<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 25, 1999
REGISTRATION NO. 333-83665
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SILICON IMAGE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3674 77-0517246
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
------------------------------
10131 BUBB RD.
CUPERTINO, CALIFORNIA 95014
(408) 873-3111
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------------
DAVID D. LEE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
10131 BUBB RD.
CUPERTINO, CALIFORNIA 95014
(408) 873-3111
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
DENNIS R. DEBROECK, ESQ. JOHN A. FORE, ESQ.
SUSAN A. DUNN, ESQ. KATHLEEN B. BLOCH, ESQ.
DAVID K. MICHAELS, ESQ. PAUL W. HARTZEL, ESQ.
ANDREW Y. LUH, ESQ. WILSON SONSINI GOODRICH & ROSATI, P.C.
PAMELA A. SERGEEFF, ESQ. 650 PAGE MILL ROAD
FENWICK & WEST LLP PALO ALTO, CA 94304
TWO PALO ALTO SQUARE (650) 493-9300
PALO ALTO, CA 94306
(650) 494-0600
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / / _________
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / _________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / / _________
------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED (1) PER SHARE PRICE(2) FEE(3)
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value per share........ 4,485,000 $10.00 $44,850,000 $12,468
</TABLE>
(1) Includes 585,000 shares that the underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act of 1933.
(3) The Company paid a registration fee in the amount of $12,510 with its filing
on July 25, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED , 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
3,900,000 Shares
[SILICONE IMAGE, INC. LOGO]
Common Stock
-----------
Prior to this offering, there has been no public market for our common
stock. The initial public offering price is expected to be between $8.00 and
$10.00 per share. We have applied to list our common stock on The Nasdaq Stock
Market's National Market under the symbol "SIMG."
The underwriters have an option to purchase a maximum of 585,000 additional
shares to cover over-allotment of shares.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" STARTING ON
PAGE 5.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO SILICON
TO PUBLIC COMMISSIONS IMAGE
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per Share............................................. $ $ $
Total................................................. $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
BANCBOSTON ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
a division of Dain Rauscher Incorporated
The date of this prospectus is , 1999
<PAGE>
[Description of graphics on inside front cover page]
The inside front cover contains two pages of graphics. The graphic on the
first page is entitled "Proliferating All-Digital Host Systems and Displays."
The background of the entire graphic is a shadowy depiction of an engineering
blueprint. The blueprint background is bordered on top and bottom by a mustard
yellow bar which extends horizontally across the page. The title is centered in
the top mustard yellow bar. Centered above the title is the Silicon Image logo.
In the center of the page is the phrase "High-Speed Digital Communications." The
word "Digital" is in bold letters. Above this phrase, from left to right, are
the words "digital," "high speed" and "technology." Below this phrase, from left
to right, are the words "communication" and "fast." These words are all on the
border of the yellow mist oval, written in a slightly darker shade for a
shadowed effect. Seven tubes curving upwards originate from this phrase in the
center of the page and end at a horizontal series of graphics across the top of
the page. These graphics appear below the title and run from the left side of
the page to the right side of the page. A series of zeroes and ones is depicted
inside each tube. The horizontal series of graphics above the tubes depict
representations of a personal computer, a notebook computer, a set-top box, a
gaming station, a DVD player, a handheld computer and a digital camcorder. The
representations are labeled as follows: "PC," "Notebook," "Set-Top Box," "Gaming
Station", "DVD," "Handheld Computer" and "Digital Camcorder." To the right of
the "PC" and "Notebook" labels are logos depicting Silicon Image's PanelLink
Technology. To the left of the center of the page is Silicon Image's PanelLink
Technology logo. To the right of the logo is the label "PanelLink Digital."
Below the logo and label is the phrase "High-Speed Digital Interconnect
Technology." Below that is Silicon Image's DVC Architecture logo. Below the logo
is the phrase "All-Digital Architecture to Enable Intelligent Displays." Below
that phrase, in a vertical column appears the phrases "High Image Quality," "Low
Cost" and "Ease of Use." From the phrase "High-Speed Digital Communications" in
the center of the page, ten tubular-shaped arrows curve downwards and end at a
horizontal series of graphics across the bottom of the page. A series of zeroes
and ones is depicted inside each arrow. Each arrow ends above a different
graphic. The horizontal series of graphics across the bottom of the page
consists of a series of representations of a LCD monitor, a projector, a plasma
display, a point of sale display, a kiosk, a digital CRT display, a HDTV
display, a microdisplay and an automobile dashboard display. The representations
are labeled as follows: "LCD Monitor," "Projector," "Plasma," "Point of Sale,"
"Kiosk," "Digital CRT," "HDTV," "Microdisplay" and "Automotive." To the right of
the "LCD Monitor," "Projector," "Plasma," "Point of Sale" and "Kiosk" labels are
logos depicting Silicon Image's PanelLink Technology. Under the "LCD Monitor"
label and to the right of the PanelLink Technology logo is a logo depicting
Silicon Image's DVC Architecture. To the right of the graphic labeled
"Automotive," a large circle with smaller circles within it emanates from the
curving tube farthest to the right. Above the circle is the title "The Future
Intelligent Displays." On the left side, inside the circle, is an arrow pointing
toward the inside of the circle and an arrow pointing away from the center of
the circle. Inside the circle is a graphical representation of a flat panel
display with a joystick, remote control and mouse. Centered at the bottom of the
page in the bottom mustard yellow bar is the phrase "Our solution provides a
seamless connection to all types of digital displays and integrates new features
and functionality to enable intelligent displays." Centered below that phrase is
the phrase "The PanelLink Digital logo and DVC symbols indicate host systems and
displays currently shipping that include our high-speed digital communications
products. The other host systems and displays shown represent potential markets
for our products and technology." Within this phrase after the words "PanelLink
Digital logo" appears the PanelLink Digital logo within parentheses.
The graphic on the second page is entitled "Semiconductor Solutions for
High-Speed Digital Communications." The word "Digital" is in bold letters. This
phrase appears on the background of a sunny sky. Below the title and to the left
is a three-dimensional computer chip. The chip is located on top of the sun in
the background. Inside the chip is the Silicon Image logo. Below the logo are
the words "PanelLink." Below the chip is the representation of a highway. The
highway is separated from the sunny sky background with a thick green line. The
left lane and right lane of the highway are also separated by a thick green
line. In the left lane of the highway is the sentence "The connection between
host systems and displays is one of the last remaining analog holdouts." To the
right and slightly above this sentence is a graphic depicting a monitor. The
monitor shows a picture of an old automobile. Below the graphic of the monitor
is the phrase "Limited Functionality." To the right of the monitor, and
connected by a curving line, is a computer with the words "Digital" and "Analog"
inside of it. The words are separated by a series of vertical zeroes and ones.
To the right of the computer graphic is the phrase "Video Data." Below the line
connecting the monitor with the computer picture are the phrases "Flicker,"
"Fuzziness" and "Color Variation," which appear in a bullet list format. In the
right lane of the highway, is a graphic depicting a purple computer, with the
phrase "Pure Digital" on the right side panel and the PanelLink Technology logo
on the front of the computer. To the right of the logo is the label "PanelLink
Digital." To the right of and below the graphic of the computer is another
graphic depicting the label "Storage Networks." Below the label is the phrase "1
Gigabit per second." The graphic labeled "Storage Networks" is connected to the
computer graphic by a curving tube that is filled with a series of zeroes and
ones. To the left and below the computer graphic is a white cloud-shaped
graphic. Inside the cloud is a series of lines that intersect with large points
at the ends of each line. The cloud-shaped graphic is connected to
<PAGE>
the computer graphic by a curving tube that is filled with a series of zeroes
and ones. Below the cloud shape is the label "Local Area Networks." Below that
is the phrase "1 Gigabit per Second." To the right of the cloud-shaped graphic
is a large curving tube, filled with a series of multicolored zeroes and ones,
connecting the computer graphic to a graphic of a purple flat panel video
display. Inside this flat panel display graphic is a picture of a formula one
race car. On the bottom right hand corner of the flat panel display is the
PanelLink Technology logo with the label "PanelLink Digital" to the right of the
logo. To the left of the flat panel display graphic is Silicon Image's PanelLink
Technology logo. To the right of the logo is the label "PanelLink Digital."
Under this label is the phrase "Silicon Image's high-speed digital
communications solutions eliminate the need for analog technology in host
systems and displays." Below this phrase is Silicon Image's DVC Architecture
logo. Below this logo is the phrase "All-Digital Architecture To Enable
Intelligent Displays."
<PAGE>
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUMMARY............................. 3
RISK FACTORS................................... 5
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS................................... 16
USE OF PROCEEDS................................ 17
DIVIDEND POLICY................................ 17
CAPITALIZATION................................. 18
DILUTION....................................... 19
SELECTED FINANCIAL DATA........................ 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................... 21
BUSINESS....................................... 32
<CAPTION>
PAGE
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<S> <C>
MANAGEMENT..................................... 49
CERTAIN TRANSACTIONS........................... 60
PRINCIPAL STOCKHOLDERS......................... 64
DESCRIPTION OF CAPITAL STOCK................... 67
SHARES ELIGIBLE FOR FUTURE SALE................ 70
UNDERWRITING................................... 72
NOTICE TO CANADIAN RESIDENTS................... 74
LEGAL MATTERS.................................. 75
EXPERTS........................................ 75
ADDITIONAL INFORMATION......................... 75
INDEX TO FINANCIAL STATEMENTS.................. F-1
</TABLE>
--------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
This preliminary prospectus is subject to completion prior to this offering.
Among other things, this preliminary prospectus describes our company as we
currently expect it to exist at the time of this offering.
EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES:
- THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED;
- ALL OUTSTANDING SHARES OF PREFERRED STOCK ARE CONVERTED INTO SHARES OF
COMMON STOCK UPON THE CONSUMMATION OF THIS OFFERING;
- THE REINCORPORATION OF SILICON IMAGE IN DELAWARE; AND
- THE ADOPTION OF VARIOUS NEW EMPLOYEE BENEFIT PLANS, WHICH WILL OCCUR PRIOR
TO THE CONSUMMATION OF THIS OFFERING.
PanelLink-Registered Trademark- is a federally registered trademark of
Silicon Image, Inc. Certain titles and logos of Silicon Image, Inc.'s products
and services appearing in this prospectus, including PixelPrecision-TM-, Silicon
Image-TM-, TMDS-TM-, the PanelLink Logo and the Silicon Image Logo, are
trademarks or service marks of Silicon Image, Inc. and may be registered in
other jurisdictions. Each trademark or service mark of any other company
appearing in this prospectus belongs to its holder.
DEALER PROSPECTUS DELIVERY OBLIGATIONS
UNTIL , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS. THE OUTCOME OF THE
EVENTS DESCRIBED IN THESE FORWARD-LOOKING STATEMENTS IS SUBJECT TO RISKS AND
ACTUAL RESULTS COULD DIFFER MATERIALLY. THE SECTIONS ENTITLED "RISK FACTORS,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" AND "BUSINESS," AS WELL AS DISCUSSIONS ELSEWHERE IN THIS PROSPECTUS,
CONTAIN A DISCUSSION OF SOME OF THE FACTORS THAT COULD CONTRIBUTE TO THESE
DIFFERENCES.
SILICON IMAGE, INC.
We develop and market semiconductors for applications that require
cost-effective, integrated solutions for high-speed data communications. We are
initially focusing our technology on the local interconnect between host
systems, such as PCs, set-top boxes and DVD players, and digital displays, such
as flat panel displays and CRTs. Our current products enable host systems to
transmit digital video data and enable displays to receive and manipulate
digital video data. As with other consumer electronic devices, such as digital
cellular phones, significant benefits can be achieved by converting displays
from analog to digital and by replacing conventional analog connections between
host systems and displays with digital connections.
Recognizing the need for a cost-effective, high-speed digital display
solution, we developed a digital interconnect technology and began shipping
semiconductors for digital displays in 1997. To provide a worldwide, freely
available specification for an all-digital display solution, we, together with
Intel, Compaq, IBM, Hewlett-Packard, NEC and Fujitsu, formed the Digital Display
Working Group, or DDWG, to define such a specification based on our technology.
In April 1999, the DDWG published the Digital Visual Interface, or DVI,
specification, which defines a high-speed data communications link between host
systems and digital displays. The formation of the DDWG and the release of the
DVI specification have accelerated the shift of display technology to digital.
Our key products are based on our PanelLink digital interface technology and
Digital Visual Controller architecture. PanelLink technology is our proprietary
implementation of the DVI specification. The DVC architecture is our platform
for developing products that integrate PanelLink receiver technology with
additional functionality to enable low-cost, intelligent displays for the mass
market. Our products eliminate the need for analog technology in host systems
and displays, improve image quality and allow display manufacturers to increase
the functionality of their products. Our solutions are:
High-speed--our technology enables data to be transmitted at the multi-gigabit
rates needed to support high resolution displays;
Highly integrated--our products incorporate technology for high speed digital
communications with functions such as digital image processing and display
control; and
Cost-effective--we are able to produce products that provide multi-gigabit data
transmission using standard foundry processes. Because our products integrate a
number of functions in a single semiconductor, they eliminate the need for
multiple components.
Our objective is to be a leading provider of semiconductor solutions that
enable high-speed digital communications for targeted markets. Key elements of
our strategy are to:
- Target the display market first
- Promote open industry standards
- Drive broad adoption of digital-ready host systems
- Increase the intelligence of displays through highly-integrated receiver
solutions
- Maintain technology leadership
- Penetrate new markets and applications
As of June 30, 1999, we had shipped over four million units of our products.
Our products are incorporated in host systems and displays sold by leading
manufacturers such as Apple, ATI, Compaq, Fujitsu, Gateway, Hitachi, IBM, LG,
Matrox, NEC, Princeton Graphics, Samsung, Sharp, Toshiba and ViewSonic.
We incorporated in California as Silicon Image, Inc. on January 1, 1995 and
plan to reincorporate in Delaware before the completion of this offering. Our
address is 10131 Bubb Road, Cupertino, California 95014, and our telephone
number is (408) 873-3111.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Silicon Image.......... 3,900,000 shares
Common stock to be outstanding after this 25,020,274 shares
offering.......................................
Use of proceeds................................ For general corporate purposes, including
working capital and capital expenditures, and
for the repayment of the outstanding balance
under our line of credit. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol......... SIMG
</TABLE>
In addition to the 25,020,274 shares of common stock to be outstanding after
the offering, we have outstanding options and warrants to purchase a total of
1,466,856 shares of common stock. We may issue additional shares under our
equity plans and an agreement with Intel as described under "Management--
Employee Benefit Plans" and "Certain Transactions--Transactions with Intel and
its Subsidiary, Chips and Technologies."
SUMMARY FINANCIAL DATA
The as adjusted balance sheet data summarized below reflects the receipt of
the net proceeds from the sale of 3,900,000 shares of common stock offered by us
at an assumed initial public offering price of $9.00 per share after deducting
the estimated underwriting discounts and commissions and estimated offering
expenses payable by us and the application of net proceeds from the offering.
See "Use of Proceeds." The statement of operations data for the six months ended
June 30, 1999 summarized below is unaudited.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- ----------------
1995 1996 1997 1998 1998 1999
----- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Product revenue........................................... $ -- $ 30 $ 1,280 $ 7,703 $ 2,652 $ 7,706
Development and license revenue........................... -- 1,121 1,582 100 25 575
Cost of product revenue................................... -- 5 851 4,314 1,711 3,328
Stock compensation and warrant expense.................... -- -- -- 1,361 184 2,898
Net loss.................................................. (178) (1,944) (4,036) (6,622) (3,103) (3,909)
Basic and diluted net loss per share...................... $(0.51) $ (0.98) $ (1.14) $ (1.39) $ (0.72) $ (0.73)
Weighted-average shares of common stock used to compute
basic and diluted net loss per share.................... 350 1,981 3,533 4,766 4,301 5,327
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------
ACTUAL AS ADJUSTED
--------- -------------
<S> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and short-term investments................................................................ $ 12,647 $ 43,133
Working capital................................................................................ 8,740 39,983
Total assets................................................................................... 16,014 46,500
Line of credit................................................................................. 757 --
Capital lease obligations, long-term........................................................... 773 773
Total stockholders' equity..................................................................... 9,152 40,395
</TABLE>
4
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE MAKING AN
INVESTMENT DECISION. YOU SHOULD CAREFULLY CONSIDER THESE RISK FACTORS, TOGETHER
WITH ALL OF THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS, BEFORE YOU DECIDE
TO PURCHASE SHARES OF OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED
BELOW ARE NOT THE ONLY ONES WE FACE. ADDITIONAL RISKS AND UNCERTAINTIES NOT
PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO HARM OUR
BUSINESS.
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR FUTURE
PROSPECTS.
We were founded in 1995 and have a limited operating history, which makes an
evaluation of our future prospects difficult. In addition, the revenue and
income potential of our business and the digital display market are unproven. We
began volume shipments of our first products, the SiI 100 and SiI 101, in the
third quarter of 1997. The Digital Visual Interface specification, which is
based upon technology developed by us and used in many of our products, was
first published in April 1999. Accordingly, we face risks and difficulties
frequently encountered by early-stage companies in new and rapidly evolving
markets. If we do not successfully address these risks and difficulties, our
business would be seriously harmed.
WE HAVE A HISTORY OF LOSSES AND MAY NOT BECOME PROFITABLE.
We incurred net losses of $4.0 million in 1997, $6.6 million in 1998 and
$3.9 million for the first six months of 1999, and we expect to continue to
incur operating losses. As of June 30, 1999, we had an accumulated deficit of
approximately $16.7 million. In the future, we expect research and development
expenses and selling, general and administrative expenses to increase. We will
also incur substantial non-cash charges relating to the amortization of unearned
compensation and issuances of warrants. Although our revenues have increased in
recent quarters, they may not continue to increase, and we may not achieve and
subsequently sustain profitability. See "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY IN THE FUTURE DUE TO
FACTORS RELATED TO OUR INDUSTRY AND THE MARKETS FOR OUR PRODUCTS.
Our quarterly operating results are likely to vary significantly in the
future based on a number of factors related to our industry and the markets for
our products over which we have little or no control. Any of these factors could
cause our stock price to fluctuate. These factors include:
- the growth of the market for digital-ready host systems and displays;
- the evolution of industry standards;
- the timing and amount of orders from customers;
- the deferral of customer orders in anticipation of new products or
enhancements by us or our competitors; and
- the announcement and introduction of products and technologies by our
competitors.
These factors are difficult to forecast and could seriously harm our
business.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY IN THE FUTURE DUE TO
FACTORS RELATED TO HOW WE MANAGE OUR BUSINESS.
Our quarterly operating results are likely to vary significantly in the
future based on a number of factors related to how we manage our business. Any
of these factors could cause our stock price to fluctuate. These factors
include:
- our ability to manage product transitions;
- the mix of the products we sell and the distribution channels through
which they are sold; and
5
<PAGE>
- the availability of production capacity at the semiconductor foundry that
manufactures our products.
In the past, our introduction of new products and our product mix have
affected our quarterly operating results. We also anticipate that the rate of
orders from our customers may vary significantly from quarter to quarter. Our
expenses and inventory levels are based on our expectations of future revenues,
and our expenses are relatively fixed in the short term. Consequently, if
revenues in any quarter do not occur when expected, expenses and inventory
levels could be disproportionately high, and our operating results for that
quarter and, potentially, future quarters may be harmed, adversely affecting the
price of our stock. "Management's Discussion and Analysis of Financial Condition
and Results of Operation."
GROWTH OF THE MARKET FOR OUR PRODUCTS DEPENDS ON THE WIDESPREAD ADOPTION AND USE
OF THE DVI SPECIFICATION.
Our business strategy is based upon the rapid and widespread adoption of the
DVI specification, which defines a high-speed data communication link between
host systems and digital displays. Due to the recent release of the DVI
specification, we cannot predict whether or at what rate the DVI specification
will be adopted by manufacturers of host systems and displays. To date, no
complete DVI-compliant system that includes both a host system and a display has
been shipped. Adoption of the DVI specification may be affected by the
availability of DVI-compliant transmitters, receivers, connectors and cables
necessary to implement the specification. Other specifications may also emerge,
which could adversely affect the acceptance of the DVI specification. For
example, a number of companies have promoted alternatives to the DVI
specification which use other interface technologies, such as LVDS. LVDS, or Low
Voltage Differential Signaling is a technology that is used in high speed data
transmission, primarily for notebook PCs. Any delay in the widespread adoption
of the DVI specification would seriously harm our business.
OUR SUCCESS IS DEPENDENT ON INCREASING SALES OF OUR RECEIVER AND DISPLAY
CONTROLLER PRODUCTS, WHICH DEPENDS ON HOST SYSTEM MANUFACTURERS INCLUDING
DVI-COMPLIANT TRANSMITTERS IN THEIR SYSTEMS.
Our success depends on increasing sales of our receiver and display
controller products to display manufacturers. In 1998, over 75% of our product
revenues resulted from the sale of transmitter products to manufacturers of host
systems. While revenues from the sale of receivers and display controllers have
increased in the past six months, transmitters continue to represent between 50%
and 60% of our product revenues. To increase sales of our receiver and display
controller products, we need manufacturers of host systems to incorporate
DVI-compliant transmitters into their systems, making these systems
digital-ready. Unless host systems are digital-ready, they will not operate with
digital displays. If we are unable to increase revenues from receivers and
display controllers, we would remain dependent on the market for transmitters,
which we expect to become particularly competitive. This would seriously harm
our business. See "Management's Discussion and Analysis of Financial Conditions
and Results of Operations."
OUR SUCCESS WILL DEPEND ON THE GROWTH OF THE DIGITAL DISPLAY MARKET.
Our business depends on the growth of the digital display market, which is
at an early stage of development. The potential size of this market and its rate
of development are uncertain and will depend on many factors, including:
- the number of digital-ready host systems;
- the rate at which display manufacturers replace analog interfaces with
DVI-compliant interfaces; and
- the availability of cost-effective semiconductors that implement a
DVI-compliant interface.
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In addition, improvements to analog interfaces could slow the adoption of
digital displays. The failure of the digital display market to grow for any
reason would seriously harm our business.
GROWTH OF THE MARKET FOR OUR PRODUCTS DEPENDS ON AN INCREASE IN THE SUPPLY OF
FLAT PANEL DISPLAYS AND A CORRESPONDING DECREASE IN THEIR PRICE.
In order for the market for many of our products to grow, flat panel
displays must be widely available and affordable to consumers. Currently, there
is a limited supply of flat panels, and increasing the supply of flat panels is
a costly and lengthy process requiring significant capital investment.
Accordingly, we do not expect the current shortage of flat panels or their high
prices to change in the near term. In the past, the supply of flat panels has
been cyclical. We expect this pattern to continue. Undercapacity in the flat
panel market may limit our ability to increase our revenues.
WE NEED TO OBTAIN DESIGN WINS IN ORDER TO INCREASE OUR REVENUES.
Our future success will depend on manufacturers of host systems and displays
designing our products into their systems. To achieve design wins--decisions by
those manufacturers to design our products into their systems--we must define
and deliver cost-effective, innovative and integrated semiconductor solutions.
Once a manufacturer has designed a supplier's products into its systems, the
manufacturer may be reluctant to change its source of components due to the
significant costs associated with qualifying a new supplier. Accordingly, the
failure to achieve design wins with key manufacturers of host systems and
displays will seriously harm our business.
OUR LENGTHY SALES CYCLE CAN RESULT IN UNCERTAINTY AND DELAYS IN GENERATING
REVENUES.
Because our products are based on new technology and standards, a lengthy
sales process, typically requiring several months or more, is often required
before potential customers begin the technical evaluation of our products. This
technical evaluation can then exceed six months. It can take an additional six
months before a customer commences volume shipments of systems that incorporate
our products. However, even when a manufacturer decides to design our products
into its systems, the manufacturer may never ship systems incorporating our
products. Given our lengthy sales cycle, we experience a delay between the time
we increase expenditures for research and development, sales and marketing
efforts and inventory and the time we generate revenues, if any, from these
expenditures. As a result, our business could be seriously harmed if a
significant customer reduces or delays orders or chooses not to release products
incorporating our products.
OUR PARTICIPATION IN THE DIGITAL DISPLAY WORKING GROUP REQUIRES US TO LICENSE
SOME OF OUR INTELLECTUAL PROPERTY FOR FREE, WHICH MAY MAKE IT EASIER FOR OTHERS
TO COMPETE WITH US.
We are a member of the DDWG which published and promotes the DVI
specification. We have based our strategy on promoting and enhancing the DVI
specification and developing and marketing products based on the specification
and future enhancements. As a result:
- we must license for free specific elements of our intellectual property to
others for use in implementing the DVI specification; and
- we may license additional intellectual property for free as the DDWG
promotes enhancements to the DVI specification.
Accordingly, companies that implement the DVI specification in their
products can use specific elements of our intellectual property for free to
compete with us.
OUR RELATIONSHIP WITH INTEL DOES NOT GUARANTEE THAT INTEL WILL COOPERATE WITH US
IN THE FUTURE.
In September 1998, Intel agreed to work with us to develop and promote
adoption of the DVI specification and an enhanced version of the DVI
specification. As part of this effort, Intel has been an important founder of,
contributor to and promoter of the DDWG. We have benefited from Intel's
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cooperation and support. We cannot be sure that Intel will continue to devote
attention and resources to the DDWG and the Silicon Image relationship. If Intel
were to breach our agreements with them, it is possible that no adequate remedy
would be available to us. For more information regarding our relationship with
Intel, see "Certain Transactions--Transactions with Intel and Its Subsidiary,
Chips and Technologies."
OUR RELATIONSHIP WITH INTEL INVOLVES COMPETITIVE RISKS.
We have entered into a patent cross-license with Intel in which each of us
granted the other a license to use the grantor's patents, except in identified
types of products. We believe that the scope of our license to Intel excludes
our current products and anticipated future products. Intel could, however,
exercise its rights under this agreement to use our patents to develop and
market other products that compete with ours, without payment to us.
Additionally, Intel's rights to our patents could reduce the value of our
patents to any third party who otherwise might be interested in acquiring rights
to use our patents in such products. Finally, Intel could endorse a competing
digital interface, or develop its own proprietary digital interface, which would
seriously harm our business. For more information regarding our relationship
with Intel, see "Certain Transactions--Transactions with Intel and Its
Subsidiary, Chips and Technologies."
WE DEPEND ON A FEW KEY CUSTOMERS AND THE LOSS OF ANY OF THEM COULD SIGNIFICANTLY
REDUCE OUR REVENUES.
Historically, a relatively small number of customers and distributors have
accounted for a significant portion of our product revenues. In 1998, sales of
transmitter products to Mitac, a third party manufacturer, accounted for 54% of
our total revenues, and ATI Technologies, a leading graphics board manufacturer,
accounted for 12% of our total revenues. These manufacturers are significant
suppliers to Compaq, who decided in 1998 to design our transmitters into some of
its desktop personal computer models. For the six month period ended June 30,
1999, sales to Mitac decreased to 13% of our total revenues. Kanematsu, a
Japanese distributor, accounted for 13% of our total revenues and Microtek, a
Japanese distributor, accounted for 11% of our total revenues. As a result of
customer concentration any of the following factors could seriously harm our
business:
- a significant reduction, delay or cancellation of orders from one or more
of our key customers or OEMs; or
- if one or more significant customers selects products manufactured by a
competitor for inclusion in future product generations.
We expect our operating results to continue to depend on sales to or design
decisions of a relatively small number of host system and display OEMs and their
suppliers. See "Business-- Customers."
WE DO NOT HAVE LONG-TERM COMMITMENTS FROM OUR CUSTOMERS, AND WE ALLOCATE
RESOURCES BASED ON OUR ESTIMATES OF CUSTOMER DEMAND.
Our sales are made on the basis of purchase orders rather than long-term
purchase commitments. In addition, our customers may cancel or defer purchase
orders. We manufacture our products according to our estimates of customer
demand. This process requires us to make multiple demand forecast assumptions,
each of which may introduce error into our estimates. If we overestimate
customer demand, we may allocate resources to manufacturing products which we
may not be able to sell. As a result, we would have excess inventory, which
would increase our losses. Conversely, if we underestimate customer demand or if
sufficient manufacturing capacity is unavailable, we would forego revenue
opportunities, lose market share and damage our customer relationships. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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OUR INCREASING DEPENDENCE ON SELLING THROUGH DISTRIBUTORS INCREASES THE RISKS
AND COMPLEXITY OF OUR BUSINESS.
Over the past four quarters, the percentage of our product revenues
attributable to distributors has increased substantially, from less than 10% in
the quarter ended June 30, 1998 to nearly 60% in the quarter ended June 30,
1999. Much of this increase reflects design wins with new OEMs which rely on
third-party manufacturers or distributors to provide inventory management and
purchasing functions. Selling through distributors reduces our ability to
forecast sales and increases the complexity of our business, requiring us to:
- manage a more complex supply chain;
- manage the level of inventory at each distributor;
- provide for credits, return rights and price protection;
- estimate the impact of credits, return rights, price protection and unsold
inventory at distributors; and
- monitor the financial condition and credit worthiness of our distributors.
Any failure to manage these challenges could seriously harm our business.
COMPETITION IN OUR MARKETS MAY LEAD TO REDUCED SALES OF OUR PRODUCTS, INCREASED
LOSSES AND REDUCED MARKET SHARE.
The high-speed communication, display and semiconductor industries are
intensely competitive. These markets are characterized by rapid technological
change, evolving standards, short product life cycles and decreasing prices. Our
current products face competition from a number of sources including analog
solutions, DVI-compliant solutions and other digital interface solutions. We
expect competition in our market to increase. For example, Genesis Microchip has
announced plans to introduce a DVI-compliant product that will compete with our
DVCs and ATI Technologies has recently introduced a graphics controller chip
that includes a DVI-compliant transmitter.
Many of our competitors have longer operating histories and greater presence
in key markets, greater name recognition, access to large customer bases and
significantly greater financial, sales and marketing, manufacturing,
distribution, technical and other resources than we do. As a result, they may be
able to adapt more quickly to new or emerging technologies and customer
requirements or devote greater resources to the promotion and sale of their
product than we may. In particular, well-established semiconductor companies,
such as Analog Devices, Intel, National Semiconductor and Texas Instruments, may
compete against us in the future. In addition, in the process of establishing
our technology as an industry standard, and to ensure rapid adoption of the DVI
specification, we have agreed to license specific elements of our intellectual
property to others for free. We have also licensed elements of our intellectual
property to Intel and other semiconductor companies and we may continue to do
so. Competitors could use these elements of our intellectual property to compete
against us. We cannot assure you that we can compete successfully against
current or potential competitors, or that competition will not seriously harm
our business by reducing sales of our products, increasing our losses and
reducing our market share. See "Business--Competition" for additional
information about our competitors and competition in our market.
OUR SUCCESS DEPENDS ON THE DEVELOPMENT AND INTRODUCTION OF NEW PRODUCTS, WHICH
WE MAY NOT BE ABLE TO DO IN A TIMELY MANNER BECAUSE THE PROCESS OF DEVELOPING
HIGH-SPEED SEMICONDUCTOR PRODUCTS IS COMPLEX AND COSTLY.
The development of new products is highly complex, and we have experienced
delays in completing the development and introduction of new products on several
occasions in the past, some of which exceeded six months. We expect to introduce
new transmitter, receiver and controller products in the future. We also plan to
develop our initial products designed for high-speed networking and storage
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applications. As our products integrate new, more advanced functions, they
become more complex and increasingly difficult to design and debug. Successful
product development and introduction depends on a number of factors, including:
- accurate prediction of market requirements and evolving standards,
including enhancements to the DVI specification;
- development of advanced technologies and capabilities;
- definition of new products which satisfy customer requirements;
- timely completion and introduction of new product designs;
- use of leading-edge foundry processes and achievement of high
manufacturing yields; and
- market acceptance of the new products.
Accomplishing all of this is extremely challenging, time-consuming and
expensive. We cannot assure you that we will succeed. If we are not able to
develop and introduce our products successfully, our business will be seriously
harmed.
WE DEPEND ON A SINGLE THIRD-PARTY WAFER FOUNDRY TO MANUFACTURE ALL OF OUR
PRODUCTS.
We do not own or operate a semiconductor fabrication facility. We rely on
Taiwan Semiconductor Manufacturing Company, an outside foundry, to produce all
of our semiconductor products. Our reliance on an independent foundry involves a
number of significant risks, including:
- reduced control over delivery schedules, quality assurance, manufacturing
yields and production costs;
- lack of guaranteed production capacity or product supply; and
- unavailability of, or delayed access to, next-generation or key process
technologies.
