation as to whether I should exchange my eligible options? A43. No. We are not making any recommendation as to whether you should accept the offer to exchange your eligible options. You must make your own decision as to whether or not to accept the offer to exchange. For questions regarding personal tax implications or other investment-related questions, you should talk to your own legal counsel, accountant, and/or financial advisor. Q44. Who can I contact if I have any questions about the Exchange Program or need additional copies of any Exchange Program documents? A44. For additional information or assistance, you should contact Mellon Investor Services. Customer service representatives are available Monday through Friday from 5:00 a.m. to 4:00 p.m., Pacific Time (U.S.) at: o 1-888-256-2709 (Calling from within the U.S.) o +201-329-8905 (Calling from outside the U.S.). If you require a translator, a customer service representative will connect you with one and answer any questions you have over the phone. This and other educational tools related to the Exchange Program are provided as general information and do not take the place of the Offer to Exchange filed with the Securities and Exchange Commission as part of our Schedule TO-I. Employees should consult the Offer to Exchange for specific details of the Exchange Program. EX-99.(A)(1)(D) 6 e300526_ex99-a1d.txt WEB SITE ELECTION AND CONFIRMATION FORMS. - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- Welcome to the RadiSys Stock Option Exchange Program web site. This web site was designed by Mellon Investor Services and RadiSys, and is dedicated specifically to RadiSys. From this web site, you will be able to: - - Access information to help you understand the details of the RadiSys Stock Option - - View your RadiSys stock option history and exchange ratio for stock options - - Make your election if you choose to participate in the Exchange Program. - - Print your Election Confirmation should you choose to participate in the Exchange - - Log back on to verify or to change your election decision. Please click the "Continue" button below to log into the web site. -------- Continue -------- - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- Enter your 9 digit Personal Identification Number (PIN) that you received via e-mail. Please do not enter spaces. ----------- ----------- | | | ------------------------------------ If user enters an invalid PIN number more than three times the PIN number will be locked out. ------------------------------------ -------- Continue -------- - -------------------------------------------------------------------------------- If you have questions, contact the Mellon call center, Monday through Friday between the hours of 5:00 a.m. to 4:00 p.m. Pacific Time at: 888-256-2709 (From within the U.S.) 201-329-8905 (From outside the U.S.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- Enter your 3- or 4-digit employee ID number; don't enter leading zeros. For example, if your employee number if 001322, just enter 1322. ----------- ---- ----------- | | If you do not know your employee ID number: | | U.S. Employees: Look at your most recent paycheck voucher, available | from the ProBusiness Payroll Work Center Web site at | http://workcenter.probusiness.com | |-| Employees Outside the U.S.: Look at your most recent paycheck voucher. | | | | Enter your birth date as day/month/year | | | | ----- ----- ----- | | DD: MM: YYYY: ---- | ----- ----- ----- | | -------- | Continue ---------------------------------- -------- - -------------------------------------------------------------- User can input multiple times but will not let them proceed if there is no match. Inputs are not a lock out feature - -------------------------------------------------------------- - -------------------------------------------------------------------------------- If you have questions, contact the Mellon call center, Monday through Friday between the hours of 5:00 a.m. to 4:00 p.m. Pacific Time at: 888-256-2709 (From within the U.S.) 201-329-8905 (From outside the U.S.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- --------------------------- FAQ and Overview HTMLS will ------------------------| reflect "Plan B Versions" | --------------------------- | | The offer to participate in RadiSys' Stock Option Exchange Program (the | "Exchange Program") expires at 9:00 p.m. Pacific Time on Wednesday, | August 27, 2003. | | ------------------- | Example of html pop | out on page 13. -------| | ------------------- | | | | 1. Click on the links below to view details on RadiSys' | | Exchange Program: | | | | o Program Overview | | o Frequently Asked Questions --------------------------| | |--------- o Significant Events Calendar | | o Guide to International Issues -----------------------| | o Offer to Exchange (219K, pdf.) ---------------------------------| | | | 2. Press Continue to: | | | | o View your RadiSys stock option history and exchange ratio for stock | | options eligible for exchange under the Exchange Program. | | | | o Make your election if you choose to participate in the Exchange | | Program. | | | | o View your Summary of Election if you previously submitted an Election | | Agreement from the web site. | | | | o Verify or change your election decision. | | | | -------- | | Continue | | -------- | | | | -------------------------------------------- | |------------- When user clicks on link, a separate browser | box will pop out to that html document. | -------------------------------------------- | | - ------------------------------------------------------------------------------ | If you have questions, contact the Mellon call center, Monday through Friday | between the hours of 5:00 a.m. to 4:00 p.m. Pacific Time at: | | 888-256-2709 (From within the U.S.) | 201-329-8905 (From outside the U.S.) | - ------------------------------------------------------------------------------ | | ------------------------------- | When user clicks on link, a PDF ----------------------| browser box will pop out. ------------------------------- - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- Hello [Jane]; Here is the information we have for you. Name and Address: [Full Name] [Address] [E-mail] If you have a change of home address: U.S. Employees: Send an e-mail to stacie.anderson@radisys.com Employees Outside the U.S.: Send an e-mail to elizabeth.yardley@radisys.com From this page, you can view your entire stock option grant history as of July 31, 2003. Please note that all of your options, including options that are not eligible for exchange under the Exchange Program, are shown below. It may be helpful to take into account your total stock option grant history as you consider whether or not to exchange eligible options for a predetermined number of new options that we anticipate will be granted no earlier than Monday, March 1, 2004, and the exercise price of which will be equal to the closing price of shares of RadiSys common stock on the new option grant date in accordance with the Exchange Program terms and conditions. The predetermined number of new options you will receive depends on the exercise price of the eligible options you surrender. Exchange Ratio (Calculated based upon the closing price of shares of RadiSys common stock on Wednesday, July 30, 2003): $15.46 The number of new options that you may receive in exchange for your eligible options depends upon the exercise price of your eligible options.
- ---------------------------------------------------------------------------------------------------------- If your eligible options have an exercise Then, if you authorize a surrender of eligible price of: options in exchange for new options: - ---------------------------------------------------------------------------------------------------------- $20.00 - $34.99 1.40 options will be cancelled and replaced with 1 option - ---------------------------------------------------------------------------------------------------------- $35.00 or higher 2.00 options will be cancelled and replaced with 1 option - ----------------------------------------------------------------------------------------------------------
If you choose to participate in the Exchange Program, you must cancel all (but not less than all) eligible options shown below (excluding those shown as "Ineligible") and exchange them for new options as shown in the last column. - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------- New Grant if Options Option Grant Options Exercise Options Outstanding Grant # Date Granted Price Outstanding * Exchanged - --------------------------------------------------------------------------------------------- 123658 7/12/1999 2,125 $27.25 3,250 2,322 - --------------------------------------------------------------------------------------------- 236985 5/14/1996 2,125 $12.25 3,250 Ineligible - ---------------------------------------------------------------------------------------------
*This number is the basis for applying the exchange ratio to arrive at the number of new options that will be granted under the terms of the Exchange Program should you elect to participate. Options outstanding are options that have not been exercised, and includes both vested and unvested options. If you have options eligible for exchange and if you elect to exchange your options outstanding, you will cancel [x.xx] options. You will be granted [x.xx ] new options, in accordance with the terms and conditions of the Exchange Program. We anticipate that the new options will be granted no earlier than Monday, March 1, 2004. These new options will be subject to a new vesting schedule (see the Stock Option Exchange Program Frequently Asked Questions for details) and will have a term of seven years. If you want to see additional information associated with each of the stock option grants shown above, you can access your account from the E*TRADE OptionsLink web site at www.optionslink.com. From the OptionsLink web site, you can view the number of options that are vested and exercisable, and the expiration date of each stock option. To access the web site, you will need your OptionsLink ID and Password. Call E*TRADE at 800-838-0908 if you don't have this information or if you need assistance logging onto the web site. If you have questions about the information shown on your E*Trade OptionsLink account, contact our stock administrator, EquitEase, Monday - Friday from 8:00 a.m. - 5:00 p.m. Pacific Time at 877-791-8981. -------- Continue -------- - -------------------------------------------------------------------------------- If you have questions, contact the Mellon call center, Monday through Friday between the hours of 5:00 a.m. to 4:00 p.m. Pacific Time at: 888-256-2709 (From within the U.S.) 201-329-8905 (From outside the U.S.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- ELECTION AGREEMENT AUTHORIZATION TO EXCHANGE ELIGIBLE OPTIONS I understand that by clicking on the "Exchange My Options" button below, I am authorizing the cancellation of [x.xx] options, and I will be granted [x.xx] new options, in accordance with the terms and conditions of the Offer to Exchange, Exchange Program Overview, and Exchange Program Frequently Asked Questions. - -------------------------- -------------------------- Do Not Exchange My Options Do Not Exchange My Options - -------------------------- -------------------------- | | | | | | - ---------------------------------- ---------------------------------- To Screen7 if all your grants To Screen 7 if all your grants are are ineligible or Screen 9 if not. ineligible or to Screen 8 if not. - ---------------------------------- ---------------------------------- If you are an employee who resides in Germany and elect to exchange options under the Exchange Program, local regulations require that you sign a paper election form. Please do not make your election from this web site. A paper election form was sent to you via first class mail (to your home address) on July 31, 2003. Please follow the mailing instructions shown on the paper election form. - -------------------------------------------------------------------------------- If you have questions, contact the Mellon call center, Monday through Friday between the hours of 5:00 a.m. to 4:00 p.m. Pacific Time at: 888-256-2709 (From within the U.S.) 201-329-8905 (From outside the U.S.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- You do not have options eligible for exchange under the Exchange Program. ------ Logout ------ - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- ELECTION CONFIRMATION Please print out this page for your records. You have authorized the following election. [TIME & DATE] Name and Address: --------------------------- [Full Name] FAQ and Overview HTMLS will [Address] reflect "Plan B Versions" [E-mail] --------------------------- Your current election is reflected below. Please be advised that you cannot change your election after the Exchange Program expires at 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003. However, you may return to this web site to make a change at any time before the Exchange Program expires. If you elect to exchange your options, you will receive a "Confirmation of Cancellation of Tendered Options and Promise to Grant New Options" at your RadiSys e-mail address or by mail after the Exchange Program expiration date.
- ------------------------------------------------------------------------------------------------------ Options Outstanding to New Options to Option Grant # Grant Date Exercise Price be Cancelled be Granted - ------------------------------------------------------------------------------------------------------ 123658 7/12/1999 $27.25 3,250 2,322 - ------------------------------------------------------------------------------------------------------ 236985 5/14/1996 $12.25 3,250 Ineligible - ------------------------------------------------------------------------------------------------------ You have elected to cancel 3,250 options. You will be granted 2,322 new options* - ------------------------------------------------------------------------------------------------------ *The exercise price of the new options will be equal to the closing price of shares of RadiSys common stock on the new option grant date, in accordance with the terms and conditions of the Exchange Program. - ------------------------------------------------------------------------------------------------------
Click on the links below to view details on RadiSys' Exchange Program: Program Overview Frequently Asked Questions Significant Events Calendar Guide to International Issues Offer to Exchange (219K, pdf) You may log back into this web site at any time until the expiration of the offer to exchange at 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003. Logout - -------------------------------------------------------------------------------- If you have questions, contact the Mellon call center, Monday through Friday between the hours of 5:00 a.m. to 4:00 p.m. Pacific Time at: 888-256-2709 (From within the U.S.) 201-329-8905 (From outside the U.S.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- ELECTION CONFIRMATION Please print out this page for your records. You have Elected not to participate in the Exchange Program. [TIME & DATE] Name and Address: --------------------------- [Full Name] FAQ and Overview HTMLS will [Address] reflect "Plan B Versions" [E-mail] --------------------------- Your current election is reflected below. Please be advised that you cannot change your election after the Exchange Program expires at 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003. However, you may return to this web site to make a change at any time before the Exchange Program expires. If you elect to exchange your options, you will receive a "Confirmation of Cancellation of Tendered Options and Promise to Grant New Options" at your RadiSys e-mail address or by mail after the Exchange Program expiration date.
- ------------------------------------------------------------------------------------------------------- Options New Grant If Options Option Grant # Grant Date Exercise Price Outstanding Outstanding Exchanged* - ------------------------------------------------------------------------------------------------------- 123658 7/12/1999 $27.25 3,250 2,322 - ------------------------------------------------------------------------------------------------------- 236985 5/14/1996 $12.25 3,250 Ineligible - ------------------------------------------------------------------------------------------------------- You have elected to cancel 3,250 options. You will be granted 2,322 new options* - ------------------------------------------------------------------------------------------------------- *The exercise price of the new options will be equal to the price of shares of RadiSys common stock on Monday, March 1, 2004, in accordance with the terms and conditions of the Exchange Program. - -------------------------------------------------------------------------------------------------------
*You have elected to cancel 0,000 options. You will be granted 0,000 new options. You have elected not to participate in the Exchange Program, and you will not be granted any new options. Your options will remain outstanding until they become vested and are exercised, or until they expire by their terms and conditions of grant and they will retain their current exercise price and vesting schedule. Click on the links below to view details on RadiSys' Exchange Program: Program Overview Frequently Asked Questions Significant Events Calendar Guide to International Issues Offer to Exchange (219K, pdf) You may log back into this web site at any time until the expiration of the offer to exchange at 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003. ------ Logout ------ - -------------------------------------------------------------------------------- If you have questions, contact the Mellon call center, Monday through Friday between the hours of 5:00 a.m. to 4:00 p.m. Pacific Time at: 888-256-2709 (From within the U.S.) 201-329-8905 (From outside the U.S.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- You have logged out of the RadiSys Stock Option Exchange Program web site. - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- Welcome back, [Jane]. ------------------------------------------- When revisiting the sight, this Screen will Name and Address: display after Screen 4 [Full Name] ------------------------------------------- [Address] | [E-mail] | | You visited the RadiSys site on [Date of previous election]. Our records indicate that you do not have any grants eligible for exchange. Please see the table below for details. You may logout by clicking on the "Logout" button below.
- --------------------------------------------------------------------------------------------------- Option Grant # Grant Date Exercise Price Options New Grant If Options Outstanding Outstanding Exchanged - --------------------------------------------------------------------------------------------------- 123658 7/12/1999 $14.99 3,250 Ineligible - --------------------------------------------------------------------------------------------------- 236985 5/14/1996 $12.96 3,250 Ineligible - ---------------------------------------------------------------------------------------------------
You may log back into this web site at any time until the expiration of the offer to exchange at 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003. Ineligible ------ Welcome Back Logout Screen ------ - -------------------------------------------------------------------------------- If you have questions, contact the Mellon call center, Monday through Friday between the hours of 5:00 a.m. to 4:00 p.m. Pacific Time at: 888-256-2709 (From within the U.S.) 201-329-8905 (From outside the U.S.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) - -------------------------------------------------------------------------------- [LOGO] RadiSys. Stock Option Exchange Program - -------------------------------------------------------------------------------- SUMMARY OF ELECTION Welcome back, [Jane]. ------------------------------------------- When revisiting the sight, this Screen will Name and Address: display after Screen 4 [Full Name] ------------------------------------------- [Address] | [E-mail] | | You made the following election on [Date of previous election]. To change your election, press the "Change My Election" button below. If you do not wish to change your election, you may logout by clicking on the "Logout" button below.
- ----------------------------------------------------------------------------------------------- Options Outstanding to New Options to Option Grant # Grant Date Exercise Price be Cancelled be Granted - ----------------------------------------------------------------------------------------------- 123658 7/12/1999 $27.25 3,250 2,322 - ----------------------------------------------------------------------------------------------- 236985 5/14/1996 $12.25 3,250 Ineligible - ----------------------------------------------------------------------------------------------- You have elected to cancel 3,250 options. You will be granted 2,322 new options* - ----------------------------------------------------------------------------------------------- *The exercise price of the new options will be equal to the closing price of shares of RadiSys common stock on the new option grant date, in accordance with the terms and conditions of the Exchange Program. - -----------------------------------------------------------------------------------------------
You may log back into this web site at any time until the expiration of the offer to exchange at 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003. ------ ------------------ Logout Change My Election ------ ------------------ | ---------------------------------- | Goes back to "Hello election page" -------------| ---------------------------------- - -------------------------------------------------------------------------------- If you have questions, contact the Mellon call center, Monday through Friday between the hours of 5:00 a.m. to 4:00 p.m. Pacific Time at: 888-256-2709 (From within the U.S.) 201-329-8905 (From outside the U.S.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Screen 1 [LOGO] Mellon Mellon Investor Services A Mellon Financial Company(SM) Guide to International Issues From this page, you can access a summary of tax consequences associated with the cancellation of outstanding options in exchange for the grant of new options for each country shown. These summaries are general in nature and do not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor are they intended to be applicable in all respects to all categories of option holders. Please note that tax laws change frequently and, occasionally, on a retroactive basis. You are advised to seek appropriate professional advice as to how the tax and other laws in your country apply to your specific situation before you elect to participate in the Stock Option Exchange Program. Germany United Kingdom --------------------------------------| | United States | | ---------------------------------------------- Links are part of this html and will drop down into those sections. ---------------------------------------------- Tax Sample, Page 13 EX-99.(A)(1)(E) 7 e300526_ex99-a1e.txt HARD COPY ELECTION AGREEMENT. Exhibit (a)(1)(E) Stock Option Exchange Program Election Agreement [Full name] [Address] [Address] [Employee ID#] Dear Employee: If you would like to participate in (or withdraw from) the Stock Option Exchange Program (the "Exchange Program"), you must complete, sign, and return this form to Mellon Investor Services ("Mellon"). If you elect to participate in this voluntary Exchange Program, the number of new options you will receive in exchange for your eligible options depends upon the exercise price of your eligible options, as follows: Exchange Ratio (calculated based upon the closing price of shares of RadiSys common stock on Wednesday, July 30, 2003): $15.46
- ------------------------------------------------------------------------------------------------------------------ If your eligible options have an exercise Then, if you authorize a surrender of eligible options in exchange price of: for new options: - ------------------------------------------------------------------------------------------------------------------ $20.00 - $34.99 1.40 options will be cancelled and replaced with 1 option - ------------------------------------------------------------------------------------------------------------------ $35.00 or higher 2.00 options will be cancelled and replaced with 1 option - ------------------------------------------------------------------------------------------------------------------
Below is your entire stock option grant history as of July 31, 2003. Please note that all of your options, including options that are not eligible for the Exchange Program, are shown below. (It may be helpful to take into account your total stock option grant history as you consider whether or not to participate in the Exchange Program.) If you elect to participate in the Exchange Program, you must cancel all eligible options shown below (excluding those shown as "Ineligible") and exchange them for new options as shown in the last column.