We do not have a long-term supply agreement with Taiwan Semiconductor
Manufacturing Company, or TSMC, and instead obtain manufacturing services on a
purchase order basis. This foundry has no obligation to supply products to us
for any specific period, in any specific quantity or at any specific price,
except as set forth in a particular purchase order. Our requirements represent a
small portion of the total production capacity of this foundry and Taiwan
Semiconductor Manufacturing Company may reallocate capacity to other customers
even during periods of high demand for our products. If Taiwan Semiconductor
Manufacturing Company were to become unable or unwilling to continue
manufacturing our products in the required volumes, at acceptable quality,
yields and costs, in a timely manner, our business would be seriously harmed. As
a result, we would have to identify and qualify substitute foundries, which
would be time consuming and difficult, resulting in unforeseen manufacturing and
operations problems. In addition, if competition for foundry capacity increases,
our product costs may increase, and we may be required to pay significant
amounts to secure access to manufacturing services.
We may qualify additional foundries in the future. If we do not qualify an
additional foundry, we may be exposed to increased risk of capacity shortages
due to our complete dependence on Taiwan Semiconductor Manufacturing Company.
See "Business--Manufacturing."
WE DEPEND ON THIRD-PARTY SUBCONTRACTORS FOR ASSEMBLY AND TEST.
Our semiconductor products are assembled and tested by two independent
subcontractors: Anam in Korea and Advanced Semiconductor Engineering in Taiwan
and California. We do not have long-term agreements with either of these
subcontractors and typically obtain services from them on a purchase order
basis. Our reliance on these subcontractors involves risks such as reduced
control over delivery schedules, quality assurance and costs. These risks could
result in product shortages or increase our costs of manufacturing, assembling
or testing our products. If these subcontractors are unable or unwilling to
continue to provide assembly and test services and deliver products of
acceptable quality,
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at acceptable costs and in a timely manner, our business would be seriously
harmed. We would also have to identify and qualify substitute subcontractors,
which could be time consuming and difficult and result in unforeseen operations
problems.
OUR SEMICONDUCTOR PRODUCTS ARE COMPLEX AND ARE DIFFICULT TO MANUFACTURE
COST-EFFECTIVELY.
The manufacture of semiconductors is a complex process. It is often
difficult for semiconductor foundries to achieve acceptable product yields.
Product yields depend on both our product design and the manufacturing process
technology unique to the semiconductor foundry. Since low yields may result from
either design or process difficulties, identifying yield problems can only occur
well into the production cycle, when actual product exists which can be analyzed
and tested.
We only test our products after they are assembled, as their high-speed
nature makes earlier testing difficult and expensive. As a result, defects are
not discovered until after assembly. This could result in a substantial number
of defective products being assembled and tested, lowering our yields and
increasing our costs. This would seriously harm our business.
DEFECTS IN OUR PRODUCTS COULD INCREASE OUR COSTS AND DELAY OUR PRODUCT
SHIPMENTS.
Although we test our products, they are complex and may contain defects and
errors. In the past we have encountered defects and errors in our products.
Delivery of products with defects or reliability, quality or compatibility
problems may damage our reputation and our ability to retain existing customers
and attract new customers. In addition, product defects and errors could result
in additional development costs, diversion of technical resources, delayed
product shipments, increased product returns, and product liability claims
against us which may not be fully covered by insurance. Any of these could
seriously harm our business.
WE MUST ATTRACT AND RETAIN QUALIFIED PERSONNEL TO BE SUCCESSFUL, AND COMPETITION
FOR QUALIFIED PERSONNEL IS INTENSE IN OUR MARKET.
Our success depends to a significant extent upon the continued contributions
of our key management, technical and sales personnel, many of whom would be
difficult to replace. The loss of one or more of these employees could seriously
harm our business. We do not have key person life insurance on any of our key
personnel. Although we have severance agreements with our Chief Executive
Officer and with our Vice President of Business Strategy, we have employment
agreements with our Executive Vice President of Marketing and Business
Development, our Vice President of Finance and Administration and our Vice
President of Worldwide Sales and customarily enter into employment offer letters
with our new hires, none of such agreements obligates the employee to continue
working for us.
Our success also depends on our ability to identify, attract and retain
qualified technical, sales, marketing, finance and managerial personnel.
Competition for qualified personnel is particularly intense in our industry and
our location in Silicon Valley, California due to a number of factors, including
the high concentration of established and emerging growth technology companies.
This competition makes it difficult to retain our key personnel and to recruit
new highly-qualified personnel. We have experienced, and may continue to
experience, difficulty in hiring and retaining candidates with appropriate
qualifications. If we do not succeed in hiring and retaining candidates with
appropriate qualifications, our business could be seriously harmed. See
"Management."
OUR DEPENDENCE ON ACADEMIC RESEARCHERS LOCATED IN KOREA COULD ADVERSELY AFFECT
OUR ABILITY TO DEVELOP AND PROTECT KEY TECHNOLOGY.
Some of our key technology is developed by academic researchers at Seoul
National University in Korea whom we have retained as consultants. These
researchers operate under the direction of Dr. Jeong, a founder of Silicon Image
and our Chief Technical Adviser. Since neither Dr. Jeong nor these researchers
are our employees, we have limited control over their activities and can expect
only
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limited amounts of their time to be dedicated to developing our technology.
These researchers are also not actively involved in managing our business or in
developing our products. They may also have relationships with other commercial
entities, some of which could compete with us. Dr. Jeong and these researchers
sign agreements which require them to keep our proprietary information and the
results of their research confidential. However, we may not be able to keep this
information confidential and its dissemination could seriously harm our
business. Also, we generally obtain an assignment of intellectual property
rights in technology that may result from these researchers' projects. However,
the laws of Korea may not protect our intellectual property rights to the same
extent as the laws of the United States. As a result, our dependence on these
researchers could adversely affect our ability to develop and protect key
technology. For additional information regarding our relationship with academic
researchers located in Korea, see "Certain Transactions--Relationship with Dr.
Jeong."
WE FACE FOREIGN BUSINESS, POLITICAL AND ECONOMIC RISKS BECAUSE A MAJORITY OF OUR
PRODUCTS AND OUR CUSTOMERS' PRODUCTS ARE MANUFACTURED AND SOLD OUTSIDE OF THE
UNITED STATES.
A substantial portion of our business is conducted outside of the United
States and as a result, we are subject to foreign business, political and
economic risks. All of our products are manufactured outside of the United
States. Many of our customers are the manufacturers or suppliers for OEMs who
have designed in our products. Many of these manufacturers and suppliers are
located outside of the United States, primarily concentrated in Japan, Korea and
Taiwan. Sales outside of the United States accounted for 94% of our revenues in
1997, 95% of our revenues in 1998 and 91% of our revenues in the first six
months of 1999. We anticipate that sales outside of the United States will
continue to account for a substantial portion of our revenue in future periods.
Accordingly, we are subject to international risks, including:
- difficulties in managing distributors;
- difficulties in staffing and managing foreign operations;
- political and economic instability;
- adequacy of local infrastructure;
- difficulties in accounts receivable collections;
In addition, OEMs who design our semiconductors into their products sell
them outside of the United States. This exposes us indirectly to foreign risks.
Because sales of our products have been denominated to date exclusively in
United States dollars, increases in the value of the United States dollar will
increase the price of our products so that they become relatively more expensive
to customers in the local currency of a particular country, leading to a
reduction in sales and profitability in that country. A portion of our
international revenues may be denominated in foreign currencies in the future,
which will subject us to risks associated with fluctuations in those foreign
currencies.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY.
We rely on a combination of patent, copyright, trademark and trade secret
laws, as well as nondisclosure agreements and other methods to protect our
proprietary technologies. We have been issued patents and have a number of
pending United States patent applications. However, we cannot assure you that
any patent will issue as a result of any applications or, if issued, that any
claims allowed will be sufficiently broad to protect our technology. In
addition, it is possible that existing or future patents may be challenged,
invalidated or circumvented. It may be possible for a third party to copy or
otherwise obtain and use our products, or technology without authorization,
develop similar technology independently or design around our patents. Effective
copyright, trademark and trade secret protection may be unavailable or limited
in foreign countries.
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Disputes may occur regarding the scope of the license of our intellectual
property we have granted to the DDWG participants for use in implementing the
DVI specification in their products. These disputes may result in:
- costly and time consuming litigation; or
- the license of additional elements of our intellectual property for free.
OTHERS MAY BRING INFRINGEMENT CLAIMS AGAINST US WHICH COULD BE TIME-CONSUMING
AND EXPENSIVE TO DEFEND.
In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. This litigation is
widespread in the high-technology industry and is particularly prevalent in the
semiconductor industry, where a number of companies aggressively use their
patent portfolios by bringing numerous infringement claims. In addition, in
recent years, there has been an increase in the filing of so-called "nuisance
suits" alleging infringement of intellectual property rights, which pressure
defendants into entering settlement arrangements to quickly dispose of such
suits, regardless of their merits. We may become a party to litigation in the
future to protect our intellectual property or as a result of an alleged
infringement of others' intellectual property. These lawsuits could subject us
to significant liability for damages and invalidate our proprietary rights.
These lawsuits, regardless of their success, would likely be time-consuming and
expensive to resolve and would divert management time and attention. Any
potential intellectual property litigation also could force us to do one or more
of the following:
- stop selling products or using technology that contain the allegedly
infringing intellectual property;
- attempt to obtain a license to the relevant intellectual property, which
license may not be available on reasonable terms or at all; and
- attempt to redesign those products that contain the allegedly infringing
intellectual property.
If we are forced to take any of these actions, we may be unable to
manufacture and sell our products, which could seriously harm our business.
THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY MAY LEAD TO SIGNIFICANT
VARIANCES IN THE DEMAND FOR OUR PRODUCTS.
In the past, the semiconductor industry has been characterized by
significant downturns and wide fluctuations in supply and demand. Also, the
industry has experienced significant fluctuations in anticipation of changes in
general economic conditions, including economic conditions in Asia. This
cyclicality has led to significant variances in product demand and production
capacity. It has also accelerated erosion of average selling prices per unit. We
may experience periodic fluctuations in our future financial results because of
changes in industry-wide conditions.
WE ARE GROWING RAPIDLY, WHICH STRAINS OUR MANAGEMENT AND RESOURCES.
We are experiencing a period of significant growth that will continue to
place a great strain on our management and other resources. We have grown from
50 employees on January 1, 1999 to 66 employees on June 30, 1999. To manage our
growth effectively, we must:
- implement and improve operational and financial systems;
- train and manage our employee base;
- attract and retain qualified personnel with relevant experience; and
- lease additional facilities within the next six months.
We must also manage multiple relationships with customers, business
partners, the DDWG and other third parties, such as our foundry and test
partners. Moreover, we will spend substantial amounts
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of time and money in connection with our rapid growth and may have unexpected
costs. Our systems, procedures or controls may not be adequate to support our
operations and we may not be able to expand quickly enough to exploit potential
market opportunities. Our future operating results will also depend on expanding
sales and marketing, research and development and administrative support. If we
cannot attract qualified people or manage growth effectively, our business would
be seriously harmed.
YEAR 2000 RISKS MAY ADVERSELY AFFECT US.
The Year 2000 problem is the potential for system and processing failure of
date-related data as a result of computer-controlled systems that use two digits
rather than four to define a year in the date field. Many computer hardware
systems and software applications could fail or create erroneous results unless
corrected so that they can correctly process data related to the year 2000 and
beyond. Failures by our internal systems, or by systems used by our suppliers,
distributors or customers, could seriously harm our business. In particular, the
infrastructure of foreign countries where our products are manufactured or our
customers are located may be subject to disruption or failure as a result of the
Year 2000 problem. For additional information concerning this risk and our
assessment of its impact, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Compliance."
STOCKHOLDERS MAY NOT AGREE WITH MANAGEMENT REGARDING THE USE OF THE NET PROCEEDS
OF THIS OFFERING.
Our management has broad discretion as to how to spend the net proceeds from
this offering and may spend those proceeds in ways with which our stockholders
may not agree. We cannot assure you that our investments and use of the net
proceeds of this offering will yield favorable returns or results. See "Use of
Proceeds."
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL OF SILICON IMAGE AND MAY REDUCE THE MARKET PRICE OF OUR COMMON
STOCK.
Provisions of our certificate of incorporation and bylaws may discourage,
delay or prevent a merger or acquisition that a stockholder may consider
favorable. These provisions include:
- authorizing the issuance of preferred stock without stockholder approval;
- providing for a classified board of directors with staggered, three-year
terms;
- prohibiting cumulative voting in the election of directors;
- requiring super-majority voting to amend some provisions in our
certificate of incorporation and bylaws;
- limiting the persons who may call special meetings of stockholders; and
- prohibiting stockholder actions by written consent.
Provisions of Delaware law also may discourage, delay or prevent someone
from acquiring or merging with us. See "Description of Capital Stock--Preferred
Stock" and "--Anti-takeover Provisions."
CERTAIN EXISTING STOCKHOLDERS OWN A LARGE PERCENTAGE OF OUR VOTING STOCK.
Immediately after the offering, it is anticipated that our executive
officers, directors and other principal stockholders will beneficially own or
control, directly or indirectly approximately 57.2% of the outstanding shares of
common stock. As a result, if these persons act together, they will control the
election of our directors and approval or disapproval of our significant
corporate actions. This influence over our affairs might be adverse to the
interests of other stockholders. In addition, the voting power of these
stockholders could have the effect of delaying or preventing a change in control
of Silicon Image. See "Principal Stockholders."
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OUR COMMON STOCK HAS NOT BEEN PUBLICLY TRADED AND WE EXPECT THAT THE PRICE OF
OUR STOCK MAY FLUCTUATE SUBSTANTIALLY.
Recently, the stock prices of technology companies similar to Silicon Image
have been quite volatile. Moreover, prior to this offering, there has been no
public market for our common stock. The initial public offering price will be
determined through negotiations between the underwriters and us. You may not be
able to resell your shares at or above the initial public offering price. The
market price of our common stock may fluctuate significantly in response to a
number of factors, including:
- actual or anticipated fluctuations in our operating results;
- changes in expectations as to our future financial performance;
- changes in financial estimates of securities analysts;
- changes in market valuations of other technology companies;
- announcements by us or our competitors of significant technical
innovations, design wins, contracts, standards or acquisitions; and
- the operating and stock price performance of other comparable companies.
Due to these factors, the price of our stock may decline and the value of
your investment would be reduced. In addition, the stock market experiences
extreme volatility that often is unrelated to the performance of particular
companies. These market fluctuations may cause our stock price to decline
regardless of our performance.
OUR BUSINESS MAY BE HARMED BY CLASS ACTION LITIGATION DUE TO STOCK PRICE
VOLATILITY.
In the past, securities class action litigation often has been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and could divert our management's
attention and resources.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS WHICH WOULD LIMIT OUR
ABILITY TO GROW.
We believe our net proceeds from this offering, together with our existing
cash balances and funds available under our credit facilities will be sufficient
to meet our capital requirements for at least the next 12 months. However, we
may need, or could elect, to seek additional funding prior to that time. To the
extent that funds generated by this offering, together with existing resources,
are insufficient to fund our future activities, we may need to raise additional
funds through public or private equity or debt financing. Additional funds may
not be available, or if available, we may not be able to obtain them on terms
favorable to us or our stockholders. Further, if we issue equity securities,
stockholders may experience additional dilution or the new equity securities may
have rights, preferences or privileges senior to those of existing holders of
common stock. If we cannot raise funds on acceptable terms, we not be able to
develop or enhance our products, take advantage of future opportunities or
respond to competitive pressures or unanticipated requirements. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET MAY DEPRESS OUR STOCK
PRICE.
After this offering, we will have outstanding 25,020,274 shares of common
stock. Sales of a substantial number of shares of our common stock in the public
market following this offering could cause our stock price to decline. All the
shares sold in this offering will be freely tradable. Of the remaining
21,120,274 shares of common stock outstanding after this offering, approximately
19,236,716 shares will be eligible for sale in the public market beginning 180
days after the effective data of this offering. The remaining 1,883,558 shares
will become freely tradable at various times thereafter. In
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addition, the sale of these shares could impair our ability to raise capital
through the sale of additional stock. See "Shares Eligible for Future Sale."
NEW INVESTORS WILL INCUR SUBSTANTIAL AND IMMEDIATE DILUTION.
The present owners of our issued and outstanding shares of common stock have
acquired a controlling interest in Silicon Image at a cost substantially less
than the price at which the investors in this offering may purchase their
shares. Therefore, investors in this offering will suffer immediate and
substantial dilution, meaning the net tangible book value of each share
purchased by them will be less than the purchase price paid for each share. See
"Dilution."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that relate to future
events or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"intend," "potential" or "continue" or the negative of such terms or other
comparable terminology. These statements are only predictions. We cannot
guarantee future results, levels of activity, performance or achievements. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of various factors, including the risk
outlined under "Risk Factors" and elsewhere in this prospectus.
16
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the 3,900,000 shares of common stock
offered by us will be approximately $31.2 million or approximately $36.1 million
if the underwriters' over-allotment option is exercised in full, at an assumed
initial public offering price of $9.00 per share and after deducting estimated
underwriting discounts and commissions and the estimated offering expenses
payable by us.
We intend to use the net proceeds from this offering primarily for general
corporate purposes, including working capital and capital expenditures, and for
the repayment of the outstanding balance under our line of credit. As of June
30, 1999, the outstanding balance under our line of credit was $757,000, bearing
interest at a rate of 8.25% per year. We may use a portion of the net proceeds
from this offering to acquire or invest in businesses, technologies or services
that are complementary to our business. However, we have no present plans or
commitments and are not engaged in any negotiations with respect to any
transactions of this type.
The amounts that we use for working capital purposes will vary significantly
depending on a number of factors. We will retain broad discretion in the
allocation and use of the net proceeds of this offering. Pending their use, we
intend to invest the net proceeds in short-term, interest-bearing,
investment-grade securities.
The principal purposes of this offering are to increase our working capital,
create a public market for our stock, increase our visibility and facilitate
future access by us to public equity markets.
DIVIDEND POLICY
We have never declared or paid cash dividends on shares of our capital
stock. We intend to retain any future earnings to finance future growth and do
not anticipate paying cash dividends in the future. In addition, the terms of
our line of credit prohibit us from paying cash dividends on our capital stock
without prior consent of the lender.
17
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
- on an actual basis;
- on a pro forma basis to reflect the conversion of all outstanding shares
of preferred stock into 11,657,000 shares of common stock and the filing
of our amended and restated certificate of incorporation prior to
completion of this offering; and
- on a pro forma as adjusted basis to reflect the sale of 3,900,000 shares
of common stock in this offering at an assumed initial public offering
price of $9.00 per share, after deducting estimated underwriting discounts
and commissions and the estimated offering expenses payable by us and the
application of the net proceeds from the offering. See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE DATA)
Cash and short term investments.............................................. $ 12,647 $ 12,647 $ 43,133
--------- ----------- -----------
--------- ----------- -----------
Line of credit............................................................... $ 757 $ 757 $ --
--------- ----------- -----------
--------- ----------- -----------
Capital lease obligations, long-term......................................... $ 773 $ 773 $ 773
--------- ----------- -----------
Stockholders' equity
Convertible preferred stock, $0.001 par value; 10,065,000 shares
authorized, 9,560,000 shares issued and outstanding, actual; 5,000,000
shares authorized, none issued or outstanding, pro forma and pro forma as
adjusted................................................................. 10 -- --
Common stock, $0.001 par value; 21,500,000 shares authorized, 9,463,000
shares issued and outstanding, actual; 75,000,000 shares authorized,
21,120,000 shares issued and outstanding, pro forma; 75,000,000 shares
authorized, 25,020,000 shares issued and outstanding, pro forma as
adjusted................................................................. 9 21 25
Additional paid-in capital................................................. 34,796 34,794 66,033
Notes receivable from stockholders......................................... (1,461) (1,461) (1,461)
Unearned compensation...................................................... (7,513) (7,513) (7,513)
Accumulated deficit........................................................ (16,689) (16,689) (16,689)
--------- ----------- -----------
Total stockholders' equity............................................... 9,152 9,152 40,395
--------- ----------- -----------
Total capitalization................................................... $ 9,925 $ 9,925 $ 41,168
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
- --------------------------
The number of shares of common stock outstanding set forth in the table
above excludes the following:
- 1,149,000 shares issuable upon the exercise of outstanding stock options,
at a weighted average exercise price of $0.53 per share;
- 317,856 shares issuable upon the exercise of outstanding warrants, at a
weighted average exercise price of $2.08 per share, and 142,857 shares
issuable upon exercise of a warrant at an exercise price of $0.35 a share
that we are obligated to issue upon satisfaction of a milestone as
described under "Certain Transactions--Transactions with Intel and Its
Subsidiary, Chips and Technologies;" and
- 2,689,000 shares available for future issuance under our 1995 Equity
Incentive Plan, 1999 Equity Incentive Plan and 1999 Employee Stock
Purchase Plan, subject to automatic annual increases each January 1 as
described under "Management--Employee Benefit Plans."
18
<PAGE>
DILUTION
As of June 30, 1999, our pro forma net tangible book value was approximately
$9.2 million, or $0.43 per share of common stock. Pro forma net tangible book
value per share represents the amount of our total tangible assets less total
liabilities, divided by 21,120,274 shares of common stock outstanding after
giving effect to the conversion of all outstanding shares of preferred stock
into shares of common stock upon completion of this offering. Dilution in net
tangible book value per share represents the difference between the amount per
share paid by purchasers of shares of our common stock in this offering and the
net tangible book value per share of our common stock immediately following this
offering.
After giving effect to the receipt of the net proceeds from the sale of the
3,900,000 shares of our common stock at an assumed initial public offering price
of $9.00 per share and after deducting estimated underwriting discounts and
commissions and the estimated offering expenses, our pro forma net tangible book
value as of June 30, 1999 would have been approximately $40.4 million, or $1.61
per share. This represents an immediate increase in pro forma net tangible book
value of $1.18 per share to existing stockholders and an immediate dilution of
$7.39 per share to new investors purchasing shares at the initial public
offering price. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $ 9.00
Pro forma net tangible book value per share as of June 30, 1999..... $ 0.43
Increase per share attributable to new investors.................... 1.18
---------
Pro forma net tangible book value per share after this offering....... 1.61
---------
Dilution per share to new investors................................... $ 7.39
---------
---------
</TABLE>
The following table summarizes as of June 30, 1999, on the pro forma basis
described above, the number of shares of common stock purchased from us, the
total consideration paid to us and the average price per share paid by existing
stockholders and by new investors purchasing shares of common stock in this
offering, before deducting underwriting discounts and commissions and the
estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............................. 21,120,274 84% $ 23,043,000 40% $ 1.09
New investors...................................... 3,900,000 16 35,100,000 60 9.00
------------ --- ------------- ---
Total............................................ 25,020,274 100% 58,143,000 100%
------------ --- ------------- ---
------------ --- ------------- ---
</TABLE>
The above discussion and tables assume no exercise of any stock options or
warrants for common stock outstanding as of June 30, 1999. As of June 30, 1999,
there were options outstanding to purchase a total of 1,149,000 shares of common
stock at a weighted average exercise price of $0.53 per share and warrants
outstanding to purchase a total of 317,856 shares of common stock with a
weighted average exercise price of $2.08 per share. In addition, upon
satisfaction of a milestone, we are obligated to issue a warrant for an
additional 142,857 shares exercisable at $0.35 per share. If any of these
options or warrants are exercised, there will be further dilution to new public
investors. Please see "Capitalization," "Management--Employee Benefit Plans,"
"Certain Transactions--Transactions with Intel and Its Subsidiary, Chips and
Technologies" and Note 8 of Notes to Financial Statements.
19
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with,
and are qualified by reference to, our financial statements and notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this prospectus. The statement of operations
data for the years ended December 31, 1996, 1997 and 1998 and six months ended
June 30, 1999, and the balance sheet data as of December 31, 1997 and 1998 and
June 30, 1999, are derived from, and are qualified by reference to, our audited
financial statements which are included elsewhere in this prospectus. The
statement of operations data for the year ended December 31, 1995, and the
balance sheet data as of December 31, 1995 and 1996 are derived from our audited
financial statements which are not included in this prospectus. The statement of
operations data for the six months ended June 30, 1998 are derived from our
unaudited financial statements which are included elsewhere in this prospectus.
In the opinion of management, the unaudited financial statements have been
prepared on the same basis as the audited financial statements and contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of our results of operations for these periods and financial
condition at that date. The historical results presented below are not
necessarily indicative of future results. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------ --------------------
1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenue:
Product revenue........................................... $ -- $ 30 $ 1,280 $ 7,703 $ 2,652 $ 7,706
Development and license revenue........................... -- 1,121 1,582 100 25 575
--------- --------- --------- --------- --------- ---------
Total revenue............................................... -- 1,151 2,862 7,803 2,677 8,281
Cost and operating expenses:
Cost of product revenue................................... -- 5 851 4,314 1,711 3,328
Research and development.................................. -- 1,307 3,176 4,524 1,956 3,060
Selling, general and administrative....................... 180 1,811 2,990 4,335 1,906 3,052
Stock compensation and warrant expense.................... -- -- -- 1,361 184 2,898
--------- --------- --------- --------- --------- ---------
Total operating expenses.................................... 180 3,123 7,017 14,534 5,757 12,338
--------- --------- --------- --------- --------- ---------
Loss from operations........................................ (180) (1,972) (4,155) (6,731) (3,080) (4,057)
Interest income............................................. 3 32 171 242 31 210
Interest expense and other, net............................. (1) (4) (52) (133) (54) (62)
--------- --------- --------- --------- --------- ---------
Net loss.................................................... $ (178) $ (1,944) $ (4,036) $ (6,622) $ (3,103) $ (3,909)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Net loss per share:
Basic and diluted......................................... $ (0.51) $ (0.98) $ (1.14) $ (1.39) $ (0.72) $ (0.73)
Weighted average shares................................... 350 1,981 3,533 4,766 4,301 5,327
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Pro forma net loss per share(1):
Basic and diluted (unaudited)............................. $ (0.46) $ (0.23)
--------- ---------
--------- ---------
Weighted average shares (unaudited)....................... 14,483 16,984
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1995 1996 1997 1998
----- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and short-term investments........................................... 802 2,271 2,773 11,497
Working capital........................................................... 715 846 1,530 8,953
Total assets.............................................................. 926 3,175 4,371 14,774
Line of credit............................................................ -- -- 372 757
Capital lease obligations, long term...................................... -- 10 -- 300
Total stockholders' equity................................................ 839 1,658 2,593 9,852
<CAPTION>
JUNE 30,
-----------
1999
-----------
<S> <C>
BALANCE SHEET DATA:
Cash and short-term investments........................................... 12,647
Working capital........................................................... 8,740
Total assets.............................................................. 16,014
Line of credit............................................................ 757
Capital lease obligations, long term...................................... 773
Total stockholders' equity................................................ 9,152
</TABLE>
- ------------------------------
(1) Pro forma net loss per share has been calculated assuming the conversion of
our preferred stock into shares of common stock, as if such conversion had
occurred at the beginning of the period.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND THE NOTES TO THE FINANCIAL STATEMENTS INCLUDED IN THIS
PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM
THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE DISCUSSED IN "RISK FACTORS," "BUSINESS" AND ELSEWHERE
IN THIS PROSPECTUS. WE ASSUME NO OBLIGATION TO UPDATE THE FORWARD-LOOKING
STATEMENTS OR SUCH FACTORS.
OVERVIEW
We develop and market semiconductors for applications that require
cost-effective integrated solutions for high-speed data communications. We are
initially focusing our technology on the local interconnect between host systems
and digital displays, including flat panel displays and digital CRTs. The
products we have shipped to date enable host systems to transmit digital video
data and displays to receive and manipulate digital video data. These products
are based on our PanelLink digital interface technology and Digital Visual
Controller architecture. They enable our customers to introduce all-digital
displays, thereby eliminating the need for analog technology in both host
systems and displays.
From our inception in 1995 through the first half of 1997, we were primarily
engaged in developing our first generation PanelLink digital transmitter and
receiver products and our high-speed digital interconnect technology,
establishing our digital interface technology as an open standard and building
strategic customer and foundry relationships. During that period, we derived
substantially all of our revenue from development contracts providing for the
joint development of technologies for high-speed digital communication and of
panel controllers for flat panel displays, and license fees from licenses of our
high-speed digital interconnect technology. We have incurred losses in each year
since inception, as well as for the six months ended June 30, 1999. At June 30,
1999, we had an accumulated deficit of $16.7 million.
In the third quarter of 1997, we began shipping our first generation
PanelLink digital transmitter and receiver products in volume. Since that time,
we have derived predominantly all of our revenue from the sale of our PanelLink
products. We have introduced two new generations of transmitter and receiver
products providing higher speed and increased functionality since the first
generation PanelLink products. In the first quarter of 1999, we introduced our
first generation digital display controller product based on our DVC
architecture. Our digital display controller products integrate our receiver
with digital image processing and display controller technology, providing a
solution to enable intelligent displays for the mass-market.
We focus our sales and marketing efforts on achieving design wins with
leading host system and display OEMs worldwide. We rely on a combination of
direct sales personnel, distributors, and manufacturer's representatives
throughout the world to sell our products. We recognize revenue from product
sales to direct customers upon shipment. Reserves for sales returns and
allowances are recorded at the time of shipment. Our sales to distributors are
made under agreements allowing for returns or credits under certain
circumstances and we defer recognition of revenue on sales to distributors until
we estimate that the products are resold by the distributor to the end user.
Development and license revenues have been primarily derived from two
development contracts and a limited number of patent and technology licenses.
Development and license revenues are recognized as development milestones are
met or as license fees are earned. We do not anticipate that development and
license revenue will be material in the future.
Historically, a relatively small number of customers and distributors have
accounted for a significant portion of our product revenue. Our top five
customers, including distributors, accounted for
21
<PAGE>
90.6% of product revenue in 1998 and 57.7% of product revenue in the six-month
period ended June 30, 1999. Recently, the percentage of our revenue attributable
to sales to distributors has increased substantially. Much of this increase
reflects revenue from design wins with new OEMs which rely on third-party
manufacturers or distributors to provide inventory management and purchasing
functions. See "Risk Factors--We depend on a few key customers and the loss of
any of them could significantly reduce our revenue" and "--Our increasing
dependence on selling through distributors increases the risks and complexity of
our business."
In addition, a significant portion of our products are sold overseas. Sales
to customers in Asia, including distributors, accounted for 69.1% of product
revenue in 1998 and 72.1% of product revenue in the six-month period ended June
30, 1999. These customers incorporate our products into systems that are sold
worldwide. Since many manufacturers of flat panel displays and personal
computers are located in Asia, we expect that a majority of our product revenues
will continue to be represented by sales to customers in that region. In
addition, we have recently increased our selling efforts in Japan. All revenue
to date has been denominated in U.S. dollars. See "Risk Factors--We face foreign
business, political and economic risks because a majority of our products and
our customers' products are manufactured and sold outside of the United States."
Product gross margin increased over the past several quarters due to
increasing overall average selling prices and decreasing product costs. The
increase in average selling prices was due to increases in sales of
higher-bandwidth products to a broader customer base, and increases in sales of
our receiver products. We anticipate that our product gross margin may fluctuate
and may decline.
We are a "fabless" semiconductor company--that is, we do not own our own
manufacturing, assembly and test facilities. Instead, we use independent
contractors to perform wafer manufacturing and assembly and test operations.
This approach allows us to focus on defining, developing, and marketing our
products and significantly reduces the amount of capital we need to invest in
manufacturing assets. See "Risk Factors--We depend on a single third-party wafer
foundry to manufacture all our products" and "--We depend on third-party
subcontractors for assembly and test."
We will incur substantial stock compensation expense in future periods which
represents non-cash charges incurred as a result of the issuance of stock
options to employees and consultants. With respect to stock options granted to
employees, such charges are recorded based on the difference between the deemed
fair value of the common stock and the option exercise price of such options at
the date of grant, which is amortized under the accelerated method over the
option vesting period. At June 30, 1999, the amount of employee unearned
compensation was $7.5 million which will be amortized in future periods. The
charge related to options granted to consultants is calculated at the end of
each reporting period based upon the Black-Scholes model, which approximates
fair value and is amortized based on the term of the consulting agreement or
service period. The amount of the charge in each period can fluctuate depending
on our stock price and volatility.