- ---------------------------------------------------------------------------------------------------------- Option Grant Date # of Options Exercise # of Options New Grant if Options Outstanding Grant #* Granted Price Outstanding** Exchanged - ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- * If you want to see additional information associated with each of the option grants shown above, you can access your account from the E*TRADE OptionsLink web site at www.optionslink.com. From this web site, you can view the number of options that are vested and exercisable, and the expiration date of each option grant. To access the Web site, you will need your OptionsLink ID and Password. Call E*TRADE at 800-838-0908 if you don't have this information or if you need assistance logging onto the Web site. - ---------------------------------------------------------------------------------------------------------- ** This number is the basis for applying the exchange ratio to arrive at the number of new options that will be granted under the terms of the Exchange Program should you elect to participate. Options outstanding are options - ----------------------------------------------------------------------------------------------------------
If you have eligible options and you elect to participate in the Exchange Program, you will cancel [XXX] options. You will be granted [XXX] new options, in accordance with the terms and conditions of the Exchange Program. These new options will be subject to a new vesting schedule (see the Stock Option Exchange Program Frequently Asked Questions for details) and will have a term of seven years. The exercise price of the new option grant will be equal to the closing price of shares of RadiSys common stock on the new option grant date, which we currently expect to be no earlier than Monday, March 1, 2004, in accordance with the Exchange Program terms and conditions. Authorization to Exchange Eligible Options I understand that by checking the "I ELECT" box and signing my name below, I am authorizing the cancellation of [XXX] options, and I will be granted [XXX] new options, in accordance with the terms and conditions of the Stock Option Exchange Program Tender Offer Statement, the Stock Option Exchange Program Overview, and the Stock Option Exchange Program Frequently Asked Questions. I understand that I will lose my rights to all surrendered options that are cancelled under the Exchange Program. My cancelled options will not be reinstated, and I will not receive new options if my employment with RadiSys ends for any reason before the new option grant date, which is expected to be no earlier than March 1, 2004. I also acknowledge that I will be unable to withdraw this Election Agreement after 9:00 p.m. Pacific Time (U.S.), on Wednesday, August 27, 2003. I understand that by checking the "I WITHDRAW" box and signing my name below, I am authorizing the withdrawal of my previous election, and I will maintain all my eligible options. I also acknowledge that I will be unable to re-elect to participate after 9:00 p.m. Pacific Time (U.S.), on Wednesday, August 27, 2003. I understand that if I am an employee who resides in Germany or Japan, I must return a signed copy of this Election Agreement to Mellon to validly participate in the Exchange Program. Even if I make an election online on the Mellon web site, it will not be valid--only the election I make by mailing this Election Agreement will be valid. |_| I ELECT to participate in the Exchange Program and cancel all my eligible option grants listed above. |_| I WITHDRAW my previous election to participate in the Exchange Program and retain all my eligible option grants. - ---------------------------------- ------------------------ Employee Signature Date - ---------------------------------- Employee Name (please print) Please keep a copy of this Election Agreement for your records and send the original to Mellon, using one of the following delivery methods: By Fax: By Mail: By Overnight Courier: Mellon Investor Services LLC Mellon Investor Services LLC Mellon Investor Services LLC +201-329-8456 Attn: Reorganization Dept. Attn: Reorganization Dept. P.O. Box 3301 85 Challenger Road South Hackensack, NJ 07606 Mail Drop-Reorg Ridgefield Park, NJ 07660
In order for your election to be valid, your election must be RECEIVED by Mellon in accordance with these instructions by 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003, unless the offer period is extended by RadiSys. You are responsible for ensuring the successful delivery of your Election Agreement. Please allow for enough delivery time based on the method of delivery that you choose to ensure we receive your Election Agreement on time. This is a one-time offer, and we will strictly enforce the expiration date. We reserve the right to reject any options that are not in the appropriate form or that are unlawful to accept. If you have any questions, call Mellon Monday through Friday, from 5:00 a.m. to 4:00 p.m. Pacific Time (U.S.) at: 888-256-2709 (Calling from within the U.S.) +201-329-8905 (Calling from outside the U.S.) EX-99.(A)(1)(F) 8 e300526_ex99-a1f.txt RADISYS HR DEPARTMENT PRESENTATION MATERIALS. Exhibit (a)(1)(F) RadiSys Corporation Stock Option Exchange Program RadiSys Human Resources Department Presentation Materials Slide 1 RadiSys Stock Option Exchange Program Meetings Held August 4 - 15, 2003 Speaker Notes: Good Morning/Afternoon/Evening, I'm Marlene Barclay; I work in HR as the Comp/Benefits/HRIS Manager. I would like to welcome you to today's presentation, RadiSys Stock Option Exchange Program. Last week/two weeks ago, Glenn Splieth sent an email to all employees, announcing the Stock Option Exchange Program, along with a link to a web site developed by both Mellon and RadiSys. From the web site, you have access to: a Program Overview, FAQ, Guide to International Issues (that address specific tax issues that apply to each country, the Offer to Exchange, and Significant Events Calendar and you can view your entire RadiSys stock options exchange history and exchange ratios for options eligible for exchange under the Program The objective of today's presentation is to provide you with some basic information about stock options and to cover key features of the Exchange Program. I should say up front that there are strict SEC regulations governing this type of program, and there may not be much I can add to the material I'll cover today. However, you do have a number of resources for getting the information you need to determine whether to participate in the program if you are eligible to do so. Slide 2 Agenda Stock Option Plan Basics: - Total Compensation at RadiSys - Stock Option Characteristics - Value of an Option - Vesting of an Option - Expiration of Stock Option Grants - Exercising Your Vested Options - Stock Option Plan Fundamentals Seminar - For More Information About Your Stock Option Grants - Resource for Tax Planning Assistance Speaker Notes: Here are two agendas: Stock Option Basics, and Stock Option Program Details Slide 3 Agenda Stock Option Exchange Program (the "Exchange Program") Details: - What is the Exchange Program? - Why Offer a Stock Option Exchange Program? - Timing of Exchange Program Launch Date, Grant Date of New Options - Who's Eligible to Participate - SEC Restrictions - Key Exchange Program Design Features - Tax Considerations - Risks of Participating in the Exchange Program - How to Participate in The Exchange Program - Exchange Program Key Dates - Where to Get More Information Slide 4 Stock Option Plan Basics Speaker Notes: Before I talk about the Exchange Program, it may help if I spend a few minutes talking about why RadiSys thinks stock option plans are important, and how stock options work. I'm not going to spend a lot of time on this topic since we held a comprehensive seminar for employees several weeks ago. The seminar, titled Stock Option Plan Fundamentals, covered a lot of details about stock options - stock option characteristics, how to turn stock option grants into cash, and tax planning strategies. At the end of this section of today's meeting, I'll point you to the HR Toolkit, where we have published the slides from the presentation. Slide 5 Total Compensation at RadiSys o RadiSys' Total Compensation package represents a significant investment by the Company in its employees o Strategy is to offer you an overall set of comprehensive employment programs that are competitive among high tech employers within our revenue size o Total Compensation includes: - - Cash Compensation (Base Salary, Profit Sharing Plan, Recognition and Reward Programs) - - Employee Benefit Programs (Group Insurance Plans, 401(k) Plan, ESPP, Time Off, Special Services) - - Stock Option Plan - - Learning Opportunities (internal training, seminars, tuition reimbursement) o Stock Options play an important role in our compensation philosophy Speaker Notes: Before I talk about the two major agenda items, I'd like to put some context around how stock options fit into our Total Compensation philosophy. RadiSys' success depends upon our employees. For that reason, it's important that we provide employees with competitive programs to help us retain and motivate the talent we already have and encourage new recruits to the business. When viewed in their entirety (cash compensation, benefit programs and services, learning opportunities), our Tcomp package represents a significant investment by RadiSys in its employees. Our Stock Option Plan is an important component of our Total Compensation program for employees. They are intended to encourage each of us to act as owners and to share in the value they create for RadiSys. Given the downturn in the economy over the last few years, many of us hold stock options whose exercise prices (the price that we would have to pay if we exercised our option to purchase shares of stock) are significantly higher than the current market price of our stock, commonly referred to as "underwater" options. As you will learn today, the Stock Option Exchange Program is designed to provide our employees the opportunity to replace underwater options with options that may have greater potential to increase in value over time. We believe this will create better performance incentives for eligible employees and maximize shareholder value. Slide 6 Option Characteristics o An option is the right to purchase a specific number of shares at a predetermined price within a specific time period o Options are granted by the Board of Directors, a designated group of individuals or an appointed committee o All options are granted pursuant to a Stock Option Plan under which a pool of shares has been authorized for issuance Speaker Notes: All new hires receive stock option grants; and, as part of our annual performance appraisal cycle, employees may also receive additional stock option grants under our refresher program. Slide 7 Value of an Option o Based upon the exercise method followed by nearly 100% of employees (cashless, or same-day sale), there is no cash investment required by you in order to turn your vested stock options into cash compensation (subject to applicable tax rules) o Stock options represent a means by which some of the economic benefits of stock ownership can be obtained without the need for you to make a cash investment at the onset o The fundamental economic benefit of an option lies in the potential increase in the fair market value (FMV) of the Company's common stock over the option price at which you may purchase the shares Speaker Notes: I'll talk about the two types of exercise methods in a few minutes. Exercising your vested stock options are the way in which you turn the options into cash. What you need to know is that based upon the most common exercise method (cashless exercise, or same-day sale; they are synonymous), there is no cash investment by you in order to turn your vested stock options into cash compensation. Stock options provide you with the opportunity to share in RadiSys' sustained financial success over the long term. The higher our stock price rises in relationship to the price at which your options are granted, the more your vested options are worth to you should you exercise them. Slide 8 Value of an Option - Example Grant Date: January 28, 2003 Number of Shares Granted: 500 Exercise Date: February 1, 2004 Number of Shares Vested: 165 Option Grant Price: $7.04 FMV on Exercise Date*: $15.00 o The employee exercises (same-day sale) all vested shares (165 shares) o Option Value: $2,475.00 (165 x $15.00) o Option Cost: $1,161.60 (165 x $7.04) o The pre-tax gain on the same-day sale of your vested shares is: $1,313.40 * The projected FMV shown is for illustration purposes only; illustration does not include tax obligations associated with exercise since that will vary by individual Speaker Notes: This example illustrates how an employee turns a vested stock option into cash. Slide 9 Vesting of an Option o Vesting is the method by which a specified number or percentage of shares of an option grant become available for exercise (purchase) o Vesting schedules are included in the Notice of Grant of Stock Options o There is no obligation to exercise the stock options once vested. The vested options will accumulate and remain exercisable until exercised or until the option expires; if you leave RadiSys, you have 30 calendar days following the last day worked to exercise vested/unexercised options (90 calendar days for Texas Micro stock options that were converted to RadiSys stock options) o Vesting schedules and expiration dates vary based upon the type of stock option granted and when it was granted; this information is available from your E*TRADE OptionsLink account Slide 10 Vesting Schedule o The vesting schedule in effect is based upon the option grant date; the three most common vesting schedules are as follows: o Employees hired prior to January 24, 2001 (36-Month Vesting Schedule): - New Hire Stock Option Grants: Options vest in three equal installments - 1/3 on the first anniversary date following the grant date; 1/3 on the second anniversary, and the remaining 1/3 on the third anniversary date. - Refresher Stock Option Grants: Vest 50% of the total shares granted on the second anniversary date following the granting of the option; remaining 50% of the total shares granted vest on the third anniversary following the granting of the option. o Employees hired on/after January 24, 2001 (36-Month Vesting Schedule): - New Hire and Refresher Stock Option Grants: The option vests approximately 33% of the total shares granted on the first anniversary date following the grant date, and an additional 2.8% of the total shares granted vest each month thereafter Slide 11 Expiration of Stock Option Grants o All stock options expire o Expiration date is determined by RadiSys at the time of grant; generally options expire 5, 7, or 10 years from the date of grant Speaker Notes: When your stock option grant expires, it goes away. You no longer have a right to exercise it. Most grants made since Jan. `01 have a 7-year term; grants made prior to that vary in terms - either 7 or 10 year term One of the chief reasons that RadiSys is offering the Exchange Program to employees is because many employees hold stock options whose exercise prices are significantly higher than the current market price of our stock, commonly referred to as "underwater" options. That means that the FMV of our stock today is lower than the exercise (grant) price. For example, many of us hold options that were granted at $42, $53, $57 per share, and depending upon the grant date, they will expire in the next several years. If our price doesn't reach those levels prior to the expiration date, most employees would not exercise an underwater option, and a valuable part of our compensation package goes away. Slide 12 Exercising Vested Stock Options o Exercise is the term used to describe the method by which an Optionee exchanges their option shares for stock or cash. o The two most common exercise methods are: o Cash Exercise - Exercise of the option to purchase shares with the intention of holding the stock for sale at a later date o Cashless Exercise - Simultaneous purchase and sale of shares (same-day sale) Speaker Notes: A cash exercise requires the outlay of cash equal to the exercise (grant) price x number of shares to be exercised. So, if you wanted to exercise and hold 100 vested shares granted at $10, you would pay a broker $1,000 and would then own the shares, the same as if you purchased them on a retail basis. Most people don't take this approach, most do what's called a cashless exercise. There is no outlay of cash. You simultaneously purchase and sell the shares, and receive payment equal to the difference between the grant price and the sale price. Recall the example I used earlier - slide # 8. Slide 13 Stock Option Plan Fundamentals Seminar o Series of Personal Financial Planning seminars announced last month, with a focus on Stock Option Plan, 401(k) Plan, and ESPP o Last month, "Stock Option Plan Fundamentals" seminar held; was available to all U.S. employees o Seminar designed to help employees understand the value of stock options and tax planning strategies o Slides posted to HR Toolkit (Communities>HR>HR Toolkit>Compensation>Stock Option Plan) o Information on the meeting schedule for the 401(k) Plan and ESPP seminars will be provided in August/September Slide 14 For More Information About Your Stock Option Grants . . . o Visit the E*TRADE OptionsLink web site: www.optionslink.com (you'll need your account number and personal identification number) o Call an E*TRADE Customer Service Representative: 800-838-0908 5:00 a.m. to 6:00 p.m. Pacific Time, Monday through Friday o Send an e-mail to E*TRADE: optionslink@etrade.com o Call EquitEase, RadiSys' stock administrator: 877-791-8981 8:00 a.m. - 5:00 p.m. Pacific Time, Monday through Friday Speaker Notes: If you have visited the Mellon web site, you will see information about your entire stock option grant history- (grant date, number of options (or shares) granted, exercise (or grant) price, and # of options outstanding. For those options eligible for exchange under this program, the new option grant if eligible options are surrendered and exchanged has already been calculated and displayed for each option grant. I'll be talking more about the exchange ratios and examples to illustrate the application of the exchange ratio later in the presentation. Let me pause to define the term "outstanding", since this is the basis for applying the exchange ratio to arrive at the number of new options that will be granted under the terms of the Exchange Program should you elect to participate. Options outstanding are options that have not been exercised (in other words, you have never executed a cashless or cash exercise of your options), and includes both vested and unvested options. I encourage you to also visit your E*TRADE OptionsLink account to view other information that may help you make a decision to participate, or to not participate, in the Exchange Program. Your OptionsLink account will display, for each and every grant, the following: - number of vested shares - number of vested shares that are exercisable - vesting schedule (not the detail you might expect; call EquitEase if you want to know the specific vesting schedule that applies to your grant) - expiration date Slide 15 Resources for Tax Planning Assistance > Working Solutions Legal/Financial Plus Resource and Referral Service: Call 800-358-8515, 24 hours a day/7 days a week or visit Web site @ www.todayslife.com - PIN is 6161 > WS won't provide tax advice, but can help you locate a tax advisor that meets criteria specified by you - i.e. cost, location, specific expertise you need Speaker Notes: Pick up brochure Slide 16 Stock Option Exchange Program Details Slide 17 What is the Exchange Program? Voluntary opportunity to exchange outstanding * RadiSys stock options granted under our 1995 Stock Incentive Plan and 2001 Nonqualified Stock Option Plan with exercise prices that were higher than the closing price of RadiSys stock on Wednesday, July 30, 2003 ("underwater" options) with a lesser number of new options that may have a greater potential to increase in value over time. The new option grant is currently expected to be made no earlier than March 1, 2004. * "outstanding" options are options that have not been exercised, and includes both vested and unvested options Speaker Notes: THIS IS NOT A REPRICING. A Stock option repricing is when a company reduces the grant price on an outstanding stock option grant. Under an exchange program, employees can voluntarily cancel outstanding stock options and receive a replacement grant for a lesser number of new options to be granted at a future date, which I'll be discussing later in the presentation. Slide 18 Why Offer An Exchange Program o The Shareholders, Board of Directors, and the Executive Team want employees to experience the financial rewards of increasing shareholder value o Stock options are a component of our Compensation philosophy o Close to 40% of our employee options outstanding have a grant price at or at/above $20.00/share o An Exchange Program reduces stock option overhang (total number of stock option shares outstanding + options available for grant/total number of RadiSys common stock shares outstanding), a key measure for Shareholders Speaker Notes: As mentioned earlier, stock options are an important component of RadiSys' Total Compensation strategy for employees. They are intended to encourage employees to act as owners and to share in the value they help create for the Company. Many of our option grants were made when the economy was strong and the stock market was much stronger. For example, in early 2000, options were being granted at or above $40/share. Recently, our stock has been trading at below $16/share. In fact, as the slide states, close to 40% of our employee options outstanding have an exercise price at/above $20/share. Due to market conditions, many of the outstanding stock options held by employees are underwater, meaning that the exercise prices of the stock options are greater than the current market price of our common stock. Underwater stock options result in a waste of a valuable resource/component of our Compensation philosophy since they may have little or no chance of ever being exercised. From a shareholder perspective, we chose to make this offer instead of simply granting more options because a key measure for our shareholders is higher than it should be. - - Our overhang rate is at around 38%. Overhang is calculated by dividing total option shares outstanding + total stock options available for grant by the total number of RS shares outstanding (17,800,000). Our target overhang rate is to be around 25%. - - Many of the currently outstanding options will effect RadiSys' overhang for the life of the stock option because they may have little or no chance of ever being exercised. - - We have a limited number of options that we may grant without shareholder approval, therefore, our current reserves must be conserved for ongoing grants and new hires. If we use them up and don't address our overhang percentage, s/h may not approve a future request to replenish the pool. Slide 19 Timing of Exchange Program, Grant Date of New Options o Under published rules of the U.S. Financial Accounting Standards Board, RadiSys would be required to recognize significant charges on our financial statements if: 1. Effective date of Exchange Program was sooner than six months and one day following the most recent date on which stock option grants made to existing employees (on January 28, 2003, RadiSys granted refresher stock option grants to eligible employees). 