Charges associated with the fair value of warrants issued to Intel were
expensed as Intel progressed towards achievement of a milestone. In September
1998, we entered into several agreements with Intel Corporation. Under the terms
of these agreements, we issued to Intel two warrants, each to purchase 142,857
shares of our common stock. The first warrant was issued in September 1998 and
was immediately exercisable at an exercise price of $3.50 per share. The second
warrant was issued in September 1998 and became exercisable on March 31, 1999 at
an exercise price of $0.35 per share. Charges associated with the fair value of
the warrants issued to Intel were expensed as Intel progressed towards
achievement of a milestone. We are obligated to issue an additional warrant to
Intel for 142,857 shares of our common stock exercisable at $0.35 per share upon
satisfaction of a milestone. In the event that we issue this warrant, we will
record an expense which will be equal to the fair value of the warrant at the
time of issuance. The size of this expense may be significant and will be
dependent on the price and volatility of our stock at that time. Please see
"Certain Transactions--Transactions
22
<PAGE>
with Intel and Its Subsidiary, Chips and Technologies" and "Risk Factors--Our
relationship with Intel does not guarantee that Intel will cooperate with us in
the future" and "--Our relationship with Intel involves competitive risks" for a
description of our agreements with Intel and risks of the relationship.
Substantially all of our sales are made on the basis of purchase orders
rather than long-term agreements. In addition, the sales cycle for our products
is long which may cause us to experience a delay between the time we incur
expenses and the time we generate revenue from these expenditures. We intend to
increase our investment in research and development, selling, general and
administrative functions and inventory as we seek to expand our operations. We
anticipate the rate of new orders may vary significantly from quarter to
quarter. Consequently, if anticipated sales and shipments in any quarter do not
occur when expected, expenses and inventory levels could be disproportionately
high, seriously harming our operating results for that quarter and, potentially,
future quarters. See "Risk Factors--Our quarterly operating results may
fluctuate significantly in the future due to factors related to how we manage
our business" and "--Our lengthy sales cycle can result in uncertainty and
delays in generating revenues."
RESULTS OF OPERATIONS
The following table sets forth statement of operations data expressed as a
percentage of total revenue for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Product revenue........................................ 2.6% 44.7% 98.7% 99.1% 93.1%
Development and license revenue........................ 97.4 55.3 1.3 0.9 6.9
--------- --------- --------- --------- ---------
Total revenue............................................ 100.0 100.0 100.0 100.0 100.0
--------- --------- --------- --------- ---------
Cost and operating expenses:
Cost of product revenue................................ 0.4 29.7 55.3 63.9 40.2
Research and development............................... 113.6 111.0 58.0 73.1 37.0
Selling, general and administrative.................... 157.3 104.5 55.6 71.2 36.8
Stock compensation and warrant expense................. 0.0 0.0 17.4 6.9 35.0
--------- --------- --------- --------- ---------
Total operating expenses................................. 271.3 245.2 186.3 215.1 149.0
--------- --------- --------- --------- ---------
Loss from operations..................................... (171.3) (145.2) (86.3) (115.1) (49.0)
Interest income.......................................... 2.8 6.0 3.1 1.2 2.5
Interest expense and other, net.......................... (0.4) (1.8) (1.7) (2.0) (0.7)
--------- --------- --------- --------- ---------
Net loss................................................. (168.9)% (141.0)% (84.9)% (115.9)% (47.2)%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
PRODUCT REVENUE. Product revenue increased 191%, from $2.7 million for the
six months ended June 30, 1998 to $7.7 million for the six months ended June 30,
1999. The increase in product revenue was derived primarily from significantly
higher unit shipments of transmitters and receivers, driven by increased market
acceptance of digital-ready host systems and displays. The increase in unit
volume resulted primarily from new design wins with new customers in Japan as
demand for flat panel displays was particularly strong in that region. In
addition, in the six months ended June 30, 1999, a larger proportion of our
revenue was derived from sales of receiver products, which are generally higher-
priced than transmitter products.
23
<PAGE>
DEVELOPMENT AND LICENSE REVENUE. Development and license revenue increased
from $25,000 for the six months ended June 30, 1998 to $575,000 for the six
months ended June 30, 1999. In the first quarter of 1999, we recognized $550,000
of development revenue, which represented amounts previously recorded as
deferred revenue under a contract for the development of display technology that
was terminated during the period when the other party, a Korean corporation,
decided to reduce its research and development expenses. We do not expect
development and license revenue to represent a material portion of total revenue
in the future.
COST OF PRODUCT REVENUE. Cost of product revenue consists primarily of the
costs of manufacturing, assembly and test of our semiconductor devices and our
related overhead costs. Product gross margin (product revenue minus cost of
product revenue, as a percentage of product revenue) increased from 35.5% for
the six month period ended June 30, 1998 to 56.8% for the six month period ended
June 30, 1999. The increase in product gross margin was due to higher average
selling prices and lower unit product costs. The increase in average selling
prices was due to an increase in sales of higher-speed products, an increase in
sales to customers that were not eligible for volume discounts, and an increase
in sales of our higher-priced receiver products. The reduction in product costs
was primarily the result of more efficient designs and lower manufacturing
costs. We anticipate that our product gross margin may decrease from current
levels in future periods as a result of increased competition in our markets.
RESEARCH AND DEVELOPMENT. R&D consists primarily of compensation and
associated costs relating to development personnel, consultants and prototypes.
R&D was $2.0 million, or 73.1% of total revenue for the six months ended June
30, 1998, and $3.1 million or 37.0% of total revenue for the six months ended
June 30, 1999. The increase in absolute dollars was primarily due to the hiring
of additional development personnel and outside consultants and an increase in
prototyping costs. Our research and development staff increased from 14 at June
30, 1998 to 23 at June 30, 1999. We expect that R&D will continue to
significantly increase in absolute dollars in the future.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A consists primarily of employee
salaries, sales commissions, and marketing and promotional expenses. SG&A was
$1.9 million, or 71.2% of total revenue, for the six months ended June 30, 1998,
and $3.1 million or 36.8% of total revenue for the six months ended June 30,
1999. SG&A increased in absolute dollars due primarily to hiring of additional
personnel, expanded sales and marketing activities related to the further
broadening of our customer and product base in 1999 and increased sales
commissions. Our sales and marketing staff increased from 13 at June 30, 1998 to
23 at June 30, 1999, and administrative and finance staff increased from 10 at
June 30, 1998 to 12 at June 30, 1999. We expect that SG&A will continue to
increase in absolute dollars as we hire additional personnel, expand our sales
and marketing efforts, pay increased sales commissions and incur costs
associated with being a public company.
STOCK COMPENSATION AND WARRANT EXPENSE. Stock compensation and warrant
expense was $184,000, or 6.9% of total revenue for the six months ended June 30,
1998, and $2.9 million, or 35.0% of total revenue for the six months ended June
30, 1999. A substantial portion of the increase was due to the amortization of
unearned compensation related to the vesting of employee stock options, and
additional amounts related to progress made towards the achievement of a
milestone on a warrant issued to Intel.
INTEREST INCOME. Interest income increased from $31,000 in the six months
ended June 30, 1998 to $210,000 for the six months ended June 30, 1999. This
increase was principally due to higher average cash balances resulting from the
net proceeds of the sale of convertible preferred stock in the third quarter of
1998.
24
<PAGE>
INTEREST EXPENSE. Interest expense increased from $54,000 in the six months
ended June 30, 1998 to $62,000 for the six months ended June 30, 1999. This
increase was the result of an increase in the average outstanding debt and an
increase in fixed assets held under a capital lease.
PROVISION FOR INCOME TAXES. We have not recorded a provision for federal or
state income taxes through June 30, 1999 since we have experienced net tax
losses since inception. We have recorded a valuation allowance for the full
amount of our net deferred tax assets, as the future realization of the tax
benefit is not likely.
At June 30, 1999 we had net operating loss carry-forwards for federal and
state tax purposes. For federal tax purposes our net operating loss
carry-forwards were approximately $16.1 million and our state tax carry-forwards
were $5.4 million. These federal and state tax loss carry-forwards are available
to reduce future taxable income and expire at various dates into fiscal 2019.
Under the provisions of the Internal Revenue Code, some substantial changes in
our ownership may limit the amount of net operating loss carry-forwards that
could be utilized annually in the future to offset taxable income.
YEAR ENDED DECEMBER 31, 1996, 1997 AND 1998
PRODUCT REVENUE. Product revenue increased from $30,000 in 1996 to $1.3
million in 1997, and increased to $7.7 million in 1998. In April 1997, we began
shipping our initial PanelLink transmitter and receiver products. Product
revenue increased from 1997 to 1998 primarily as a result of significantly
higher unit shipments of transmitters. The increase was primarily due to sales
to Mitac and ATI. These manufacturers are significant suppliers to Compaq, with
whom we had a major design win for our transmitter in 1998.
DEVELOPMENT AND LICENSE REVENUE. Development and license revenue was $1.1
million in 1996, $1.6 million in 1997 and $100,000 in 1998. Development and
license revenue in 1996 and 1997 was primarily derived from two significant
development contracts entered into in 1996. We also derived revenue from license
fees paid during these years for licenses of our high-speed digital interconnect
technology.
COST OF PRODUCT REVENUE. Product gross margin increased from 33.5% in 1997
to 44.0% in 1998. In 1996 product gross margin was 83.3% on $30,000 of product
revenue. The increase in product gross margin in 1998 was primarily due to
higher average selling prices resulting from the introduction of new products
and a reduction in product costs. Product costs declined due to a general
decrease in the prices charged by contract manufacturers of semiconductors, and
improvements in the yields achieved in manufacturing our products.
RESEARCH AND DEVELOPMENT. R&D was $1.3 million, or 114% of total revenue
for 1996, $3.2 million, or 111% of total revenue for 1997, and $4.5 million, or
58.0% of total revenue for 1998. The increases in absolute dollars were
primarily due to the hiring of additional development personnel and outside
consultants and an increase in prototyping costs. Our research and development
staff increased from six at December 31, 1996 to 12 at December 31, 1997 and 17
at December 31, 1998.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A was $1.8 million, or 157% of
total revenue for 1996, $3.0 million, or 104% of total revenue for 1997, and
$4.3 million, or 55.6% of total revenue for 1998. The year to year increases in
absolute dollars were due primarily to the hiring of additional personnel,
increased sales commissions, expanded marketing activities for our initial
product introductions in 1997 and the broadening of our customer and product
base in 1998. Our sales and marketing staff increased from six at December 31,
1996 to 11 at December 31, 1997 to 16 at December 31, 1998, and our
administrative and finance staff increased from seven at December 31, 1996 to
nine at December 31, 1997 to 11 at December 31, 1998.
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<PAGE>
STOCK COMPENSATION AND WARRANT EXPENSE. Stock compensation and warrant
expense was $1.4 million, or 17.4% of total revenue in 1998. A substantial
portion of the expense in 1998 was due to the amortization of unearned
compensation related to the vesting of employee stock options, and additional
amounts were related to progress made towards the achievement of milestones on
warrants issued to Intel.
INTEREST INCOME. Interest income was $32,000 in 1996, $171,000 in 1997 and
$242,000 in 1998. In each year, the increase in interest income was primarily
due to interest earned on higher average cash balances.
INTEREST EXPENSE. Interest expense was $4,000 in 1996, $52,000 in 1997 and
$133,000 in 1998. The increases in interest expense were primarily due to higher
average debt balances.
PROVISION FOR INCOME TAXES. We have not recorded a provision for federal or
state income taxes in 1996, 1997 and 1998 as we have experienced net tax losses
since inception.
QUARTERLY RESULTS OF OPERATIONS
The following table presents selected quarterly financial information for
each of the six quarters ended June 30, 1999. This information is unaudited but,
in our opinion, reflects all adjustments, consisting only of normal recurring
adjustments that we consider necessary for a fair presentation of
26
<PAGE>
this information in accordance with generally accepted accounting principles.
These quarterly results are not necessarily indicative of future results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30,
1998 1998 1998 1998 1999 1999
----------- --------- --------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Product revenue............................ $ 1,051 $ 1,601 $ 2,014 $ 3,037 $ 3,486 $ 4,220
Development and license revenue............ -- 25 25 50 575 --
----------- --------- --------- ----------- ----------- ---------
Total revenue................................ 1,051 1,626 2,039 3,087 4,061 4,220
Cost and operating expenses:
Cost of product revenue.................... 607 1,104 1,140 1,463 1,578 1,750
Research and development................... 1,008 948 1,140 1,428 1,441 1,619
Selling, general and administrative........ 824 1,082 1,165 1,264 1,339 1,713
Stock compensation and warrant expense..... 38 146 554 623 1,391 1,507
----------- --------- --------- ----------- ----------- ---------
Total operating expenses..................... 2,477 3,280 3,999 4,778 5,749 6,589
----------- --------- --------- ----------- ----------- ---------
Loss from operations......................... (1,426) (1,654) (1,960) (1,691) (1,688) (2,369)
Interest income.............................. 22 9 84 127 87 123
Interest expense and other, net.............. (13) (42) (38) (40) (29) (33)
----------- --------- --------- ----------- ----------- ---------
Net loss..................................... $ (1,417) $ (1,687) $ (1,914) $ (1,604) $ (1,630) $ (2,279)
----------- --------- --------- ----------- ----------- ---------
----------- --------- --------- ----------- ----------- ---------
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue:
Product revenue............................ 100.0% 98.5% 98.8% 98.4% 85.8% 100.0%
Development and license revenue............ 0.0 1.5 1.2 1.6 14.2 0.0
----------- --------- --------- ----------- ----------- ---------
Total revenue................................ 100.0 100.0 100.0 100.0 100.0 100.0
Cost and operating expenses:
Cost of revenue............................ 57.8 67.9 55.9 47.4 38.9 41.4
Research and development................... 95.9 58.3 55.9 46.3 35.5 38.4
Selling, general and administrative........ 78.4 66.5 57.1 40.9 33.0 40.6
Stock compensation and warrant expense..... 3.6 9.0 27.2 20.2 34.2 35.7
----------- --------- --------- ----------- ----------- ---------
Total operating expenses..................... 235.7 201.7 196.1 154.8 141.6 156.1
----------- --------- --------- ----------- ----------- ---------
Loss from operations......................... (135.7) (101.7) (96.1) (54.8) (41.6) (56.1)
Interest income.............................. 2.1 0.6 4.1 4.1 2.2 2.9
Interest expense and other, net.............. (1.2) (2.6) (1.9) (1.3) (0.7) (0.8)
----------- --------- --------- ----------- ----------- ---------
Net loss..................................... (134.8)% (103.7)% (93.9)% (52.0)% (40.1)% (54.0)%
----------- --------- --------- ----------- ----------- ---------
----------- --------- --------- ----------- ----------- ---------
</TABLE>
PRODUCT REVENUE. Product revenue increased from the preceding quarter in
each of the six quarters ended June 30, 1999. The increase in product revenue
was derived primarily from significantly higher unit shipments driven by
increased market acceptance of digital-ready host systems and displays. In
addition, in the first two quarters of 1999, a larger proportion of our revenue
was derived from sales of receiver products, which are generally higher-priced
than transmitter products. The effect of these trends was offset in part by
decreases in our sales to Mitac, a supplier to Compaq, in the fourth quarter of
1998 and the first two quarters of 1999.
27
<PAGE>
DEVELOPMENT AND LICENSE REVENUE. In the first quarter of 1999, we
recognized $550,000 of development revenue, which represented amounts previously
recorded as deferred revenue under a development contract that was terminated
during the period. In addition, we received other revenue from patent licenses
during the last three quarters of 1998 and the first quarter of 1999.
COST OF PRODUCT REVENUE. The following table sets forth product gross
margin for the six quarters ended June 30, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30,
1998 1998 1998 1998 1999 1999
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Product gross margin:................................. 42.2% 31.0% 43.4% 51.8% 54.7% 58.5%
</TABLE>
Product gross margin decreased in the second quarter of 1998 to 31.0%
primarily due to establishing reserves for the return of non-saleable products
under a distribution agreement that expired in that quarter. In the fourth
quarter of 1998, the product margin increase to 51.8% was primarily attributable
to decreases in transmitter product costs. The increases in product margin in
the first two quarters of 1999 are primarily a result of continued increases in
overall average selling prices due to continued increases in the breadth of our
customer base, continued increases in receiver products sold, and product cost
reductions.
RESEARCH AND DEVELOPMENT. R&D increased, in general, in absolute dollars
primarily due to the hiring of additional development personnel and consultants,
and an increase in prototyping costs.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A has increased quarter to quarter
in absolute dollars primarily due to hiring additional personnel, increased
sales commissions and expanded marketing activities to broaden our customer base
and product mix.
STOCK COMPENSATION AND WARRANT EXPENSE. Stock compensation and warrant
expense increased in each quarter primarily as a result of option grants to
employees and increases in the associated amortization of unearned compensation
related to the vesting of employee stock options. In the third and fourth
quarter of 1998 and the first quarter of 1999, we incurred additional expenses
related to the progress made by Intel towards the achievement of milestones on
warrants issued to them.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed operations through a combination of
private sales of convertible preferred stock, lines of credit and capital lease
financing. At June 30, 1999, we had $8.7 million in working capital and $12.6
million in cash, cash equivalents and short-term investments.
We used cash in our operating activities in the amount of $505,000 in 1996,
$4.5 million in 1997 and $3.7 million in 1998. In 1996, 1997 and 1998, cash used
for operating activities was attributable primarily to the net loss in each
year. Our operating activities provided cash in the amount of $269,000 during
the six months ended June 30, 1999. The increase in cash for this period was
primarily a result of an increase in accounts payable and deferred margin on
sales to distributors, partially offset by the net loss and a decrease in
accrued liabilities and deferred revenue. Accounts payable increased as a result
of an overall increase in our inventory levels and operating expenses, as our
business has grown, as well as the timing of our disbursements within each
period. The deferred margin on sales to distributors increased as a result of an
overall increase in the amount of shipments to distributors, as our revenue
recognition policy is to defer recognition of revenue on sales to distributors
until we estimate that the products are sold by the distributor to the end
customer.
We used cash in our investing activities in the amount of $724,000 in 1996,
$300,000 in 1997 and $1.7 million in 1998. In 1996 and 1997, cash used in
investing activities was attributable to purchases of
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<PAGE>
property and equipment. In 1998, the use of cash was attributable to purchases
of short-term investments and property and equipment. For the six months ended
June 30, 1999, cash used by investing activities was $673,000 which was
primarily attributable to purchases of short-term investments.
Net cash provided by financing activities was $2.7 million in 1996, $5.3
million in 1997, $12.8 million in 1998 and $994,000 in the first six months of
1999. In 1996, 1997 and 1998, cash provided by financing activities was
primarily attributable to proceeds from the issuance of convertible preferred
stock. In 1999, cash provided by financing activities was primarily attributable
to proceeds from the financing of property and equipment and the exercise of
stock options.
In December 1998, we entered into a line of credit agreement, which provides
for borrowings of up to $4.0 million based on and secured by eligible accounts
receivable. Borrowings accrue interest at the bank's commercial lending rate
plus 0.25%, which equaled 8.25% at June 30, 1999. On June 30, 1999, we were in
compliance with all line of credit covenants, we had borrowed $757,000 under
this line of credit and an additional $755,000 was available for borrowing. This
line of credit expires in April 2000. In February 1999, we entered into a $2.5
million capital lease line that allows for the leasing of equipment and software
over 33 to 42 month terms. The stated interest rate under this lease line is
8.0%. The lease line expires in October 2000. On June 30, 1999, we were in
compliance with all lease line covenants and we had borrowed $841,000 under this
lease line.
We lease equipment and software under short-term and long-term leases with
terms ranging from one to three years. We intend to exercise purchase options at
the end of the lease terms for a minimal cost. We also plan to spend up to
approximately $3.0 million during the next 12 months for test equipment,
potential tenant improvements and additional equipment and software. We lease
our facility under a noncancelable operating lease which expires in December
2002. We currently intend to relocate our headquarters to larger facilities and
are actively seeking rental space. We will incur additional costs related to any
relocation and may have to pay rent on two leases for a period of time.
We believe that the net proceeds from this offering, together with existing
cash balances and funds available under our existing credit facilities, will be
sufficient to meet our capital requirements for at least the next 12 months.
After this period, capital requirements will depend on many factors, including
the levels at which we maintain inventory and accounts receivable, costs of
securing access to adequate manufacturing capacity and increases in our
operating expenses. To the extent that funds generated by this offering,
together with existing resources and cash from operations, are insufficient to
fund our future activities, we may need to raise additional funds through public
or private equity or debt financing. Additional funds may not be available, or
if available, we may not be able to obtain them on terms favorable to us or our
stockholders. See "Use of Proceeds."
QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISKS
INTEREST RATE RISK
Our cash equivalents and short-term investments are exposed to financial
market risk due to fluctuation in interest rates, which may affect our interest
income and the fair market value of our investments. We manage the exposure to
financial market risk by performing ongoing evaluations of our investment
portfolio and investing in short-term investment-grade corporate securities.
These securities are highly liquid and generally mature within 12 months from
our purchase date. Due to the short maturities of our investments, the carrying
value approximates the fair value. In addition, we do not use our investments
for trading or other speculative purposes.
We have performed an analysis to assess the potential effect of reasonably
possible near-term changes in interest and foreign currency exchange rates. The
effect of such rate changes is not expected
29
<PAGE>
to be material to our results of operations, cash flows or financial condition.
All transaction to date have been denominated in United States dollars.
As of June 30, 1999, our cash included money market securities. Due to the
short duration of our investment portfolio, an immediate 10% change in interest
rates would not have a material effect on the fair market value of our
portfolio. Therefore, we would not expect our operating results or cash flows to
be affected to any significant degree by the effect of a sudden change in market
interest rates on our securities portfolio.
FOREIGN CURRENCY EXCHANGE RISK
Substantially all of our sales are denominated in U.S. dollars and as a
result, we have relatively little exposure to foreign currency exchange risk
with respect to any of our sales. We do not currently enter into forward
exchange contracts to hedge exposures denominated in foreign currencies or any
other derivative financial instruments for trading or speculative purposes. The
effect of an immediate 10% change in exchange rates would not have a material
impact on our future operating results or cash flows.
YEAR 2000 COMPLIANCE
We are aware of the widely publicized problems associated with computer
systems as they relate to the Year 2000. Many existing computer hardware systems
and software applications, and embedded computer chips, software and firmware in
control devices use only two digits to identify a year in the date field,
without considering the impact of the upcoming change in the century. Others do
not correctly process "leap year" dates. As a result, such system applications
and devices could fail or create erroneous results unless corrected so that they
can correctly process data related to the Year 2000 and beyond. These problems
are expected to increase in frequency and severity as the Year 2000 approaches.
We have commenced our business risk assessment of the impact that the Year
2000 problem may have on our operations. As business conditions warrant, this
assessment may be revised as new information is made available to us. To date,
we have identified the following four key areas of our business that may be
affected:
PRODUCTS. We have evaluated each of our products and believe that they do
not contain date sensitive functionality. We cannot determine whether all of our
customers' products into which our products are incorporated will be Year 2000
compliant because we have little or no control over the design, production and
testing of our customers' products.
THIRD-PARTY SUPPLIERS. We rely, directly and indirectly, on external
systems utilized by our suppliers for the management and control of fabrication,
assembly and test of our products. To date, we have received responses from our
key suppliers, including our most significant supplier Taiwan Semiconductor
Manufacturing Company, which indicate that each believes that it has adequately
addressed its Year 2000 issue or is in the process of developing and
implementing mediation plans. In addition, we have identified our key products
and may increase our inventory levels of these products during the fourth
calendar quarter of this year. For such products, we expect increased demand in
2000 and therefore we do not expect the additional inventory to have a material
effect on our business.
INTERNAL INFRASTRUCTURE. We are conducting an assessment of internal
software applications and computer hardware. The Year 2000 compliance of
hardware including networks, telecommunications equipment, workstations and
other items is nearing completion. Most of the software applications used by us
are generally recent versions of vendor supported, commercially available
products. Because most of the software applications used by us are generally
recent versions of vendor supported, commercially available products, we have
not incurred, and do not expect in the future to incur, significant costs to
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<PAGE>
upgrade these applications as Year 2000 compliant versions are released by the
respective vendors. We will continue to seek certifications that products
installed are Year 2000 ready, and are targeting October 1999 to complete this
process.
FACILITY SYSTEMS. Systems such as utilities, sprinklers, test equipment and
security at our facilities may also be affected by the Year 2000 problem. We
have commenced assessing the business risks and costs of remediating the Year
2000 problem on our facility related systems. We estimate that our total cost of
completing any required modifications, upgrades or replacements of these systems
will not have a material adverse effect on our business or results of
operations. We currently expect to complete the remediation of our facility
systems by October 30, 1999.
DISTRIBUTOR AND CUSTOMER READINESS. Distributor and customer readiness
focuses on Year 2000 compliance of customer support and inventory management
systems including the development of contingency plans where appropriate, as
well as the ability of our distributors and customers to continue to conduct
business. We are working with our distributors and customers in this effort and
anticipate completing this program by October 1999.
We presently estimate that the total cost of addressing our Year 2000 issues
will not exceed $100,000. This estimate was derived utilizing numerous
assumptions, including the assumption that we have already identified our most
significant Year 2000 issues and that the plans of our third party suppliers,
distributors and customers will be fulfilled in a timely manner without cost to
us. However, these assumptions may not be accurate, and actual results could
differ materially and adversely from those anticipated after completion of
remediation, testing, and contingency planning phases.
We are currently developing contingency plans to address those Year 2000
issues that may pose a significant risk to our ongoing operations. We currently
expect to complete these contingency plans by October 1999. Such plans could
include accelerated replacement of affected equipment software and systems, the
use of back up test and assembly suppliers and buffer inventories or the
implementation of manual procedures to compensate for system deficiencies.
However, any contingency plans we implement may not succeed or may not be
adequate to meet our needs without materially impacting our operations. In
addition, the delays and inefficiencies inherent in conducting operations in an
alternative manner could materially and adversely affect our results of
operations. More specifically, if our third party suppliers or our distributors
were to lose power, or the ability to ship product as a result of Year 2000
related issues, we would be exposed to missing customer shipments and
potentially lose revenues and profits. We believe the likelihood of losing
revenue and profits from difficulties resulting from Year 2000 issues is low.
INFLATION
The impact of inflation on our business has not been material for the fiscal
years ended December 31, 1996, 1997 and 1998, or the six months ended June 30,
1999.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards, or SFAS, No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes a new model for
accounting for derivatives and hedging activities and supersedes and amends a
number of existing accounting standards. SFAS No. 133 requires that all
derivatives be recognized in the balance sheet at their fair market value, and
the corresponding derivative gains or losses be either reported in the statement
of operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivative. We do not currently enter into
forward exchange contracts to hedge exposures denominated in foreign currencies
or any other derivative financial instruments for trading or speculative
purposes.
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BUSINESS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS
DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH A
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS."
We develop and market semiconductors for applications that require
cost-effective, integrated solutions for high-speed data communications. We are
initially focusing our technology on the local interconnect between host
systems, such as PCs, set-top boxes and DVD players, and digital displays, such
as flat panel displays and CRTs. Our current products enable host systems to
transmit digital video data and enable displays to receive and manipulate
digital video data. As with other consumer electronic devices, such as digital
cellular phones, significant benefits can be achieved by converting displays
from analog to digital and by replacing conventional analog connections between
host systems and displays with digital connections.
INDUSTRY BACKGROUND
Two prominent trends in the electronics industry are the increasing demand
for bandwidth and the transition of electronic systems from analog to digital.
Bandwidth, which is often measured in terms of megabits per second, represents
the amount of data that can be transmitted across a medium in a given period of
time. In attempts to address the increasing demand for bandwidth, new
communications standards such as Fast Ethernet, SONET and Fibre Channel have
been adopted, and new classes of communications semiconductors have been
developed to implement these standards. The second trend, the shift from analog
to digital, has made information easier to reliably store, transmit and
manipulate. It has also reduced manufacturing costs, improved quality and
enhanced functionality through the addition of new features that were
unavailable or not practical with analog technologies. For example, many
features, such as messaging, paging and security, became more feasible as
wireless phones from analog to digital.
As with wireless phones, significant benefits can be achieved by replacing
analog displays with digital displays. To enable this transition, displays
require digital communication with the host system. Until recently, however,
there was no commercially viable standard that addressed the challenges of
enabling digital communications between host systems, such as PCs, set-top boxes
and DVD players, and video displays, such as flat panel displays and CRTs. A
principal reason that such a standard did not exist was the substantial
technical challenge of developing a cost-effective high-bandwidth solution
capable of transmitting data at the multi-gigabit rates needed to link the host
system to a high-resolution display. This rate is 50 times faster than the Fast
Ethernet networking standard and 500 times faster than cable modems. In the
absence of a digital standard, host systems, though processing data in digital
form, have been forced to convert that data to analog form before transmitting
it to the display. Consequently, the functionality of display devices has
changed little since the introduction of analog cathode ray tubes.
Recognizing the need for a cost-effective, high-bandwidth digital display
solution, Silicon Image developed a digital interconnect technology and began
shipping semiconductor products for digital displays in 1997. To provide a
worldwide, open specification for an all-digital display solution, Silicon
Image, together with Intel, Compaq, IBM, Hewlett-Packard, NEC and Fujitsu,
formed the Digital Display Working Group to define such a specification based on
Silicon Image's technology. In April 1999, the DDWG published the Digital Visual
Interface specification, which defines a high-speed serial data communication
link between host systems and displays. Silicon Image authored major portions of
the DVI specification. Today, over 50 companies, including systems
manufacturers, graphics
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semiconductor companies and monitor manufacturers are participants in the DDWG,
and many are developing hardware and software products designed to be compliant
with the DVI specification.
<TABLE>
<S> <C> <C> <C>
DDWG MEMBERSHIP
DDWG PROMOTERS
Compaq Hewlett-Packard Intel Silicon Image
Fujitsu IBM NEC
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
DDWG PARTICIPANTS
<CAPTION>
HOST SYSTEM ADD-IN BOARD DISPLAY PROJECTOR SEMICONDUCTOR OTHER
<S> <C> <C> <C> <C> <C>
Apple Computer ATI Technologies Amtran Technology Lightware Analog Devices Amphenol
Gateway AVED Display Daewoo Electronics Proxima Ardent Aurora Systems
MaxVision ELSA AG FED Corporation Sanyo Electric Technologies Foxconn (Hon Hai)
Multi Q I-O Data Hitachi Seiko Epson Avance Logic Precision
Toshiba Number Nine Hosiden Chrontel JAE Electronics
S3 LG Electronics Innovative Joinsoon Electronic
STB Systems EIZO Nanao Semiconductors MNC International
VMIC Nokia Display Pixel Fusion Molex Incorporated
Philips Monitors Pixelworks Rainbow Optics
Princeton Graphics Real 3D Tai-Sol Electronics
Van Koevering Rendition
Xerox Sage
Silicon Magic
Silicon Motion
SP3D Chip Design
</TABLE>
The formation of the DDWG and the release of the DVI specification have
accelerated the shift of display technology to digital. The market research firm
DisplaySearch projects that the number of desktop LCD monitors shipped annually
will grow from four million units in 1999 to 18 million units in 2003.
DisplaySearch further estimates that the digital interface will rapidly gain
market share over analog for desktop LCDs, from 18% in the first quarter of 1999
to 82% in the first quarter of 2001. In addition, three of the five largest
desktop CRT manufacturers are developing digital CRTs compliant with the DVI
specification. According to Stanford Resources, Inc., the overall market for
desktop CRTs will grow from 83 million units in 1999 to 115 million units in
2003. In response to projected growth in the market for digital displays,
manufacturers are seeking to differentiate their products by adding
functionality and intelligence to their displays. Consequently, these companies
are looking for semiconductor solutions that combine high-speed digital
communications technology with the functionality required to enable intelligent
displays for the mass market.
THE SILICON IMAGE SOLUTION
Silicon Image designs, develops and markets semiconductor solutions for
high-speed digital communications. Our technology is designed for applications
that require cost-effective, high-speed integrated solutions for data
transmission, such as the local interconnect between host systems and digital
displays, high-speed networking and data storage. Our initial products enable
host systems to transmit digital video data and allow displays to receive and
manipulate digital video data.
Our key products are based on our PanelLink digital interface technology and
Digital Visual Controller architecture. PanelLink technology is our proprietary
implementation of the DVI specification to provide a high-speed serial digital
link between hosts and digital displays. The DVC architecture is our platform
for developing controllers which integrate PanelLink receiver technology with
additional functionality to enable intelligent displays for the mass market. Key
features of our solution include:
- HIGH-SPEED INTERFACE. Our PanelLink technology transmits data over three
high-speed serial channels at up to 1.67 gigabits per second per channel
for an aggregate speed of approximately five gigabits per second.
PanelLink technology supports such speeds over twisted-pair copper
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wire at distances of up to 10 meters and permits direct coupling with
fiber optic interconnect modules for longer distance data transmission.