2. Effective date of new option grants is sooner than six months and one day after the date surrendered options cancelled (surrendered option grants to be cancelled on August 28, 2003). o If we commenced the Exchange Program earlier than July 31, 2003 or if we granted new options before March 1, 2004, our potential for profitability in the future would be significantly reduced because we would be required to record charges against earnings Speaker Notes: By way of summary, if RadiSys didn't adhere to the rules described in this slide, grants made this past January, 2003 and new option grants to be made to employees who surrender options under this program would have to be treated as a variable expense to earnings, which means that we would be required to record the non-cash accounting impact of increases in our stock price as a compensation expense; this treatment would have to continue until options were exercised or expired. The higher the market value of our shares, the greater comp expense we would have to record. This would have a negative impact on our potential for profitability in the future. Slide 20 Who's Eligible to Participate o All employees with eligible options (with an exercise price of $20.00 or more) are eligible, with the exception of: - Members of Board of Directors, Vice-Presidents and Executive Officers - Employees who reside in Israel or The Netherlands (due to local tax and labor restrictions) Slide 21 SEC Restrictions o U.S. Securities and Exchange Commission (SEC) sets strict guidelines on option exchange program communications o RadiSys cannot advise employees whether or not to participate o RadiSys managers, employees and Mellon call center staff cannot answer questions on tax treatment beyond what is provided in the "Offer to Exchange" document (filed with the SEC), Schedule B Slide 22 Key Exchange Program Features o Critical Dates o Exchange Ratios o Terms and Conditions of New Option Grant Slide 23 Critical Dates - -------------------------------------------------------------------------------- Date - -------------------------------------------------------------------------------- Thursday, July 31, 2003 > Exchange Program begins - -------------------------------------------------------------------------------- Wednesday, August 27, 2003 > Exchange Program ends at 9:00 p.m. Pacific Time (U.S.) - -------------------------------------------------------------------------------- Thursday, August 28, 2003 > Cancellation date of options surrendered under the Exchange Program - -------------------------------------------------------------------------------- Monday, March 1, 2004 > Earliest date it is expected that new options will be granted; exercise price of new options will be equal to the price of RadiSys common stock on the new option grant date - -------------------------------------------------------------------------------- Slide 24 Exchange Ratios
- ----------------------------------------------------------------------------------------------------------------- Exchange Ratios By Tier - Depicts # of Shares from Current Option Grant Required to Surrender in Exchange for Each 1 New Share for Each 1 New Share - ----------------------------------------------------------------------------------------------------------------- Exchange Ratio Based Upon Closing FMV of RadiSys Stock on Wednesday, July 30, 2003: - ----------------------------------------------------------------------------------------------------------------- $5.00/Share $7.00/Share $9.00/Share $11.00/Share $13.00/Share $15.00/Share - ----------------------------------------------------------------------------------------------------------------- Tier Exercise (Grant) Price of Current Option Grant - ----------------------------------------------------------------------------------------------------------------- 1 $20.00-34.99 3.00 to 1 2.35 to 1 2.00 to 1 1.75 to 1 1.50 to 1 1.40 to 1 - ----------------------------------------------------------------------------------------------------------------- 2 $35.00 or higher 5.25 to 1 3.75 to 1 3.00 to 1 2.55 to 1 2.25 to 1 2.00 to 1 - -----------------------------------------------------------------------------------------------------------------
Speaker Notes: In order to participate in the Exchange Program, you must agree to surrender ALL eligible stock option grants in exchange for a lesser number of new options. Your stock option grant history is shown on the Mellon website, and each of those option grants that are eligible for exchange are displayed and the system has been programmed to automatically calculate the new number of shares that would be granted based upon the exchange ratio that applies to each grant. The table shown above, taken from our "Notice of Annual Meeting of Shareholders to be Held May 13, 2003", depicts the basis for setting the exchange ratios for two different tiers of stock options, banded based upon their exercise, or grant price ranges. The exchange ratio table was set up to calculate the exchange ratio based upon the closing price of our stock on the trading day prior to the launch of the program. The exchange ratios we're using were set based upon the closing FMV of our stock on Wed., 7/30/03 (the trading day just before the program was launched on 7/31/03), which was $15.46. I have highlighted the exchange ratio used based upon this closing price. Let's talk about how the exchange ratios were determined, and why they are different for options with different exercise prices. This program required stockholder approval. Since a 1:1 exchange rate resets option value without providing any reduction in option overhang, shareholders disapprove of such practices. However, it is important that the exchange ratio be both fair to employees and responsible to shareholders. In order to gain stockholder approval for this program, exchange ratios were designed to create a value-neutral exchange. A value-neutral exchange is one where the value of the new options granted approximates the value of the options being surrendered. We used an option pricing model (Black -Scholes) that is a widely recognized and accepted method to determine the value of a stock option. This valuation model takes into account a # of variables (current stock price, stock volatility, duration and vesting provisions of options being valued) and the valuation methodology took into account changes in our stock price through the time the exchange offer was expected to commence at the end of July. We relied upon Buck Consultants, a nationally recognized independent compensation consulting firm, to determine the appropriate option values and exchange ratios based on the methodology just described. As mentioned earlier, the methodology is intended to result in a value to value exchange based upon the closing price of shares of our stock the day before the exchange program began. You receive fewer shares, but they may have greater potential to increase in value over time. If you look closely at the table, you will see that for each tier, the lower the closing price of shares of our stock, the higher the exchange ratio; and vice-versa. If our stock price closed at $5 on 7/30/03 and you had, say, options to purchase 100 shares in the tier 3 range, you would give up a greater # of shares in the exchange (5.25 for every one share), but based upon a price that is more in line with the current market price. If you couple that with an imminent expiration date - the higher priced option grant may never be in the money before it expires. Recall that when an option expires, it's gone forever. Keep in mind that the option pricing model was only used to value RadiSys stock for purposes of setting exchange ratios on 7/30/03. Slide 25 Exchange Ratio Calculation
- -------------------------------------------------------------------------------------------------------- Then, if you authorize a surrender of If your eligible options have an eligible options in exchange for new options: Tier exercise price of: - -------------------------------------------------------------------------------------------------------- 1 $20.00 - $34.99 1.40 options will be cancelled and replaced with 1 option - -------------------------------------------------------------------------------------------------------- 2 $35.00 or higher 2.00 options will be cancelled and replaced with 1 option - --------------------------------------------------------------------------------------------------------
IMPORTANT: If you decide to participate in this voluntary program, all outstanding eligible options must be exchanged. You cannot "pick and choose" among eligible option grants Speaker Notes: Here is another table that more clearly conveys the exchange rates that apply to our Exchange Program. You may wonder why you must exchange all eligible options vs. getting to pick and choose. As I mentioned earlier, close to 40% of total outstanding stock options were granted at/above $20. Our overhang rate is 38%, about 13% above our target of 25%. Our shareholders want to see a lower overhang rate. By designing the program as an all or nothing proposition, we are more likely to achieve a more desirable overhang rate. If our overhang rate remains high coupled with continuing to exhaust our stock option pool, shareholders might not approve a request to replenish the pool at a future date. And, our philosophy is either you're in or you're out. If people can "cherry pick", that really doesn't benefit RadiSys and our shareholders over the long term. Slide 26 Exchange Ratio Example o Assume employee has 750 outstanding options with an exercise price over $20.00: - - 250 shares at $22 - - 250 shares at $25 - - 250 shares at $42 o New option grants on the anticipated grant date of March 1, 2004 (if all terms/conditions of Exchange Program satisfied): - - 250 divided by 1.40 = 179 - - 250 divided by 1.40 = 179 - - 250 divided by 2.00 = 125 - - Total # of New Shares (to be granted in one stock option grant) = 483 Slide 27 Terms and Conditions of New Option Grant o Exercise Price: Exercise price of new option grant will be equal to the closing price of shares of RadiSys common stock on the new option grant date o Vesting Schedule - 30-Month Vesting Schedule: - Six months following grant date: approximately 33% of the total shares will vest and become exercisable. - Then: Approximately 2.8% of the total shares granted will vest each month thereafter and become exercisable. - Your option grant will be fully vested 30 months following the grant date o Option Type: Nonqualified Stock Options ("NSOs"); even if you surrendered an Incentive Stock Option ("ISOs") o Expiration Date: Seven years from the new option grant date, or earlier if your employment with RadiSys ends Speaker Notes: Mention that difference between NSO's and ISO's are in their tax treatment upon exercise. Most (99%) employees use cashless exercise; and tax treatment is the same - taxed at ordinary income rates on difference between FMV on date of exercise and exercise price. However, tax withholding is taken from proceeds for NSO's; with ISO's, gain reported on W-2 and account for taxes when income taxes filed for that year. Taxes not withheld from proceeds. Refer to Stock Option Plan Fundamentals slides for details about tax treatment of cash exercises (complex, AMT may apply). Slide 28 Terms and Conditions of New Option Grants MOST IMPORTANTLY: o You must remain an employee of RadiSys through the date on which the new options are granted (expected to be a date no earlier than March 1, 2004) o If for any reason you are not employed by RadiSys on the new option grant date, you will not receive any new options or other compensation in exchange for the options that you surrendered and that were subsequently cancelled Slide 29 Example of Vesting Schedule - New Option Grant 30-Month Vesting Schedule (standard vesting schedule for RadiSys stock option grants is 36 months) Example: Option granted on March 1, 2004 to purchase a total of 1,000 shares 1. No shares will be exercisable for the first six months. 2. On September 1, 2004, approximately 33%* of the total or 333 shares vest and become exercisable. 3. On October 1, 2004, approximately 2.8%* of the total shares granted or 28 shares vest, 28 more on November 1, 2004 and so on until the option grant is fully vested on September 1, 2006 (30-month vesting schedule). * Shares do not vest fractionally. EquitEase applies a rounding factor at the first vesting date (six months following grant date) and during the subsequent 24-month period. In this example, the number of shares that vest each month will vary slightly. However, at the end of the 30-month period, the employee will be vested in exactly 1,000 shares (assuming continued employment with RadiSys) Slide 30 Tax Considerations
- ------------------------------------------------------------------------------------------------------- Country - ------------------------------------------------------------------------------------------------------- Upon Surrender of Current Options Grant of New Option Exercise of New Option - ------------------------------------------------------------------------------------------------------- U.S. > Not subject to > Not subject to U.S. > See "Guide to U.S. federal income federal income tax when new International tax option is granted Issues" document (Mellon Web site) for further information - ------------------------------------------------------------------------------------------------------- U.K. > Not subject to > Not subject to tax or > Same as above tax or National NICs when new option is Insurance granted Contributions ("NICs") - ------------------------------------------------------------------------------------------------------- Germany > Unlikely that > Not subject to tax when > Same as above employee will be new option is granted subject to tax; may wish to contact local tax authority - ------------------------------------------------------------------------------------------------------- Japan > May be subject to > Not subject to tax when > Same as above income tax; may wish new option is granted to contact local tax authority - -------------------------------------------------------------------------------------------------------
Strongly recommend that you consult with your own tax advisor to determine your own personal tax consequence of participating in the Exchange Program. Speaker Notes: This is just to make you aware of possible tax consequences associated with three aspects of the exchange program: surrender, grant of new option, exercise of new option. Please see the Guide to International Issues on the Mellon web site for details. Slide 31 Risks of Participating in the Exchange Program o You must be employed with RadiSys continuously until the new options are granted (currently anticipate that the new option grant date will be no earlier than March 1, 2004) o New exercise price may be higher than exercise price of options you surrendered o Tax consequences vary by country o Other risks are detailed in the Offer to Exchange document Speaker Notes: A very important consideration about the program and your decision whether or not to participate is the requirement that you must be continuously employed by RadiSys through the new option grant date - which we currently anticipate to be no earlier than 3/1/04. If, for any reason, including, but not limited to - voluntary termination, involuntary termination, death, total and permanent disability - you do not remain continuously employed by RadiSys through the new option grant date, you will not receive any new options or other compensation in exchange for the eligible options that you elected to exchange. If you choose to surrender your eligible options in exchange for a new grant, remember that the new grant price will be determined on the date the new options are granted. With regard to bullet # 2 - if you exchange, say, 500 options granted at $22, you would receive 358 new options at the closing price of RadiSys stock on 3/1/04, even if the closing price on that day is, say $30. In this example, your new option will have a higher exercise price than the cancelled option. Additionally, your new option will be for a smaller number of shares than the eligible options you exchanged. You need to look at each of your own eligible stock option holdings and make your own individual decision. Slide 32 Example to Illustrate Individual Analysis of Stock Option Grants Eligible for Exchange
- ------------------------------------------------------------------------------------------------------- Options Grant Date Outstanding (Current (Current # Expiration Date New Options Grant) Grant) Exercise Options of Current Grant+ Exchange Ratio to be (Grant) Vested Granted * Price - 8/1/03 - ------------------------------------------------------------------------------------------------------- 11/1/99 100 $36.33 100 11/1/04 (5 year- 2.00 50 term) - ------------------------------------------------------------------------------------------------------- 9/15/00 150 $56.88 100 9/15/05 (5-year 2.00 75 term) - ------------------------------------------------------------------------------------------------------- 2/16/01 200 $25.81 100 2/16/08 (7-year 1.40 143 term) - ------------------------------------------------------------------------------------------------------- * Total * 450 268 - -------------------------------------------------------------------------------------------------------
* Exercise price of new options will be equal to the closing price of shares of RadiSys common stock on the new option grant date, in accordance with the terms and conditions of the Exchange Program. We expect the grant date to be no earlier than March 1, 2004. + Information available from your OptionsLink account Speaker Notes: The purpose of this example is to help bring together the information I've covered in this presentation as you look at your own stock options that are eligible for exchange under this program. 1. Set up the example: - - Example lists stocks with exercise prices that range from $25.81 - $56.88; this range is representative of the option grants held by many employees. - - I've added two added data points that you may wish to factor in as you evaluate your eligible option grants - # of shares vested and the expiration date. This data is available from your OptionsLink account at the E*TRADE web site I mentioned earlier in this presentation. You may want to print out your options summary from the Mellon web site and write this info next to each option grant eligible for exchange under the program. - - Also listed is the exchange ratio and # of new shares that would be granted under the terms of the Exchange Program should you elect to participate. 2. Reviewing the option grants: - - In this example, most, if not all, o/s shares are vested. However, look at the exercise price and also the expiration date. - - Look at the exchange ratio for each grant - the lowest priced grant ($25.81) has a lower exchange ratio than the higher priced grants. 3. Don't forget to take into account the terms of the exchange mentioned earlier (new option grant not made until expected grant date of at least 3/1/04 - six months/one day after the cancellation date of existing eligible options, new vesting schedule [but accelerated in comparison to our standard vesting schedule]); and risks mentioned earlier (must be employed at RS on new option grant date, grant price of new options could be higher than some/all of options being surrendered). Slide 33 How to Participate in The Exchange Program Employees in the U.S. and the U.K.: o Use your 9-digit PIN, employee ID # and date of birth to access the Mellon web site at https://www.corporate-action.net/RadiSys o You will see pages with your personal information, including all your option grants (eligible and ineligible under the Exchange Program) o To authorize a surrender of all eligible options, navigate to the "Election Agreement" page and click on "Exchange My Options" o Print a copy of the "Election Confirmation" screen for your records o Must make elections on-line no later than 9:00 p.m. Pacific Time (U.S.) on Wednesday, August 27, 2003 Slide 34 How to Participate in The Exchange Program o Employees in Germany, Japan: o Due to local regulations, you cannot make your election electronically o You received a hard-copy Election Agreement at home o You must return a signed copy of your Election Agreement to Mellon to validly exchange your options (employees in Germany, please do not make your election on-line) o You may return your Election Agreement to Mellon by fax, mail, or overnight courier; see your Election Agreement for address/fax information o Keep a signed copy of your Election Agreement and fax confirmation (if you choose to fax) for your records o For your election to be valid, your Election Agreement must be RECEIVED by Mellon by 9:00 p.m. Pacific Time (U.S.) on Wednesday, August 27, 2003 Slide 35 Exchange Program Key Dates