[PanelLink Diagram]
[Description of graphics on page 33]
This graphic depicts a small three-dimensional cube connected to a large
three-dimensional cube. The small cube is labeled "Host System Transmitter." The
large cube is labeled "Digital Display Receiver." Inside both the small and the
large cubes are representations of a computer chip labeled "PanelLink." The
large and small cubes are connected by three lines, each a different color.
Above these lines appears the phrase "Up to 5 Gbps." Under these lines is the
PanelLink Technology logo. To the right of the logo appears the phrase
"PanelLink Digital."
- LOW COST OF SYSTEM IMPLEMENTATION. PanelLink technology operates at full
speed over inexpensive twisted-pair copper wire. In addition, our products
are manufactured using cost-effective standard foundry processes and
low-cost plastic packaging. Our all-digital interconnect solution
eliminates the need for additional components currently required in
digital displays to convert data from analog to digital and to remove
errors associated with the conversion.
- SYSTEM LEVEL INTEGRATION. Our solution combines high-speed digital
communication technology with system-level functionality, including
digital image processing and display control. Our DVC architecture is
designed to support the integration of additional functions. Furthermore,
all of its elements can be provided using the same CMOS--Complementary
Metal Oxide Semiconductor--manufacturing processes, simplifying this
integration.
- SCALABILITY. We offer products that support the entire range of standard
display resolutions, from VGA (640 x 480 pixels) to UXGA (1600 x 1200
pixels). Support for these resolutions requires our solution to transmit
and receive data at speeds ranging from 250 megabits to 1.65 gigabits per
second per channel.
Our solution enables our customers to introduce digital display products,
thereby eliminating the need for analog technology in both the host system and
display. This provides a number of benefits to our customers:
- LOWER COST FOR MASS MARKET ADOPTION. The low cost of implementing our
PanelLink technology helps our customers offer intelligent displays
targeting the consumer market.
- EASE OF USE. Use of our all-digital solution enables "plug and play"
connection of any digital display to any digital-ready host system--that
is, no configuration must be done by the end-user.
- IMPROVED VISUAL EXPERIENCE. Our high-bandwidth solution enables the
transmission of data-intensive video images in digital form, without
degradation of image quality. Because our solution is all-digital, it
eliminates the errors associated with the use of an analog interface, such
as flicker, fuzziness and color variation.
- ABILITY TO ADD NEW FEATURES AND DIFFERENTIATE PRODUCTS. Our technology
enables our customers to add new features and functions to their displays
and to offer differentiated products. For example, one of our existing
products enables image quality to be directly controlled in the display
rather than in the host system. In addition, our products are
programmable, allowing our customers to configure image processing and
user interface functions.
- ACCELERATED TIME TO MARKET. By using our products instead of developing
solutions internally, our customers can shorten their design time for
digital display products. The highly integrated nature of our products
simplifies the design of digital displays.
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<PAGE>
SILICON IMAGE STRATEGY
Our objective is to be a leading provider of semiconductors that enable
high-speed digital communications and optimize cost per bandwidth across
targeted communications markets. Key elements of our strategy are to:
TARGET THE DISPLAY MARKET FIRST
While our technologies are applicable to solving the needs of multiple
markets, we have initially chosen to focus our efforts on being the leading
provider of high-speed solutions for the large and rapidly growing digital
display market. Relative to other data communication applications, the digital
display interface demands a particularly high-speed, low cost solution that
operates over a wide range of transmission speeds. Our technology effectively
addresses these demands and incorporates many additional features and
capabilities. Companies shipping displays which incorporate our products include
Apple, Compaq, Fujitsu, Gateway, Hitachi, IBM, NEC, Princeton Graphics, Sharp
and ViewSonic.
PROMOTE OPEN INDUSTRY STANDARDS
We believe that the widespread acceptance of the DVI specification and
subsequent enhancements to this specification will lead to broader market
penetration of digital displays in many different applications, help us maintain
our leadership position and create new opportunities for us. We are one of the
seven founding members of the DDWG and a member of its governing board. We
authored major portions of the DVI specification and developed the core
technology upon which the specification is based. We intend to continue to
actively participate in defining and promoting open industry standards. We
believe that our participation will provide us with valuable insight and
relationships and assist us in rapidly bringing new standards-based products to
market.
DRIVE BROAD ADOPTION OF DIGITAL-READY HOST SYSTEMS
We believe that broad adoption of digital-ready host systems will drive the
widespread transition to all-digital displays. Accordingly, we aggressively
market our host-based transmitter products and promote the adoption of the DVI
specification, in order to expand the market for our receiver and display
controller products. To date, we have shipped over 3.5 million units of our
PanelLink transmitter products. In the PC industry, we have achieved transmitter
design wins with leading host system OEMs, including Compaq, Fujitsu, Hitachi,
IBM and NEC, and with makers of video graphics accelerators, including ATI
Technologies, Diamond Multimedia and Number Nine. While continuing to focus on
the PC industry, we intend to follow a similar strategy for other host systems,
such as set-top boxes, game consoles and DVD players.
INCREASE THE INTELLIGENCE OF DISPLAYS THROUGH HIGHLY INTEGRATED RECEIVER
SOLUTIONS
We believe the conversion to end-to-end digital displays allows a
significant amount of functionality to shift from the host system to the display
and the addition of new capabilities to the display. Our display controllers
integrate additional functionality with our receiver technology to enable a new
class of intelligent displays and allow display vendors to differentiate and
increase the value of their products. We are focusing a substantial amount of
our product development, marketing and sales efforts on DVI-compliant display
controllers.
MAINTAIN TECHNOLOGY LEADERSHIP
We are the inventor of the technology upon which the DVI specification is
based and have substantial experience in the design, manufacture and deployment
of semiconductor products incorporating this high-speed data communications
technology. We are developing our fourth
35
<PAGE>
generation of transmitter and receiver products and believe that this experience
provides us with significant competitive advantages. In particular, our
broadband clock and data recovery technology in our receivers exceeds the
reliability specifications established in various multi-gigabit communication
standards. The advanced nature of our high-speed digital design allows us to
integrate significant functionality with high-speed communications capabilities
using industry-standard, low-cost CMOS processes. We intend to continue to focus
significant resources on maintaining and extending our technology leadership.
PENETRATE NEW MARKETS AND APPLICATIONS
We intend to use our core technical competencies and relationships with key
partners and customers to develop solutions for additional markets. We believe
our technology is well suited to many applications requiring high bandwidth and
system level integration. To address these opportunities, we are focusing on
developing products and technologies for new markets, primarily the gigabit
networking and high-speed serial interface storage markets.
STRATEGIC RELATIONSHIPS
As part of our business strategy, we have established strategic
relationships with key customers and partners.
INTEL RELATIONSHIP
In September 1998, Silicon Image entered into an agreement with Intel
Corporation to work together to develop and promote adoption by the PC industry
of a complete digital display interface based on our PanelLink technology. As
part of the strategic relationship, Intel became an equity investor in Silicon
Image and the companies entered into a patent cross license and other
agreements. See "Certain Transactions--Transactions with Intel and Its
Subsidiary, Chips and Technologies."
DIGITAL DISPLAY WORKING GROUP
Silicon Image, together with Intel, Compaq, IBM, Hewlett-Packard, NEC and
Fujitsu, announced the formation of the DDWG in October 1998. Subsequently, the
parties entered into a Promoter's Agreement in which they agreed to:
- define, establish and support the DVI specification, an open industry
specification for an all-digital display solution;
- encourage broad and open industry adoption of the DVI specification, in
part by creating an implementer's forum that others may join in order to
receive information and support relating to the DVI specification; and
- invite third parties to enter into a Participant's Agreement in order to
consult on the content, feasibility and other aspects of the DVI
specification.
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<PAGE>
JOINT DEVELOPMENT OF DIGITAL CRTS
We have been collaborating with Acer, ADI Corp. and Samsung, three of the
world's top five CRT monitor manufacturers, in their design and development of
CRTs incorporating DVI-compliant DVCs that we are developing and expect to
introduce in the first half of 2000.
BRANDING RELATIONSHIPS
Currently, we have branding relationships with Compaq, NEC and Sharp. In
exchange for rebates or other consideration, these manufacturers use the
PanelLink brand on their products, product boxes, product collateral and web
sites.
MARKETS
Our current target markets consist of host systems, including PCs, set-top
boxes and DVD players, and displays, including flat panel displays and CRTs. In
addition, we believe our technologies are well suited to new markets such as
high-speed networking and storage applications.
HOST SYSTEMS
PERSONAL COMPUTERS
Dataquest projects that the desktop personal computer market will grow from
89 million units in 1999 to 150 million units in 2003. Several large PC
manufacturers, including Compaq, Fujitsu, Hitachi and IBM, are shipping
digital-ready desktop PCs which incorporate our semiconductor products. Based on
the number of transmitters we have shipped, we estimate that more than three
million digital-ready PCs have shipped over the last 18 months.
Dataquest projects that the notebook PC market will grow from 17 million
units in 1999 to 29 million units in 2003. We believe that there are two
opportunities for DVI-compliant digital interfaces in the notebook PC market:
replacement of the external analog video-out interface and replacement of the
internal interface to the notebook display.
SET-TOP BOXES AND DVD PLAYERS
Selantek Market Research projects that the digital set-top box market will
grow from 19 million units in 1999 to 56 million units in 2002. High definition
content is driving the demand for higher quality displays, such as
high-definition televisions based on CRTs, digital projectors and flat panel
displays. The interface to such a high definition display/television requires a
digital link that provides high-speed data transmission in order to preserve the
digital image quality. While no digital interface specification has been
defined, the DVI specification is well-suited to the needs of this market. We
believe there is a significant opportunity for DVI-compliant transmitter
products in this market. We also believe that DVD players would similarly
benefit from a single digital interface standard. Selantek Market Research
projects that the DVD player market will grow from four million units in 1999 to
25 million units in 2003.
DISPLAYS
DISPLAYS FOR DESKTOP COMPUTERS
Stanford Resources, Inc. projects that the market for desktop CRTs will grow
from 83 million units in 1999 to 115 million in 2003. The DVI specification is
designed to enable digital CRTs. CRT manufacturers Acer, ADI Corp. and Samsung,
which Stanford Resources, Inc. estimates together shipped over 18 million CRT
monitors in 1998, are developing DVI-compliant digital CRTs. ViewSonic has also
announced plans to market DVI-compliant digital CRTs.
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<PAGE>
DisplaySearch projects that the market for desktop LCDs will grow from
nearly four million units in 1999 to 18 million units in 2003. DisplaySearch
further projects that the digital interface will rapidly gain market share over
analog for desktop LCDs, from 18% in the first quarter of 1999 to 82% in the
first quarter of 2001.
Until recently, graphics processing capabilities were provided by a separate
semiconductor in the desktop computer. Several major semiconductor companies
have announced that they are developing products that integrate these
capabilities with other system functions such as the computer's central
processing unit. We believe that this trend will limit the display-specific
functionality provided by the host system, and will create an opportunity for
digital display OEMs to provide more advanced or specialized capabilities in the
display. We believe that the market growth for digital desktop displays, as well
as the trend towards increasing the capabilities of the display, provides a
significant market opportunity for DVI-compliant display controller products.
DISPLAYS FOR WIDE-SCREEN TV SYSTEMS
Stanford Resources, Inc. projects that the market for wide format display
systems, including HDTV display systems, will grow from eight million units in
1999 to over 14 million units in 2003. We believe wide format display systems
will benefit from use of a digital interface and all-digital image processing.
DISPLAYS FOR OTHER APPLICATIONS
In addition to PC applications, LCD displays are used in automobile
navigation, automobile televisions, industrial displays, kiosks and
point-of-sale displays. DisplaySearch projects that the combined market for
automobile navigation and television displays will grow from three million units
in 1998 to seven million units in 2003. DisplaySearch projects that the market
for industrial displays will grow from five million units in 1998 to nine
million units in 2003. Currently these displays use a variety of interfaces. We
believe the markets for these displays would benefit from a single industry
standard digital interface. We believe that the DVI specification can address
the interface requirements of these markets.
HIGH-SPEED NETWORKING AND STORAGE APPLICATIONS
Dataquest projects that the overall number of Gigabit Ethernet ports for
high-speed networks will grow from over two million in 1999 to over 22 million
in 2003. Dataquest also projects that the market for high-bandwidth hard disk
drive solutions, which use high-speed interfaces such as Serial ATA and Fibre
Channel, will grow from 1.5 million units in 1999 to over 114 million units in
2003. Our core technology allows data transmission at 1.67 gigabits per second
over twisted-pair copper wire in display applications. We believe our technology
is well-suited to address the high bandwidth requirements of the gigabit
networking and high-speed serial interface storage markets.
CUSTOMERS
We have achieved design wins with many leading host system and display
manufacturers. To date, we have shipped over four million semiconductor devices,
including transmitters, receivers and
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<PAGE>
controllers. Our products have been designed into host systems and displays from
a number of companies including:
<TABLE>
<S> <C> <C>
HOST SYSTEM COMPANIES DISPLAY SYSTEM COMPANIES
- ----------------------------------- ----------------------------------- -----------------------------------
PCs LCD Displays Projectors
Acer* Acer* Compaq
Compaq Apple CTX*
Fujitsu Compaq NEC
Hitachi Fujitsu Proxima
IBM Gateway Sanyo
Mitac* Hitachi Sharp
NEC IBM -----------------------------------
Sharp LG Electronics* LCD Panels
Toshiba Matsushita LG LCD
- ----------------------------------- Mitac* Samsung
Graphics Add-in Boards NEC Toshiba
ATI Princeton Graphics
Diamond Multimedia Samsung Electronics*
Elsa ViewSonic
Leadtek
Matrox
Number Nine
3Dlabs
</TABLE>
* These companies sell unbranded products to other companies which
incorporate our products.
We focus our sales and marketing efforts on achieving design wins with
leading host system and display OEMs. In most cases, these OEMs outsource
manufacturing functions to third parties. Therefore, once we have won the
design, we typically help these third party manufacturers rapidly bring the
design to production. Once the design is complete, we sell our products to these
third party manufacturers either directly or indirectly through distributors. In
1998, sales to Mitac, a third party manufacturer, accounted for 54% of our total
revenues, and ATI, a leading graphics board manufacturer, accounted for 12% of
our total revenues. These manufacturers are significant suppliers to Compaq,
with whom we had a major design win for our transmitter in 1998. For the six
month period ended June 30, 1999, Mitac accounted for 13% of our total revenues,
Kanematsu, a Japanese distributor, accounted for 13% of our total revenues and
Microtek, a Japanese distributor, accounted for 11% of our total revenues. For a
description of the risk of our customer concentration, see "Risk Factors--We
depend on a few key customers and the loss of any of them could significantly
reduce our revenues."
Recently, the percentage of our revenues attributable to sales through
distributors has increased substantially. Much of this increase reflects design
wins with new OEMs which rely on third-party manufacturers or distributors to
provide inventory management and purchasing functions. See "Risk Factors--Our
increasing dependence on selling through distributors increases the risks and
complexity of our business."
PRODUCTS
Silicon Image designs, develops and markets semiconductors for high-speed
digital communications. We have chosen to focus initially on the digital display
market because it is a rapidly growing and potentially large market in which we
are a technology leader. All of our current products are manufactured using
low-cost, standard foundry CMOS processes at Taiwan Semiconductor Manufacturing
Corporation in Taiwan. In addition to our primary products, we develop and sell
reference design kits that represent application examples for incorporation of
our products into our customers' equipment. By providing these reference design
kits, we can assist the manufacturer in achieving easier and faster transitions
from initial prototype designs through final production releases. Our primary
products are transmitters for host systems and receivers and display controllers
for displays. In 1998, over 75% of our product revenues resulted from the sale
of transmitter products to
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<PAGE>
manufacturers of host systems. While revenues from the sale of receivers and
display controllers have increased in the past six months, transmitters continue
to represent between 50% and 60% of our product revenues.
HOST SYSTEM PRODUCTS
Our PanelLink transmitters reside in the host system and take digital video
data from a graphics source, convert it to DVI-compliant digital output and
transmit that output to a receiver in the display. We market discrete
transmitters to manufacturers of PC motherboards, graphics boards and other
applications such as point-of-sale terminal systems. Our transmitters operate at
speeds from 0.75 to five gigabits per second, supporting resolutions from VGA to
UXGA. Our transmitters directly interface with video graphics processors from
companies such as 3Dfx, 3Dlabs, ATI, Intel, Matrox, nVidia, S3 and Trident and
have been included in PC systems from leading companies such as Compaq, Fujitsu
and NEC. As part of our strategy to drive the broad adoption of digital-ready
host systems, we have licensed our transmitter technology to other semiconductor
companies and we intend to do so in the future.
Our host system products are:
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
PANELLINK TRANSMITTERS
MAXIMUM MAXIMUM TARGET INTRODUCTION
PRODUCT RESOLUTION BANDWIDTH MARKETS DATE
SiI 100 Tx XGA 2.04 Gbps Point-of-sale Q2 1997
(1040x768 pixels) terminals
SiI 140 Tx High-refresh XGA 2.58 Gbps PC motherboards and Q4 1997
(1040x768 pixels) add-in boards
SiI 150 Tx SXGA 3.36 Gbps PC motherboards, add- Q3 1998
(1280x1024 pixels) in boards and flat
panel displays
SiI 154 Tx SXGA 3.36 Gbps PC motherboards and Q1 1999
(1280x1024 pixels) add-in boards
SiI 164 Tx UXGA 5 Gbps PC motherboards and Q4 1999*
(1600x1200 pixels) add-in boards
</TABLE>
* Anticipated introduction date.
DISPLAY SYSTEM PRODUCTS
We have three families of display products: PanelLink receivers, Digital
Visual Controllers and Intelligent Panel Controllers.
PANELLINK RECEIVERS
Our PanelLink receivers reside in the display and receive DVI-compliant
input and restore the digital video data. We market receivers to manufacturers
of flat panel displays, CRTs, projectors and point-of-sale terminals. Our
receivers operate at speeds from 0.75 to 5 Gbps, supporting resolutions from VGA
to UXGA. To ensure reliable data transmission, our receivers have been designed
to exceed many of technical requirements of the DVI specification, such as
having a lower pixel error rate than the DVI specification. Our receivers have
been included in display systems from leading manufacturers such as Compaq,
Fujitsu, Hitachi, IBM, NEC, Princeton Graphics, Proxima, Sanyo, Sharp and
ViewSonic.
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<PAGE>
Our receiver products are:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
PANELLINK RECEIVERS
MAXIMUM MAXIMUM TARGET INTRODUCTION
PRODUCT RESOLUTION BANDWIDTH MARKETS DATE
SiI 101 Rx XGA 2.04 Gbps Point-of-sale Q2 1997
(1040x768 pixels) terminals
SiI 141 Rx high-refresh XGA 2.58 Gbps PC motherboards and Q4 1997
(1040x768 pixels) add-in boards
SiI 151 Rx SXGA 3.36 Gbps Flat panel displays Q3 1998
(1280x1024 pixels)
SiI 161 Rx UXGA 5 Gbps PC motherboards and Q1 2000*
(1600x1200 pixels) add-in boards
</TABLE>
* Anticipated introduction date
DIGITAL VISUAL CONTROLLERS
To enable intelligent displays and consistently deliver a high-quality
digital visual experience, we have developed the Digital Visual Controller
architecture. The DVC architecture is our platform for development of
system-level semiconductors that can deliver value-added functionality to our
display customers. Our DVC architecture includes three functional layers:
[Description of graphics on page 41]
There is a rectangle comprised of four connected jigsaw puzzle pieces. The
puzzle piece furthest to the left is red and inside the piece is Silicon Image's
PanelLink Technology logo. To the right of the logo is the phrase "PanelLink
Digital." The left side of the graphic contains graphical representations,
arranged from top to bottom, of a personal computer, a notebook computer and a
DVD player. Each of these representations is connected to the "PanelLink" puzzle
piece by a thick line filled with a series of zeroes and ones. The rectangle
labeled "PanelLink" is connected on the right side to another puzzle piece,
which is yellow, labeled "pixelprecision." Inside the puzzle piece and above the
label "pixelprecision" is Silicon Image's PixelPrecision logo. The puzzle piece
labeled "PixelPrecision" is connected on the right side to a blue puzzle piece
with the words "Display Adaption" inside it. The "Display Adaption" puzzle piece
is connected to another red puzzle piece which is horizontally subdivided into
four smaller puzzle pieces. These smaller puzzle pieces are labeled, from top to
bottom, "Flat Panel Monitor," "Projector," "Digital CRT" and "Future." A thick
line filled with zeroes and ones extends from the right of the "Flat Panel
Monitor" puzzle piece to a graphical representation of a flat panel display. A
thick line filled with zeroes and ones extends from the right of the "Projector"
puzzle piece to a graphic labeled "Projector." A thick line filled with zeroes
and ones extends from the right of the "Digital CRT" puzzle piece to a graphical
representation of a digital CRT monitor.
- THE INTERFACE LAYER. This allows the display to receive digital data from
any DVI-compliant host system. This layer includes our PanelLink receiver
technology. We anticipate that in the future this layer will support
additional input and output capabilities to allow the display to
communicate with the host system or other peripherals.
- THE DIGITAL VIDEO PROCESSING LAYER. This includes our PixelPrecision,
all-digital, image processing technology for functions such as on-screen
display and scaling--that is, switching readily from low to high
resolutions. This layer takes advantage of the reliable digital data
delivered from the host system across the PanelLink interface to produce
high image quality at low cost. We anticipate that in the future this
layer will contain functions such as frame rate conversion and support for
multiple video streams.
- THE DISPLAY ADAPTION LAYER. This layer formats and optimizes the output
from the Digital Video Processing Layer for use on multiple display types,
such as LCDs and CRTs. Our development plans are to support additional
display types such as plasma displays and micro displays. In addition, the
display adaption layer provides capabilities such as gamma correction,
which allows the manufacturer to change the image contrast to match the
characteristics of the individual display.
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<PAGE>
DVCS FOR FLAT PANEL DISPLAYS. In June 1999, we announced the SiI 801-- the
first product implementing our DVC architecture. The SiI 801 is designed
specifically for high-volume, XGA resolution, flat panel displays. With the SiI
801, a flat panel display supports a full range of digital input resolutions
from VGA to XGA, while scaling the input resolutions to the full XGA resolution
of the display, for a high-quality, full-screen visual experience. The SiI 801
is the first single-chip solution that provides all the necessary interface,
image processing and control functions required for an all-digital flat panel
display. In the first quarter of 2000, we expect to introduce the SiI 851, which
is designed to support input resolutions up to SXGA and to enhance the
functionality of our Display Adaption Layer. As single-chip solutions, our DVCs
for flat panel displays lower overall cost, increase reliability, occupy less
board space and simplify board design and layout. Our DVCs are included in
displays from leading manufacturers such as Compaq and NEC.
DVCS FOR CRTS. We have been collaborating with several leading CRT
manufacturers in their design and development of digital CRTs. Using the DVC
architecture, we are focusing on developing products to enable DVI-compliant
digital CRTs.
Our DVC products are:
<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
DIGITAL VISUAL CONTROLLER (DVC)
<CAPTION>
MAXIMUM MAXIMUM TARGET INTRODUCTION
PRODUCT RESOLUTION BANDWIDTH KEY FEATURES MARKETS DATE
<S> <C> <C> <C> <C> <C>
SiI 801 DVC XGA 2.58 Gbps - Scaling Flat panel Q2 1999
(1040x768 pixels) - On-screen displays
display
- Power
management
SiI 851 DVC SXGA 3.36 Gbps - Scaling Flat panel Q1 2000*
(1280x1024 pixels) - On-screen displays
display
- Power
management
- Gamma
correction
- Dithering
SiI 901 DVC UXGA 5 Gbps - Integrated Digital CRT Q2 2000*
(1600x1200 pixels) digital- Progressive scan
to-analog TV
converter
</TABLE>
* Anticipated introduction date.
INTELLIGENT PANEL CONTROLLERS
Our IPCs reside on the LCD module and receive digital input that complies
with either the DVI specification or the LVDS standard (a standard which is
commonly used in notebook PCs). Our IPCs then restore the video data format and
directly interface with LCD module electronics. In addition, our IPC products
contain functionality which simplifies the design of LCD modules by providing
programmable timing controls, and support resolutions from VGA to XGA. We market
IPCs to manufacturers of LCDs for use in notebook and flat panel displays.
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<PAGE>
Our panel controller products are:
<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
INTELLIGENT PANEL CONTROLLER (IPC)
<CAPTION>
MAXIMUM MAXIMUM TARGET INTRODUCTION
PRODUCT RESOLUTION BANDWIDTH KEY FEATURES MARKETS DATE
<S> <C> <C> <C> <C> <C>
SiI 201 IPC XGA 2.04 Gbps - PanelLink LCDs for notebook Q3 1998
(1040x768 pixels) Receiver PCs and flat panel
- LCD timing displays
controller
SiI 211 IPC XGA 2.94 Gbps - LVDS Receiver LCDs for notebook Q4 1999*
(1040x768 pixels) - LCD timing PCs and flat panel
controller displays
</TABLE>
* Anticipated introduction date.
SILICON IMAGE TECHNOLOGY
We believe that our key technical competencies are our high-speed serial
link technology, semiconductor design expertise, display systems expertise and
high-speed applications expertise.
HIGH-SPEED SERIAL LINK TECHNOLOGY
Serial link technology is the basis for the physical layer, which performs
the electrical signalling, in several data communication protocols, including
Ethernet, Fibre Channel and Asynchronous Transfer Mode. This technology converts
data into into a serial stream that is transmitted sequentially at a constant
rate and then reconstituted into its original form. Our high-speed serial link
technology includes a number of proprietary elements designed to address the
significant challenge of ensuring that the data sent to the display can be
accurately recovered after it has been separated and transmitted in serial
streams over three separate wires. These include proprietary oversampling
techniques to reduce errors in distinguishing data from noise and parallel data
recovery algorithms to recover data from the serial streams. In order to enable
the display to recognize this data at the proper time and rate, our digital
serial link technology uses a digital phase-locked loop combined with a unique
phase detecting and tracking method in order to monitor the timing of the data.
These circuit techniques allow for mostly digital implementation of a high speed
serial link that can be manufactured using standard CMOS processes. We can
readily apply our high-speed serial link technology to all three types of serial
transmission methods currently used in communications systems: synchronous,
asynchronous, and plesiochronous. Synchronous systems, which allow data and the
clock, which contains timing information, to be transmitted simultaneously, are
appropriate for short-range communication links such as computer input/output
devices and backplane buses. Asynchronous systems, in which only data is sent,
are appropriate for mid- to long-range communication links or optical
communications. Plesiochronous systems send only data, but adjust the data flow
to effectively achieve the result of a synchronous transmission. These systems
are appropriate for applications such as processor-to-processor links and
general input/output where the sender and the receiver operate at slightly
different clock frequencies.
HIGH-SPEED SEMICONDUCTOR DESIGN EXPERTISE
Our circuit designers are skilled in the design of high-speed, low-power and
mixed-signal CMOS semiconductors. We use advanced design techniques, including
low-power serializer, current mode driver and common mode canceler, to develop
high-speed, highly integrated semiconductors which can be manufactured using
conventional low-cost packages and can transmit and receive data using
inexpensive cables and connectors. Our design methodology combines logic
synthesis and full-custom mixed-signal design, allowing us to develop small,
cost-effective semiconductors.
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<PAGE>
DISPLAY SYSTEMS EXPERTISE
Our display systems expertise ranges from display technology, driver and
system design to display processing, testing and system integration. In addition
to experience in existing display technologies, our active involvement within
the display community contributes to our understanding of emerging display
technologies.
HIGH-SPEED APPLICATIONS EXPERTISE
We have developed extensive expertise, at the semiconductor and system
design levels, in solving problems related to designing systems using high-speed
semiconductor devices such as electromagnetic compliance. Our expertise in
solving electromagnetic compliance-related problems enables us to make our
semiconductor products easier for our customers to design into their systems. In
addition to providing semiconductor solutions, we assist our customers
throughout the system design process, enabling them to reduce their
time-to-market.
RESEARCH AND DEVELOPMENT
We have assembled a core team of engineers and technologists who have
extensive experience in the areas of high-speed circuit design, digital imaging
and LCD panels and LCD panel electronics. As of June 30, 1999, we had 23
employees in the engineering department, including 13 with Ph.Ds. These
engineers are involved in advancing our PanelLink technology and adding new
features and functionality to our host system and display products.
Some of our key technology is developed by academic researchers at Seoul
National University in Korea whom we have retained as consultants. These
researchers operate under the direction of Dr. Jeong, a founder of Silicon Image
and our Chief Technical Adviser. Significant portions of our high-speed serial
link technology were developed under the direction of Dr. Jeong. He continues to
direct our research and development efforts in Korea which focus on applying our
core technology to new markets, such as high-speed networking and storage.
We have invested, and expect that we will continue to invest, significant
funds on research and development activities. Our research and development
expenses were approximately $1.3 million in 1996, $3.2 million in 1997, $4.5
million in 1998 and $3.1 million in the first six months of 1999. For more
information regarding the risks of our research and development efforts, see
"Risk Factors--Our success depends on the development and introduction of new
products, which we may not be able to do in a timely manner because the process
of developing high-speed semiconductor products is complex and costly" and
"--Our dependence on academic researchers located in Korea could adversely
affect our ability to develop and protect key technology."
SALES AND MARKETING
We sell our products through a direct sales force and indirectly through
distributors and manufacturer's representatives. As of June 30, 1999, our sales
and marketing organizations included 23 employees in North America, Europe and
Asia, and our network of distributors and manufacturer's representatives
included seven in Asia, seven in Europe and four in North America.
Our sales and marketing strategy is to achieve design wins with key industry
leaders to help accelerate both the adoption of the DVI specification in host
systems and the conversion to end-to-end digital display systems. We believe
that superior field applications and engineering support are key to building
long-term relationships with leading OEMs and third-party manufacturers. Sales
personnel and applications engineers are dedicated to key customers to promote
close communication and provide a high-level of technical support.
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<PAGE>
Our marketing efforts focus primarily on promoting adoption of the DVI
specification, working closely with other DDWG members, participating in
industry trade shows and forums, and entering into branding relationships to
build awareness of the PanelLink brand.
MANUFACTURING
WAFER FABRICATION
Our semiconductor products are fabricated using standard CMOS processes,
which permits us to engage independent wafer foundries to fabricate our
semiconductors. By outsourcing our manufacturing requirements, we are able to
avoid the high cost of owning and operating a semiconductor wafer fabrication
facility. This allows us to focus our resources on the design and marketing of
our products. We currently outsource all of our wafer manufacturing to Taiwan
Semiconductor Manufacturing Company, or TSMC. However, we do not have a
long-term agreement with Taiwan Semiconductor Manufacturing Company. If Taiwan
Semiconductor Manufacturing Company were unable or unwilling to meet our
requirements, our business would be seriously harmed. See "Risk Factors--We
depend on a single third-party wafer foundry to manufacture all of our products"
and "--Our semiconductor products are complex and are difficult to manufacture
cost-effectively."
Our devices are currently fabricated using both 0.5 micron, double-layer
metal and 0.35 micron, triple-layer metal processes. We continuously evaluate
the benefits and feasibility of migrating to a smaller geometry process
technology in order to reduce costs and improve performance.
ASSEMBLY AND TEST
After wafer fabrication, die are assembled into packages and the finished
products are tested. Our products are designed to use low-cost standard packages
and to be tested with widely-available semiconductor test equipment. We
outsource all of our packaging and test requirements to Anam in Korea and ASE in
Taiwan and California. For a description of risks presented by our dependence on
third-party subcontractors, see "Risk Factors--We depend on third-party
subcontractors for assembly and test."
The high-speed nature of our products makes it difficult to test our
products in a cost-effective manner before they are assembled. Since the
fabrication yields of our products have historically been high and the costs of
our packaging have historically been low, we test our products after they are
assembled. Defects are not discovered until that time. Our operations personnel
closely review the process control monitor information provided to us by our
foundry. To ensure quality, we have firmly established guidelines for rejecting
wafers that we consider unacceptable. To date, bypassing wafer probe testing has
not caused us to experience higher final test failures or lower yields. However,
lack of wafer probe testing could have adverse effects in case there are
problems with the wafer processing. See "Risk Factors--Our semiconductor
products are complex and are difficult to manufacture cost-effectively."
QUALITY ASSURANCE
We focus on product quality through all stages of the design and
manufacturing process. Our designs are subjected to in-depth circuit simulation
at temperature, voltage and processing extremes before being committed to
silicon. We pre-qualify each of our subcontractors. This pre-qualification
process consists of a series of industry standard environmental product stress
tests, as well as an audit and analysis of the subcontractor's quality system
and manufacturing capability. We also participate in quality and reliability
monitoring through each stage of the production cycle by reviewing electrical
parametric data from our wafer foundry and assembly subcontractors. We closely
monitor wafer foundry production to ensure consistent overall quality,
reliability and yield levels. The facilities of our independent foundry and
assembly and test subcontractors have achieved ISO 9000 certification.
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INTELLECTUAL PROPERTY
Our success and future revenue growth will depend, in part, on our ability
to protect our intellectual property. We rely on a combination of patent,
copyright, trademark and trade secret laws, as well as nondisclosure agreements
and other methods to protect our proprietary technologies. We have been issued
four United States patents. These patents expire in 2016, subject to our payment
of periodic maintenance fees. We have filed 17 additional United States patent
applications. Three of these 17 applications have been allowed by the U.S.
Patent and Trademark Office. We cannot assure you that any valid patent will
issue as a result of any applications or, if issued, that any claims allowed
will be sufficiently broad to protect our technology. We also generally control
access to and distribution of our documentation and other proprietary
information. Despite our precautions, it may be possible for a third party to
copy or otherwise obtain and use our products, or technology without
authorization, develop similar technology independently or design around our
patents. See "Risk Factors--We may be unable to adequately protect our
intellectual property."
Upon our inception, we licensed serial link technology from Dr. Jeong, a
founder of Silicon Image and our Chief Technical Adviser. Our current license to
this technology is worldwide and, except in case of bankruptcy or material
breach, perpetual and irrevocable. Dr. Jeong granted rights in this technology
to other companies before licensing it to Silicon Image. Dr. Jeong has agreed,
however, not to grant additional rights to any third parties. Under our license,
we can develop and sell products based on the serial link technology, and
sublicense others to do the same. The serial link technology is a high-speed
communication interconnect technology which is an important element of all of
our products and enables them to efficiently transmit data in serial stream at
high speeds. See "Certain Transactions" for additional information regarding our
license agreement with Dr. Jeong.
A significant portion of our technology is developed by consultants based in
Korea. While our agreements with these consultants provide for the assignment of
all intellectual property rights in their work product to us, Korean law may not
effectively provide the same level of protection of our intellectual property
rights as United States law. Effective copyright, trademark and trade secret
protection may be unavailable or limited in foreign countries. See "Risk
Factors--Our dependence on academic researchers located in Korea could adversely
affect our ability to develop and protect key technology."
Our participation in the DDWG requires that we grant the right to others to
use specific elements of our intellectual property in implementing the DVI
specification in their products at no cost, in exchange for an identical right
to use specific elements of their intellectual property for this purpose. This
reciprocal free license covers the external behavior of the host and display. It
does not, however, extend to the internal methods by which such behavior is
created. Although the DVI specification is an open industry standard, we have
developed proprietary methods of implementing the DVI specification. The
intellectual property that we have agreed to license defines the logical
structure of the interface, such as the number of signal wires, the signalling
types (expressed in voltage or current levels), and the data encoding method for
serial communication. Our implementation of this logical structure in integrated
circuits remains proprietary, and includes our techniques to convert data to and
from a serial stream, our signal recovery algorithms and our circuits to reduce
EMI (electromagnetic interference). We cannot be sure, however, that third
parties will not develop equivalent or superior implementations of the DVI
specification, or that we will succeed in protecting our intellectual property
rights in our proprietary implementation. We agreed to grant rights to the
adopters of the DVI specification in order to promote the adoption of our
technology as an industry standard. We thereby limited our ability to rely on
intellectual property law to prevent the adopters of the DVI specification from
using specific elements of our intellectual property for free. See "Risk
Factors--Our participation in the Digital Display Working Group requires us to
license some of our intellectual property for free, which may make it easier for
others to compete with us."
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We entered into a patent cross-license agreement with Intel in which each of
us granted the other a license to use the grantor's patents, with specific
exclusions related to the grantor's current products and anticipated future
products, and network devices. This cross-license agreement expires when the
last licensed patent expires, subject to the right of either party to terminate
the agreement earlier upon material breach by the other party, or a bankruptcy,
insolvency or change of control of the other party. We believe that this
cross-license strengthens our business relationship with Intel. We have
forfeited, however, our ability to rely on intellectual property law to prevent
Intel from using our patents to the extent of this license. See "Risk
Factors--Our relationship with Intel involves competitive risks."
The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions. This often results in
significant, protracted litigation. For additional information on risks we may
face as a result of intellectual property disputes, see "Risk Factors-- Others
may bring infringement claims against us which can be time-consuming and
expensive to defend."
COMPETITION.
The high-speed communication, display and semiconductor industries are
intensely competitive. These markets are characterized by rapid technological
change, evolving standards, short product life cycles and decreasing prices. We
believe that the principal factors affecting competition in our markets are
levels of product integration, adherence to industry standards, time-to-market,
cost, product capabilities, system design costs, intellectual property, customer
support and reputation. Our current products face competition from a number of
sources including: analog solutions, DVI-compliant solutions and other digital
interface solutions.
- ANALOG SOLUTIONS. Display systems still predominantly employ an analog
interface. Improvements to analog interface display solutions may slow the
adoption of all-digital display systems. We compete with analog solution
vendors such as Analog Devices and Genesis Microchip.
- DVI-COMPLIANT SOLUTIONS. We believe that over time, the DVI specification
may become widely adopted in the digital display industry and attract
additional market entrants that will compete with us. For example, we
believe that a number of providers of video graphics accelerators are
currently integrating DVI-compliant transmitter technology into their
products. ATI Technologies, a major provider of video graphics
accelerators that improve the speed and image quality of video output from
computers, and one of our significant customers in 1998, recently
introduced a product that contains an internally developed DVI-compliant
transmitter capable of supporting very high resolution.
We anticipate that various companies will develop DVI-compliant receivers.
Entrants in this market may include companies currently shipping analog
image processing solutions, such as Arithmos, Genesis Microchip,
Pixelworks and Sage, as well as companies with other digital interface
solutions such as Texas Instruments and National Semiconductor.
- OTHER DIGITAL INTERFACE SOLUTIONS. Texas Instruments and National
Semiconductor offer proprietary digital interface solutions based on LVDS
technology. While LVDS technology has gained broad market acceptance in
notebook PCs, few PC and display manufacturers have adopted this
technology for use outside of the notebook PC market.
The market for our panel controller products is also very competitive. Some
of our panel controller products are designed to be functionally interchangeable
with similar products sold by Texas Instruments, National Semiconductor and
Thine.
We expect competition to increase in our markets. For example, Genesis
Microchip has announced plans to introduce a DVI-compliant product that will
compete with our DVCs.
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In the process of establishing our technology as an industry standard, and
to ensure rapid adoption of the DVI specification, we have agreed to license
specific elements of our intellectual property to others for free. In addition,
we have licensed elements of our intellectual property to Intel and other
semiconductor companies, and we may continue to do so. Competitors could use
these elements of our intellectual property to compete against us. Many of our
competitors have longer operating histories and greater presence in key markets,
greater name recognition, access to large customer bases and significantly
greater financial, sales and marketing, manufacturing, distribution, technical
and other resources than we do. As a result, they may be able to adapt more
quickly to new or emerging technologies and customer requirements or devote
greater resources to the promotion and sale of their product than we may. In
particular, well-established semiconductor companies, such as Analog Devices,
Intel, National Semiconductor and Texas Instruments, may compete against us in
the future. We cannot assure you that we can compete successfully against
current or potential competitors or that competition will not seriously harm our
business. See "Risk Factors--Our participation in the Digital Display Working
Group requires us to license some of our intellectual property for free, which
may make it easier for others to compete with us."
EMPLOYEES
As of June 30, 1999, we had a total of 66 employees -- 23 in engineering, 23
in sales and marketing, eight in operations and 12 in finance and
administration. Of these employees, 63 were located in the United States. None
of our employees is represented by a collective bargaining agreement, nor have
we experienced any work stoppage. We consider our relations with our employees
to be good.
We depend on the continued service of our key technical, sales and senior
management personnel and our ability to attract and retain additional qualified
personnel. If we are unable to hire and retain qualified personnel in the
future, our business would be seriously harmed.
FACILITIES
Our headquarters, including our principal administrative and marketing
facilities, are located in approximately 18,000 square feet of space we have
leased in Cupertino, California under a lease expiring December 14, 2002 with a
renewal option for an additional five years. We believe that with our planned
increases in personnel and activities, these facilities will become inadequate
to meet our facility requirements in 2000. Accordingly, we will need to lease
additional space and may need to vacate our current location and attempt to
sublease our current facility. There is currently limited office space available
close to our current location. The additional space we will need to lease may
cost substantially more than our current space, and we may incur substantial
capital expenditures for improvements to a new facility.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND A KEY CONSULTANT
Our executive officers, directors and a key consultant and their ages as of
August 31, 1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- -------------------------------------------------------------------------
<S> <C> <C>
David D. Lee..................... 43 Chairman of the Board, Chief Executive Officer and President
Steve Tirado..................... 45 Executive Vice President, Marketing and Business Development
Daniel K. Atler.................. 40 Vice President, Finance and Administration and Chief Financial Officer
Victor M. Da Costa............... 39 Vice President, Engineering
Deog-Kyoon Jeong................. 40 Chief Technical Adviser (consultant)
Parviz Khodi..................... 40 Vice President, Worldwide Sales
Scott A. Macomber................ 42 Vice President, Business Strategy
Jalil Shaikh..................... 45 Vice President, Operations
Herbert Chang(1)................. 37 Director
Sang-Chul Han.................... 44 Director
David A. Hodges(2)............... 62 Director
Andrew S. Rappaport(1)(2)........ 42 Director
Ronald V. Schmidt(1)............. 55 Director
</TABLE>
- ------------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
DAVID D. LEE has served as Chairman of the Board and Chief Executive Officer
since our inception on January 1, 1995, and in addition served as President from
inception until October 1996 and since June 1999. Prior to founding Silicon
Image, Dr. Lee was a principal investigator at Sun Microsystems, Inc., a
computer networking company, where he led advanced development projects from
1993 to 1995, as a Visiting Scientist at Sun's Technology Development Group and
as Senior Staff Engineer at Sun Labs. Before joining Sun, Dr. Lee was a member
of the research staff at Xerox Corporation's Palo Alto Research Center, from
1989 to 1994. Dr. Lee holds Bachelor of Science, Master of Science and Ph.D.
degrees in Electrical Engineering and Computer Sciences from the University of
California at Berkeley.
STEVE TIRADO has served as Silicon Image's Executive Vice President of
Marketing and Business Development since August 1999. From April 1986 to July
1999, Mr. Tirado held various marketing and management positions at Sun
Microsystems, Inc., a computer networking company, serving most recently as Vice
President of Marketing and Business Development for the NC Systems Group. From
1985 to 1986, Mr. Tirado was President of Tirado, Sorrentino Associates, a
consulting firm. From 1984 to 1985, Mr. Tirado held the position of Marketing
Administration Manager at Qualogy, a mass storage disk drive and controller
company. From 1976 to 1984, Mr. Tirado was a public program administrator and
policy analyst within various government agencies. Mr. Tirado holds a Bachelor
of Arts degree in Psychology from the University of California at Santa Barbara,
a Master of Arts Degree in Organizational Planning and Consultation from Boston
University and a Master of Business Administration degree from the University of
California at Berkeley.
DANIEL K. ATLER has served as Silicon Image's Chief Financial Officer and
Vice President of Finance and Administration since June 1998. Mr. Atler served
as Chief Financial Officer and Vice President of Finance and Administration for
Wireless Access, Inc., a two-way wireless communication systems company, from
January 1995 to November 1997, when Wireless Access, Inc., was acquired by
Glenayre Technologies, Inc., a wireless personal communication systems company.
After the merger, Mr. Atler continued in the same position at Wireless Access
Group, a division of Glenayre Technologies, Inc., from November 1997 to June
1998. From July 1992 to December 1994, Mr. Atler served as Corporate Controller
for Global Village Communication, Inc., a designer, developer and marketer of
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communication products for personal computers. From July 1982 to July 1992, Mr.
Atler was with Ernst & Young, a financial accounting firm, most recently as a
Senior Manager. Mr. Atler holds a Bachelor of Science degree in Business
Administration from Colorado State University.
VICTOR M. DA COSTA has served as Silicon Image's Vice President of
Engineering since October 1998. Dr. Da Costa joined Silicon Image as a Senior
Staff Engineer in February 1996. Dr. Da Costa was a member of the research staff
at the Xerox Corporation's Palo Alto Research Center, from 1991 to 1996. Dr. Da
Costa was a principal engineer at Versatec, a maker of electrostatic plotters,
from 1988 to 1991. Dr. Da Costa holds a Bachelor of Science degree in Physics
from California State University of Fresno, a Master of Arts degree in Physics
from the University of California at Davis and a Ph.D. in Experimental Condensed
Matter Physics from the University of California at Davis.
DEOG-KYOON JEONG was a founder of Silicon Image and has served as Chief
Technical Adviser in a consulting capacity since October 1995. Since August
1991, Dr. Jeong has been on the faculty of the School of Electrical Engineering
at Seoul National University. Dr. Jeong holds the position of associate
professor. From June 1989 to August 1991, Dr. Jeong worked at Texas Instruments,
a semiconductor company, as a research scientist. Dr. Jeong holds Bachelor of
Science and Master of Science degrees in Electrical Engineering from Seoul
National University and a Ph.D. in Electrical Engineering and Computer Sciences
from the University of California at Berkeley.
PARVIZ KHODI has served as Silicon Image's Vice President of Worldwide Sales
since August 1998. Mr. Khodi joined Silicon Image in July 1998 as Director of
Asia Pacific Sales. From November 1987 to July 1998, Mr. Khodi worked at Chips
and Technologies, Inc., a maker of semiconductor chips principally for the
graphics market, where he held various technical and managerial sales positions,
most recently Director, Asia Pacific Sales. From 1986 to 1987, Mr. Khodi was a
field applications engineer at Touch Communications, Inc., a software networking
company. From 1984 to 1986, Mr. Khodi was an applications engineer at Intel. Mr.
Khodi holds Bachelor of Science and Master of Science degrees in Electrical
Engineering from the University of Kansas.
SCOTT A. MACOMBER has served as Silicon Image's Vice President of Business
Strategy since June 1999. Mr. Macomber joined Silicon Image in December 1995, as
Vice President, Business Development and a member of the board of directors. Mr.
Macomber served as President of Silicon Image from October 1996 to June 1999 and
as a director from December 1995 until June 1999. From 1989 until 1995, Mr.
Macomber served in various marketing and management capacities at LSI Logic
Corporation, a semiconductor company, most recently as Director of Corporate
Development. Mr. Macomber was one of a founding group of employees at Silicon
Solutions Corporation, a maker of high-performance computers, and was employed
there from 1983 to 1987 in a number of managerial, marketing and engineering
positions. From 1980 until 1982, Mr. Macomber was a member of the technical
staff at Bell Telephone Laboratories, the research and development division of
the American Telephone and Telegraph Company. Mr. Macomber holds a Bachelor of
Science degree in Electrical Engineering from the University of Michigan, a
Master of Science degree in Electrical Engineering from Stanford University and
a Master of Business Administration degree from Stanford University.
JALIL SHAIKH has served as Silicon Image's Vice President of Operations
since September 1996. From August 1994 to August 1996, he served as Director of
Engineering Operations for graphics and multimedia products at Trident
Microsystems, a designer, developer and marketer of digital media. From July
1991 to August 1994, he served as Product Engineering Manager at Micro Linear
Corporation, an analog and mixed signal semiconductor company. Mr. Shaikh holds
a Master of Science degree in Electrical Engineering from Rutgers, The State
University of New Jersey and a Master of Business Administration degree from the
University of Phoenix.
HERBERT CHANG has served as a director of Silicon Image since July 1998.
Since April 1996, Mr. Chang has served as president of InveStar Capital, Inc., a
venture capital fund management company. From July 1994 to March 1996, Mr. Chang
was Senior Vice President at WK Technology
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Fund, a venture capital fund. From September 1991 to June 1994, Mr. Chang was
Vice President of DynaLab, Inc., a developer of fonts for Asian characters. From
July 1986 to August 1991, Mr. Chang was Assistant Vice President at Acer, Inc.,
a Taiwanese manufacturer of personal computers. Mr. Chang holds a Bachelor of
Science degree in Geology from National Taiwan University and a Master of
Business Administration degree from National Chiao-Tung University. Mr. Chang
currently serves as a director of NetIQ Corporation, a developer of applications
management software, and several private companies.
SANG-CHUL HAN has served as a director of Silicon Image since April 1996.
Dr. Han is the founder of KNCS, Inc., a cable system operator in Seoul, Korea,
and has served as a director since 1994. Dr. Han also founded Ewoo Films, a film
production company, and served as its president from 1992 to 1994. Dr. Han has
held the position of director of RK Industrial Co., a trading company in Seoul,
Korea, since 1988. Dr. Han holds a Bachelor of Science degree in Engineering
from Seoul National University and a Ph.D. in Finance from the New York
University.
DAVID A. HODGES has served as a director of Silicon Image since February
1997. Dr. Hodges is a Professor in the Graduate School and the Daniel M. Tellep
Distinguished Professor Emeritus at the University of California at Berkeley,
where he has been a member of the faculty in the department of Electrical
Engineering and Computer Sciences since 1970. From 1990 to 1996, Dr. Hodges
served as Dean of the College of Engineering at the University of California at
Berkeley. From 1966 to 1970, Dr. Hodges worked at Bell Telephone Laboratories,
the research and development division of the American Telephone and Telegraph
Company. Dr. Hodges holds a Bachelor of Electrical Engineering degree from
Cornell University and Master of Science and Ph.D. degrees in Electrical
Engineering from the University of California at Berkeley. Dr. Hodges serves as
a director of Mentor Graphics Corporation, an electronic design automation
company.
ANDREW S. RAPPAPORT has served as a director of Silicon Image since June
1997. Mr. Rappaport has been a partner of August Capital, LLC, a venture capital
firm, since July 1996. Prior to that time, Mr. Rappaport was president of The
Technology Research Group, Inc., a Boston-based strategic management consulting
firm which he founded in August 1984. Mr. Rappaport attended Princeton
University. Mr. Rappaport serves as a director of MMC Networks, Inc., a
developer and supplier of network processors, and several private companies.
RONALD V. SCHMIDT has served as a director of Silicon Image since April
1997. Since 1997, he has held the position of Research Vice President at Lucent
Bell Laboratories Research Silicon Valley, a division of Lucent Technologies,
Inc., a global communications company. From 1994 to 1997, he served as Executive
Vice President and Chief Technical Officer and a director of Bay Networks, Inc.,
a data networking products and services company formed by the merger of
SynOptics Communications, Inc., and Wellfleet Communications, Inc. Dr. Schmidt
was a co-founder of Synoptics in 1985, and served as Senior Vice President,
Chief Technical Officer and a director of SynOptics until the merger. From 1981
to 1985, Dr. Schmidt was a research fellow at Xerox Corporation's Palo Alto
Research Center. Dr. Schmidt holds Bachelor of Science, Master of Science and
Ph.D. degrees in Electrical Engineering and Computer Science from the University
of California at Berkeley. Mr. Schmidt serves as a director of a private
company.
BOARD COMPOSITION
Our bylaws currently provide for a board of directors consisting of six
members. The term of each of our current directors will expire at the next
annual meeting of stockholders. Commencing at the first annual meeting of
stockholders following the annual meeting of stockholders when we shall have had
at least 800 stockholders, the board of directors will be divided into three
classes, each serving staggered three-year terms: Class I, whose term will
expire at the first annual meeting of stockholders following the annual meeting
of stockholders when we shall have had at least 800 stockholders; Class II,
whose
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term will expire at the second annual meeting of stockholders following the
annual meeting of stockholders when we shall have had at least 800 stockholders;
and Class III, whose term will expire at the third annual meeting of
stockholders following the annual meeting of stockholders when we shall have had
at least 800 stockholders. As a result, only one class of directors will be
elected at each annual meeting of stockholders of Silicon Image, with the other
classes continuing for the remainder of their respective terms. Messrs. Chang
and Han have been designated as Class I directors; Drs. Hodges and Schmidt have
been designated as Class II directors; and Dr. Lee and Mr. Rappaport have been
designated as Class III directors. We do not expect to have 800 or more
stockholders immediately after this offering. Mr. Chang was elected to the board
of directors pursuant to a voting agreement among Silicon Image and some of its
principal stockholders. This voting agreement will terminate upon completion of
this offering.
BOARD COMMITTEES
The audit committee consists of Dr. Hodges and Mr. Rappaport. The audit
committee:
- reviews our financial statements and accounting practices;
- makes recommendations to the board regarding the selection of independent
accountants; and
- reviews the results and scope of the audit and other services provided by
our independent accountants.
The compensation committee consists of Messrs. Chang and Rappaport and Dr.
Schmidt. The compensation committee:
- reviews and recommends to the Board of Directors the compensation and
benefits of all officers, directors and consultants of Silicon Image; and
- reviews general policy relating to compensation and benefits.
Except for grants under the 1995 Equity Incentive Plan made by the
compensation committee at its meeting on November 20, 1998, the board of
directors has continued to administer the issuance of stock options and other
awards under our 1995 Equity Incentive Plan, our 1999 Equity Incentive Plan and
our 1999 Employee Stock Purchase Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of Silicon Image's board of directors is
currently comprised of Messrs. Chang and Rappaport and Dr. Schmidt. None of
these individuals has at any time been an officer or employee of Silicon Image.
For a description of the transactions between Silicon Image and members of the
compensation committee and entities affiliated with the compensation committee
members, see "Certain Transactions." None of our executive officers serves as a
member of the board of directors or compensation committee of any entity which
has one or more executive officers serving as a member of our board of directors
or compensation committee.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
Silicon Image entered into severance agreements with both David Lee and
Scott Macomber on April 22, 1997, and amended and restated these agreements on
August 15, 1997. The agreements provide that if, on or before December 31, 2000,
the executive is terminated by Silicon Image other than for cause, or if the
executive resigns for good reason, the executive will continue to receive salary
at his current rate for six months and vesting of his stock and options will
accelerate, subject to limitations in the event of specified types of
acquisitions of Silicon Image. In addition, if either Dr. Lee or Mr. Macomber is
terminated for cause, or resigns without good reason, then Silicon Image may
elect to continue his salary for six months. During any period when Dr. Lee or
Mr. Macomber is receiving post-termination salary pursuant to the severance
agreement, he will be available to consult with Silicon Image from time to time
as Silicon Image may request, and he may not compete with
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Silicon Image in defined geographical areas. In June 1999, our Board recognized
that changes that had occurred in Mr. Macomber's title and position constituted
good reason as defined in the severance agreement, and that Mr. Macomber will be
entitled to the benefits described above if he resigns from Silicon Image or if
we terminate him without cause.
Silicon Image entered into an employment agreement with Daniel Atler on June
15, 1998. In addition to describing Mr. Atler's initial title and compensation,
the agreement provides that Mr. Atler will continue to receive salary at his
current rate and benefits for six months in the event that his employment
terminates other than for cause. The agreement further provides that vesting of
Mr. Atler's stock and options will accelerate in part in the event of a change
in control of Silicon Image, subject to certain limitations. If Mr. Atler's
employment continues after a change in control of Silicon Image, his options and
restricted stock grants will continue to vest at an accelerated rate.
Silicon Image entered into an employment agreement with Parviz Khodi on June
10, 1999. In addition to describing Mr. Khodi's title and compensation, the
agreement provides for continuation of salary and commission for six months in
the event that there is a change in control of Silicon Image and Silicon Image
terminates Mr. Khodi's employment other than for cause, disability or death. The
agreement also provides that Mr. Khodi may purchase up to $10,000 of Silicon
Image's common stock at the end of each of eight fiscal quarters, commencing
with the fourth quarter of 1998, at the then current fair market value as
determined by the board of directors. Mr. Khodi has exercised this right by
purchasing a total of $20,000 of Silicon Image's stock to date. This stock
purchase opportunity expires upon the earliest of termination of Mr. Khodi's
employment, the closing of Silicon Image's initial public offering, or a change
in control that results in our common stock (or securities issued in exchange
for our common stock) becoming publicly traded.
Silicon Image entered into a letter agreement with Steve Tirado in 1999. The
agreement sets forth Mr. Tirado's title and provides for an initial salary of
$225,000 per year and a bonus of up to $50,000 in the first year. Pursuant to
the agreement, Silicon Image sold Mr. Tirado 470,175 shares of common stock at
the price of $2.00 per share. All of the shares initially are subject to our
right to repurchase the shares at cost if Mr. Tirado's employment terminates,
and this right lapses over a four-year period. The agreement provides that Mr.
Tirado will continue to receive salary at his current rate and benefits for six
months in the event his employment terminates other than for cause.
DIRECTOR COMPENSATION
Directors of Silicon Image do not receive cash compensation for their
services as directors, but are reimbursed for their reasonable and necessary
expenses for attending board and board committee meetings. All board members are
eligible to receive stock options pursuant to the discretionary option grant
program in effect under Silicon Image's 1995 Equity Incentive Plan and 1999
Equity Incentive Plan. In 1998, each of Dr. Hodges and Dr. Schmidt was granted
an option to purchase 40,000 shares under the 1995 Equity Incentive Plan. Each
option is immediately exercisable, and shares purchased upon exercise are
subject to our right of repurchase, which lapses over four years.
Immediately following each annual meeting of our stockholders, each director
who is not an employee and whose direct pecuniary interest in our common stock
is less than 5% will automatically be granted an option under our 1999 Equity
Incentive Plan to purchase 10,000 shares if the director has served continuously
as a member of the board of directors for a period of at least one year, an
additional option for 5,000 shares if the director has served on the audit
committee, and an additional option for 5,000 shares if the director has served
on the compensation committee. Each option will have an exercise price equal to
the fair market value of our common stock on the date of grant. These annual
grants will be immediately vested in full and will have a two-year term, but
will generally terminate three months following the date the option-holder
ceases to be a director or consultant.
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EXECUTIVE COMPENSATION
The following table shows all compensation awarded to, earned by or paid for
services rendered to Silicon Image in all capacities during 1998 by our chief
executive officer and our other executive officers or former executive officers
who earned at least $100,000 in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
ANNUAL COMPENSATION UNDERLYING
NAME AND PRINCIPAL POSITIONS SALARY BONUS OPTIONS(#)
- -------------------------------------------------------------------------- ---------- ------------- -----------
<S> <C> <C> <C>
David D. Lee(1) .......................................................... $ 144,473 $ -- --
Chairman of the Board and Chief Executive Officer
Scott A. Macomber(2) ..................................................... 143,672 -- --
Vice President, Business Strategy
Scott Slinker ............................................................ 135,579 17,656 --
former Vice President, Sales(3)
Jalil Shaikh ............................................................. 133,289 -- 60,000
Vice President, Operations
Victor Da Costa .......................................................... 120,621 -- 100,000
Vice President, Engineering
Brian Underwood .......................................................... 112,423 -- --
former Vice President, Marketing(4)
</TABLE>
- ------------------------
(1) Silicon Image authorized the sale of 150,000 shares of common stock to Dr.
Lee in October 1998, and the sale was completed in January 1999. The price
per share was $0.35, which the board of directors determined was the fair
market value of our common stock on the date of sale. We have a right to
repurchase these shares upon termination of employment, which right lapses
over a four-year period.
(2) Silicon Image authorized the sale of 250,000 shares of common stock to Mr.
Macomber in October 1998, and the sale was completed in January 1999. The
price per share was $0.35, which the board of directors determined was the
fair market value of our common stock on the date of sale. We have the right
to repurchase these shares upon termination of employment in some
circumstances, which right lapses over a four-year period.
(3) Mr. Slinker resigned from Silicon Image on October 31, 1998. The
compensation information above for Mr. Slinker includes severance pay up to
the end of 1998.
(4) Mr. Underwood is a founder of Silicon Image and our former Vice President,
Marketing.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information about each stock option granted during
1998 to the officers named in the Summary Compensation Table above.
All options included in the following table are immediately exercisable and
are incentive stock options. We have a right to repurchase the shares issued on
exercise of these options upon termination of the optionee's employment. This
right lapses over four years. We granted the options at an exercise price equal
to the fair market value of our common stock, as determined by our board of
directors on the date of grant. The options generally expire on the earlier of
ten years from the date of grant or
54
<PAGE>
three months after termination of employment. The percentage numbers are based
on an aggregate of 1,068,500 options granted to our employees during fiscal
1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF PERCENTAGE OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES PRICE EXPIRATION --------------------------
NAME GRANTED IN 1998 PER SHARE DATE 5% 10%
- ----------------------------------- ----------- ----------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
David D. Lee....................... -- -- -- -- -- --
Scott A. Macomber.................. -- -- -- -- -- --
Scott Slinker...................... -- -- -- -- -- --
Jalil Shaikh....................... 60,000 5.6% $ 0.35 10/21/08 $ 858,603 $ 1,379,621
Victor Da Costa.................... 100,000 9.4% 0.35 10/21/08 1,431,005 2,299,368
Brian Underwood.................... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Potential realizable values are computed by (a) multiplying the number of
shares of common stock subject to a given option by the assumed initial
public offering price of $9.00 per share, (b) assuming that the aggregate
stock value derived from that calculation compounds at the annual 5% or 10%
rates shown in the table for the entire ten year term of the option, and
(c) subtracting from that result the aggregate option exercise price. The
5% and 10% assumed annual rates of compounded stock price appreciation in
the table above are required by the rules of the Securities and Exchange
Commission and do not represent our estimates or projections of our future
stock prices.
In addition, two of our officers joined us in 1998 and therefore were not
included in the tables relating to summary compensation and option grants in
1998. Mr. Atler, our Vice President, Finance and Administration and Chief
Financial Officer, is compensated at an annual rate of $162,751 and was granted
options to purchase 170,000 shares at an exercise price of $0.25 per share in
1998. Mr. Atler's options represented 15.9% of the total options granted to
employees in 1998. Mr. Khodi, our Vice President, Worldwide Sales, is
compensated at an annual rate of $143,838 and earned commissions and bonuses
totaling $25,229 in 1998. Mr. Khodi was granted options to purchase 60,000
shares at $0.25 per share and 60,000 shares at $0.35 per share in 1998, which
represented an aggregate of 11.2% of the total options granted to employees in
1998. The options granted to Mr. Atler and Mr. Khodi were immediately
exercisable. Upon termination of the optionee's employment, we have a right to
repurchase the shares issued upon exercise of these options. Our right to
repurchase the shares lapses over a four-year period.
FISCAL YEAR END OPTION VALUES
The following table provides information about stock option exercises by
each of the executive officers named in the Summary Compensation Table above
that exercised options in 1998. It also provides information about unexercised
options held by these officers at the end of 1998. We have a
55
<PAGE>
right to repurchase the shares issued upon exercise of these options upon
termination of the optionee's employment. Our right to repurchase the shares
lapses over a four-year period.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE END(#) FISCAL YEAR END($)(2)
ON EXERCISE REALIZED ---------------------------- ---------------------------
NAME (#)(1) ($)(2) EXERCISABLE(3) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- --------------- ------------ ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
David D. Lee........... -- $ -- -- -- $ -- --
Scott A. Macomber...... 100,000 887,500 100,000 -- 887,500 --
Scott Slinker.......... -- -- 108,750 -- 967,969 --
Jalil Shaikh........... 81,000 718,875 133,000 -- 1,166,875 --
Victor Da Costa........ 140,000 1,253,000 120,000 -- 1,042,500 --
Brian Underwood........ -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Of these shares, the following numbers were vested as of December 31, 1998:
Scott A. Macomber--80,000 shares, Jalil Shaikh--81,000 shares; Victor Da
Costa--96,250.
(2) The amount set forth represents the difference between the fair market value
of the underlying common stock at December 31, 1998 (using an assumed
initial public offering price of $9.00 per share as the fair market value)
and the exercise price of the option.
(3) Of the shares issuable upon exercise of these options, the following numbers
were vested as of December 31, 1998: Scott A. Macomber--no shares, Scott
Slinker--108,750 shares, Jalil Shaikh-- no shares, Victor Da Costa--5,000
shares.
EMPLOYEE BENEFIT PLANS
1995 EQUITY INCENTIVE PLAN
Our 1995 Equity Incentive Plan was adopted by our board of directors in
September 1995. As of June 30, 1999, there were outstanding options to purchase
a total of 1,098,963 shares of common stock under this plan, and 1,439,000
shares remained available for future grants of options under this plan. This
plan will terminate immediately prior to this offering and no further options
will be granted. However, the termination of this plan will not affect any
outstanding options, which will remain outstanding until they are exercised,
terminate or expire.