- -------------------------------------------------------------------------------------------------------------------- Date Event/Action - -------------------------------------------------------------------------------------------------------------------- Thursday, July 31, 2003 > Exchange Program begins at 8:00 a.m. Pacific Time. - -------------------------------------------------------------------------------------------------------------------- Wednesday, August 27, 2003 > Exchange Program ends at 9:00 p.m. Pacific Time (Web site shuts down). - -------------------------------------------------------------------------------------------------------------------- Thursday, August 28, 2003 > Cancellation date of options surrendered under the Exchange Program. - -------------------------------------------------------------------------------------------------------------------- Week of September 1, 2003 > Mellon sends (via your RadiSys e-mail address) a confirmation statement to employees who participated in the Exchange Program. > Mellon will also send "Notice of No Election" to employees who had options eligible to surrender, but did not participate in the Exchange Program. - -------------------------------------------------------------------------------------------------------------------- Friday, September 5, 2003 > Mellon Call Center closes at 5:00 p.m. Pacific Time. - -------------------------------------------------------------------------------------------------------------------- Monday, March 1, 2004 > Earliest date it is expected that new options will be granted to employees who meet all terms and conditions of the Exchange Program. Exercise price of new options will be equal to the closing price of shares of RadiSys common stock on the new option grant date. - -------------------------------------------------------------------------------------------------------------------- Within 2 - 3 business days > Employees who participated in the Exchange Program will receive a stock option of new option grant date grant notice and plan prospectus. EquitEase will mail these documents to your home address. - --------------------------------------------------------------------------------------------------------------------
Slide 36 Where to Get More Information o From the Mellon Web Site @ https://www.corporate-action.net/RadiSys, you can: o obtain information to help you understand the details of the Exchange Program: Program Overview, Frequently Asked Questions, Significant Events Calendar, Guide to International Issues, Offer to Exchange. o view your entire RadiSys stock option history; and the exchange ratio for those stock options that are eligible for exchange. o make your election if you choose to participate in the Exchange Program (U.S. and U.K. employees only). o print your Election Confirmation (U.S. and U.K. employees only) should you choose to participate. o log back on to verify or to change your election decision. Slide 37 Where to Get More Information o Call at Mellon customer service representative: Monday through Friday, 5:00 a.m. to 4:00 p.m., Pacific Time 888-256-2709 (Calling from within the US) + 201-329-8905 (Calling from outside the US) Slide 38 Disclaimer This presentation does not constitute the Exchange Program offer. RadiSys has provided eligible option holders with written materials explaining the precise terms and timing of the Exchange Program. Eligible option holders should read these written materials carefully because they contain important information about the Exchange Program. These materials and other documents filed by RadiSys with the U.S. Securities and Exchange Commission can be obtained free of charge from the SEC's web site at http://www.sec.gov. The Exchange Program is subject to securities regulations in most countries. RadiSys option holders may obtain a written copy of the Offer to Exchange statement from the Mellon web site established for RadiSys employees. Speaker Notes: In summary, we hope that the information you heard today along with the resources available from the Mellon web site are helpful as you look at your individual situation. EX-99.(A)(1)(G) 9 e300526_ex99-a1g.txt EMAIL FROM GLENN SPLIETH DATED JULY 31, 2003. Exhibit (a)(1)(G) Email from Glenn Splieth dated July 31, 2003 We are pleased to introduce the RadiSys Stock Option Exchange Program (the "Exchange Program"). This Exchange Program was approved by our Board of Directors and Shareholders earlier this year and implementation begins July 31, 2003. This e-mail is to provide you with an overview of this program and communicate more information to help you understand your choices. Please note, the offering period ends at 9:00 p.m. Pacific Time (U.S.) on Wednesday, August 27, 2003 so you must make your decision no later than that date. Due to legal requirements, you will not be allowed to make elections or make any changes to your previous elections this time. Please read the following information carefully to help you with your decision. Background Stock options are an important component of RadiSys' Total Compensation strategy The stock options are intended to encourage employees to act as owners and to share in the economic value that employees help create. Due to market conditions, many of the outstanding stock options held by RadiSys employees are "underwater," meaning that the exercise prices of the stock options are greater than the current market price of our common stock. As a result, employees would not realize any value if they exercised their options. To help restore value to your stock options, RadiSys' Board of Directors and Shareholders have approved the Exchange Program. This voluntary program lets you exchange your eligible stock options for a lesser number of new options. Here are a few key aspects of the Exchange Program: o The exchange ratio (between the number of options you will surrender and the number of new options you will receive) depends on the exercise price of your current option grant(s). o U.S. accounting regulations require that we wait at least six months and one day from the cancellation date before we grant the new options to avoid a potentially significant expense on our financial statements. We will grant the new options following the expiration of that period, which we expect to be no earlier than March 1, 2004. o The exercise price of the new option grant will be the closing price of shares of our common stock as reported by the Nasdaq National Market on the new option grant date. o The offering period is from Thursday, July 31, 2003 at 8:00 a.m. Pacific Time (U.S.) through Wednesday, August 27, 2003, at 9:00 p.m. Pacific Time. This timeframe complies with Securities and Exchange Commission regulations requiring that we give you at least 20 business days to decide whether or not to participate. - -------------------------------------------------------------------------------- announcemt email Final Page 1 RadiSys Corporation Draft prepared by Buck Consultants July 2, 2003 o On the first business day after the offering period expires (Thursday, August 28, 2003), we will cancel your surrendered options. Eligibility To be eligible, you must: o Have eligible options (i.e., options with an exercise price of $20.00 or more), and o Be a current employee of RadiSys residing in Germany, Japan, the United Kingdom, or the United States, and o Remain employed by RadiSys continuously through the new option grant date. If your employment ends for any reason before the new option grant date (whether voluntarily or involuntarily), you will not receive any new options. The RadiSys Board of Directors, Vice-Presidents and Executive Officers, as well as RadiSys employees who reside in Israel or The Netherlands are not eligible to participate in the Exchange Program. The Exchange Program Web Site RadiSys has engaged Mellon Investor Services ("Mellon") to handle the administration of the Exchange Program. Mellon's Web site contains important information about the Exchange Program, including: o The Offer to Exchange, which contains the terms and conditions of the Exchange Program, o A Stock Option Exchange Program Overview, o Frequently Asked Questions ("FAQs"), o A Significant Events Calendar, and o Guide to International Issues. Our U.S. and U.K. employees will also use the Mellon Web site to elect to participate in the Exchange Program. Complete instructions on how to elect to participate are included in the Stock Option Exchange Program Overview. You will be able to view all of your option grant information on the Web site. All of your outstanding option grants will be listed on the site, regardless of whether they are eligible for exchange under the Exchange Program. It is possible that none of your option grants will be eligible for the Exchange Program, but we are providing you with this information so you can keep track of your outstanding options. Immediately following your receipt of this e-mail, you will receive an e-mail (at your RadiSys e-mail address) from Mellon that includes your personal identification number ("PIN"), which will let you access this Web site. (Employees who are on an authorized leave of absence will receive their PINs by first-class mail.) If you do not receive your PIN by the end of today (or by August 8, 2003 for employees on leave of absence), please call Mellon at one of the phone numbers below. Employees in Japan will receive hard copies of all the Exchange Program materials, including a personalized Election Agreement, by first-class mail. They will not receive PINs. - -------------------------------------------------------------------------------- announcemt email Final Page 2 RadiSys Corporation Draft prepared by Buck Consultants July 2, 2003 Employees in Germany will have access to the Web site. However, due to local legal requirements, a paper Election Agreement must be submitted to Mellon in order to validly exchange eligible options under this program. A personalized Election Agreement will be mailed via first-class mail to employees at their home address. RadiSys has made arrangements to provide Internet access to those employees in Hillsboro who do not have Internet access at their regular workstation. Work stations that include a computer, printer, and telephone are available in building DC-2, second floor, next to the exit door sign near the Human Resource Department. Please see your supervisor in order to schedule use of one of these workstations. Additional Resources Beginning next week, Human Resources will be holding employee meetings in Hillsboro, Des Moines, and Boca Raton to discuss and answer questions about the Exchange Program. This meeting schedule is included in the Significant Events Calendar posted on the Mellon Web site. Employees in all locations also have access to help with questions by telephone. See information below. In addition, we have revised the Plan Summary and Prospectus for the 2001 Nonqualified Stock Option Plan and the 1995 Stock Incentive Plan. You can find this on the HR Toolkit of the RadiSphere intranet at http://radisphere.radisys.com. Select Communities > HR > HR Toolkit > Compensation > Stock Option Plan. For More Information For additional information or assistance, you can contact Mellon. Mellon customer service representatives are available Monday through Friday from 5:00 a.m. to 4:00 p.m., Pacific Time (U.S.) at: o 1-888-256-2709 (Calling from within the U.S.) o +201-329-8905 (Calling from outside the U.S.) If you require a translator, a customer service representative will connect you with one and answer any questions you have over the phone. Thank you for your consideration of this program and for your ongoing contributions to RadiSys' future success. All of your work and efforts on behalf of the Company are sincerely appreciated. We hope you will find the Exchange Program useful. Best Regards, Glenn - -------------------------------------------------------------------------------- announcemt email Final Page 3 RadiSys Corporation Draft prepared by Buck Consultants July 2, 2003 EX-99.(A)(1)(H) 10 e300526_ex99-a1h.txt LETTER TO EMPLOYEES ON LEAVE OF ABSENCE. Exhibit (a)(1)(H) Letter from Glenn Splieth to eligible RadiSys employees on leave of absence July 31, 2003 Dear Employee: As I previously announced on July 31, 2003, RadiSys is offering its employees a Stock Option Exchange Program (the "Exchange Program"). This letter is to provide a general overview of this program and sources of detailed information to help you understand your choices. Background Stock options are an important component of RadiSys' Total Compensation strategy for employees. They are intended to encourage employees to act as owners and to share in the value they help create for the Company. Due to market conditions, many of the outstanding stock options held by employees are "underwater," meaning that the exercise prices of the stock options are greater than the current market price of our common stock. As a result, employees would not realize any value if they exercised their options. To help restore value to your stock options, RadiSys; Board of Directors and Shareholders have approved the Exchange Program. This program lets you exchange your eligible stock options for a lesser number of new options. Here are a few key aspects of the Exchange Program: o The exchange ratio (between the number of options you will surrender and the number of new options you will receive) depends on the exercise price of your current option grant(s). o U.S. accounting regulations require that we wait at least six months and one day from the cancellation date before we grant the new options to avoid a potentially significant expense on our financial statements. We will grant the new options following the expiration of that period, which we expect to be no earlier than March 1, 2004. o The exercise price of the new option grant will be the closing price of shares of our common stock as reported by the Nasdaq National Market on the new option grant date. o The offering period is from Thursday, July 31, at 8:00 a.m. Pacific Time (U.S.) through Wednesday, August 27, 2003, at 9:00 p.m. Pacific Time. This timeframe complies with Securities and Exchange Commission regulations requiring that we give you at least 20 business days to decide whether to participate. o On the first business day after the offering period expires (August 28, 2003), we will cancel your surrendered options. - -------------------------------------------------------------------------------- announcemt LOA Final Page 1 RadiSys Corporation Draft prepared by Buck Consultants July 2, 2003 Eligibility To be eligible, you must: o Have eligible options (i.e., options with an exercise price of $20.00 or more), o Be a current employee of RadiSys residing in Germany, Japan, the United Kingdom, or the United States, and o Remain employed by RadiSys continuously through the new option grant date. If your employment ends for any reason before the new option grant date (whether voluntarily or involuntarily), you will not receive any new options. Board of Director, Vice-Presidents and Executive Officers, as well as RadiSys employees who reside in Israel or The Netherlands are not eligible to participate in the Exchange Program. In This Packet This packet contains important information about the Exchange Program, including: o The Offer to Exchange, which contains the terms and conditions of the Exchange Program, o A Stock Option Exchange Program Overview, o Frequently Asked Questions ("FAQs"), o A Significant Events Calendar, o Guide to International Issues, o A letter with your personal identification number (PIN), which you will need to log onto the Mellon Investor Services Web site (see below for more information), and o Your personalized Election Agreement. Additional Resources Human Resources will be holding meetings to discuss and answer questions about the Exchange Program. The meeting schedule is included in the enclosed Significant Events Calendar. If you are unable to attend a meeting and wish to receive a copy of the presentation, please contact Marlene Barclay, Compensation/Benefits/HRIS Manager, at (503) 615-1351. In addition, we have revised the Plan Summary and Prospectus for the 2001 Nonqualified Stock Option Plan and the 1995 Stock Incentive Plan. You can find this on the HR Toolkit of the RadiSphere intranet at http://radisphere.radisys.com. Select Communities > HR > HR Toolkit > Compensation > Stock Option Plan. How To Participate There are two ways for you to participate in the Exchange Program: 1. Complete the enclosed hard copy Election Agreement and send it to Mellon Investor Services ("Mellon"), whom RadiSys has engaged to handle the administration of the Exchange Program. Detailed instructions, mailing addresses, and a facsimile number are included on the Election Agreement. 2. Complete the Election Agreement online by following these instructions: a) Log onto the Mellon Web site at https://www.corporate-action.net/RadiSys, and press the "Continue" button. - -------------------------------------------------------------------------------- announcemt LOA Final Page 2 RadiSys Corporation Draft prepared by Buck Consultants July 2, 2003 b) Enter your 9-digit PIN (which is enclosed in this packet), and press the "Continue" button. c) On the following screen, enter your 3- or 4-digit employee ID number (without any leading zeros; for example, if your employee number is 001322, just enter 1322) and your birth date, and press the "Continue" button d) You should now be successfully logged in. You will see a page with your personal information, including all your eligible option grants. To participate, you must select the "Exchange My Options" button from the "Election Agreement" Web page. e) Print a copy of the confirmation screen for your records. In order for your election to be valid, your election must be RECEIVED by Mellon by 9:00 p.m., Pacific Time (U.S.), on Wednesday, August 27, 2003, unless the offer period is extended by RadiSys. You are responsible for ensuring the successful delivery of your election form. Please allow for enough delivery time based on the method of delivery that you choose to ensure we receive your election form on time. This is a one-time offer, and we will strictly enforce the expiration date. For More Information For additional information or assistance, you can contact Mellon. Mellon customer service representatives are available Monday through Friday from 5:00 a.m. to 4:00 p.m., Pacific Time at 1-888-256-2709. There is no charge to you for the call. Thank you for your consideration of this program and for your ongoing contributions to RadiSys' future success. Regards, /s/ Glenn Splieth Glenn Splieth Senior Director, Human Resources - -------------------------------------------------------------------------------- announcemt LOA Final Page 3 RadiSys Corporation Draft prepared by Buck Consultants July 2, 2003 EX-99.(A)(1)(I) 11 e300526_ex99-a1i.txt LETTER TO EMPLOYEES IN JAPAN. Exhibit (a)(1)(I) Letter from Glenn Splieth to eligible employees in Japan July 31, 2003 Dear Employee: As I previously announced in an e-mail message on July 31, 2003, RadiSys is offering its employees a Stock Option Exchange Program (the "Exchange Program"). This letter is to provide a general overview of this program and sources of detailed information to help you understand your choices. Background Stock options are an important component of RadiSys' Total Compensation strategy for employees. They are intended to encourage employees to act as owners and enable them to share in the value they help create for the Company. Due to market conditions, many of the outstanding stock options held by RadiSys employees are "underwater," meaning that the exercise prices of the stock options are greater than the current market price of our common stock. As a result, employees would not realize any value if they exercised their options. To help restore value to your stock options, RadiSys' Board of Directors and Shareholders have approved the Exchange Program. This program lets you exchange your eligible stock options for a lesser number of new options. Here are a few key aspects of the Exchange Program: o The exchange ratio (between the number of options you will surrender and the number of new options you will receive) depends on the exercise price of your current option grant(s). o U.S. accounting regulations require that we wait at least six months and one day from the cancellation date before we grant the new options to avoid a potentially significant expense on our financial statements. We will grant the new options following the expiration of that period, which we expect to be no earlier than March 1, 2004. o The exercise price of the new option grant will be the closing price of shares of our common stock as reported by the Nasdaq National Market on the new option grant date. o The offering period is from Thursday, July 31, at 8:00 a.m. Pacific Time (U.S.) through Wednesday, August 27, 2003, at 9:00 p.m. Pacific Time. This timeframe complies with U.S. Securities and Exchange Commission regulations requiring that we give you at least 20 business days to decide whether or not to participate. o On the first business day after the offering period expires (August 28, 2003), we will cancel the surrendered options. Eligibility To be eligible, you must: - -------------------------------------------------------------------------------- announcement Japan Final2 Page 1 RadiSys Corporation Draft prepared by Buck Consultants July 2, 2003 o Have eligible options (i.e., options with an exercise price of $20.00 or more), o Be a current employee of RadiSys residing in Germany, Japan, the United Kingdom, or the United States, and o Remain employed by RadiSys continuously through the new option grant date. If your employment ends for any reason before the new option grant date (whether voluntary or involuntary), you will not receive any new options. Board of Directors, vice-presidents and executive officers, as well as RadiSys employees who reside in Israel or The Netherlands are not eligible to participate in the Exchange Program. In This Packet This packet contains important information about the Exchange Program, including: o The Offer to Exchange, which contains the terms and conditions of the Exchange Program, o A Stock Option Exchange Program Overview, o Frequently Asked Questions ("FAQs") o A Significant Events Calendar, o Guide to International Issues, and o Your personalized Election Agreement, which lists all your outstanding option grants. Additional Resources Human Resources will be holding meetings to discuss and answer questions about the Exchange Program. This meeting schedule is included on the enclosed Significant Events Calendar. In addition, we have revised the Plan Summary and Prospectus for the 2001 Nonqualified Stock Option Plan and the 1995 Stock Incentive Plan. You can find this on the HR Toolkit of the RadiSphere intranet at http://radisphere.radisys.com. Select Communities > HR > HR Toolkit > Compensation > Stock Option Plan. How To Participate To participate in the program, you must complete the enclosed Election Agreement and send it to Mellon Investor Services ("Mellon"), whom RadiSys has engaged to handle the administration of this Exchange Program. The election form must be received by Mellon by Wednesday, August 27, 2003, at 9:00 p.m. Pacific Time (U.S.). Detailed instructions, mailing addresses and a facsimile number are listed on the Election Agreement. Deciding Whether to Participate Participation in the Exchange Program is completely voluntary. If you choose not to participate, you will retain your current options under their current terms and conditions. Neither the Company nor the Board of Directors can help you to determine whether or not to participate in the Exchange Program. Therefore, you should carefully read the Offer to Exchange, as well as the other information we've provided, before you decide whether to - -------------------------------------------------------------------------------- announcement Japan Final2 Page 2 RadiSys Corporation Draft prepared by Buck Consultants July 2, 2003 participate. In addition, we encourage you to seek advice from your personal financial, legal and/or tax advisors to weigh the benefits and risks involved in participating in the Exchange Program. The decision of whether or not to participate is completely your choice. For More Information For additional information or assistance, you can contact Mellon. Mellon customer service representatives are available Monday through Friday from 5:00 a.m. to 4:00 p.m., Pacific Time (U.S.), at +201-329-8905. If you require a translator, a customer service representative will connect you with one and answer any questions you have over the phone. Thank you for your consideration of the Exchange Program and for your ongoing contributions to RadiSys' future success. Regards, /s/ Glenn Splieth Glenn Splieth Senior Director, Human Resources - -------------------------------------------------------------------------------- announcement Japan Final2 Page 3 RadiSys Corporation Draft prepared by Buck Consultants July 2, 2003 EX-99.(A)(1)(J) 12 e300526_ex99-a1j.txt PIN EMAIL FOR ELIGIBLE EMPLOYEES. Exhibit (a)(1)(J) PIN e-mail for Eligible Employees Re: Stock Option Exchange Program Web Site and PIN Dear [ee]: As Glenn Splieth just announced, RadiSys has launched the Stock Option Exchange Program (the "Exchange Program") effective today, Thursday, July 31, 2003. If you have options that are eligible for exchange, and if you decide to accept RadiSys' offer to exchange your options, you must complete and submit an online election form before 9:00 p.m. Pacific Time (PT) on Wednesday, August 27, 2003. Elections or changes to elections cannot be accepted after this time. You will be able to make your election to participate in the Exchange Program on the Mellon Investor Services Web site dedicated specifically to RadiSys. For security purposes, a Personal Identification Number (PIN) has been assigned to you to access your personal information and make your election choices. Your PIN is: [PIN]. Please visit the Mellon web site at https://www.corporate-action.net/RadiSys and follow the instructions for accessing your personal information and making and submitting your elections. If you have questions or if you require translation services, please call Mellon. One of Mellon's Customer Service Representatives will connect you with a translator and will be able to answer your questions over the phone. Please do not reply to this e-mail message, as no one will respond to your message. If you have a question, please call Mellon. Mellon Investor Services Customer Service Representatives are available Monday through Friday from 5:00 a.m. to 4:00 p.m., Pacific Time 1-888-256-2709 (Calling from within the US) +201-329-8905 (Calling from outside the US EX-99.(A)(1)(K) 13 e300526_ex99-a1k.txt SIGNIFICANT EVENTS CALENDAR. Exhibit (a)(1)(K) RadiSys Stock Option Exchange Program Significant Events Calendar
- ------------------------------------------------------------------------------------------------------------------------------------ Date Communications Event - ------------------------------------------------------------------------------------------------------------------------------------ Thursday, July RadiSys Stock Option Exchange Program (the "Exchange Program") Begins 31, 2003 >> Exchange Program Web Site opens. >> Exchange Program Call Center opens. If you have questions or need a translator, contact the Mellon Investor Services call center, Monday through Friday between the hours of 5:00 a.m. to 4:00 p.m. Pacific Time, at: 888-256-2709 (calling from within the U.S.) +201-329-8905 (calling from outside the U.S.) - ------------------------------------------------------------------------------------------------------------------------------------ Weeks of August 4 >> Employee information meetings held for all locations world-wide - two major topics: and August 11, 2003 - Stock Option Basics - RadiSys Stock Option Exchange Program Details >> Meeting dates, times, and locations are as follows: Office Location Date/Time Meeting Room -------------------------------------------------------------------------------------------- Birmingham, UK Mon. August 4, 2003, 3:30pm to 5:00pm (GMT) Meeting Room 1 (Video-conference) Boca Raton, FL Wed. August 6, 2003, 12:00pm to 1:30pm (ET) MultiPurpose Room (Video-conference) Wed. August 6, 2003, 2:30pm to 4:00pm (ET) MultiPurpose Room Thu. August 7, 2003, 12:00pm to 1:30pm (ET) MultiPurpose Room Thu. August 7, 2003, 2:30pm to 4:00pm (ET) MultiPurpose Room Fri. August 15, 2003, 12:00pm to 1:30pm (ET) MultiPurpose Room DesMoines, IA Wed. August 6, 2003, 11:00am to 12:30pm (CT) VonNeumann Room (Video-conference) Wed. August 6, 2003, 1:30pm to 3:00pm (CT) VonNeumann Room Thu. August 7, 2003, 11:00am to 12:30pm (CT) VonNeumann Room Thu. August 7, 2003, 1:30pm to 3:00pm (CT) VonNeumann Room Fri. August 15, 2003, 11:00am to 12:30pm (CT) VonNeumann Room Hillsboro, OR Wed. August 6, 2003, 9:00am to 10:30am (PT)* MultiPurpose Room Wed. August 6, 2003, 11:30am to 1:00pm (PT) * MultiPurpose Room Wed. August 6, 2003, 2:00pm to 3:30pm (PT) MultiPurpose Room Thu. August 7, 2003, 9:00am to 10:30am (PT)* MultiPurpose Room Thu. August 7, 2003, 11:30am to 1:00pm (PT)* MultiPurpose Room Thu. August 7, 2003, 2:00pm to 3:30pm (PT) MultiPurpose Room Fri. August 15, 2003, 9:00am to 10:30am (PT)* MultiPurpose Room Fri. August 15, 2003, 11:30am to 1:00pm (PT) MultiPurpose Room Fri. August 15, 2003, 2:00pm to 3:30pm (PT) MultiPurpose Room Munich, Germany Mon., August 4, 2003; 4:30 - 6:00pm (GMT + 1) N/A (Tele-conference) Tokyo, Japan Tue. August 5, 2003, 9:30am to 11:00am (local time) Conference Room (Translator provided; video-conference) * Field employees will be able to call in to these meetings; bridge line phone number to be provided via e-mail - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Wednesday, August Exchange Program expires at 9:00 p.m. Pacific Time 27, 2003 >> Exchange Program Web site shuts down at 9:00 p.m. Pacific Time. >> Exchange Program Call Center remains open through Friday, September 5, 2003 at 5:00 Pacific Time. - ------------------------------------------------------------------------------------------------------------------------------------ Thursday, August >> Cancellation date of options surrendered under the Exchange Program. 28, 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Week of September >> Mellon sends (via your RadiSys e-mail address) a confirmation statement to employees who participated in 1, 2003 the Exchange Program. >> Mellon will also send "Notice of No Election" to employees who had options eligible to surrender, but did not participate in the Exchange Program. - ------------------------------------------------------------------------------------------------------------------------------------ Friday, September >> Exchange Program Call Center closes at 5:00 p.m. Pacific Time. 5, 2003 - ------------------------------------------------------------------------------------------------------------------------------------ Monday, March 1, >> Earliest date it is expected that new options will be granted. Exercise price of new options will be equal 2004 to the closing price of shares of RadiSys common stock on the new option grant date. - ------------------------------------------------------------------------------------------------------------------------------------ Within 2 - 3 >> Employees who participated in the Exchange Program (and who meet all terms and conditions of the Exchange business days of Program) on the new option grant date will receive a stock option grant notice and plan prospectus. new option grant EquitEase will mail these documents to your home address. date - ------------------------------------------------------------------------------------------------------------------------------------
EX-99.(A)(1)(L) 14 e300526_ex99-a1l.txt FORM OF OPTION EXCHANGE REMINDER EMAILS. Exhibit (a)(1)(L) Form of Option Exchange Reminder Emails August 7, 2003 - One Week After Offer to Exchange Program Commences We have just completed week one of RadiSys' Stock Option Exchange Program (the "Exchange Program"). The offer to exchange your eligible stock options under the terms/conditions of the Exchange Program will expire at 9:00 p.m. Pacific Time (U.S.) on Wednesday, August 27, 2003. To learn more about the Exchange Program, visit the Mellon web site at https://www.corporate-action.net/RadiSys. You will need your Personal Identification Number (PIN) sent to you by Mellon at your RadiSys e-mail address on July 31, 2003. From this web site, you are able to: >> Access information to help you understand the details of the Exchange Program. >> View your RadiSys stock option history and exchange ratio for stock options eligible for exchange under the Exchange Program. >> Make your election if you choose to participate in the Exchange Program. >> Print your Election Confirmation should you choose to participate in the Exchange Program. >> Log back on to verify or to change your election decision. If you have questions, please call: Mellon Investor Services Monday through Friday 5:00 a.m. to 4:00 p.m. Pacific Time (U.S.) 888-256-2709 (Calling from within the U.S.) + 201-329-8905 (Calling from outside the U.S.) If you require a translator, a customer service representative will connect you with one and answer any questions you have. If you have lost your PIN, please call Mellon Investor Services and it will be provided to you again. Marlene Barclay Compensation/Benefits/HRIS Manager Telephone: (503) 615-1351 August 11, 2003 - Two Weeks After Program Commences We are entering into week two of RadiSys' Stock Option Exchange Program (the "Exchange Program"). The offer to exchange your eligible stock options under the terms/conditions of the Exchange Program will expire at 9:00 p.m. Pacific Time (U.S.) on Wednesday, August 27, 2003. To learn more about the Exchange Program, visit the Mellon web site at https://www.corporate-action.net/RadiSys. You will need your Personal Identification Number (PIN) sent to you by Mellon at your RadiSys e-mail address on July 31, 2003. From this web site, you are able to: >> Access information to help you understand the details of the Exchange Program. >> View your RadiSys stock option history and exchange ratio for stock options eligible for exchange under the Exchange Program. >> Make your election if you choose to participate in the Exchange Program. >> Print your Election Confirmation should you choose to participate in the Exchange Program. >> Log back on to verify or to change your election decision. If you have questions, please call: Mellon Investor Services Monday through Friday 5:00 a.m. to 4:00 p.m. Pacific Time (U.S.) 888-256-2709 (Calling from within the U.S.) + 201-329-8905 (Calling from outside the U.S.) If you require a translator, a customer service representative will connect you with one and answer any questions you have. If you have lost your PIN, please call Mellon Investor Services and it will be provided to you again. August 25, 2003 - Three Days Before Expiration Date on 8/27/03 This Wednesday, August 27, 2003 at 9:00 p.m. Pacific Time (U.S.) is the last day to elect to exchange your eligible options as part of RadiSys' Stock Option Exchange Program. To learn more about the Exchange Program, visit the Mellon web site at https://www.corporate-action.net/RadiSys. You will need your Personal Identification Number (PIN) sent to you by Mellon at your RadiSys e-mail address on July 31, 2003. From this web site, you are able to: >> Access information to help you understand the details of the Exchange Program. >> View your RadiSys stock option history and exchange ratio for stock options eligible for exchange under the Exchange Program. >> Make your election if you choose to participate in the Exchange Program. >> Print your Election Confirmation should you choose to participate in the Exchange Program. >> Log back on to verify or to change your election decision. If you have questions, please call: Mellon Investor Services Monday through Friday 5:00 a.m. to 4:00 p.m. Pacific Time (U.S.) 888-256-2709 (Calling from within the U.S.) + 201-329-8905 (Calling from outside the U.S.) If you require a translator, a customer service representative will connect you with one and answer any questions you have. If you have lost your PIN, please call Mellon Investor Services and it will be provided to you again. EX-99.(A)(1)(M) 15 e300526_ex99-a1m.txt FORM OF CONFIRMATION OF CANCELLATION OF TO. Exhibit (a)(1)(M) RADISYS CORPORATION Stock Option Exchange Program CONFIRMATION OF CANCELLATION OF TENDERED OPTIONS AND PROMISE TO GRANT NEW OPTIONS August ___, 2003 <> <> Dear <>, RadiSys has accepted your election to exchange all of your eligible options to purchase RadiSys common stock (referred to as "exchanged options") for replacement under RadiSys' Stock Option Exchange Program. As a result of your election and our acceptance, we hereby confirm that these exchanged options were cancelled on Thursday, August 28, 2003. In exchange for your agreement to cancel {__________} options, RadiSys hereby promises to grant you a nonstatutory stock option to purchase [________] shares of RadiSys' common stock granted under the 2001 Nonqualified Stock Option Plan of RadiSys Corporation (referred to as the "New Option"). We will grant the New Option on the New Option grant date, which we anticipate will be no earlier than Monday, March 1, 2004. The exercise price of each New Option will be equal to the closing price for shares of our common stock as reported by the Nasdaq National Market on the New Option grant date. All New Options granted in exchange for eligible options will not be exercisable for six months after the date of the grant, after which the options will be exercisable for one-third of the total option shares, and become exercisable in monthly increments equal to 1/36th of the total option shares, cumulatively, each month thereafter, becoming fully exercisable two and one-half years after the date of the grant, subject to your continued employment with RadiSys or one of RadiSys' subsidiaries. This vesting schedule applies to all New Options, regardless of the vested position of the options you elected to exchange. Each New Option granted in exchange for eligible options will have a term of seven years from the New Option grant date. In order to receive your New Option, you must continue to be employed by RadiSys or one of its subsidiaries on the New Option grant date. This Promise does not constitute a guarantee of employment with RadiSys or any of its subsidiaries for any period. Unless expressly provided by the applicable laws of a non-U.S. jurisdiction, your employment with RadiSys or its subsidiaries will remain "at will" and can be terminated by you or RadiSys at any time, with or without cause or notice. If your employment with RadiSys or one of its subsidiaries terminates before the New Option grant date for any reason, including a reduction-in-force, you will lose all rights under this Promise to receive a New Option. This Promise is subject to the terms and conditions of the Exchange Program as set forth in: (1) the Stock Option Exchange Program Tender Offer Statement; (2) the Stock Option Exchange Program Overview; (3) the Stock Option Exchange Program Frequently Asked Questions; (4) the Web Site Election Forms; (5) the Hard Copy Election Form; and (6) the Telephonic Election Form Script (collectively, the "Exchange Offer Documents"), all of which are incorporated herein by reference. This Promise and the Exchange Offer Documents reflect the entire agreement between you and RadiSys with respect to this transaction. This Promise may be amended only by means of a writing signed by you and an authorized officer of RadiSys. RADISYS CORPORATION - --------------------------------- By: Julia Harper ----------------------------- Title: Chief Financial Officer -------------------------- EX-99.(A)(1)(N) 16 e300526_ex99-a1n.txt FORM OF NOTICE OF NO ELECTION. Exhibit (a)(1)(N) Notice of No Election August __, 2003 [Employee Name] Employee ID: [Address] [Address] [Address] On Wednesday, August 27, 2003, the RadiSys Corporation Stock Option Exchange Program (the "Exchange Program") expired. Our records show that you did not make an election to exchange any of your eligible options pursuant to the Exchange Program. Because you did not make an election during the offer period, the Exchange Program did not alter your option grants. If you have questions regarding this information or about the Exchange Program, please contact Marlene Barclay, Human Resource Department, via e-mail at marlene.barclay@radisys.com or by calling 503-615-1351. Regards, Julia Harper Chief Financial Officer, RadiSys Corporation EX-99.(D)(1) 17 e300526_ex99-d1.txt 1995 STOCK INCENTIVE PLAN. Exhibit (d)(1) RADISYS CORPORATION 1995 STOCK INCENTIVE PLAN (As Amended Through May 13, 2003) 1. Purpose. The purpose of this Stock Incentive Plan (the "Plan") is to enable RadiSys Corporation (the "Company") to attract and retain the services of (1) selected employees, officers and directors of the Company or of any subsidiary of the Company and (2) selected nonemployee agents, consultants, advisors, persons involved in the sale or distribution of the Company's products and independent contractors of the Company or any subsidiary. 2. Shares Subject to the Plan. Subject to adjustment as provided below and in paragraph 13, the shares to be offered under the Plan shall consist of Common Stock of the Company, and the total number of shares of Common Stock that may be issued under the Plan shall not exceed 5,425,000* shares. The shares issued under the Plan may be authorized and unissued shares or reacquired shares. If an option, stock appreciation right or performance unit granted under the Plan expires, terminates or is canceled, the unissued shares subject to such option, stock appreciation right or performance unit shall again be available under the Plan. If shares sold or awarded as a bonus under the Plan are forfeited to the Company or repurchased by the Company, the number of shares forfeited or repurchased shall again be available under the Plan. 3. Effective Date and Duration of Plan. (a) Effective Date. The Plan shall become effective as of August 7, 1995. No option, stock appreciation right or performance unit granted under the Plan to an officer who is subject to Section 16(b) of the Securities Exchange Act of 1934, as amended (an "Officer") or a director, and no incentive stock option, shall become exercisable, however, until the Plan is approved by the affirmative vote of the holders of a majority of the shares of Common Stock represented at a shareholders meeting at which a quorum is present and any such awards under the Plan prior to such approval shall be conditioned on and subject to such approval. Subject to this limitation, options, stock appreciation rights and performance units may be granted and shares may be awarded as bonuses or sold under the Plan at any time after the effective date and before termination of the Plan. - ---------- * Adjusted to reflect a 3-for-2 stock split of the shares of Common Stock, without par value, of the Company, effected in the form of a 50% share dividend in accordance with ORS 60.154, declared by the Board of Directors on October 19, 1999, and paid on November 29, 1999 to shareholders of record at the close of business on November 8, 1999. (b) Duration. The Plan shall continue in effect until all shares available for issuance under the Plan have been issued and all restrictions on such shares have lapsed. The Board of Directors may suspend or terminate the Plan at any time except with respect to options, performance units and shares subject to restrictions then outstanding under the Plan. Termination shall not affect any outstanding options, any right of the Company to repurchase shares or the forfeitability of shares issued under the Plan. 4. Administration. (a) Board of Directors. The Plan shall be administered by the Board of Directors of the Company, which shall determine and designate from time to time the individuals to whom awards shall be made, the amount of the awards and the other terms and conditions of the awards. Subject to the provisions of the Plan, the Board of Directors may from time to time adopt and amend rules and regulations relating to administration of the Plan, advance the lapse of any waiting period, accelerate any exercise date, waive or modify any restriction applicable to shares (except those restrictions imposed by law) and make all other determinations in the judgment of the Board of Directors necessary or desirable for the administration of the Plan. The interpretation and construction of the provisions of the Plan and related agreements by the Board of Directors shall be final and conclusive. The Board of Directors may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency. (b) Committee. The Board of Directors may delegate to a committee of the Board of Directors or specified officers of the Company, or both (the "Committee") any or all authority for administration of the Plan. If authority is delegated to a Committee, all references to the Board of Directors in the Plan shall mean and relate to the Committee except (i) as otherwise provided by the Board of Directors, (ii) that only the Board of Directors may amend or terminate the Plan as provided in paragraphs 3 and 15 and (iii) that a Committee including officers of the Company shall not be permitted to grant options to persons who are officers of the Company. If awards are to be made under the Plan to Officers or directors, authority for selection of Officers and directors for participation and decisions concerning the timing, pricing and amount of a grant or award, if not determined under a formula meeting the requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, shall be delegated to a committee consisting of two or more disinterested directors. 