1999 EQUITY INCENTIVE PLAN
Our 1999 Equity Incentive Plan will become effective on the date of this
prospectus and will serve as the successor to our 1995 Equity Incentive Plan. We
have reserved 1,000,000 shares of common stock for issuance under this plan. The
number of shares reserved for issuance under this plan will be increased to
include:
- any shares reserved under our 1995 Equity Incentive Plan not issued or
subject to outstanding grants on the date of this prospectus;
- any shares issued under our 1995 Equity Incentive Plan that are
repurchased by us at the original purchase price; and
- any shares issuable upon exercise of options granted under our 1995 Equity
Incentive Plan that expire or become unexercisable without having been
exercised in full.
The number of shares reserved under this plan will be increased
automatically on January 1 of each year by an amount equal to 5% of our total
outstanding shares as of the immediately preceding December 31. Our board of
directors or compensation committee may reduce the amount of the
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<PAGE>
increase in any particular year. The following shares will be available for
grant and issuance under our 1999 Equity Incentive Plan:
- shares issuable upon exercise of an option granted under this plan that is
terminated or cancelled before the option is exercised;
- shares issued upon exercise of an option granted under this plan that are
subsequently repurchased by us at the original purchase price;
- shares subject to awards granted under this plan that are subsequently
forfeited or repurchased by us at the original issue price; and
- shares subject to stock bonuses granted under this plan that otherwise
terminate without shares being issued.
Our 1999 Equity Incentive Plan will terminate in 2009, unless sooner
terminated in accordance with the terms of the plan. Our 1999 Equity Incentive
Plan authorizes the award of options, restricted stock awards and stock bonuses.
No person will be eligible to receive more than 500,000 shares in any calendar
year under this plan (750,000 in the case of new employees). This plan is
administered by the compensation committee of our board of directors, which
currently consists of Mr. Chang, Mr. Rappaport and Mr. Schmidt, all of whom are
"outside directors" as defined under applicable federal tax laws. The committee
has the authority to interpret this plan and any agreement made under the plan,
grant awards and make all other determinations for the administration of this
plan. Our 1999 Equity Incentive Plan provides for the grant of both incentive
stock options that qualify under Section 422 of the Internal Revenue Code, and
nonqualified stock options. Incentive stock options may be granted only to
employees. Nonqualified stock options, and all other awards other than incentive
stock options, may be granted to employees, officers, directors, consultants,
independent contractors and advisors of Silicon Image or subsidiary of Silicon
Image. However, consultants, independent contractors and advisors are only
eligible to receive awards if they render bona fide services not in connection
with the offer and sale of securities in a capital-raising transaction. The
exercise price of incentive stock options must be at least equal to the fair
market value of our common stock on the date of grant. The exercise price of
incentive stock options granted to 10% stockholders must be at least equal to
110% of that value. The exercise price of nonqualified stock options must be at
least equal to 85% of the fair market value of the our common stock on the date
of grant. The maximum term of options granted under our 1999 Equity Incentive
Plan is ten years. Awards granted under this plan may not be transferred in any
manner other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of the optionee only by the optionee. The
compensation committee may allow exceptions to this restriction with respect to
awards that are not incentive stock options. Options granted under our 1999
Equity Incentive Plan generally expire three months after the termination of the
optionee's service to Silicon Image or a parent or subsidiary of Silicon Image.
In the event of a "change in control" of Silicon Image, if the successor does
not assume the options, they will expire upon conditions determined by the
compensation committee. Alternatively, the compensation committee may accelerate
the vesting of awards upon a change in control of Silicon Image.
1999 EMPLOYEE STOCK PURCHASE PLAN
Our 1999 Employee Stock Purchase Plan will become effective on the first day
on which price quotations are available for our common stock on the Nasdaq
National Market. We have initially reserved 250,000 shares of common stock for
issuance under this plan. The number of shares reserved for issuance under our
1999 Employee Stock Purchase Plan will be increased automatically on January 1
of each year by an amount equal to 1% of our total outstanding shares as of the
immediately preceding December 31. Our board of directors or compensation
committee may reduce the amount of the increase in any particular year. Our
compensation committee will administer our 1999 Employee Stock Purchase Plan.
Employees generally will be eligible to participate in our 1999 Employee Stock
57
<PAGE>
Purchase Plan if they are employed by Silicon Image, or any subsidiaries that
Silicon Image designates, for more than 20 hours per week and more than five
months in a calendar year. Employees are not eligible to participate in our 1999
Employee Stock Purchase Plan if they are 5% stockholders, or would become 5%
stockholders as a result of their participation in this plan. Under our 1999
Employee Stock Purchase Plan, eligible employees may acquire shares of our
common stock through payroll deductions. Eligible employees may select a rate of
payroll deduction between 1% and 15% of their cash compensation and are subject
to certain maximum purchase limitations. Participation in this plan will end
automatically upon termination of employment for any reason. A participant will
not be able to purchase shares having a fair market value of more than $25,000,
determined as of the first day of the applicable offering period, for each
calendar year in which the employee participates in this plan. Each offering
period under this plan will be for two years and will consist of four six-month
purchase periods. The first offering period is expected to begin on the first
business day on which price quotations for our common stock are available on the
Nasdaq National Market. The first purchase period may be more or less than six
months long. Offering periods thereafter will begin on February 1 and August 1.
The purchase price for common stock purchased under this plan will be 85% of the
lesser of the fair market value of our common stock on the first day of the
applicable offering period or the last day of each purchase period. The
compensation committee will have the power to change the duration of offering
periods. Our 1999 Employee Stock Purchase Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code.
This plan will terminate in 2009, unless it is terminated earlier pursuant to
its terms.
401(K) PLAN
We sponsor a defined contribution plan intended to qualify under Section 401
of the Internal Revenue Code. Participants may make pre-tax contributions to the
plan of up to 20% of their eligible earnings, subject to a statutorily
prescribed annual limit. Participants are fully vested in their contributions
and the investment earnings. We may make matching contributions on a
discretionary basis to the 401(k) plan, but have not done so in the past.
Contributions by the participants or us to the 401(k) plan, and the income
earned on such contributions, are generally not taxable to the participants
until withdrawn. Our matching contributions, if any, are generally deductible by
us when made. Contributions are held in trust as required by law. Individual
participants may direct the trustee to invest their accounts in authorized
investment alternatives.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Our certificate of incorporation includes a provision that eliminates the
personal liability of a director for monetary damages resulting from breach of
his fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to Silicon Image or its
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
Our bylaws provide that:
- we are required to indemnify our directors and officers to the fullest
extent permitted by the Delaware General Corporation Law, subject to
limited exceptions where indemnification is not permitted by applicable
law;
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<PAGE>
- we are required to advance expenses, as incurred, to our directors and
executive officers in connection with a legal proceeding to the fullest
extent permitted by the Delaware General Corporation Law, subject to
certain limited exceptions; and
- the rights conferred in the bylaws are not exclusive.
In addition to the indemnification required in our certificate of
incorporation and bylaws, before the completion of this offering, we intend to
enter into indemnity agreements with each of our current directors and officers.
These agreements provide for the indemnification of our officers and directors
for all expenses and liabilities incurred in connection with any action or
proceeding brought against them by reason of the fact that they are or were
agents of Silicon Image. We also intend to obtain directors' and officers'
insurance to cover our directors, officers and some of our employees for
liabilities, including liabilities under securities laws. We believe that these
indemnification provisions and agreements and this insurance are necessary to
attract and retain qualified directors and officers.
The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. They
may also reduce the likelihood of derivative litigation against directors and
officers, even though an action, if successful, might benefit us and other
stockholders. Furthermore, a stockholder's investment may be adversely affected
to the extent we pay the costs of settlement and damage awards against directors
and officers as required by these indemnification provisions. At present, there
is no pending litigation or proceeding involving any of our directors, officers
or employees regarding which indemnification by Silicon Image is sought, nor are
we aware of any threatened litigation that may result in claims for
indemnification.
59
<PAGE>
CERTAIN TRANSACTIONS
Since we were incorporated in January 1995, there has not been, nor is there
currently proposed, any transaction or series of similar transactions to which
Silicon Image was or is to be a party in which the amount involved exceeds
$60,000 and in which any director, executive officer or holder of more than 5%
of our common stock had or will have a direct or indirect interest, other than
compensation arrangements, which are described where required under
"Management," and the transactions described below.
FORMATION OF SILICON IMAGE. In connection with the formation of Silicon
Image, we issued and repurchased shares of common stock as set forth in the
following table.
<TABLE>
<CAPTION>
DATE OF NUMBER OF NUMBER OF
PURCHASE OR SHARES SHARES PRICE PER
NAME REPURCHASE PURCHASED REPURCHASED SHARE
- --------------------------------------------------------------- ----------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
David Lee...................................................... 01/01/95 1,735,000 $ 0.0005
03/01/95 800,000 0.0005
10/02/95 335,000* 0.0005
Deog-Kyoon Jeong............................................... 01/01/95 640,000 0.0005
09/05/95 360,000 0.0150
Brian Underwood................................................ 01/01/95 800,000 0.0005
09/05/95 400,000 0.0150
</TABLE>
- ------------------------
* We repurchased shares from Dr. Lee in the course of negotiating the terms of
our Series A preferred stock financing.
All shares were subject to our right of repurchase, which expired in quarterly
increments over a four-year period. This repurchase right has now expired with
respect to all of the shares described above.
RELATIONSHIP WITH DR. JEONG. Effective in May 1995, we entered into a
license agreement with Dr. Jeong, a founder of Silicon Image and our Chief
Technical Adviser, pursuant to which Dr. Jeong granted us a royalty-bearing
license to serial link technology. Dr. Jeong released Silicon Image from the
obligation to pay further royalties as part of the amendment of his consulting
agreement in 1999. At that time, we had paid Dr. Jeong royalties totaling less
than $50,000.
Dr. Jeong has been a consultant to Silicon Image continuously since October
1995, and has managed advanced research and development projects on our behalf.
We paid Dr. Jeong $77,000 for his services in fiscal 1998, and we paid him
$48,000 for his services in the six month period ended June 30, 1999. In
addition, since February 1996, we have entered into four research and
development agreements with the Inter-University Semiconductor Research Center
of Seoul National University for research projects relating to advanced
interconnect technologies. Dr. Jeong is an associate professor of the School of
Electrical Engineering at Seoul National University and is named as the primary
technical and faculty contact under each of these four contracts. We paid the
Inter-University Semiconductor Research Center of Seoul National University a
total of $60,000 under these agreements in fiscal 1998, and we paid it $80,000
for the six months ended June 30, 1999. See "Business--Research and
Development."
PREFERRED STOCK. Since our inception in January 1995, we have issued shares
of preferred stock in private placement transactions as described below. Share
numbers and per share prices for the transactions described below are adjusted
for a change in the conversion ratio of the Series A preferred stock and Series
B preferred stock caused by the issuance of the Series C Preferred Stock.
- 3,130,000 shares of Series A preferred stock at $0.50 per share from
October 1995 to March 1996.
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<PAGE>
- 932,203 shares of Series B preferred stock at $2.36 per share in September
1996.
- 4,000,000 shares of Series C preferred stock at $1.25 per share in June
1997.
- 3,594,859 shares of Series D preferred stock at $3.50 per share from July
1998 to September 1998.
The investors who negotiated the terms of these transactions were not affiliated
with Silicon Image prior to purchasing the shares. The following table
summarizes the shares of preferred stock purchased by each of the executive
officers named in the Summary Compensation Table above and by directors,
principal stockholders and entities associated with them in the foregoing
private placement transactions:
<TABLE>
<CAPTION>
SHARES OF SHARES OF SHARES OF
SERIES A SERIES C SERIES D
PREFERRED PREFERRED PREFERRED
INVESTOR STOCK STOCK STOCK
- --------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Entities Affiliated with August Capital, L.P
(Andrew Rappaport)....................................................... -- 3,200,000 1,428,572
Entities Affiliated with InveStar Capital
(Herbert Chang).......................................................... -- -- 857,143
David A. Hodges............................................................ -- 15,000 --
Sang-Chul Han.............................................................. 1,777,850 365,975 --
Ronald Schmidt............................................................. -- 46,068 10,000
Intel Corporation.......................................................... -- -- 857,143
</TABLE>
Shares held by all affiliated persons and entities have been aggregated.
In connection with our issuances of preferred stock, we have entered into an
investors rights agreement granting the holders of the preferred stock
registration rights with respect to the common stock issuable upon conversion of
their preferred stock. Their registration rights are described in more detail
under "Description of Capital Stock--Registration Rights." In addition, we
agreed in the investors rights agreement to provide the investors with periodic
financial information, and granted the investors a right of first refusal on
future issuances by us of equity securities. The right to receive this financial
information and the right of first refusal terminate immediate prior to the
closing of this offering.
RESTRICTED STOCK. The following officers and a key consultant purchased
shares of our common stock in exchange for full recourse promissory notes issued
to us. Except as otherwise noted below, we have a right to repurchase these
shares, which right lapses over a four-year period with respect to 25% of the
shares after one year and 2.0833% each month thereafter. The full principal
amount and accrued interest under each promissory note remain outstanding. The
terms of the restricted stock purchases are summarized below:
<TABLE>
<CAPTION>
PRINCIPAL
DATE OF NUMBER OF PRICE PER AMOUNT OF INTEREST
NAME PURCHASE SHARES SHARE NOTE DATE DUE RATE
- ----------------------------------- ------------------- ----------- ----------- ----------- ------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Daniel K. Atler.................... June 1, 1999 60,000 $ 1.00 $ 60,000 June 1, 2004 5.30%
Deog-Kyoon Jeong................... March 29, 1999 150,000 0.35 52,500 March 29, 2004 4.77
Parviz Khodi....................... June 1, 1999 60,000 1.00 60,000 June 1, 2004 5.30
June 1, 1999 20,000* 1.00 20,000 June 1, 2004 5.30
David Lee.......................... January 29, 1999 150,000 0.35 52,500 January 29, 2004 4.64
Scott Macomber..................... January 29, 1999 250,000 0.35 87,500 January 29, 2004 4.64
Jalil Shaikh....................... June 15, 1999 30,000 1.25 37,500 June 15, 2004 5.30
Steve Tirado....................... June 21, 1999 470,175 2.00 940,350 June 21, 2004 5.30
</TABLE>
- ------------------------
* Indicates shares not subject to a right of repurchase on behalf of Silicon
Image.
61
<PAGE>
TRANSACTIONS WITH INTEL AND ITS SUBSIDIARY, CHIPS AND TECHNOLOGIES. Our
relationship with Intel and its subsidiary, Chips and Technologies, is set forth
in the following agreements:
- In September 1998, we entered into a Business Cooperation Agreement with
Intel. Under this agreement, we worked with Intel to develop and promote
adoption by the personal computer industry of a complete digital display
interface specification based on our existing technology and an advanced
specification based an enhanced version of our technology. The Business
Cooperation Agreement was amended in October 1998 to provide that it would
conform to other agreements that Intel and Silicon Image expected to enter
into with other parties to advance the same goals.
- In January 1999, Silicon Image entered into a Promoter's Agreement with
Intel, Compaq Computer Corporation, Fujitsu Limited, Hewlett-Packard
Company, International Business Machines Corporation, and NEC Corporation.
The parties to this agreement formed the Digital Display Working Group.
They agreed:
- To define, establish and support a digital visual interface
specification for integrating digital display devices in a computer
system environment;
- To encourage broad and open industry adoption of the DVI
specification, in part by creating an implementer's forum that others
may join in order to receive information and support relating to the
DVI specification;
- To invite third parties to enter into a Participant's Agreement in
order to consult on the content, feasibility and other aspects or the
DVI specification;
- To grant to one another, and to any other adopter who agrees in turn
to grant to the promoters and all other adopters, a nonexclusive,
nontransferable, royalty-free, nonsublicenseable, worldwide,
perpetual, irrevocable, reciprocal license under the claims of all
patents filed prior to January 1, 2003 which are necessarily infringed
to comply with that specification or for which infringement is based
on an implementation of any example included in the body of that
specification. Such license will convey the rights to make, have made,
use, import and directly and indirectly, offer to sell, lease, sell,
promote and otherwise distribute portions of products that are fully
compliant with that specification.
- In September 1998, Intel acquired the following equity securities of
Silicon Image in addition to the 857,143 shares of our Series D preferred
stock described above under the heading "-- Preferred Stock":
- a warrant to purchase 142,857 shares of our common stock at a purchase
price of $3.50 per share that expires in September 2004;
- a warrant to purchase 142,857 shares of our common stock at a purchase
price of $0.35 per share. This warrant became exercisable on March 31,
1999 and expires in September 2004;
- an agreement that Silicon Image will issue an additional warrant to
purchase 142,857 shares of our common stock at a purchase price of
$0.35 per share when and if Intel ships for revenue a product
supporting an enhanced version of our digital display interface
technology, provided that this takes place by September 2004.
- In September 1998 we entered into a Patent License Agreement with Intel
pursuant to which:
- Silicon Image granted Intel a non-exclusive, nontransferable,
worldwide license, without right to sublicense, to make, have made,
use, import and directly or indirectly sell, offer
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<PAGE>
to sell and otherwise dispose of, Intel products with specific
exclusions related to Silicon Image's current products, anticipated
future products, and network devices;
- Intel granted Silicon Image a non-exclusive, nontransferable,
worldwide license, without right to sublicense, to make, have made,
use, import, and directly or indirectly sell, offer to sell and
otherwise dispose of, identified types of Silicon Image products with
specific exclusions related to Intel's current products, anticipated
future products, and network devices.
- In December, 1997, Silicon Image entered into a Transmitter Core License
and Product Distribution Agreement with Chips and Technologies. Intel
subsequently acquired Chips and Technologies. Chips and Technologies has
not exercised its right under this agreement to develop and sell a chip
that integrates our transmitter technology with its graphics
functionality. This agreement terminates in December 2002. Mr. Khodi, our
Vice President of Sales, was employed by Chips and Technologies when we
negotiated this agreement. Mr. Khodi did not, however, participate in
these negotiations.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock as of June 30, 1999 and as adjusted to reflect the
sale of the common stock in this offering, by:
- each stockholder known by us to be the beneficial owner of more than 5% of
our common stock;
- each of our directors;
- each executive officer listed in the Summary Compensation Table; and
- all current executive officers and directors as a group.
The percentage of beneficial ownership for the following table is based on
21,120,274 shares of common stock outstanding as of June 30, 1999, assuming
conversion of all outstanding shares of preferred stock into common stock, and
25,020,274 shares of common stock outstanding after the completion of this
offering.
Unless otherwise indicated, the address for each listed stockholder is: c/o
Silicon Image, Inc., 10131 Bubb Road, Cupertino, California 95014. To our
knowledge, except as indicated in the footnotes to this table and under
applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common stock.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
NUMBER OF SHARES SHARES BENEFICIALLY OWNED
BENEFICIALLY ----------------------------------
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING AFTER OFFERING
- --------------------------------------------------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
Directors and Executive Officers:
Andrew Rappaport(1)............................................ 4,776,097 22.6% 19.1%
Sang-Chul Han(2)............................................... 2,143,825 10.2 8.6
David Lee(3)................................................... 2,108,000 10.0 8.4
Herbert Chang(4)............................................... 1,056,144 5.0 4.2
Brian Underwood................................................ 1,000,000 4.7 4.0
Scott A. Macomber(5)........................................... 900,000 4.3 3.6
Victor M. Da Costa............................................. 260,000 1.2 1.0
Jalil Shaikh................................................... 244,000 1.2 1.0
Scott Slinker.................................................. 108,750 * *
David A. Hodges................................................ 95,000 * *
Ronald V. Schmidt.............................................. 136,068 * *
All directors and executive officers as a group (11 persons)... 12,149,134 57.0 48.2
Other 5% Stockholders:
Entities affiliated with August Capital, L.P.(1)............... 4,776,097 22.6 19.1
Intel Corporation(6)........................................... 1,142,857 5.3 4.5
Deog-Kyoon Jeong............................................... 1,130,000 5.4 4.5
Entities affiliated with InveStar Capital, Inc.(4)............. 1,056,144 5.0 4.2
</TABLE>
- ------------------------
* Less than 1%.
(1) Andrew Rappaport is a member of August Capital Management LLC, which is a
general partner of each of August Capital, L.P., August Capital Strategic
Partners, L.P. and August Capital Associates, L.P. Mr. Rappaport shares
voting power with respect to the shares held by these entities with Mr.
David Marquardt and Mr. John Johnston. Mr. Rappaport disclaims beneficial
ownership of shares held by these entities except to the extent of his
pecuniary interest in these entities. The address of Mr. Rappaport and
August Capital is 2480 Sand Hill Road, Suite 101, Menlo Park, CA 94025.
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(2) Mr. Han's address is c/o Young Jin Lee, 1115 Huntington Drive, Unit G,
South Pasadena, CA 91030.
(3) Includes 300,000 shares held by David Lee as custodian for his minor
children.
(4) Represents 199,001 shares held by InveStar Dayspring Venture Capital, Inc.,
428,572 shares held by InveStar Semiconductor Development Fund, 285,714
shares held by InveStar Excelsus Venture Capital (Int'l), Inc. and 142,857
shares held by Forefront Venture Partners, L.P. Herbert Chang is the
President of InveStar Capital, Inc., which is the investment manager of
each of InveStar Dayspring Venture Capital, Inc., InveStar Semiconductor
Development Fund and InveStar Excelsus Venture Capital (Int'l), Inc. Mr.
Chang is also the managing member of Forefront Associates LLC, which is the
general partner of Forefront Venture Partners, L.P. Mr. Chang disclaims
beneficial ownership of shares held by these entities except to the extent
of his pecuniary interest in these entities. Mr. Chang's address is Room
1201, TWTC Int'l Trade Building 12F, 333 Keelung Road, Section 1, Taipei,
Taiwan.
(5) Excludes 100,000 shares held in trust by George R. Macomber for the benefit
of Scott Macomber's minor children.
(6) Includes 285,714 shares subject to a warrant exercisable on or before
August 29, 1999. Excludes a warrant for 142,857 shares of common stock
exercisable at $0.35 per share that Silicon Image is obligated to issue to
Intel upon satisfaction of a milestone. Intel's address is 2200 Mission
College Boulevard, Santa Clara, CA 95052.
The shares included in the preceding table as beneficially owned by some of
our executive officers and directors include outstanding shares that we have the
right to repurchase upon termination of their employment or status as a director
or consultant. This repurchase right entitles us to repurchase the shares at a
price equal to the initial purchase price paid by the stockholder for the
shares. Our repurchase right lapses over a four-year period, beginning on the
date that the stockholder begins rendering services to Silicon Image or, if the
stockholder already is rendering services, beginning on the date we agreed to
sell the shares or granted an option to acquire the shares.
In addition, the shares included in the preceding table include shares that
are issuable under stock options or warrants that are exercisable on or before
August 29, 1999. These shares are deemed outstanding for purposes of computing
the percentage held by the person holding the options or warrants but are not
deemed outstanding for purposes of computing the percentage of any other person.
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The following table sets forth the number of shares shown in the preceding
table as beneficially owned by any person or entity that were subject to our
repurchase right as of June 30, 1999, or that were issuable under options or
warrants that were exercisable on or before August 29, 1999:
<TABLE>
<CAPTION>
OUTSTANDING SHARES HELD SHARES
SUBJECT TO REPURCHASE ISSUABLE
NAME OF BENEFICIAL OWNER RIGHTS UNDER OPTIONS
- ------------------------------------------------- -------------------------- --------------
<S> <C> <C>
David Lee........................................ 150,000 --
Brian Underwood.................................. 50,000 --
Scott Macomber................................... 438,750 --
Victor M. Da Costa............................... 26,250 120,000(1)
Jalil Shaikh..................................... 148,000 --
David A. Hodges.................................. 50,000 --
Ronald V. Schmidt................................ -- 80,000(2)
All Directors and Executive Officers as a Group 1,330,500 200,000(3)
(11 persons)...................................
Deog-Kyoon Jeong................................. 195,000 --
</TABLE>
- ------------------------
(1) 110,000 of the shares issuable to Mr. Da Costa under options that are
exercisable on or before August 29, 1999 are subject to our right of
repurchase.
(2) 50,000 of the shares issuable to Dr. Schmidt under options that are
exercisable on or before August 29, 1999 are subject to our right of
repurchase.
(3) 160,000 of the shares issuable to our directors and executive officers as a
group under options that are exercisable on or before August 29, 1999 are
subject to our right of repurchase.
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DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, our authorized capital
stock will consist of 75,000,000 shares of common stock, $0.001 par value per
share, and 5,000,000 shares of preferred stock, $0.001 par value per share. As
of June 30, 1999, and assuming the conversion of all outstanding preferred stock
into common stock, there were outstanding 21,120,274 shares of common stock held
of record by approximately 117 stockholders, of which 2,727,066 shares were
subject to our right of repurchase, options to purchase 1,149,000 shares of
common stock and warrants to purchase 317,856 shares of common stock. Before the
closing of this offering, Silicon Image will reincorporate in the State of
Delaware.
COMMON STOCK
DIVIDEND RIGHTS. Subject to preferences that may apply to shares of
preferred stock outstanding at the time, the holders of outstanding shares of
common stock are entitled to receive dividends out of assets legally available
at the times and in the amounts as our board or directors may determine.
VOTING RIGHTS. Each holder of common stock is entitled to one vote for each
share of common stock held on all matters submitted to a vote of stockholders.
Cumulative voting for the election of directors is not provided for in our
certificate of incorporation. This means that commencing at the first annual
meeting of stockholders following the date on which we shall have had at least
800 stockholders, the holders of a majority of the shares voted can elect all of
the directors then standing for election.
NO PREEMPTIVE OR SIMILAR RIGHTS. Our common stock is not entitled to
preemptive rights and is not subject to conversion or redemption.
RIGHT TO RECEIVE LIQUIDATION DISTRIBUTIONS. Upon a liquidation, dissolution
or winding-up of Silicon Image, the holders of common stock are entitled to
share ratably with holders of any participating preferred stock in all assets
remaining after payment of all liabilities and the liquidation preferences of
any outstanding preferred stock. Each outstanding share of common stock is, and
all shares of common stock to be outstanding upon completion of this offering
will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, each outstanding share of preferred stock
will be converted into shares of common stock. See Note 5 of Notes to Financial
Statements for a description of our preferred stock.
Following the offering, we will be authorized, subject to limitations
imposed by Delaware law, to issue preferred stock in one or more series, to
establish from time to time the number of shares to be included in each series,
and to fix the rights, preferences and privileges of the shares of each wholly
unissued series and any of its qualifications, limitations or restrictions. The
board of directors can also increase or decrease the number of shares of any
series, but not below the number of shares of such series then outstanding,
without any further vote or action by the stockholders. The board may authorize
the issuance of preferred stock with voting or conversion rights that could
adversely affect the voting power or other rights of the holders of the common
stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, have the effect of delaying, deferring or preventing a change in
control of Silicon Image and may adversely affect the market price of the common
stock and the voting and other rights of the holders of common stock. We have no
current plan to issue any shares of preferred stock.
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WARRANTS
In September 1998, we issued to Intel a warrant to purchase 142,857 shares
of our common stock at an exercise price of $3.50 per share. In September 1998,
we also issued to Intel a warrant to purchase 142,857 shares of our common stock
at an exercise price of $0.35 per share. Each of these warrants will remain
outstanding after the completion of this offering until September 2004 unless
sooner exercised. In addition, we are obligated to issue an additional warrant
to Intel for 142,857 shares of common stock exercisable at $0.35 per share upon
satisfaction of a milestone. This warrant will entitle Intel to purchase 142,857
shares of our common stock at an exercise price of $0.35 per share.
In February 1999, we issued a warrant to an equipment lease financing
company to purchase 32,142 shares of our Series D preferred stock with an
exercise price of $3.50 per share. This warrant is immediately exercisable and
will remain outstanding after the completion of this offering at which time it
will become exercisable for 32,142 shares of our common stock. The warrant
expires in February 2004.
REGISTRATION RIGHTS
As a result of an investors' rights agreement dated July 28, 1998 between
Silicon Image and some of our stockholders, the holders of 11,799,919 shares of
common stock will be entitled to rights with respect to the registration of
these shares under the Securities Act, as described below.
DEMAND REGISTRATION RIGHTS. At any time after 90 days following this
offering, the holders of at least 50% of the shares of common stock issuable
upon conversion of our Series C and D preferred stock can request that we
register all or a portion of their shares, so long as such registration covers
at least 20% of their shares and the total offering price of the shares to the
public is at least $5,000,000. We will only be required to file two registration
statements in response to their demand registration rights. We may postpone the
filing of a registration statement for up to 90 days once in a 12 month period
if we determine that the filing would be seriously detrimental to Silicon Image
and our stockholders.
PIGGYBACK REGISTRATION RIGHTS. If we register any securities for public
sale, the holders of the shares of common stock issuable upon conversion of our
Series A through D preferred stock will have the right to include their shares
in the registration statement. However, this right does not apply to a
registration statement relating to any of our employee benefit plans or a
corporate reorganization. The managing underwriter of any underwritten offering
will have the right to limit the number of shares registered by these holders to
25% of the total shares covered by the registration statement due to marketing
reasons.
FORM S-3 REGISTRATION RIGHTS. The holders of the shares of common stock
issuable upon conversion of our Series A through D preferred stock can request
that we register their shares if we are eligible to file a registration
statement on Form S-3 and if the total price of the shares offered to the public
is at least $500,000. These holders may only require us to file two registration
statements on Form S-3 in any 12 month period. We may postpone the filing of a
registration statement for up to 120 days once in a 12 month period if we
determine that the filing would be seriously detrimental to Silicon Image and
our stockholders.
We will pay all expenses incurred in connection with the registrations
described above, except for underwriters' and brokers' discounts and
commissions, which will be paid by the selling stockholders.
The registration rights described above will expire with respect to a
particular stockholder if it can sell all of its shares in a three month period
under Rule 144 of the Securities Act. In any event, the registration rights
described above will expire seven years after this offering is completed.
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<PAGE>
Holders of these registration rights have waived the exercise of these
registration rights for 180 days following the date of this prospectus.
ANTI-TAKEOVER PROVISIONS
The provisions of Delaware law, our certificate of incorporation and our
bylaws may have the effect of delaying, deferring or discouraging another person
from acquiring control of our company.
DELAWARE LAW
We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents some
Delaware corporations from engaging, under some circumstances, in a "business
combination," which includes a merger or sale of more than 10% of the
corporation's assets with any "interested stockholder," meaning a stockholder
who owns 15% or more of the corporation's outstanding voting stock, as well as
affiliates and associates of the stockholder, for three years following the date
that the stockholder became an "interested stockholder" unless:
- the transaction is approved by the board of directors prior to the date
the interested stockholder attained that status;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or
- on or subsequent to such date the business combination is approved by the
board and authorized at an annual or special meeting of stockholders by at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
A Delaware corporation may opt out of this provision with an express
provision in its original certificate of incorporation or an express provision
in its certificate or incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
However, we have not opted out of this provision. The statute could prohibit or
delay mergers or other takeover or change-in-control attempts and, accordingly,
may discourage attempts to acquire us.
CHARTER AND BYLAW PROVISIONS
Our certificate of incorporation and bylaws provide that:
- following the completion of this offering, no action shall be taken by
stockholders except at an annual or special meeting of the stockholders
called in accordance with our bylaws and that stockholders may not act by
written consent;
- following the completion of this offering, the approval of two-thirds of
the stockholders shall be required to adopt, amend or repeal our bylaws;
stockholders may not call special meetings of the stockholders or fill
vacancies on the board;
- commencing at the first annual meeting of stockholders following the date
on which we shall have had at least 800 stockholders, our board of
directors will be divided into three classes, each serving staggered
three-year terms, which means that only one class of directors will be
elected at each annual meeting of stockholders, with the other classes
continuing for the remainder of their respective terms, and directors may
only be removed for cause (we do not expect to have 800 stockholders as a
result of this offering, and we may not have this many shareholders for
some time, if at all); and
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<PAGE>
- we will indemnify officers and directors against losses that they may
incur in investigations and legal proceedings resulting from their
services to us, which may include services in connection with takeover
defense measures.
These provisions of our certificate of incorporation and bylaws may have the
effect of delaying, deferring or discouraging another person from acquiring
control of our company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
LISTING
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the trading symbol "SIMG."
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no public market for our common stock.
A significant public market for our common stock may not develop or be sustained
after this offering. Future sales of substantial amounts of our common stock in
the public market, or the possibility of these sales occurring, could adversely
affect prevailing market prices for our common stock or our future ability to
raise capital through an offering of equity securities.