5. Types of Awards; Eligibility. The Board of Directors may, from time to time, take the following action, separately or in combination, under the Plan: (i) grant Incentive Stock Options, as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as provided in paragraphs 6(a) and 6(b); (ii) grant options other than Incentive Stock Options ("Non-Statutory Stock Options") as provided in paragraphs 6(a) and 6(c); (iii) award stock bonuses as provided in paragraph 7; (iv) sell shares subject to restrictions as provided in paragraph 8; (v) grant stock appreciation rights as provided in paragraph 9; (vi) grant cash bonus rights as provided in paragraph 10; (vii) grant performance units as provided in paragraph 11 and (viii) grant foreign qualified awards as provided in paragraph 12. Any such awards may be made to employees, including employees who are officers or directors, and to other individuals described in paragraph 1 who the Board of Directors believes have made or will make an important contribution to the Company or any subsidiary of the Company; provided, however, that only employees of the Company or any subsidiary shall be eligible to receive Incentive Stock Options under the Plan. The Board of Directors shall select the individuals to whom awards shall be made and shall specify the action taken with respect to each individual to whom an award is made. At the discretion of the Board of Directors, an individual may be given an election to surrender an award in exchange for the grant of a new award; provided, however, that, notwithstanding anything to the contrary contained herein, in no event shall any option or stock appreciation right granted under the Plan be repriced, replaced or regranted through the cancellation and reissuance thereof at a lower exercise price, or by lowering the exercise price of a previously granted option or stock appreciation right, without the prior approval of the shareholders of the Company, except that the Board of Directors may provide an individual the election to surrender an option or other award (including an option at a time when its exercise price is equal to or greater than the fair market value of the underlying stock) in exchange for cash. No employee may be granted options or stock appreciation rights under the Plan for more than an aggregate of 450,000 shares of Common Stock in connection with the hiring of the employee or 100,000 shares of Common Stock in any calendar year otherwise. 6. Option Grants. (a) General Rules Relating to Options. (i) Terms of Grant. The Board of Directors may grant options under the Plan. With respect to each option grant, the Board of Directors shall determine the number of shares subject to the option, the option price, the period of the option, the time or times at which the option may be exercised and whether the option is an Incentive Stock Option or a Non-Statutory Stock Option. At the time of the grant of an option or at any time thereafter, the Board of Directors may provide that an optionee who exercised an option with Common Stock of the Company shall automatically receive a new option to purchase additional shares equal to the number of shares surrendered and may specify the terms and conditions of such new options. 3 (ii) Exercise of Options. Except as provided in paragraph 6(a)(iv) or as determined by the Board of Directors, no option granted under the Plan may be exercised unless at the time of such exercise the optionee is employed by or in the service of the Company or any subsidiary of the Company and shall have been so employed or provided such service continuously since the date such option was granted. Absence on leave or on account of illness or disability under rules established by the Board of Directors shall not, however, be deemed an interruption of employment or service for this purpose. Unless otherwise determined by the Board of Directors, vesting of options shall not continue during an absence on leave (including an extended illness) or on account of disability. Except as provided in paragraphs 6(a)(iv) and 13, options granted under the Plan may be exercised from time to time over the period stated in each option in such amounts and at such times as shall be prescribed by the Board of Directors, provided that options shall not be exercised for fractional shares. Unless otherwise determined by the Board of Directors, if the optionee does not exercise an option in any one year with respect to the full number of shares to which the optionee is entitled in that year, the optionee's rights shall be cumulative and the optionee may purchase those shares in any subsequent year during the term of the option. Unless otherwise determined by the Board of Directors, if an Officer exercises an option within six months of the grant of the option, the shares acquired upon exercise of the option may not be sold until six months after the date of grant of the option. (iii) Nontransferability. Each Incentive Stock Option and, unless otherwise determined by the Board of Directors with respect to an option granted to a person who is neither an Officer nor a director of the Company, each other option granted under the Plan by its terms shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the optionee's domicile at the time of death, and shall be exercisable during the optionee's lifetime only by the optionee. (iv) Termination of Employment or Service. (A) General Rule. Unless otherwise determined by the Board of Directors, in the event the employment or service of the optionee with the Company or a subsidiary terminates for any reason other than because of physical disability or death as provided in subparagraphs 6(a)(iv)(B) and (C), the option may be exercised at any time prior to the expiration date of the option or the expiration of 30 days after the date of such termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination. 4 (B) Termination Because of Total Disability. Unless otherwise determined by the Board of Directors, in the event of the termination of employment or service because of total disability, the option may be exercised at any time prior to the expiration date of the option or the expiration of 12 months after the date of such termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination. The term "total disability" means a medically determinable mental or physical impairment which is expected to result in death or which has lasted or is expected to last for a continuous period of 12 months or more and which causes the optionee to be unable, in the opinion of the Company and two independent physicians, to perform his or her duties as an employee, director, officer or consultant of the Company and to be engaged in any substantial gainful activity. Total disability shall be deemed to have occurred on the first day after the Company and the two independent physicians have furnished their opinion of total disability to the Company. (C) Termination Because of Death. Unless otherwise determined by the Board of Directors, in the event of the death of an optionee while employed by or providing service to the Company or a subsidiary, the option may be exercised at any time prior to the expiration date of the option or the expiration of 12 months after the date of death, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of death and only by the person or persons to whom such optionee's rights under the option shall pass by the optionee's will or by the laws of descent and distribution of the state or country of domicile at the time of death. (D) Amendment of Exercise Period Applicable to Termination. The Board of Directors, at the time of grant or, with respect to an option that is not an Incentive Stock Option, at any time thereafter, may extend the 30-day and 12-month exercise periods any length of time not longer than the original expiration date of the option, and may increase the portion of an option that is exercisable, subject to such terms and conditions as the Board of Directors may determine. (E) Failure to Exercise Option. To the extent that the option of any deceased optionee or of any optionee whose employment or service terminates is not exercised within the applicable period, all further rights to purchase shares pursuant to such option shall cease and terminate. 5 (v) Purchase of Shares. Unless the Board of Directors determines otherwise, shares may be acquired pursuant to an option granted under the Plan only upon receipt by the Company of notice in writing from the optionee of the optionee's intention to exercise, specifying the number of shares as to which the optionee desires to exercise the option and the date on which the optionee desires to complete the transaction, and if required in order to comply with the Securities Act of 1933, as amended, containing a representation that it is the optionee's present intention to acquire the shares for investment and not with a view to distribution. Unless the Board of Directors determines otherwise, on or before the date specified for completion of the purchase of shares pursuant to an option, the optionee must have paid the Company the full purchase price of such shares in cash (including, with the consent of the Board of Directors, cash that may be the proceeds of a loan from the Company (provided that, with respect to an Incentive Stock Option, such loan is approved at the time of option grant)) or, with the consent of the Board of Directors (which, in the case of an Incentive Stock Option, shall be given only at the time of option grant), in whole or in part, in Common Stock of the Company valued at fair market value*, restricted stock, performance units or other contingent awards denominated in either stock or cash, promissory notes and other forms of consideration. The fair market value of Common Stock provided in payment of the purchase price shall be determined by the Board of Directors. If the Common Stock of the Company is not publicly traded on the date the option is exercised, the Board of Directors may consider any valuation methods it deems appropriate and may, but is not required to, obtain one or more independent appraisals of the Company. If the Common Stock of the Company is publicly traded on the date the option is exercised, the fair market value of Common Stock provided in payment of the purchase price shall be the closing price of the Common Stock as reported in The Wall Street Journal on the last trading day preceding the date the option is exercised, or such other reported value of the Common Stock as shall be specified by the Board of Directors. No shares shall be issued until full payment for the shares has been made. With the consent of the Board of Directors (which, in the case of an Incentive Stock Option, shall be given only at the time of option grant), an optionee may request the Company to apply automatically the shares to be received upon the exercise of a portion of a stock option (even though stock certificates have not yet been issued) to satisfy the purchase price for additional portions of the option. Each optionee who has exercised an option shall immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If additional withholding is or becomes required beyond any amount deposited before delivery of the certificates, the optionee shall pay such amount to the Company on demand. If the optionee fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the optionee, including salary, subject to applicable law. With the consent of the Board of Directors (which in the case of an Incentive Stock Option, shall be given only at the time of option grant), an optionee may satisfy this obligation, in whole or in part, by having the Company withhold from the shares to be issued upon the exercise that number of shares that would satisfy the withholding amount due or by delivering to the Company Common Stock to satisfy the withholding amount. Upon the exercise of an option, the number of shares reserved for issuance under the Plan shall be reduced by the number of shares issued upon exercise of the option. - ---------- * The Board of Directors has consented to the use of Common Stock in payment of the purchase price, at a fair market value equal to the closing price of the Common Stock as reported in The Wall Street Journal on the last trading day preceding the date the option is exercised. 6 (b) Incentive Stock Options. Incentive Stock Options shall be subject to the following additional terms and conditions: (i) Limitation on Amount of Grants. No employee may be granted Incentive Stock Options under the Plan if the aggregate fair market value, on the date of grant, of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by that employee during any calendar year under the Plan and under all incentive stock option plans (within the meaning of Section 422 of the Code) of the Company or any parent or subsidiary of the Company exceeds $100,000. (ii) Limitations on Grants to 10 Percent Shareholders. An Incentive Stock Option may be granted under the Plan to an employee possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of any parent or subsidiary of the Company only if the option price is at least 110 percent of the fair market value, as described in paragraph 6(b)(iv), of the Common Stock subject to the option on the date it is granted and the option by its terms is not exercisable after the expiration of five years from the date it is granted. (iii) Duration of Options. Subject to paragraphs 6(a)(ii) and 6(b)(ii), Incentive Stock Options granted under the Plan shall continue in effect for the period fixed by the Board of Directors, except that no Incentive Stock Option shall be exercisable after the expiration of 10 years from the date it is granted. (iv) Option Price. The option price per share shall be determined by the Board of Directors at the time of grant. Except as provided in paragraph 6(b)(ii), the option price shall not be less than 100 percent of the fair market value of the Common Stock covered by the Incentive Stock Option at the date the option is granted. The fair market value shall be determined by the Board of Directors. If the Common Stock of the Company is not publicly traded on the date the option is granted, the Board of Directors may consider any valuation methods it deems appropriate and may, but is not required to, obtain one or more independent appraisals of the Company. If the Common Stock of the Company 7 is publicly traded on the date the option is exercised, the fair market value shall be deemed to be the closing price of the Common Stock as reported in The Wall Street Journal on the day preceding the date the option is granted, or, if there has been no sale on that date, on the last preceding date on which a sale occurred or such other value of the Common Stock as shall be specified by the Board of Directors. (v) Limitation on Time of Grant. No Incentive Stock Option shall be granted on or after the tenth anniversary of the effective date of the Plan. (vi) Conversion of Incentive Stock Options. The Board of Directors may at any time without the consent of the optionee convert an Incentive Stock Option to a Non-Statutory Stock Option. (c) Non-Statutory Stock Options. Non-Statutory Stock Options shall be subject to the following terms and conditions in addition to those set forth in paragraph 6(a) above: (i) Option Price. The option price for Non-Statutory Stock Options shall be determined by the Board of Directors at the time of grant and may be any amount determined by the Board of Directors. (ii) Duration of Options. Non-Statutory Stock Options granted under the Plan shall continue in effect for the period fixed by the Board of Directors. 7. Stock Bonuses. The Board of Directors may award shares under the Plan as stock bonuses. Shares awarded as a bonus shall be subject to the terms, conditions, and restrictions determined by the Board of Directors. The restrictions may include restrictions concerning transferability and forfeiture of the shares awarded, together with such other restrictions as may be determined by the Board of Directors. If shares are subject to forfeiture, all dividends or other distributions paid by the Company with respect to the shares shall be retained by the Company until the shares are no longer subject to forfeiture, at which time all accumulated amounts shall be paid to the recipient. The Board of Directors may require the recipient to sign an agreement as a condition of the award, but may not require the recipient to pay any monetary consideration other than amounts necessary to satisfy tax withholding requirements. The agreement may contain any terms, conditions, restrictions, representations and warranties required by the Board of Directors. The certificates representing the shares awarded shall bear any legends required by the Board of Directors. Unless otherwise determined by the Board of Directors, 8 shares awarded as a stock bonus to an Officer may not be sold until six months after the date of the award. The Company may require any recipient of a stock bonus to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the recipient fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the recipient, including salary or fees for services, subject to applicable law. With the consent of the Board of Directors, a recipient may deliver Common Stock to the Company to satisfy this withholding obligation. Upon the issuance of a stock bonus, the number of shares reserved for issuance under the Plan shall be reduced by the number of shares issued. 8. Restricted Stock. The Board of Directors may issue shares under the Plan for such consideration (including promissory notes and services) as determined by the Board of Directors. Shares issued under the Plan shall be subject to the terms, conditions and restrictions determined by the Board of Directors. The restrictions may include restrictions concerning transferability, repurchase by the Company and forfeiture of the shares issued, together with such other restrictions as may be determined by the Board of Directors. If shares are subject to forfeiture or repurchase by the Company, all dividends or other distributions paid by the Company with respect to the shares shall be retained by the Company until the shares are no longer subject to forfeiture or repurchase, at which time all accumulated amounts shall be paid to the recipient. All Common Stock issued pursuant to this paragraph 8 shall be subject to a purchase agreement, which shall be executed by the Company and the prospective recipient of the shares prior to the delivery of certificates representing such shares to the recipient. The purchase agreement may contain any terms, conditions, restrictions, representations and warranties required by the Board of Directors. The certificates representing the shares shall bear any legends required by the Board of Directors. Unless otherwise determined by the Board of Directors, shares issued under this paragraph 8 to an Officer may not be sold until six months after the shares are issued. The Company may require any purchaser of restricted stock to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the purchaser fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the purchaser, including salary, subject to applicable law. With the consent of the Board of Directors, a purchaser may deliver Common Stock to the Company to satisfy this withholding obligation. Upon the issuance of restricted stock, the number of shares reserved for issuance under the Plan shall be reduced by the number of shares issued. 9. Stock Appreciation Rights. (a) Grant. Stock appreciation rights may be granted under the Plan by the Board of Directors, subject to such rules, terms, and conditions as the Board of Directors prescribes. (b) Exercise. 9 (i) Each stock appreciation right shall entitle the holder, upon exercise, to receive from the Company in exchange therefor an amount equal in value to the excess of the fair market value on the date of exercise of one share of Common Stock of the Company over its fair market value on the date of grant (or, in the case of a stock appreciation right granted in connection with an option, the excess of the fair market value of one share of Common Stock of the Company over the option price per share under the option to which the stock appreciation right relates), multiplied by the number of shares covered by the stock appreciation right or the option, or portion thereof, that is surrendered. No stock appreciation right shall be exercisable at a time that the amount determined under this subparagraph is negative. Payment by the Company upon exercise of a stock appreciation right may be made in Common Stock valued at fair market value, in cash, or partly in Common Stock and partly in cash, all as determined by the Board of Directors. (ii) A stock appreciation right shall be exercisable only at the time or times established by the Board of Directors. If a stock appreciation right is granted in connection with an option, the following rules shall apply: (1) the stock appreciation right shall be exercisable only to the extent and on the same conditions that the related option could be exercised; (2) the stock appreciation rights shall be exercisable only when the fair market value of the stock exceeds the option price of the related option; (3) the stock appreciation right shall be for no more than 100 percent of the excess of the fair market value of the stock at the time of exercise over the option price; (4) upon exercise of the stock appreciation right, the option or portion thereof to which the stock appreciation right relates terminates; and (5) upon exercise of the option, the related stock appreciation right or portion thereof terminates. Unless otherwise determined by the Board of Directors, no stock appreciation right granted to an Officer or director may be exercised during the first six months following the date it is granted. (iii) The Board of Directors may withdraw any stock appreciation right granted under the Plan at any time and may impose any conditions upon the exercise of a stock appreciation right or adopt rules and regulations from time to time affecting the rights of holders of stock appreciation rights. Such rules and regulations may govern the right to exercise stock appreciation rights granted prior to adoption or amendment of such rules and regulations as well as stock appreciation rights granted thereafter. (iv) For purposes of this paragraph 9, the fair market value of the Common Stock shall be determined as of the date the stock appreciation right is exercised, under the methods set forth in paragraph 6(b)(iv). 10 (v) No fractional shares shall be issued upon exercise of a stock appreciation right. In lieu thereof, cash may be paid in an amount equal to the value of the fraction or, if the Board of Directors shall determine, the number of shares may be rounded downward to the next whole share. (vi) Each stock appreciation right granted in connection with an Incentive Stock Option, and unless otherwise determined by the Board of Directors with respect to a stock appreciation right granted to a person who is neither an Officer nor a director of the Company, each other stock appreciation right granted under the Plan by its terms shall be nonassignable and nontransferable by the holder, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the holder's domicile at the time of death, and each stock appreciation right by its terms shall be exercisable during the holder's lifetime only by the holder. (vii) Each participant who has exercised a stock appreciation right shall, upon notification of the amount due, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If the participant fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the participant including salary, subject to applicable law. With the consent of the Board of Directors a participant may satisfy this obligation, in whole or in part, by having the Company withhold from any shares to be issued upon the exercise that number of shares that would satisfy the withholding amount due or by delivering Common Stock to the Company to satisfy the withholding amount. (viii) Upon the exercise of a stock appreciation right for shares, the number of shares reserved for issuance under the Plan shall be reduced by the number of shares issued. Cash payments of stock appreciation rights shall not reduce the number of shares of Common Stock reserved for issuance under the Plan. 10. Cash Bonus Rights. (a) Grant. The Board of Directors may grant cash bonus rights under the Plan in connection with (i) options granted or previously granted, (ii) stock appreciation rights granted or previously granted, (iii) stock bonuses awarded or previously awarded and (iv) shares sold or previously sold under the Plan. Cash bonus rights will be subject to rules, terms and conditions as the Board of Directors may prescribe. Unless otherwise determined by the Board of Directors with respect to a cash bonus right granted to a person who is neither an Officer nor a director of the Company, each cash bonus right granted under the Plan by its terms shall be nonassignable and nontransferable by the holder, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the holder's domicile at the time of death. The payment of a cash bonus shall not reduce the number of shares of Common Stock reserved for issuance under the Plan. 11 (b) Cash Bonus Rights in Connection With Options. A cash bonus right granted in connection with an option will entitle an optionee to a cash bonus when the related option is exercised (or terminates in connection with the exercise of a stock appreciation right related to the option) in whole or in part if, in the sole discretion of the Board of Directors, the bonus right will result in a tax deduction that the Company has sufficient taxable income to use. If an optionee purchases shares upon exercise of an option and does not exercise a related stock appreciation right, the amount of the bonus, if any, shall be determined by multiplying the excess of the total fair market value of the shares to be acquired upon the exercise over the total option price for the shares by the applicable bonus percentage. If the optionee exercises a related stock appreciation right in connection with the termination of an option, the amount of the bonus, if any, shall be determined by multiplying the total fair market value of the shares and cash received pursuant to the exercise of the stock appreciation right by the applicable bonus percentage. The bonus percentage applicable to a bonus right, including a previously granted bonus right, may be changed from time to time at the sole discretion of the Board of Directors but shall in no event exceed 75 percent. (c) Cash Bonus Rights in Connection With Stock Bonus. A cash bonus right granted in connection with a stock bonus will entitle the recipient to a cash bonus payable when the stock bonus is awarded or restrictions, if any, to which the stock is subject lapse. If bonus stock awarded is subject to restrictions and is repurchased by the Company or forfeited by the holder, the cash bonus right granted in connection with the stock bonus shall terminate and may not be exercised. The amount and timing of payment of a cash bonus shall be determined by the Board of Directors. (d) Cash Bonus Rights in Connection With Stock Purchases. A cash bonus right granted in connection with the purchase of stock pursuant to paragraph 8 will entitle the recipient to a cash bonus when the shares are purchased or restrictions, if any, to which the stock is subject lapse. Any cash bonus right granted in connection with shares purchased pursuant to paragraph 8 shall terminate and may not be exercised in the event the shares are repurchased by the Company or forfeited by the holder pursuant to applicable restrictions. The amount of any cash bonus to be awarded and timing of payment of a cash bonus shall be determined by the Board of Directors. (e) Taxes. The Company shall withhold from any cash bonus paid pursuant to paragraph 10 the amount necessary to satisfy any applicable federal, state and local withholding requirements. 12 11. Performance Units. The Board of Directors may grant performance units consisting of monetary units which may be earned in whole or in part if the Company achieves certain goals established by the Board of Directors over a designated period of time, but not in any event more than 10 years. The goals established by the Board of Directors may include earnings per share, return on shareholders' equity, return on invested capital, and such other goals as may be established by the Board of Directors. In the event that the minimum performance goal established by the Board of Directors is not achieved at the conclusion of a period, no payment shall be made to the participants. In the event the maximum corporate goal is achieved, 100 percent of the monetary value of the performance units shall be paid to or vested in the participants. Partial achievement of the maximum goal may result in a payment or vesting corresponding to the degree of achievement as determined by the Board of Directors. Payment of an award earned may be in cash or in Common Stock or in a combination of both, and may be made when earned, or vested and deferred, as the Board of Directors determines. Deferred awards shall earn interest on the terms and at a rate determined by the Board of Directors. Unless otherwise determined by the Board of Directors with respect to a performance unit granted to a person who is neither an Officer nor a director of the Company, each performance unit granted under the Plan by its terms shall be nonassignable and nontransferable by the holder, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the holder's domicile at the time of death. Each participant who has been awarded a performance unit shall, upon notification of the amount due, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If the participant fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the participant, including salary or fees for services, subject to applicable law. With the consent of the Board of Directors a participant may satisfy this obligation, in whole or in part, by having the Company withhold from any shares to be issued that number of shares that would satisfy the withholding amount due or by delivering Common Stock to the Company to satisfy the withholding amount. The payment of a performance unit in cash shall not reduce the number of shares of Common Stock reserved for issuance under the Plan. The number of shares reserved for issuance under the Plan shall be reduced by the number of shares issued upon payment of an award. 12. Foreign Qualified Grants. Awards under the Plan may be granted to such officers and employees of the Company and its subsidiaries and such other persons described in paragraph 1 residing in foreign jurisdictions as the Board of Directors may determine from time to time. The Board of Directors may adopt such supplements to the Plan as may be necessary to comply with the applicable laws of such foreign jurisdictions and to afford participants favorable treatment under such laws; provided, however, that no award shall be granted under any such supplement with terms which are more beneficial to the participants than the terms permitted by the Plan. 13. Changes in Capital Structure. 13 (a) Stock Splits; Stock Dividends. If the outstanding Common Stock of the Company is hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares or dividend payable in shares, recapitalization or reclassification appropriate adjustment shall be made by the Board of Directors in the number and kind of shares available for grants under the Plan. In addition, the Board of Directors shall make appropriate adjustment in the number and kind of shares as to which outstanding options, or portions thereof then unexercised, shall be exercisable, so that the optionee's proportionate interest before and after the occurrence of the event is maintained. Notwithstanding the foregoing, the Board of Directors shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Board of Directors. Any such adjustments made by the Board of Directors shall be conclusive. (b) Mergers, Reorganizations, Etc. In the event of a merger, consolidation, plan of exchange, acquisition of property or stock, separation, reorganization or liquidation to which the Company or a subsidiary is a party or a sale of all or substantially all of the Company's assets (each, a "Transaction"), the Board of Directors shall, in its sole discretion and to the extent possible under the structure of the Transaction, select one of the following alternatives for treating outstanding options under the Plan: (i) Outstanding options shall remain in effect in accordance with their terms. (ii) Outstanding options shall be converted into options to purchase stock in the corporation that is the surviving or acquiring corporation in the Transaction. The amount, type of securities subject thereto and exercise price of the converted options shall be determined by the Board of Directors of the Company, taking into account the relative values of the companies involved in the Transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be issued to holders of shares of the Company. Unless otherwise determined by the Board of Directors, the converted options shall be vested only to the extent that the vesting requirements relating to options granted hereunder have been satisfied. (iii) The Board of Directors shall provide a 30-day period prior to the consummation of the Transaction during which outstanding options may be exercised to the extent then exercisable, and upon the expiration of such 30-day period, all unexercised options shall immediately terminate. The Board of Directors may, in its sole discretion, accelerate the exercisability of options so that they are exercisable in full during such 30-day period. 14 (c) Dissolution of the Company. In the event of the dissolution of the Company, options shall be treated in accordance with paragraph 13(b)(iii). (d) Rights Issued by Another Corporation. The Board of Directors may also grant options, stock appreciation rights, performance units, stock bonuses and cash bonuses and issue restricted stock under the Plan having terms, conditions and provisions that vary from those specified in this Plan provided that any such awards are granted in substitution for, or in connection with the assumption of, existing options, stock appreciation rights, stock bonuses, cash bonuses, restricted stock and performance units granted, awarded or issued by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a Transaction. 14. Amendment of Plan. The Board of Directors may at any time, and from time to time, modify or amend the Plan in such respects as it shall deem advisable because of changes in the law while the Plan is in effect or for any other reason, except that without the approval of the shareholders of the Company, the Board of Directors may not increase the number of shares authorized to be issued under paragraph 2 of the Plan (except for adjustments permitted under paragraph 13(a) of the Plan). Except as provided in paragraphs 6(a)(iv), 9, 10 and 13, however, no change in an award already granted shall be made without the written consent of the holder of such award. 15. Approvals. The obligations of the Company under the Plan are subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company will use its best efforts to take steps required by state or federal law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange on which the Company's shares may then be listed, in connection with the grants under the Plan. The foregoing notwithstanding, the Company shall not be obligated to issue or deliver Common Stock under the Plan if such issuance or delivery would violate applicable state or federal securities laws. 16. Employment and Service Rights. Nothing in the Plan or any award pursuant to the Plan shall (i) confer upon any employee any right to be continued in the employment of the Company or any subsidiary or interfere in any way with the right of the Company or any subsidiary by whom such employee is employed to terminate such employee's employment at any time, for any reason, with or without cause, or to decrease such employee's compensation or benefits, or (ii) confer upon any person engaged by the Company any right to be retained or employed by the Company or to the continuation, extension, renewal, or modification of any compensation, contract, or arrangement with or by the Company. 15 17. Rights as a Shareholder. The recipient of any award under the Plan shall have no rights as a shareholder with respect to any Common Stock until the date of issue to the recipient of a stock certificate for such shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date occurs prior to the date such stock certificate is issued. 18. Option Grants to Non-Employee Directors. (a) Initial Board Grants. Each person who becomes a Non-Employee Director after the Plan is adopted shall be automatically granted an option to purchase 15,000 shares of Common Stock when he or she becomes a Non-Employee Director, so long as such person has not previously served as a director of the Company. A "Non-Employee Director" is a director who is not an employee of the Company or any of its subsidiaries, but does not include such a director whose employer prohibits such director from receiving any grant of an option to purchase shares of Common Stock of the Company. (b) Additional Grants. Each Non-Employee Director shall be automatically granted an option to purchase additional shares of Common Stock in each calendar year subsequent to the year in which such Non-Employee Director was granted an option pursuant to paragraph 18(a), such option to be granted as of the date of the Company's annual meeting of shareholders held in such calendar year, provided that the Non-Employee Director continues to serve in such capacity as of such date. The number of shares subject to each additional grant shall be 5,000 shares for each Non-Employee Director. (c) Exercise Price. The exercise price of all options granted pursuant to this paragraph 18 shall be equal to 100 percent of the fair market value of the Common Stock determined pursuant to paragraph 6(b)(iv). (d) Term of Option. The term of each option granted pursuant to this paragraph 18 shall be 10 years from the date of grant. (e) Exercisability. Until an option expires or is terminated and except as provided in paragraphs 18(g) and 13, an option granted under this paragraph 18 shall be exercisable in full on the date one year following the grant of the option. (f) Termination As a Director. If an optionee ceases to be a director of the Company for any reason, including death, the option may be exercised at any time prior to the expiration date of the option or the expiration of 30 days (or 12 months in the event of death) after the last day the optionee served as a director, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option as of the last day the optionee served as a director. 16 (g) Nontransferability. Each option by its terms shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the optionee's domicile at the time of death, and each option by its terms shall be exercisable during the optionee's lifetime only by the optionee. (h) Exercise of Options. Options may be exercised upon payment of cash or shares of Common Stock of the Company in accordance with paragraph 6(a)(v). Adopted: August 7, 1995. Amended: May 20, 1997 (to increase shares in paragraph 2 to 1,500,000). Amended: May 18, 1999 (to increase shares in paragraph 2 to 2,250,000 and to increase individual limits in paragraph 5 to 450,000 and 100,000 shares). Amended: August 12, 1999 (to increase shares in paragraph 2 to 2,750,000). Amended: February 25, 2000 (amendments to paragraphs 6(a)(iii), 6(a)(v) and 14). Amended: May 16, 2000 (to increase shares in paragraph 2 to 5,425,000 and to make certain other changes to paragraph 5). Amended: November 19, 2002 (to make certain changes to paragraph 5). Amended: May 13, 2003 (to permit a stock option exchange program). 17 EX-99.(D)(2) 18 e300526_ex99-d2.txt 2001 NONQUALIFIED STOCK OPTION PLAN. Exhibit (d)(2) RADISYS CORPORATION 2001 NONQUALIFIED STOCK OPTION PLAN (As Amended Through May 13, 2003) 1. Purpose. The purpose of this 2001 Nonqualifed Stock Option Plan (the "Plan") is to enable RadiSys Corporation (the "Company") to attract and retain the services of selected employees of the Company or any parent or subsidiary of the Company. For purposes of this Plan, a person is considered to be employed by or in the service of the Company if the person is employed by or in the service of the Company or any parent or subsidiary of the Company (an "Employer"). 2. Shares Subject to the Plan. Subject to adjustment as provided below and in Section 7, the shares to be offered under the Plan shall consist of Common Stock of the Company, and the total number of shares of Common Stock that may be issued under the Plan shall be 2,250,000 shares. If an option granted under the Plan expires, terminates or is canceled, the unissued shares subject to that option shall again be available under the Plan. 3. Effective Date and Duration of Plan. 3.1 Effective Date. The Plan shall become effective as of the date the Plan is adopted by the Board of Directors. 3.2 Duration. The Plan shall continue in effect until all shares available for issuance under the Plan have been issued and all restrictions on the shares have lapsed. The Board of Directors may suspend or terminate the Plan at any time. Termination shall not affect any outstanding options. 4. Administration. 4.1 Board of Directors. The Plan shall be administered by the Board of Directors of the Company, which shall determine and designate the individuals to whom awards shall be made, the amount of the awards and the other terms and conditions of the awards. Subject to the provisions of the Plan, the Board of Directors may adopt and amend rules and regulations relating to administration of the Plan, advance the lapse of any waiting period, accelerate any exercise date, waive or modify any restriction applicable to shares (except those restrictions imposed by law), provide an individual the election to surrender an option or other award (including an option at a time when its exercise price is equal to or greater than the fair market value of the underlying stock) in exchange for cash and make all other determinations in the judgment of the Board of Directors necessary or desirable for the administration of the Plan. The interpretation and construction of the provisions of the Plan and related agreements by the Board of Directors shall be final and conclusive. The Board of Directors may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it deems expedient to carry the Plan into effect, and the Board of Directors shall be the sole and final judge of such expediency. 4.2 Committee. The Board of Directors may delegate to any committee of the Board of Directors or any officer of the Company (the "Committee" or "Authorized Officer") any or all authority for administration of the Plan. If authority is delegated to the Committee or an Authorized Officer, all references to the Board of Directors in the Plan shall mean and relate to the Committee or the Authorized Officer, as applicable, except (i) as otherwise provided by the Board of Directors and (ii) that only the Board of Directors may amend or terminate the Plan as provided in Sections 3 and 8. 