Upon completion of this offering, we will have 25,020,274 shares of common
stock outstanding, assuming no exercise of options and warrants outstanding as
of June 30, 1999, and the conversion of all outstanding shares of preferred
stock. Of these shares, 3,900,000 shares sold in this offering (4,485,000 if the
underwriters' over-allotment option is exercised in full) will be freely
tradable in the public market without restriction or registration under the
Securities Act, unless the shares are held by "affiliates" of Silicon Image, as
that term is defined in Rule 144 under the Securities Act.
The remaining 21,120,274 shares of common stock outstanding upon completion
of this offering will be "restricted securities" as defined in Rule 144. We
issued and sold these restricted securities in private transactions in reliance
on exemptions from registration under the Securities Act. Restricted securities
may be sold in the public market only if they are registered or if they qualify
for an exemption from registration under Rule 144 or Rule 701 under the
Securities Act, as summarized below.
Pursuant to "lock-up" agreements, all the executive officers, directors and
stockholders of Silicon Image, who collectively hold an aggregate of 21,120,274
of these restricted securities, have agreed not to offer, sell, contract to
sell, grant any option to purchase or otherwise dispose of any of these shares
for a period of 180 days from the date of this prospectus, subject to limited
exceptions. However, Credit Suisse First Boston Corporation may in its sole
discretion, at any time without notice, release all or any portion of the shares
subject to lock-up agreements.
Taking into account the lock-up agreements, and assuming Credit Suisse First
Boston does not release stockholders from these agreements, the following shares
will be eligible for sale in the public market at the following times:
- On the date of this prospectus, the 3,900,000 shares sold in the offering
will be immediately available for sale in the public market.
- 180 days after the effective date, approximately 19,236,716 shares will be
eligible for sale, of which 13,934,438 will be subject to volume, manner
of sale and other limitations under Rule 144.
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- Of the remaining shares, 1,863,558 will be eligible for sale under Rule
701 or Rule 144 upon expiration of our repurchase right with respect to
those shares, and 20,000 will be eligible for sale under Rule 144 upon the
expiration of the one-year holding period.
Following the expiration of the lock-up period, shares issued upon exercise
of options we granted prior to the date of this prospectus will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act. Rule 701 permits resales of these shares beginning 90 days after
the date of this prospectus. In general, under Rule 144, after expiration of the
lock-up period, a person who has beneficially owned restricted securities for at
least one year would be entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of:
- 1% of the then-outstanding shares of common stock, or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to manner of sale and notice
requirements and the availability of current public information about Silicon
Image. Under Rule 144(k), a person who has not been our affiliate at any time
during the three months before a sale and who has beneficially owned the shares
proposed to be sold for at least two years can sell these shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
After the effective date of this offering, we intend to file a registration
statement on Form S-8 to register approximately 4,978,138 shares of common stock
outstanding or reserved for issuance under the 1995 Equity Incentive Plan, the
1999 Equity Incentive Plan, the 1999 Employee Stock Purchase Plan and written
compensation contracts with our officers and key employees. The registration
statement will become effective automatically upon filing. Shares issued under
the foregoing employee benefit plans, after the filing of a registration
statement on Form S-8, may be sold in the open market, subject, in the case of
some holders, to the Rule 144 limitations applicable to affiliates, the lock-up
agreements and repurchase right held by us.
In addition, following this offering, the holders of 11,799,919 shares of
outstanding common stock will, under some circumstances, have right to require
us to register their shares for future sale. See "Description of Capital
Stock--Registration Rights."
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, BancBoston Robertson
Stephens, Inc. and Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated, are acting as representatives the following respective numbers of
shares of common stock:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ---------------------------------------------------------------------------------- ----------
<S> <C>
Credit Suisse First Boston Corporation............................................
BancBoston Robertson Stephens, Inc................................................
Dain Rauscher Wessels.............................................................
Total.........................................................................
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering price less the
underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------------------ ------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and commissions paid by $ $ $ $
us..............................................
Expenses payable by us............................ $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, our executive officers and directors, and existing holders of our
securities which holders own or have the right to acquire more than 1% of our
outstanding shares of common stock have agreed that we will not offer, sell,
contract to sell, announce our intention to sell, pledge or otherwise dispose
of, directly or indirectly, or file with the Securities and Exchange Commission
a registration statement under the Securities Act relating to, any shares of our
common stock or securities convertible into or exchangeable or exercisable for
any of our common stock without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the date of this prospectus,
except in our case issuances pursuant to the exercise of employee stock options
outstanding on the date hereof.
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The underwriters have reserved for sale, at the initial offering price, up
to shares of common stock for employees, directors and other persons
associated with us who have expressed an interest in purchasing common stock in
the offering. The number of shares available for sale to the general public in
this offering will be reduced to the extent these persons purchase the reserved
shares. Any reserved shares not so purchased will be offered by the underwriters
to the general public on the same terms as the other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
We have made application to list the shares of common stock on The Nasdaq
Stock Market's National Market under the symbol "SIMG".
Prior to the offering, there has been no public market for the common stock.
The initial public offering price for the common stock will be determined by
negotiation between us and the representatives, and may not reflect the market
price for the common stock following this offering. Among the principal factors
considered in determining the initial public offering price of our common stock
will be:
- the information in this prospectus and otherwise available to the
representatives;
- market conditions for initial public offerings;
- the history of and prospects for the industry in which we will compete;
- the ability of our management;
- our prospects for future earnings, the present state of our development
and our current financial condition;
- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies;
- the general condition of the securities markets at the time of this
offering and other relevant factors.
We can offer no assurances that the initial public offering price will
correspond to the price at which common stock will trade in the public market
following this offering or that an active trading market for the common stock
will develop and continue after this offering.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act.
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit
bids to purchase shares of the common stock so long as the stabilizing
bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a syndicate covering transaction to cover
syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions. These transactions may be effected on The
Nasdaq Stock Market's National Market or otherwise and, if commenced, may be
discontinued at any time.
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NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) the purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under the securities laws, (ii) where required
by law, that the purchaser is purchasing as principal and not as agent, and
(iii) the purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U. S. federal securities.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or these persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the SECURITIES ACT (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult with their own legal and
tax advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
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LEGAL MATTERS
Fenwick & West LLP, Palo Alto, California, will pass upon the validity of
the issuance of the shares of common stock offered by this prospectus for
Silicon Image. Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California, will pass upon certain legal matters in connection with this
offering for the underwriters. An entity affiliated with Fenwick & West LLP
holds 14,286 shares of our common stock.
EXPERTS
The financial statements as of December 31, 1998 and 1999 and June 30, 1999
and for each of the three years in the period ended December 31, 1998 and six
month period ended June 30, 1999 have been so included in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered hereby. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits and schedules to the
registration statement. For further information with respect to Silicon Image
and our common stock, we refer you to the registration statement and the
exhibits and schedules filed as a part of the registration statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document referred to are not necessarily complete; we refer you to the
copy of each contract or document filed as an exhibit to the registration
statement. Each such statement is qualified in all respects by reference to that
exhibit. The registration statement, including exhibits and schedules, may be
inspected without charge at the public reference facilities maintained by the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the SEC located at Seven World Trade Center, 13th Floor, New York, NY
10048, and the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies may be obtained from the SEC upon payment of
fees prescribed by the SEC. Information on the operation of the public reference
room may be obtained by calling the SEC at 1-800-SEC-0330. These reports and
other information may also be inspected without charge at a Web site maintained
by the SEC at http://www.sec.gov.
75
<PAGE>
SILICON IMAGE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Balance Sheets as of December 31, 1997 and 1998 and June 30, 1999.......................................... F-3
Statements of Operations for the year ended December 31, 1996, 1997 and 1998 and the six months ended June
30, 1998 (unaudited) and 1999............................................................................ F-4
Statements of Stockholders' Equity for the year ended December 31, 1996, 1997 and 1998 and the six months
ended June 30, 1999...................................................................................... F-5
Statements of Cash Flows for the year ended December 31, 1996, 1997 and 1998 and the six months ended June
30, 1998 (unaudited) and 1999............................................................................ F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Silicon Image, Inc.
The reincorporation described in Note 11 to the financial statements has not
been consummated at June 30, 1999. When it has been consummated, we will be in a
position to furnish the following report:
"In our opinion, the accompanying balance sheets and the related
statements of operations, of stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Silicon Image,
Inc., at December 31, 1997 and 1998, and June 30, 1999 and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1998 and the six month period ended June 30, 1999 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above."
PricewaterhouseCoopers LLP
San Jose, California
July 14, 1999
F-2
<PAGE>
SILICON IMANGE, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- ---------
1997 1998 1999
--------- --------- --------- PRO FORMA
STOCKHOLDER'S
EQUITY AT
JUNE 30,
1999
------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................................... $ 2,773 $ 10,096 $ 10,686
Short-term investments......................................... -- 1,401 1,961
Accounts receivable............................................ 287 1,518 1,581
Inventory...................................................... 129 301 356
Prepaid expenses and other current assets...................... 119 259 245
--------- --------- ---------
Total current assets......................................... 3,308 13,575 14,829
Property and equipment, net...................................... 793 1,125 1,003
Other assets..................................................... 270 74 182
--------- --------- ---------
Total assets................................................. $ 4,371 $ 14,774 $ 16,014
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit................................................. $ 372 $ 757 $ 757
Accounts payable............................................... 626 882 1,272
Accrued liabilities............................................ 181 1,154 1,412
Capital lease obligations, current............................. 17 218 489
Deferred revenue............................................... 582 1,121 155
Deferred margin on sales to distributors....................... -- 490 2,004
--------- --------- ---------
Total current liabilities.................................... 1,778 4,622 6,089
Capital lease obligations, long-term............................. -- 300 773
--------- --------- ---------
Total liabilities................................................ 1,778 4,922 6,862
--------- --------- ---------
Commitments and contingencies (Note 6 and 8)
Stockholders' Equity:
Convertible preferred stock, $0.001 par value; 6,065,000,
10,065,000, and 10,065,000 shares authorized; 5,965,000
9,560,000 and 9,560,000 shares issued and outstanding;
5,000,000 shares authorized, none issued or issued or
outstanding at June 30, 1999 on a pro forma basis
(unaudited).................................................. 6 10 10 $ --
Common stock, par value $0.001; 20,000,000, 21,500,000 and
21,500,000 shares authorized; 5,661,000, 6,786,000, and
9,463,000 shares issued and outstanding; 75,000,000 shares
authorized, 21,120,000 shares issued and outstanding at June
30, 1999 on a pro forma basis (unaudited).................... 6 7 9 21
Additional paid-in capital..................................... 8,739 24,960 34,796 34,794
Notes receivable from stockholders............................. -- (96) (1,461) (1,461)
Unearned compensation.......................................... -- (2,249) (7,513) (7,513)
Accumulated deficit............................................ (6,158) (12,780) (16,689) (16,689)
--------- --------- --------- ------------
Total stockholders' equity................................... 2,593 9,852 9,152 $ 9,152
--------- --------- --------- ------------
------------
Total liabilities and stockholders' equity................... $ 4,371 $ 14,774 $ 16,014
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
SILICON IMAGE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- ----------------------
1996 1997 1998 1999
--------- --------- --------- 1998 ---------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Product revenue................................................ $ 30 $ 1,280 $ 7,703 $ 2,652 $ 7,706
Development and license revenue................................ 1,121 1,582 100 25 575
--------- --------- --------- ----------- ---------
Total revenue................................................ 1,151 2,862 7,803 2,677 8,281
--------- --------- --------- ----------- ---------
Cost and operating expenses:
Cost of product revenue........................................ 5 851 4,314 1,711 3,328
Research and development....................................... 1,307 3,176 4,524 1,956 3,060
Selling, general and administrative............................ 1,811 2,990 4,335 1,906 3,052
Stock compensation and warrant expense......................... -- -- 1,361 184 2,898
--------- --------- --------- ----------- ---------
Total operating expenses..................................... 3,123 7,017 14,534 5,757 12,338
--------- --------- --------- ----------- ---------
Loss from operations............................................. (1,972) (4,155) (6,731) (3,080) (4,057)
Interest income.................................................. 32 171 242 31 210
Interest expense and other, net.................................. (4) (52) (133) (54) (62)
--------- --------- --------- ----------- ---------
Net loss......................................................... $ (1,944) $ (4,036) $ (6,622) $ (3,103) $ (3,909)
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
Net loss per share:
Basic and diluted.............................................. $ (0.98) $ (1.14) $ (1.39) $ (0.72) $ (0.73)
Weighted average shares........................................ 1,981 3,533 4,766 4,301 5,327
Pro forma net loss per share:
Basic and diluted (unaudited).................................. $ (0.46) $ (0.23)
Weighted average shares (unaudited)............................ 14,483 16,984
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
SILICON IMAGE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE
------------------------ ------------------------ PAID-IN FROM UNEARNED
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS' COMPENSATION
----------- ----------- ----------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995........................ 985 $ 1 5,381 $ 5 $ 1,011 $ -- $ --
Issuance of Series A
Convertible Preferred Stock
in February 1996, net of
issuance costs.............. 580 1 -- -- 577 -- --
Issuance of Series B
Convertible Preferred Stock
in Sept 1996, net of
issuance costs.............. 400 -- -- -- 2,180 -- --
Common Stock issued for cash
and notes, net.............. -- -- 280 1 14 (10) --
Net loss...................... -- -- -- -- -- -- --
----- --- ----- ----------- ----------- ------------- -------
Balance at December 31,
1996........................ 1,965 2 5,661 6 3,782 (10) --
Issuance of Series C
Convertible Preferred Stock
in June 1997, net of
issuance costs.............. 4,000 4 -- -- 4,957 -- --
Repayment of note
receivable.................. -- -- -- -- -- 10 --
Net loss...................... -- -- -- -- -- -- --
----- --- ----- ----------- ----------- ------------- -------
Balance at December 31,
1997........................ 5,965 6 5,661 6 8,739 -- --
Issuance of Series D
Convertible Preferred Stock
in September 1998, net of
issuance costs.............. 3,595 4 -- -- 12,452 -- --
Common stock issued for cash
and notes................... -- -- 1,125 1 159 (96) --
Unearned compensation......... -- -- -- -- 2,972 -- (2,972)
Amortization of unearned
compensation................ -- -- -- -- -- -- 723
Expense on options to
consultants................. -- -- -- -- 292 -- --
Expense on warrants (Note
8).......................... -- -- -- -- 346 -- --
Net loss...................... -- -- -- -- -- -- --
----- --- ----- ----------- ----------- ------------- -------
Balance at December 31,
1998........................ 9,560 10 6,786 7 24,960 (96) (2,249)
Common stock issued for cash
and notes................... -- -- 2,677 2 1,674 (1,365) --
Unearned compensation......... -- -- -- -- 7,303 -- (7,303)
Amortization of unearned
compensation................ -- -- -- -- -- -- 2,039
Expense on options to
consultants................. -- -- -- -- 264 -- --
Expense on warrants (Note
8).......................... -- -- -- -- 595 -- --
Net loss...................... -- -- -- -- -- -- --
----- --- ----- ----------- ----------- ------------- -------
Balance at June 30, 1999...... 9,560 $ 10 9,463 $ 9 $ 34,796 $ (1,461) $ (7,513)
----- --- ----- ----------- ----------- ------------- -------
----- --- ----- ----------- ----------- ------------- -------
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
------------ ---------
<S> <C> <C>
Balance at December 31,
1995........................ $ (178) $ 839
Issuance of Series A
Convertible Preferred Stock
in February 1996, net of
issuance costs.............. -- 578
Issuance of Series B
Convertible Preferred Stock
in Sept 1996, net of
issuance costs.............. -- 2,180
Common Stock issued for cash
and notes, net.............. -- 5
Net loss...................... (1,944) (1,944)
------------ ---------
Balance at December 31,
1996........................ (2,122) 1,658
Issuance of Series C
Convertible Preferred Stock
in June 1997, net of
issuance costs.............. -- 4,961
Repayment of note
receivable.................. -- 10
Net loss...................... (4,036) (4,036)
------------ ---------
Balance at December 31,
1997........................ (6,158) 2,593
Issuance of Series D
Convertible Preferred Stock
in September 1998, net of
issuance costs.............. -- 12,456
Common stock issued for cash
and notes................... -- 64
Unearned compensation......... -- --
Amortization of unearned
compensation................ -- 723
Expense on options to
consultants................. -- 292
Expense on warrants (Note
8).......................... -- 346
Net loss...................... (6,622) (6,622)
------------ ---------
Balance at December 31,
1998........................ (12,780) 9,852
Common stock issued for cash
and notes................... -- 311
Unearned compensation......... -- --
Amortization of unearned
compensation................ -- 2,039
Expense on options to
consultants................. -- 264
Expense on warrants (Note
8).......................... -- 595
Net loss...................... (3,909) (3,909)
------------ ---------
Balance at June 30, 1999...... $ (16,689) $ 9,152
------------ ---------
------------ ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
SILICON IMAGE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
------------------------------- ----------------------
1996 1997 1998 1999
--------- --------- --------- 1998 ---------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................... $ (1,944) $ (4,036) $ (6,622) $ (3,103) $ (3,909)
Adjustments to reconcile net loss to cash provided by (used in)
operating activities:
Depreciation and amortization................................ 148 312 649 306 296
Stock compensation and warrant expense....................... -- -- 1,361 184 2,898
Change in assets and liabilities:
Accounts receivable........................................ -- (287) (1,231) 4 (63)
Inventory.................................................. (26) (103) (172) (398) (55)
Prepaid expenses and other assets.......................... (95) (288) 56 210 (94)
Accounts payable........................................... 385 187 256 920 390
Accrued liabilities........................................ 27 151 973 (55) 258
Deferred revenue........................................... 1,000 (418) 539 43 (966)
Deferred margin on sales to distributors................... -- -- 490 -- 1,514
--------- --------- --------- ----------- ---------
Net cash provided by (used in) operating activities...... (505) (4,482) (3,701) (1,889) 269
--------- --------- --------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments............................. -- -- (1,401) -- (3,935)
Proceeds from sale of short-term investments................... -- -- -- -- 3,375
Purchase of property and equipment............................. (724) (300) (340) (9) (113)
--------- --------- --------- ----------- ---------
Net cash used in investing activities.................... (724) (300) (1,741) (9) (673)
--------- --------- --------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations................ (65) (59) (140) (45) (106)
Proceeds from financing of property and equipment.............. -- -- -- -- 789
Borrowings on line of credit, net.............................. -- 372 385 378 --
Proceeds from issuance of Convertible Preferred Stock, net of
issuance costs............................................... 2,758 4,961 12,456 -- --
Proceeds from issuance of Common Stock......................... 5 -- 64 25 311
Repayment of note receivable................................... -- 10 -- -- --
--------- --------- --------- ----------- ---------
Net cash provided by financing activities................ 2,698 5,284 12,765 358 994
--------- --------- --------- ----------- ---------
Net increase (decrease) in cash and cash equivalents............. 1,469 502 7,323 (1,540) 590
Cash and cash equivalents at the beginning of the period......... 802 2,271 2,773 2,773 10,096
--------- --------- --------- ----------- ---------
Cash and cash equivalents at the end of the period............... $ 2,271 $ 2,773 $ 10,096 $ 1,233 $ 10,686
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Acquisition of software and equipment under capital lease...... $ 83 $ 28 $ 641 $ 566 $ 61
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
Issuance of common stock in exchange for notes receivable...... $ -- $ -- $ 96 $ -- $ 1,365
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
Cash paid for interest......................................... $ 4 $ 6 $ 128 $ 53 $ 59
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY
Silicon Image, Inc. (the "Company") was incorporated in California in
January 1995. The Company designs, develops and markets semiconductor solutions
for applications that require cost-effective, high-bandwidth, integrated
solutions for high-speed data communications. The Company is initially focusing
its technology on the local interconnect between host systems, such as PCs,
set-top boxes and DVD players, and digital displays, such as flat panel displays
and CRTs. The Company's first products enable host systems to transmit digital
data and allows displays to receive and manipulate digital video data.
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain items previously reported in specific financial statement captions
have been reclassified to conform with the June 30, 1999 presentation.
UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial information for the six month period ended June 30,
1998 is unaudited and has been prepared on the same basis as the audited
financial statements. In the opinion of management, such unaudited information
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the interim information.
REVENUE RECOGNITION
The Company recognizes revenue from product sales to direct customers upon
shipment. Reserves for sales returns and allowances are recorded at the time of
shipment. The Company's sales to distributors are made under agreements allowing
for returns or credits under certain circumstances and the Company defers
recognition of revenue on sales to distributors until the Company estimates
products are resold by the distributor to the end-user. Development and license
revenues are recognized as milestones are met or as license fees are earned.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid debt instruments having a maturity
of three months or less on the date of purchase to be cash equivalents. At
December 31, 1997 and 1998 and June 30, 1999, approximately $0, $7,546,000 and
$7,197,000 of commercial paper and $2,700,000, $1,319,000 and $3,380,000 of
money market funds are included in cash and cash equivalents, respectively, the
fair value of which approximated cost. Short-term investments are comprised of
commercial paper for all periods presented. Short-term investments are held as
securities available for sale in accordance with Statement of Financial
Accounting Standard ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" and are reported at amortized cost as of the balance
sheet date which approximates fair market value.
F-7
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of temporary cash investments, short-term
investments and accounts receivable. The Company may place its short-term
investments in a variety of financial instruments and, by policy, limits the
amount of credit exposure through diversification and by restricting its
investments to highly liquid securities.
The Company performs ongoing credit evaluations of its customers' financial
condition and may require collateral such as letters of credit, whenever deemed
necessary. In 1997, two customers accounted for 56% and 19% of product revenue.
Three customers accounted for 36%, 24% and 12% of gross accounts receivable at
December 31, 1997. In 1998, two customers accounted for 54% and 12% of product
revenue. At December 31, 1998, the same two customers accounted for 65% and 12%
of gross accounts receivable, respectively. In the six months ended June 30,
1999, three customers accounted for 13%, 13% and 11% of product revenue. At June
30, 1999, four customers accounted for 13%, 12%, 12% and 11% of gross accounts
receivable.
INVENTORY
Inventory is stated at the lower of cost or market, cost being determined
under the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which range from two to five years. Assets held
under capital leases are amortized using the straight-line method over the
shorter of the lease term or the estimated useful life, which range from three
to five years.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred.
STOCK BASED COMPENSATION
The Company accounts for stock-based compensation arrangements in accordance
with the provisions of Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees," ("APB No. 25") and complies with the
disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." Expense associated with stock-based compensation is amortized on
an accelerated basis over the vesting period of the individual award consistent
with the method described in Financial Accounting Standards Board ("FASB")
Interpretation No. 28.
COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components and is effective for periods beginning after December 15, 1997. The
Company's comprehensive income approximated net income for all periods
presented.
F-8
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
LONG-LIVED ASSETS
The Company reviews for the impairment of long-lived assets whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual
disposition are less than the asset net book value. No such impairment losses
have been identified by the Company.
PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)
Effective upon the closing of the Company's initial public offering, the
outstanding shares of Series A, Series B, Series C and Series D Convertible
Preferred Stock will automatically convert into approximately 3,130,000,
932,203, 4,000,000 and 3,594,859 shares, respectively, of Common Stock. Also
effective upon the closing of this offering 75,000,000 shares of Common Stock
and 5,000,000 of undesignated Preferred Stock will be authorized. The pro forma
effects of these transactions are unaudited and have been reflected in the
accompanying pro forma stockholders' equity at June 30, 1999.
NET LOSS PER SHARE
The Company reports both basic net loss per share, which is based on the
weighted average number of common shares outstanding excluding contingently
issuable or returnable shares, and diluted net loss per share, which is based on
the weighted average number of common shares outstanding and dilutive potential
common shares outstanding.
The following tables set forth the computation of basic and diluted net loss
per share of common stock:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- ----------------------
1996 1997 1998 1999
--------- --------- --------- 1998 ---------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator (in thousands):
Net loss....................................................... $ (1,944) $ (4,036) $ (6,622) $ (3,103) $ (3,909)
--------- --------- --------- ----------- ---------
Denominator (in thousands):
Weighted average shares........................................ 5,416 5,661 6,029 5,795 8,054
Less: unvested common shares subject to repurchase............. (3,435) (2,128) (1,263) (1,494) (2,727)
--------- --------- --------- ----------- ---------
Denominator for basic and diluted calculation.................. 1,981 3,533 4,766 4,301 5,327
--------- --------- --------- ----------- ---------
Net loss per share:
Basic and diluted net loss per share........................... $ (0.98) $ (1.14) $ (1.39) $ (0.72) $ (0.73)
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
</TABLE>
As a result of the net losses incurred by the Company during fiscal years
1996, 1997 and 1998 and for the six month periods ended June 30, 1998 and 1999,
all potential common shares were anti-dilutive and have been excluded from the
diluted net loss per share calculation. The following table summarizes
F-9
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
securities outstanding as of each period end, on an as-converted basis, which
were not included in the calculation of diluted net loss per share since their
inclusion would be anti-dilutive.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------- ----------------------
1996 1997 1998 1999
--------- --------- --------- ---------
1998
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Preferred Stock...................... 4,062,000 8,062,000 11,657,000 8,062,000 11,657,000
Unvested common shares subject to
repurchase......................... 3,435,000 2,128,000 1,263,000 1,494,000 2,727,000
Stock options........................ 1,199,000 2,174,000 2,175,000 2,412,000 1,149,000
Common stock warrants................ -- -- 286,000 -- 286,000
Preferred stock warrants............. -- -- -- -- 32,000
</TABLE>
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share for the year ended December 31, 1998 and six
months ended June 30, 1999 is computed using the weighted average number of
common shares outstanding, including the conversion of the Company's Series A,
Series B, Series C and Series D Convertible Preferred Stock outstanding into
shares of the Company's common stock effective upon the closing of the Company's
initial public offering as if such change in conversion rate and conversion
occurred on December 31, 1998 and June 30, 1999, respectively. The calculation
of diluted net loss per share excludes potential common shares as the effect
would be antidilutive.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes a model for
accounting for derivatives and hedging activities and supercedes and amends a
number of existing accounting standards. SFAS No. 133 requires that all
derivatives be recognized in the balance sheet at their fair market value, and
the corresponding derivative gains or losses be either reported in the statement
of operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivative. We do not currently or plan to
enter into forward exchange contracts to hedge exposures denominated in foreign
currencies or any other derivative financial instruments for trading or
speculative purposes.
In March 1999, the FASB issued an exposure draft entitled, "Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25." Although the proposed interpretation becomes effective upon its
issuance, certain transactions occurring after December 15, 1998 are subject to
complicated transition rules. If approved, the proposed interpretation may
result in many changes being made to existing practice and may have a
significant impact on the Company's accounting for stock based compensation.
NOTE 2--RELATED PARTY TRANSACTIONS:
In January 1996, 550,000 shares of Common Stock were issued to an officer
for which the Company received cash of $3,750 and a note receivable of $10,000.
This note receivable and accrued interest was repaid in December 1997. In 1998,
551,000 shares of Common Stock were issued upon the exercise of options to
several officers of the Company in exchange for notes receivable totaling
$95,625.
F-10
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--RELATED PARTY TRANSACTIONS: (CONTINUED)
During the six months ended June 30, 1999, an additional 1,483,000 shares were
issued to officers and an employee in exchange for notes receivable totaling
$1,365,000. These notes bear interest at rates ranging from 4.64% to 7.75% per
annum and are due within four to five years. The Company has recorded
compensation expense in connection with option grants and sales of common stock
(Note 8).
NOTE 3--BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- ---------
1997 1998 1999
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Accounts receivable:
Accounts receivable........................................... $ 317 $ 1,549 $ 1,612
Allowance for doubtful accounts............................... (30) (31) (31)
--------- --------- ---------
$ 287 $ 1,518 $ 1,581
--------- --------- ---------
--------- --------- ---------
Inventory:
Work in process............................................... $ 38 $ 175 $ 295
Finished goods................................................ 91 126 61
--------- --------- ---------
$ 129 $ 301 $ 356
--------- --------- ---------
--------- --------- ---------
Property and equipment:
Furniture and equipment....................................... $ 439 $ 475 $ 522
Computers and software........................................ 818 1,581 1,708
--------- --------- ---------
1,257 2,056 2,230
Less: accumulated depreciation................................ (464) (931) (1,227)
--------- --------- ---------
$ 793 $ 1,125 $ 1,003
--------- --------- ---------
--------- --------- ---------
</TABLE>
Assets acquired under capitalized lease obligations are included in property
and equipment and totaled $145,000, $641,000 and $1,461,000, with related
accumulated depreciation of $50,000, $165,000 and $281,000 at December 31, 1997
and December 31, 1998 and June 30, 1999 respectively.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- ---------
1997 1998 1999
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Accrued liabilities:
Accrued payroll and related expenses.......................... $ 79 $ 167 $ 235
Customer rebates and accrued sales returns.................... -- 491 690
Other accrued liabilities..................................... 102 496 487
--------- --------- ---------
$ 181 $ 1,154 $ 1,412
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-11
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--INCOME TAXES:
No provision for federal or state income taxes has been recorded for the
years ended December 31, 1996, 1997 and 1998 and for the six month period ended
June 30, 1999, as the Company has incurred net operating losses since inception
(January 1995).
Deferred tax assets relate to the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- ---------
1997 1998 1999
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Net operating loss carryforwards.............................. $ 1,989 $ 4,996 $ 5,933
Deferred revenue.............................................. 220 690 798
Research and development credit............................... 78 462 651
Other items not currently deductible.......................... 89 197 504
--------- --------- ---------
2,376 6,345 7,886
Less: valuation allowance..................................... (2,376) (6,345) (7,886)
--------- --------- ---------
$ -- $ -- $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
Management believes that, based on a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realizability of
the deferred tax assets such that a full valuation allowance has been recorded.
These factors include the Company's history of losses, recent increases in
expense levels, the fact that the market in which the Company competes is
characterized by rapidly changing technology, the lack of carryback capacity to
realize deferred tax assets, and the uncertainty regarding continued market
acceptance of the Company's products. The Company will continue to assess the
realizability of the deferred tax assets based on actual and forecasted
operating results.
At June 30, 1999, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $16,073,000 and
$5,358,000, respectively, which expire through 2019 and 2004, respectively.
Under the Tax Reform Act of 1986, the amounts of and benefits from net operating
loss carryforwards may be impaired or limited in certain circumstances. Events
which cause limitations in the amount of net operating losses that the Company
may utilize in any one year include, but are not limited to, a cumulative
ownership change of more than 50%, as defined, over a three year period.
NOTE 5--CONVERTIBLE PREFERRED STOCK:
Convertible Preferred Stock at June 30, 1999 consists of the following:
<TABLE>
<CAPTION>
SHARES
-------------------------
SERIES AUTHORIZED OUTSTANDING
- -------------------------------------------------- ------------ ----------- PROCEEDS
NET OF
ISSUANCE
COSTS
--------------
(IN THOUSANDS)
<S> <C> <C> <C>
A................................................. 1,565,000 1,565,000 $ 1,563
B................................................. 400,000 400,000 2,180
C................................................. 4,100,000 4,000,000 4,961
D................................................. 4,000,000 3,594,859 12,456
------------ ----------- -------
10,065,000 9,559,859 $ 21,160
------------ ----------- -------
------------ ----------- -------
</TABLE>
F-12
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--CONVERTIBLE PREFERRED STOCK: (CONTINUED)
The holders of the Convertible Preferred Stock have various rights and
preferences as follows:
Each share of Series A, B, C and D Convertible ("Series A, B, C and D")
Preferred Stock outstanding is convertible into two, 2.3305, one and one
share(s) of Common Stock, respectively, at the option of the holder, subject to
certain adjustments, and automatically converts upon the completion of an
underwritten public offering of Common Stock with gross proceeds of at least
$10,000,000 and a public offering price of not less than $6.00 per share. At
June 30, 1999, the outstanding shares of Series A, B, C and D are convertible
into 3,130,000, 932,203, 4,000,000 and 3,594,859 shares of Common Stock,
respectively.
Each share of Series A, B, C and D entitles its holder to one vote for each
Common Share into which such shares would convert. Dividends at the rate of
$0.05, $0.275, $0.0625 and $0.175 per share for Series A, B, C and D Stock,
respectively, if declared by the Board of Directors, are payable to the
preferred stockholders in preference to any dividends for Common Stock declared
by the Board of Directors. Dividends are noncumulative. No dividends have been
declared by the Board of Directors through June 30, 1999.
The holders of Series A, B, C and D are entitled to receive their original
issuance prices, on an as-converted basis, of $0.50, $2.36, $1.25 and $3.50 per
share, respectively, in liquidation, plus an amount equal to all declared but
unpaid dividends, prior and in preference to any distribution to the holders of
Common Stock. As of June 30, 1999, the aggregate liquidation preference of
Series A, B, C and D was approximately $21,347,000.