5. Types of Awards, Eligibility, Limitations. The Board of Directors may, from time to time, grant options that are not incentive stock options ("nonqualified options"), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The term "options", as used in the Plan, means nonqualified options. Options may be granted only to employees who are not executive officers or directors of the Company. An executive officer is any person who is an officer of the Company within the meaning of Section 16 of the Securities Exchange Act or 1934, as amended, and the rules and regulations promulgated thereunder and any other employee of the Company whom the Board of Directors or the Compensation Committee of the Board of Directors classifies as an "executive officer" in its sole discretion. The Board of Directors shall select the individuals to whom awards shall be made and shall specify the action taken with respect to each individual to whom an award is made. 6. Option Grants. 6.1 Terms of Grant. The Board of Directors may grant options under the Plan. With respect to each option grant, the Board of Directors shall determine the number of shares subject to the option, the exercise price, the period of the option, and the time or times at which the option may be exercised. In connection with the grant of any option under the Plan, the Board of Directors may in its sole discretion provide for a cash payment to be made to the person exercising the option, at the time of exercise, in such amount as the Board of Directors determines to be appropriate to reimburse such person, in whole or in part, for any federal or state income taxes incurred in connection with such exercise. Such payment may be applied to the satisfaction of any applicable withholding tax that is incurred in connection with such exercise or with such payment 6.2 Exercise of Options. Except as provided in Section 6.4 or as determined by the Board of Directors, no option granted under the Plan may be exercised unless at the time of exercise the optionee is employed by the Company and shall have been so employed continuously since the date the option was granted. Except as provided in Sections 6.4 and 7, options granted under the Plan may be exercised from time to time over the period stated in each option in amounts and at times prescribed by the Board of Directors, provided that options may not be exercised for fractional shares. Unless otherwise determined by the Board of Directors, if an optionee does not exercise an option in any one year for the full number of shares to which the optionee is entitled in that year, the optionee's rights shall be cumulative and the optionee may purchase those shares in any subsequent year during the term of the option. 2 6.3 Nontransferability. Unless otherwise determined by the Board of Directors, each option granted under the Plan by its terms (i) shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the optionee's domicile at the time of death, and (ii) during the optionee's lifetime, shall be exercisable only by the optionee. 6.4 Termination of Employment or Service. 6.4-1 General Rule. Unless otherwise determined by the Board of Directors, if an optionee's employment or service with the Company terminates for any reason other than because of total disability or death as provided in Sections 6.4-2 and 6.4-3, his or her option may be exercised at any time before the expiration date of the option or the expiration of 30 days after the date of termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of termination. 6.4-2 Termination Because of Total Disability. Unless otherwise determined by the Board of Directors, if an optionee's employment or service with the Company terminates because of total disability, his or her option may be exercised at any time before the expiration date of the option or before the date 12 months after the date of termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of termination. The term "total disability" means a medically determinable mental or physical impairment that is expected to result in death or has lasted or is expected to last for a continuous period of 12 months or more and that, in the opinion of the Company and two independent physicians, causes the optionee to be unable to perform his or her duties as an employee, director, officer or consultant of the Employer and unable to be engaged in any substantial gainful activity. Total disability shall be deemed to have occurred on the first day after the two independent physicians have furnished their written opinion of total disability to the Company and the Company has reached an opinion of total disability. 6.4-3 Termination Because of Death. Unless otherwise determined by the Board of Directors, if an optionee dies while employed by or providing service to the Company, his or her option may be exercised at any time before the expiration date of the option or before the date 12 months after the date of death, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of death and only by the person or persons to whom the optionee's rights under the option shall pass by the optionee's will or by the laws of descent and distribution of the state or country of domicile at the time of death. 3 6.4-4 Amendment of Exercise Period Applicable to Termination. The Board of Directors may at any time extend the 30-day and 12-month exercise periods any length of time not longer than the original expiration date of the option. The Board of Directors may at any time increase the portion of an option that is exercisable, subject to terms and conditions determined by the Board of Directors. 6.4-5 Failure to Exercise Option. To the extent that the option of any deceased optionee or any optionee whose employment or service terminates is not exercised within the applicable period, all further rights to purchase shares pursuant to the option shall cease and terminate. 6.4-6 Leave of Absence. Absence on leave approved by the Employer or on account of illness or disability shall not be deemed a termination or interruption of employment or service. Unless otherwise determined by the Board of Directors, vesting of options shall continue during a medical, family or military leave of absence, whether paid or unpaid, and vesting of options shall be suspended during any other unpaid leave of absence. 6.5 Purchase of Shares. 6.5-1 Notice of Exercise. Unless the Board of Directors determines otherwise, shares may be acquired pursuant to an option granted under the Plan only upon the Company's receipt of written notice from the optionee of the optionee's binding commitment to purchase shares, specifying the number of shares the optionee desires to purchase under the option and the date on which the optionee agrees to complete the transaction, and, if required to comply with the Securities Act of 1933, containing a representation that it is the optionee's intention to acquire the shares for investment and not with a view to distribution. 6.5-2 Payment. Unless the Board of Directors determines otherwise, on or before the date specified for completion of the purchase of shares pursuant to an option exercise, the optionee must pay the Company the full purchase price of those shares in cash or by check or, in whole or in part, in Common Stock of the Company valued at fair market value. Unless otherwise determined by the Board of Directors, any Common Stock provided in payment of the purchase price must have been previously acquired and held by the optionee for at least six months. The fair market value of Common Stock provided in payment of the purchase price shall be the closing price of the Common Stock last reported before the time payment in Common Stock is made or, if earlier, committed to be made, if the Common Stock is publicly traded, or another value of the Common Stock as specified by the Board of Directors. No shares shall be issued until full payment for the shares has been made, including all amounts owed for tax withholding. With the consent of the Board of Directors, an optionee may request the Company to apply automatically the shares to be received upon the exercise of a portion of a stock option (even though stock certificates have not yet been issued) to satisfy the purchase price for additional portions of the option. 4 6.5-3 Tax Withholding. The Company may withhold the amount due, if any, necessary to satisfy any applicable federal, state and local tax withholding requirements as a result of exercise of an option. Such amounts may be withheld from other amounts payable to the optionee, including salary, subject to applicable law. If additional withholding is or becomes required (as a result of exercise of an option or as a result of disposition of shares acquired pursuant to exercise of an option) beyond any amount withheld, the optionee shall pay such amount, in cash or by check, to the Company on demand. If the optionee fails to pay the amount demanded, the Company or the Employer may withhold that amount from other amounts payable to the optionee, including salary, subject to applicable law. With the consent of the Board of Directors, an optionee may satisfy this obligation, in whole or in part, by instructing the Company to withhold from the shares to be issued upon exercise or by delivering to the Company other shares of Common Stock; provided, however, that the number of shares so withheld or delivered shall not exceed the minimum amount necessary to satisfy the required withholding obligation. 6.5-4 Reduction of Reserved Shares. Upon the exercise of an option, the number of shares reserved for issuance under the Plan shall be reduced by the number of shares issued upon exercise of the option (less the number of any shares surrendered in payment for the exercise price or withheld to satisfy withholding requirements). 6.6 Limitations on Grants to Non-Exempt Employees. Unless otherwise determined by the Board of Directors, if an employee of the Company or any parent or subsidiary of the Company is a non-exempt employee subject to the overtime compensation provisions of Section 7 of the Fair Labor Standards Act (the "FLSA"), any option granted to that employee shall be subject to the following restrictions: (i) the option price shall be at least 100 percent of the fair market value, as described in Section 6.8, of the Common Stock subject to the option on the date it is granted; and (ii) the option shall not be exercisable until at least six months after the date it is granted; provided, however, that this six-month restriction on exercisability will cease to apply if the employee dies, becomes disabled or retires, there is a change in ownership of the Company, or in other circumstances permitted by regulation, all as prescribed in Section 7(e)(8)(B) of the FLSA. 6.7 Duration of Options. Subject to Sections 6.2 and 6.4, options granted under the Plan shall continue in effect for the period fixed by the Board of Directors, except that by its terms no option shall be exercisable after the expiration of 10 years from the date it is granted. 5 6.8 Option Price. The option price per share shall be shall be determined by the Board of Directors; provided that in no event shall the price be less than the fair market value of the Common Stock on the date the option is granted. The fair market value shall be the closing price of the Common Stock last reported on the date the option is granted. 7. Changes in Capital Structure. 7.1 Stock Splits, Stock Dividends. If the outstanding Common Stock of the Company is hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares, dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall automatically be made in the number and kind of shares available for grants under the Plan. In addition, appropriate adjustment shall automatically be made in the number and kind of shares as to which outstanding options, or portions thereof then unexercised, shall be exercisable, so that the optionee's proportionate interest before and after the occurrence of the event is maintained. Notwithstanding the foregoing, no adjustment shall be made that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Board of Directors. Any such adjustments made by the Board of Directors shall be conclusive. 7.2 Mergers, Reorganizations, Etc. In the event of a merger, consolidation, plan of exchange, acquisition of property or stock, split-up, split-off, spin-off, reorganization or liquidation to which the Company is a party or any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company (each, a "Transaction"), the Board of Directors shall, in its sole discretion and to the extent possible under the structure of the Transaction, select one of the following alternatives for treating outstanding options under the Plan: 7.2-1 Outstanding options shall remain in effect in accordance with their terms. 7.2-2 Outstanding options shall be converted into options to purchase stock in one or more of the corporations, including the Company, that are the surviving or acquiring corporations in the Transaction. The amount, type of securities subject thereto and exercise price of the converted options shall be determined by the Board of Directors of the Company, taking into account the relative values of the companies involved in the Transaction and the exchange rate, if any, used in determining shares of the surviving corporation(s) to be held by holders of shares of the Company following the Transaction. Unless otherwise determined by the Board of Directors, the converted options shall be vested only to the extent that the vesting requirements relating to options granted hereunder have been satisfied. 6 7.2-3 The Board of Directors shall provide a period of 30 days or less before the completion of the Transaction during which outstanding options may be exercised to the extent then exercisable, and upon the expiration of that period, all unexercised options shall immediately terminate. The Board of Directors may, in its sole discretion, accelerate the exercisability of options so that they are exercisable in full during that period. 7.3 Dissolution of the Company. In the event of the dissolution of the Company, options shall be treated in accordance with Section 7.2-3. 7.4 Rights Issued by Another Corporation. The Board of Directors may also grant options under the Plan with terms, conditions and provisions that vary from those specified in the Plan, provided that any such awards are granted in substitution for, or in connection with the assumption of, existing granted by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a Transaction. 8. Amendment of the Plan. The Board of Directors may at any time modify or amend the Plan in any respect. Except as provided in Section 7, however, no change in an award already granted shall be made without the written consent of the holder of the award if the change would adversely affect the holder. 9. Approvals. The Company's obligations under the Plan are subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company will use its best efforts to take steps required by state or federal law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange on which the Company's shares may then be listed, in connection with the grants under the Plan. The foregoing notwithstanding, the Company shall not be obligated to issue or deliver Common Stock under the Plan if such issuance or delivery would violate state or federal securities laws. 10. Employment Rights. Nothing in the Plan or any award pursuant to the Plan shall confer upon any employee any right to be continued in the employment of an Employer or interfere in any way with the Employer's right to terminate the employee's employment at will at any time, for any reason, with or without cause, or to decrease the employee's compensation or benefits. 11. Rights as a Shareholder. The recipient of any award under the Plan shall have no rights as a shareholder with respect to any shares of Common Stock until the date the recipient becomes the holder of record of those shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date occurs before the date the recipient becomes the holder of record. 7 Adopted: February 27, 2001. Amended: November 19, 2002 (to make certain changes to Section 4.1). Amended: January 27, 2003 (to increase shares in Section 2 to 2,250,000). Amended: May 13, 2003 (to permit a stock option exchange program). 8 EX-99.(D)(3) 19 e300526_ex99-d13.txt FORM OF 1995 STOCK INCENTIVE PLAN. Exhibit (d)(3) RadiSys 5545 NE Dawson Creek Drive Hillsboro, OR 97124 RadiSys Corporation NOTICE OF STOCK OPTION GRANT Recipient: Employee ID: Stock Plan ("Plan"): 1995 Congratulations! You have been awarded a New Hire stock option grant by the Board of Directors of RadiSys Corporation to purchase shares of common stock of the Company, subject to the terms and conditions of the 1995 Stock Incentive Plan and this Option Notice, as outlined below. Stock Options are a valuable component of your total compensation program, and offer an opportunity to share in RadiSys' success over the long term. --------- ---------- ---------- ------- ----------- Shares Grant No. Grant Date Grant Type Granted Grant Price --------- ---------- ---------- ------- ----------- --------- ---------- ---------- ------- ----------- ----------------------------------------------- Detailed Vesting Schedule ----------------------------------------------- Shares Vest Type Full Vest Expiration - ---------- ------------- ------------- -------------- A copy of the Plan Prospectus is enclosed. Please access the HR Toolkit under Benefits/Financial Security to obtain a copy of the Non-Qualified Stock Option Plan, which contains important terms and conditions. To obtain of a copy of the most recent RadiSys Annual Report, go to our Web site at www.radisys.com (select Investor Relations, then Financials). By accepting this option grant and exercising any portion of your option, you agree to comply with all the terms of the Plan and this notification. Options covered by this Agreement may have certain tax consequences at the time of exercise. You are encouraged to obtain independent tax advice before exercising any options. Vesting and the duration of your option grant are both subject to your continual employment, with RadiSys Corporation. Vesting will stop and your options will automatically expire 30 calendar days after termination of your employment with RadiSys. Your option is not transferable, does not imply any right to continued employment and may be exercised only by you. E*TRADE Options Link - -------------------------------------------------------------------------------- Your stock option grant details have been posted on-line at www.optionslink.com. Your "Options Link" account will allow you to view your current balance of vested/unvested stock options, exercise vested options and initiate a variety of other stock option management services. An E*TRADE Options Link welcome packet will be arriving to your home in approximately two weeks to explain how to access your account both on-line and via the phone. EquitEase - -------------------------------------------------------------------------------- RadiSys has contracted with The EquitEase Group to maintain the records for all stock option transactions. Please call their customer service desk at (503) 610-0540 or email them at radisys@equitease.com if you have any questions or concerns regarding the accuracy of stock option date listed on-line, the process for exercising stock options and/or terms and conditions of the Stock Option Plan. EX-99.(D)(4) 20 e300526_ex99-d14.txt FORM OF 2001 NONQUALIFIED STOCK OPTION PLAN. Exhibit (d)(4) RadiSys 5545 NE Dawson Creek Drive Hillsboro, OR 97124 RadiSys Corporation NOTICE OF STOCK OPTION GRANT Recipient: Employee ID: Stock Plan ("Plan"): 2001 Congratulations! You have been awarded a New Hire stock option grant by the Board of Directors of RadiSys Corporation to purchase shares of common stock of the Company, subject to the terms and conditions of the 2001 Non-Qualified Stock Option Plan and this Option Notice, as outlined below. Stock Options are a valuable component of your Total Compensation program, and offer an opportunity to share in RadiSys' success over the long term. --------- ---------- ---------- ------- ----------- Shares Grant No. Grant Date Grant Type Granted Grant Price --------- ---------- ---------- ------- ----------- --------- ---------- ---------- ------- ----------- ----------------------------------------------- Detailed Vesting Schedule ----------------------------------------------- Shares Vest Type Full Vest Expiration - ---------- ------------- ------------- -------------- A copy of the Plan Prospectus is enclosed. Please access the HR Toolkit under Benefits/Financial Security to obtain a copy of the Non-Qualified Stock Option Plan, which contains important terms and conditions. To obtain of a copy of the most recent RadiSys Annual Report, go to our Web site at www.radisys.com (select Investor Relations, then Financials). By accepting this option grant and exercising any portion of your option, you agree to comply with all the terms of the Plan and this notification. Options covered by this Agreement may have certain tax consequences at the time of exercise. You are encouraged to obtain independent tax advice before exercising any options. Vesting and the duration of your option grant are both subject to your continual employment, with RadiSys Corporation. Vesting will stop and your options will automatically expire 30 calendar days after termination of your employment with RadiSys. Your option is not transferable, does not imply any right to continued employment and may be exercised only by you. E*TRADE Options Link - -------------------------------------------------------------------------------- Your stock option grant details have been posted on-line at www.optionslink.com. Your "Options Link" account will allow you to view your current balance of vested/unvested stock options, exercise vested options and initiate a variety of other stock option management services. An E*TRADE Options Link welcome packet will be arriving to your home in approximately two weeks to explain how to access your account both on-line and via the phone. EquitEase - -------------------------------------------------------------------------------- RadiSys has contracted with The EquitEase Group to maintain the records for all stock option transactions. Please call their customer service desk at (503) 610-0540 or email them at radisys@equitease.com if you have any questions or concerns regarding the accuracy of stock option date listed on-line, the process for exercising stock options and/or terms and conditions of the Stock Option Plan. -----END PRIVACY-ENHANCED MESSAGE-----