NOTE 6--LEASING ARRANGEMENTS AND COMMITMENTS:
The Company leases certain equipment and software under short-term and
long-term lease agreements which are reported as capital leases. The terms of
the leases range from one to three years, with purchase options at the end of
the respective lease terms. The Company intends to exercise such purchase
options, which require minimal payments. The Company's obligation under these
leasing arrangements are secured by the leased equipment.
The Company leases its facility under a noncancelable operating lease which
expires in December 2002. Rent expense is recorded using the straight-line
method and totaled $77,000, $290,000 and $333,000 in 1996, 1997 and 1998,
respectively. Rent expense for the six months ended June 30, 1999 was $225,000.
In February 1999, the Company entered into a $2,500,000 lease line of credit
that allows for the leasing of equipment and software over 33 to 42 month terms.
The stated interest rate under this agreement is 8%. The agreement expires in
October 2000. The Company granted warrants to purchase up to 32,142 shares of
the Company's Series D preferred stock at $3.50 per share to the lessor upon
approval of the lease line of credit (Note 8).
F-13
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--LEASING ARRANGEMENTS AND COMMITMENTS: (CONTINUED)
Future minimum lease payments including capitalized purchase options at June
30, 1999 and future minimum sub-lease rental receipts under non cancelable
operating leases are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDING DECEMBER 31, LEASES LEASES
- ------------------------------------------------------------------------- --------- -----------
(IN THOUSANDS)
<S> <C> <C>
1999..................................................................... $ 285 $ 237
2000..................................................................... 568 479
2001..................................................................... 416 497
2002..................................................................... 141 494
--------- -----------
Total minimum payments, net of sublease income........................... 1,410 $ 1,707
-----------
-----------
Less interest............................................................ (148)
---------
Present value of payments under current capital lease obligations........ 1,262
Less long term portion................................................... (773)
---------
Short term portion....................................................... $ 489
---------
---------
</TABLE>
NOTE 7--LINE OF CREDIT:
In June 1997, the Company entered into a line of credit agreement with a
financial institution. This line of credit provided for borrowings of up to
$750,000 which were secured by the assets of the Company. Borrowings under the
line of credit accrued interest at the bank's prime rate plus 1.5%. Unpaid
principal and accrued interest were due at the maturity of the line of credit.
At December 31, 1997, $372,000 was outstanding under this line of credit.
In December 1998, the line of credit expired and was paid in full using
proceeds from a second or new line of credit. The new line of credit provides
for borrowings of up to $4.0 million based on and secured by eligible accounts
receivable as defined in the credit agreement. Borrowings accrue interest at the
bank's commercial lending rate plus 0.25% (8.25% at June 30, 1999). Accrued
interest is due monthly. The line of credit agreement requires the Company to
meet certain financial covenants including minimum tangible net worth and quick
ratio requirements. At June 30, 1999, the Company was in compliance with such
covenants and had borrowed $757,000 under this line of credit and an additional
$755,000 was available for borrowing. The agreement expires in April 2000.
NOTE 8--STOCKHOLDER'S EQUITY:
COMMON STOCK
The Company has authorized 21,500,000 shares of Common Stock. The Company
issued to founders and certain executives restricted common stock subject to
repurchase rights. The Company has the right to repurchase all or any portion of
the unvested shares of restricted stock at the original purchase price, which
right lapses over a four year vesting period. During the six months ended June
30, 1999 the Company sold 1,210,000 shares of Common Stock to founders, certain
executives, a consultant and an employee for a total of $1,330,000. At June 30,
1999, 1,409,000 shares of restricted Common Stock were subject to the Company's
repurchase option.
F-14
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--STOCKHOLDER'S EQUITY: (CONTINUED)
STOCK WARRANTS
In September 1998, the Company and a third party entered into an agreement
to develop and promote the adoption of a digital display interface
specification, which was amended in April 1999. In connection with this
agreement, the Company granted to the manufacturer a warrant to purchase 142,857
shares of the Company's common stock at $3.50 per share. The warrant is
immediately exercisable. Under the same agreement, the Company granted a warrant
to the manufacturer to purchase 142,857 shares of the Company's common stock at
$0.35 per share. The warrant became exercisable during the quarter ended March
31, 1999 when the manufacturer achieved a milestone. The Company recorded
$346,000 in 1998 and $595,000 in the six months ended June 30, 1999 of expense
for these warrants, which expense is included in stock compensation and warrant
expense. In addition, if a milestone are achieved, the Company will grant to the
manufacturer a warrant to purchase 142,857 shares of the Company's common stock
at $0.35 per share. If the milestones are achieved, the Company will record an
expense related to the issuance of this warrant (the estimated fair value of the
warrant at June 30, 1999 was $642,000). All warrants under this agreement will
expire on September 16, 2004.
In February 1999 and in connection with a lease line of credit, the Company
granted a warrant to purchase up to 32,142 shares of the Company's Series D
preferred stock at $3.50 per share. This warrant is immediately exercisable and
expires on February 17, 2004. The Company did not ascribe any value to the
warrant because the estimated fair market value of the warrant on the date of
grant was insignificant. This warrant will remain outstanding after completion
of the Company's initial public offering and will become exercisable for 32,142
shares of the Company's Common Stock.
STOCK OPTION PLAN
In September 1995, the Board of Directors adopted the 1995 Equity Incentive
Plan (the "Plan") which provides for the granting of incentive stock options
("ISOs") and non-qualified stock options ("NSOs") for shares of common stock to
employees, directors and consultants of the Company. In accordance with the
Plan, the stated exercise price shall not be less than 100% and 85% of the
estimated fair market value of Common Stock on the date of grant for ISOs and
NSOs, respectively, as determined by the Board of Directors. The Plan provides
that the options shall be exercisable over a period not to exceed ten years and
shall vest over a period of four years. In September 1998, the Plan was amended
to allow options to be exercised prior to vesting. The Company has the right to
repurchase such shares at their original purchase price if the optionee is
terminated from service prior to vesting. Such rights expire as the options vest
over a four year period.
F-15
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--STOCKHOLDER'S EQUITY: (CONTINUED)
The following table summarizes the Company's stock option activity and
related weighted average exercise price within each category.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------
WEIGHTED
AVERAGE
EXERCISE
PRICE
PER SHARE
SHARES -----------
AVAILABLE
FOR ISSUANCE NUMBER OF
--------------- SHARES
(IN THOUSANDS) ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at December 31, 1995........................................... 620 850 $ 0.08
Authorized........................................................... 1,500 -- --
Granted.............................................................. (1,009) 1,009 0.13
Canceled............................................................. 70 (70) 0.02
Exercised............................................................ -- (590) 0.02
------ ------
Balance at December 31, 1996........................................... 1,181 1,199 0.09
Granted.............................................................. (925) 925 0.13
Canceled............................................................. -- -- --
Exercised............................................................ -- -- --
------ ------
Balance at December 31, 1997........................................... 256 2,124 0.11
Authorized........................................................... 1,750 -- --
Granted.............................................................. (1,298) 1,298 0.32
Canceled............................................................. 172 (172) 0.30
Exercised............................................................ -- (1,125) 0.14
------ ------
Balance at December 31, 1998........................................... 880 2,125 0.20
Authorized........................................................... 1,000 -- --
Granted.............................................................. (479) 479 1.10
Canceled............................................................. 38 (38) 0.27
Exercised............................................................ -- (1,467) 0.24
------ ------
Balance at June 30, 1999............................................... 1,439 1,099 0.53
------ ------
------ ------
</TABLE>
At June 30, 1999, 278,000 options were vested, and 1,318,000 unvested shares
had been exercised and remain subject to the Company's repurchase rights.
During 1997, the Company granted 50,000 options to purchase Common Stock to
a founder at an exercise price of $0.125. The options were granted outside of
the plan. The options are outstanding as of June 30, 1999.
F-16
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--STOCKHOLDER'S EQUITY: (CONTINUED)
Significant option groups outstanding at June 30, 1999, and related weighted
average exercise price and contractual life information are as follows:
<TABLE>
<CAPTION>
OUTSTANDING AND
EXERCISABLE
-------------------------- REMAINING
RANGE OF EXERCISE PRICES PRICE LIFE (YEARS)
- --------------------------------------------------------- SHARES --------- -------------
---------------
(IN THOUSANDS)
<S> <C> <C> <C>
$0.08-$0.125............................................. 370 $ 0.11 7.82
$0.25-$0.35.............................................. 434 $ 0.32 9.17
$0.50-$0.75.............................................. 158 $ 0.64 9.73
$1.00-$3.00.............................................. 187 $ 1.67 9.93
-----
1,149
-----
-----
</TABLE>
The weighted average fair value at the date of grant for options granted was
$0.13, $0.13 and $2.84 per option during 1996, 1997 and 1998, respectively. The
weighted average fair value at the date of grant for options granted during the
six month period ended June 30, 1999 was $5.02. The fair value of options at the
date of grant was estimated on the date of grant based on the fair value method
using the Black-Scholes pricing model and using the following assumptions:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------- ---------------
1996 1997 1998 1999
----- ----- ----- ---------------
<S> <C> <C> <C> <C>
Expected life (years).............................. 4 4 4 4
Risk-free Interest rate............................ 6.2% 6.0% 5.6% 5.6%
Dividend yield..................................... -- -- -- --
</TABLE>
PRO FORMA EXPENSE
Had compensation cost for the 1995 Plan been determined based on the fair
value at the grant dates for the awards under a method prescribed by SFAS 123,
the Company's net loss would have been adjusted as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- -----------
1996 1997 1998 1999
--------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net loss:
Pro forma...................................... $ (1,949) $ (4,038) $ (7,473) $ (5,762)
Basic and diluted net loss per share:
Pro forma...................................... $ (0.98) $ (1.14) $ (1.57) $ (1.08)
</TABLE>
STOCK COMPENSATION
During the year ended December 31, 1998 and the six months ended June 30,
1999, the Company granted options and sold restricted stock to employees and
recognized unearned stock compensation of $2,972,000 and $7,303,000,
respectively. Such unearned stock compensation will be amortized using an
accelerated method over the vesting period and may decrease due to employees
that terminate service prior to vesting.
F-17
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--STOCKHOLDER'S EQUITY: (CONTINUED)
OPTIONS TO CONSULTANTS
During 1998 and the six months ended June 30, 1999, the Company granted
options to purchase 120,000 and 115,000 shares of Common Stock to consultants
with a weighted average exercise price of $0.31 and $1.37 per share,
respectively. The charge related to options granted to consultants is calculated
at the end of each reporting period based upon the Black-Scholes model, which
approximates fair value and is amortized based on the term of the consulting
agreement or service period. The amount of the charge in each period can
fluctuate depending on our stock price and volatility.
NOTE 9--BENEFIT PLAN:
Effective January 1, 1995, the Company adopted a 401(k) plan which allows
all employees to participate by making salary deferral contributions to the
401(k) plan ranging from 1% to 20% of their eligible earnings. The Company may
make discretionary contributions to the 401(k) Savings Plan upon approval by the
Board of Directors. No Company contributions were made to the 401(k) Savings
Plan from inception through June 30, 1999.
NOTE 10--SEGMENT AND GEOGRAPHIC INFORMATION:
The Company operates in a single industry segment (as defined by SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information")
encompassing the design, development and sale of semiconductor solutions for
applications that require high-bandwidth and integrated system-level
functionality, such as the local interconnect between host systems and digital
displays, including flat panel displays and digital CRTs.
The following is a summary of product revenue by geographic area (in
thousands):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------------- JUNE 30,
1996 1997 1998 1999
----- --------- --------- -----------
<S> <C> <C> <C> <C>
Taiwan................................................. $ 30 $ 1 $ 4,391 $ 2,720
Japan.................................................. -- 145 163 1,873
United States.......................................... -- 78 348 724
Canada................................................. -- 14 1,078 516
Korea.................................................. -- 1,021 770 963
Others................................................. -- 21 953 910
--- --------- --------- -----------
$ 30 $ 1,280 $ 7,703 $ 7,706
--- --------- --------- -----------
--- --------- --------- -----------
</TABLE>
All development and license revenues are derived from non-domestic sources.
All sales are denominated in United States dollars. For all periods presented,
substantially all of the Company's assets were located within the United States.
NOTE 11--SUBSEQUENT EVENT:
In July 1999, the Board of Directors authorized the reincorporation of the
Company in Delaware. The Board of Directors also approved a recapitalization
that would increase the total of authorized shares of common stock to 75,000,000
and authorized 5,000,000 shares of undesignated preferred stock.
F-18
<PAGE>
SILICON IMAGE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--SUBSEQUENT EVENT: (CONTINUED)
In addition the Board of Directors approved the adoption of the 1999 Employee
Stock Purchase Plan and the 1999 Stock Plan. Adoption of these plans is subject
to stockholder approval. All of the above items will be effected prior to the
date of the offering.
F-19
<PAGE>
[Description of graphics on inside back cover page]
This graphic is entitled "Key Relationships." In the center of the page is
the Silicon Image logo. Above the logo is a shaded rectangle. Inside the
rectangle is the word "DDWG." Surrounding the upper half of the rectangle in a
semi-circular form are the following names or logos: "Compaq," "NEC," "Intel,"
"Silicon Image," "IBM," "Fujitsu" and "Hewlett Packard." Directly below the
Silicon Image logo in the center of the page is a rectangle with Silicon Image's
PanelLink Technology logo. To the right of the logo is the label "PanelLink
Digital." To the right of that is Silicon Image's DVC Architecture logo. Below
and outside of the rectangle with the PanelLink Technology logo and the DVC
Architecture logo is the phrase "Core Technologies." Below and to the left of
the phrase is a shaded rectangle. Inside the rectangle is the phrase "Host
Systems." Underneath this rectangle is the following set of names or logos:
"IBM," "Hitachi," "Compaq," "NEC," "Fujitsu," "Sharp," "Toshiba," "ATI," "Number
Nine" and "Diamond Multimedia." Below and to the right of the phrase "Core
Technologies" is a shaded rectangle. Inside the rectangle is the word
"Displays." Underneath this rectangle is the following names or logos: "IBM,"
"Samsung," "LG Electronics Inc.," "Fujitsu," "Compaq," "Sharp," "Princeton,"
"Apple," "Hitachi," "NEC," "Gateway" and "ViewSonic."
<PAGE>
[SILICONE IMAGE, INC. LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses to be paid by Silicon
Image in connection with the sale of the shares of common stock being registered
hereby. All amounts are estimates except for the SEC registration fee, the NASD
filing fee and the Nasdaq National Market filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................ $ 12,510
NASD filing fee................................................. 5,000
Nasdaq National Market initial filing fee....................... 15,000
Printing and engraving.......................................... 250,000
Legal fees and expenses of the Registrant....................... 400,000
Accounting fees and expenses.................................... 250,000
Directors and officers liability insurance...................... 400,000
Blue sky fees and expenses...................................... 5,000
Transfer agent and registrar fees and expenses.................. 30,000
Miscellaneous................................................... 32,490
Total....................................................... $1,400,000
---------
---------
</TABLE>
- ------------------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers under certain circumstances and subject to certain limitations. The
terms of Section 145 of the Delaware General Corporation Law are sufficiently
broad to permit indemnification under certain circumstances for liabilities,
including reimbursement of expenses incurred, arising under the Securities Act
of 1933.
As permitted by the Delaware General Corporation Law, the Registrant's
certificate of incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty as
a director, except for liability:
- for any breach of the director's duty of loyalty to the Registrant or its
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
As permitted by the Delaware General Corporation Law, the Registrant's
bylaws provide that:
- the Registrant is required to indemnify its directors and officers to the
fullest extent permitted by the Delaware General Corporation Law, subject
to certain very limited exceptions;
- the Registrant is required to advance expenses, as incurred, to its
directors and officers in connection with a legal proceeding to the
fullest extent permitted by the Delaware General Corporation Law, subject
to certain very limited exceptions; and
- the rights conferred in the Bylaws are not exclusive.
II-1
<PAGE>
In addition, the Registrant intends to enter into indemnity agreements with
each of our current directors and officers. These agreements provide for the
indemnification of officers and directors for all expenses and liabilities
incurred in connection with any action or proceeding brought against them by
reason of the fact that they are or were agents of the Registrant.
The Registrant intends to obtain directors' and officers' insurance to cover
its directors, officers and some of its employees for certain liabilities,
including public securities matters.
The Underwriting Agreement filed as Exhibit 1.01 to this Registration
Statement provides for indemnification by the underwriters of the Registrant and
its directors and officers for certain liabilities under the Securities Act of
1933, or otherwise.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
EXHIBIT DOCUMENT NUMBER
- ------------------------------------------------------------------------------------ -----------
<S> <C>
Underwriting Agreement.............................................................. 1.01
Registrant's Certificate of Incorporation........................................... 3.01
Registrant's Bylaws................................................................. 3.02
Form of Indemnity Agreement......................................................... 10.01
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years prior to the effective date of this Registration
Statement, we have issued and sold the following unregistered securities:
1. On February 28, 1996, we issued and sold an aggregate of 580,000 shares
of Series A preferred stock to two investors for an aggregate consideration of
$580,000 in cash.
2. On September 20, 1996, we issued and sold 400,000 shares of Series B
preferred stock to a group of 3 investors for an aggregate consideration of
$2,200,000 in cash
3. On June 20, 1997, we issued and sold 4,000,000 shares of Series C
preferred stock to 11 investors for an aggregate consideration of $5,000,000 in
cash.
4. On July 29, 1998, we issued and sold 2,737,716 shares of Series D
preferred stock to eight investors for an aggregate consideration of $9,582,006
in cash.
5. On September 16, 1998, we issued and sold 857,143 shares of Series D
preferred stock to one investor for an aggregate consideration of $3,000,000 in
cash.
6. On September 16, 1998, we issued to Intel Corporation a warrant to
purchase up to 142,857 shares of common stock at an exercise price of $3.50 per
share which expires, if not earlier exercised, on September 16, 2004.
7. On September 16, 1998, we issued to Intel Corporation a warrant, which
we amended on April 16, 1999 to provide (1) that Intel may purchase up to
142,857 shares of Common Stock at an exercise price of $0.35 per share at any
time on or before September 16, 2004, and (2) that if a certain milestone is
achieved, we will issue Intel another warrant to purchase up to 142,857 shares
of common stock at an exercise price of $0.35 per share at any time on or before
September 16, 2004.
8. In February, 1999, and in connection with a lease line of credit, we
issued a warrant to purchase up to 32,142 shares of our Series D preferred stock
at an exercise price of $3.50 per share. This warrant is immediately exercisable
and expires upon the earlier of February 17, 2004, or certain corporate
transactions.
II-2
<PAGE>
9. As of June 30, 1999, 4,538,212 shares of common stock had been issued to
our employees, consultants and other service providers upon exercise of options
or pursuant to restricted stock purchase agreements, 1,098,963 shares of common
stock were issuable upon exercise of outstanding options under our 1995 Equity
Incentive Plan and 50,000 shares of common stock were issuable upon exercise of
an outstanding option outside of any plan.
All of the 580,000 shares of Series A preferred stock will automatically
convert into 1,160,000 shares of common stock upon the consummation of this
offering as a result of a two-for-one common stock split effected on May 6,
1997.
All of the 400,000 shares of Series B preferred stock will automatically
convert into 932,203 shares of common stock upon the consummation of this
offering as a result of a two-for-one common stock split effected on May 6, 1997
and an adjustment to the Conversion Price of the Series B preferred stock from
$2.75 per share to $2.36 per share as a result of the issuance and sale of
4,000,000 shares of Series C preferred stock on June 20, 1997.
All of the 4,000,000 shares of Series C preferred stock will automatically
convert on a one-to-one basis into 4,000,000 shares of common stock and all of
the 3,594,859 shares of Series D preferred stock will automatically convert on a
one-to-one basis into 3,594,859 shares of common stock upon the consummation of
this offering.
The sale of the above securities was deemed to be exempt from registration
under the Securities Act of 1933 in reliance upon Section 4(2) of the Securities
Act of 1933 and/or Regulation D promulgated thereunder or Rule 701 promulgated
under Section 3(b) of the Securities Act of 1933 as transactions by an issuer
not involving any public offering or transactions pursuant to compensation
benefit plans and contracts relating to compensation as provided under Rule 701.
These sales were made without general solicitation or advertising. The
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof. Each purchaser was a sophisticated
investor with access to all relevant information necessary to evaluate the
investment.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ---------- -------------------------------------------------------------------------------------------------
<C> <S>
1.01 Form of Underwriting Agreement.
3.01+ Certificate of Incorporation of the Registrant, filed with the Delaware Secretary of State on
June 11, 1999.
3.02 Form of First Amended and Restated Certificate of Incorporation of the Registrant to be filed and
effective prior to completion of this offering.
3.03 Form of Second Amended and Restated Certificate of Incorporation of the Registrant to be filed
and effective upon the completion of this offering.
3.04 Bylaws of the Registrant.
3.05 Restated Bylaws of the Registrant to be effective prior to completion of this offering.
4.01* Form of Specimen Certificate for Registrant's common stock.
4.02+ Intel Warrant No. 1 to Purchase Common Stock of the Registrant.
4.03**+ Intel Warrant No. 2 to Purchase Common Stock of the Registrant, as amended April 16, 1999.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ---------- -------------------------------------------------------------------------------------------------
<C> <S>
4.04 Third Amended and Restated Investors Rights Agreement dated July 29, 1998, as amended October 15,
1998.
5.01* Opinion of Fenwick & West LLP regarding legality of the securities being registered.
10.01 Form of Indemnification Agreement entered into between the Registrant and its directors.
10.02 1995 Equity Incentive Plan, as amended through July 20, 1999, and related forms of stock option
agreements and stock option exercise agreements.
10.03 1999 Equity Incentive Plan and related forms of stock option agreements and stock option exercise
agreements.
10.04 1999 Stock Purchase Plan and related enrollment form, notice of suspension and notice of
withdrawal.
10.05 Employment Agreement with Dan Atler dated June 15, 1998.
10.06+ Employment Agreement with Parviz Khodi dated June 10, 1999.
10.07+ Amended and Restated Severance Agreement with David Lee dated August 15, 1997.
10.08+ Amended and Restated Severance Agreement with Scott Macomber dated August 15, 1997.
10.09+ Consulting Agreement with Deog-Kyoon Jeong dated March 1, 1999.
10.10**+ License Agreement dated March 15, 1995 between Deog-Kyoon Jeong and the Registrant, as amended
through June 18, 1997.
10.11+ Lease Agreement dated April 9, 1997 between Elisabeth Griffinger and the Registrant.
10.12**+ Business Cooperation Agreement dated September 16, 1998 between Intel Corporation and the
Registrant, as amended October 30, 1998.
10.13**+ Patent License Agreement dated September 16, 1998 between Intel Corporation and the Registrant.
10.14+ Digital Visual Interface Specification Revision 1.0 Promoter's Agreement dated January 8, 1999.
10.15+ Revolving Credit Loan & Security Agreement dated December 17, 1998 between Comerica
Bank-California and the Registrant.
10.16+ Research and Development Contract for Gigabit Links and Multimedia Information Delivery Systems
dated July 1, 1998 between Inter-University Semiconductor Research Center of Seoul National
University and the Registrant.
10.17+ Research and Development Contract for 1000BASE-T Gigabit Ethernet PHY Chip dated July 1, 1999
between Inter-University Semiconductor Research Center of Seoul National University and the
Registrant.
10.18+ Master Lease Agreement and Addendum with Comdisco, Inc. dated February 17, 1999.
10.19 Letter Agreement between Steve Tirado and the Registrant and Addendum thereto.
10.20 Form of Restricted Stock Purchase Agreement and Secured Full Recourse Promissory Note entered
into between Registrant and its officers and consultants.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Independent Accountants.
24.01+ Power of Attorney (included on signature page).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ---------- -------------------------------------------------------------------------------------------------
<C> <S>
27.01+ Financial Data Schedule.
</TABLE>
- ------------------------
* To be supplied by amendment.
** Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
+ Previously filed.
(b) The following financial statement schedule is filed herewith:
Schedule II--Valuation and Qualifying Accounts
Other financial statement schedules are omitted because the information
called for is not required or is shown either in the financial statements or the
notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Cupertino, State of California, on the 25th day of August, 1999.
<TABLE>
<S> <C> <C>
SILICON IMAGE, INC.
By: /s/ DAVID D. LEE
-----------------------------------------
David D. Lee
CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ DAVID D. LEE Officer and Chairman of
- ------------------------------ the Board (Principal August 25, 1999
David D. Lee Executive Officer)
Vice President, Finance
and Administration and
DANIEL K. ATLER* Chief Financial Officer
- ------------------------------ (Principal Financial August 25, 1999
Daniel K. Atler Officer and Principal
Accounting Officer)
SANG-CHUL HAN*
- ------------------------------ Director August 25, 1999
Sang-Chul Han
RONALD V. SCHMIDT*
- ------------------------------ Director August 25, 1999
Ronald V. Schmidt
DAVID A. HODGES*
- ------------------------------ Director August 25, 1999
David A. Hodges
ANDREW S. RAPPAPORT*
- ------------------------------ Director August 25, 1999
Andrew S. Rappaport
HERBERT CHANG*
- ------------------------------ Director August 25, 1999
Herbert Chang
</TABLE>
<TABLE>
<S> <C>
*By: /s/ DAVID D. LEE
-------------------------
David D. Lee
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.01 Form of Underwriting Agreement.
3.01+ Certificate of Incorporation of the Registrant, filed with the Delaware Secretary of State on June 11,
1999.
3.02 Form of First Amended and Restated Certificate of Incorporation of the Registrant to be filed and
effective prior to completion of this offering.
3.03 Form of Second Amended and Restated Certificate of Incorporation of the Registrant to be filed and
effective upon the completion of this offering.
3.04 Bylaws of the Registrant.
3.05 Restated Bylaws of the Registrant to be effective prior to completion of this offering.
4.01* Form of Specimen Certificate for Registrant's common stock.
4.02+ Intel Warrant No. 1 to Purchase Common Stock of the Registrant.
4.03**+ Intel Warrant No. 2 to Purchase Common Stock of the Registrant, as amended April 16, 1999.
4.04 Third Amended and Restated Investors Rights Agreement dated July 29, 1998, as amended October 15, 1998.
5.01* Opinion of Fenwick & West LLP regarding legality of the securities being registered.
10.01 Form of Indemnification Agreement entered into between the Registrant and its directors.
10.02 1995 Equity Incentive Plan, as amended through July 20, 1999, and related forms of stock option
agreements and stock option exercise agreements.
10.03 1999 Equity Incentive Plan and related forms of stock option agreements and stock option exercise
agreements.
10.04 1999 Stock Purchase Plan and related enrollment form, notice of suspension and notice of withdrawal.
10.05 Employment Agreement with Dan Atler dated June 15, 1998.
10.06+ Employment Agreement with Parviz Khodi dated June 10, 1999.
10.07+ Amended and Restated Severance Agreement with David Lee dated August 15, 1997.
10.08+ Amended and Restated Severance Agreement with Scott Macomber dated August 15, 1997.
10.09+ Consulting Agreement with Deog-Kyoon Jeong dated March 1, 1999.
10.10**+ License Agreement dated March 15, 1995 between Deog-Kyoon Jeong and the Registrant, as amended through
June 18, 1997.
10.11+ Lease Agreement dated April 9, 1997 between Elisabeth Griffinger and the Registrant.
10.12**+ Business Cooperation Agreement dated September 16, 1998 between Intel Corporation and the Registrant,
as amended October 30, 1998.
10.13**+ Patent License Agreement dated September 16, 1998 between Intel Corporation and the Registrant.
10.14+ Digital Visual Interface Specification Revision 1.0 Promoter's Agreement dated January 8, 1999.
10.15+ Revolving Credit Loan & Security Agreement dated December 17, 1998 between Comerica Bank-California and
the Registrant.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.16+ Research and Development Contract for Gigabit Links and Multimedia Information Delivery Systems dated
July 1, 1998 between Inter-University Semiconductor Research Center of Seoul National University and
the Registrant.
10.17+ Research and Development Contract for 1000BASE-T Gigabit Ethernet PHY Chip dated July 1, 1999 between
Inter-University Semiconductor Research Center of Seoul National University and the Registrant.
10.18+ Master Lease Agreement and Addendum with Comdisco, Inc. dated February 17, 1999.
10.19 Letter Agreement between Steve Tirado and the Registrant and Addendum thereto.
10.20 Form of Restricted Stock Purchase Agreement and Secured Full Recourse Promissory Note entered into
between Registrant and its officers and consultants.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).
23.02 Consent of Independent Accountants.
24.01+ Power of Attorney (included on signature page).
27.01+ Financial Data Schedule.
</TABLE>
- ------------------------
* To be supplied by amendment.
** Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
+ Previously filed.
<PAGE>
Exhibit 1.01
________ SHARES
SILICON IMAGE, INC.
COMMON STOCK, PAR VALUE $0.001 PER SHARE
UNDERWRITING AGREEMENT
_________, 1999
CREDIT SUISSE FIRST BOSTON CORPORATION
BANCBOSTON ROBERTSON STEPHENS INC.
DAIN RAUSCHER WESSELS
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. INTRODUCTORY. Silicon Image, Inc., a Delaware corporation
("COMPANY"), proposes to issue and sell _______ shares ("FIRM SECURITIES") of
its common stock ("SECURITIES") and also proposes to issue and sell to the
Underwriters, at the option of the Underwriters, an aggregate of not more than
_______ additional shares ("OPTIONAL SECURITIES") of its Securities as set
forth below. The Firm Securities and the Optional Securities are herein
collectively called the "OFFERED SECURITIES". As part of the offering
contemplated by this Agreement, ______________ (the "DESIGNATED UNDERWRITER")
has agreed to reserve out of the Firm Securities purchased by it under this
Agreement, up to __________ shares, for sale to the Company's directors,
officers, employees and other parties associated with the Company
(collectively, "PARTICIPANTS"), as set forth in the Prospectus (as defined
herein) under the heading "Underwriters" (the "DIRECTED SHARE PROGRAM"). The
Firm Securities to be sold by the Designated Underwriter pursuant to the
Directed Share Program (the "DIRECTED SHARES") will be sold by the Designated
Underwriter pursuant to this Agreement at the public offering price. Any
Directed Shares not orally confirmed for purchase by a Participant by the end
of the business day on which this Agreement is executed will be offered to the
public by the Underwriters as set forth in the Prospectus. The Company hereby
agrees with the several Underwriters named in Schedule A hereto
("UNDERWRITERS") as follows:
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the several Underwriters that:
(a) A registration statement (No. 333-______) relating to the
Offered Securities, including a form of prospectus, has been filed with the
Securities and Exchange Commission ("COMMISSION") and either (i) has been
declared effective under the Securities Act of 1933 ("ACT") and is not proposed
to be amended or (ii) is proposed to be amended by amendment or post-effective
amendment. If such registration statement ("INITIAL REGISTRATION STATEMENT")
has been declared effective, either (i) an additional registration statement
("ADDITIONAL REGISTRATION STATEMENT") relating to the Offered Securities may
have been filed with the Commission pursuant to Rule 462(b) ("RULE 462(b)")
under the Act and, if so filed, has become effective upon filing pursuant to
such Rule and the Offered Securities all have been duly registered under the
Act pursuant to the initial registration statement and, if applicable, the
additional registration statement or (ii) such an additional registration
statement is proposed to be filed with the Commission pursuant to Rule 462(b)
and will become effective upon filing pursuant to such Rule and upon such
filing the Offered Securities will all have been duly
<PAGE>
registered under the Act pursuant to the initial registration statement and
such additional registration statement. If the Company does not propose to
amend the initial registration statement or if an additional registration
statement has been filed and the Company does not propose to amend it, and if
any post-effective amendment to either such registration statement has been
filed with the Commission prior to the execution and delivery of this
Agreement, the most recent amendment (if any) to each such registration
statement has been declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c) ("RULE 462(c)") under the Act
or, in the case of the additional registration statement, Rule 462(b). For
purposes of this Agreement, "EFFECTIVE TIME" with respect to the initial
registration statement or, if filed prior to the execution and delivery of
this Agreement, the additional registration statement means (i) if the
Company has advised the Representatives that it does not propose to amend
such registration statement, the date and time as of which such registration
statement, or the most recent post-effective amendment thereto (if any) filed
prior to the execution and delivery of this Agreement, was declared effective
by the Commission or has become effective upon filing pursuant to Rule
462(c), or (ii) if the Company has advised the Representatives that it
proposes to file an amendment or post-effective amendment to such
registration statement, the date and time as of which such registration
statement, as amended by such amendment or post-effective amendment, as the
case may be, is declared effective by the Commission. If an additional
registration statement has not been filed prior to the execution and delivery
of this Agreement but the Company has advised the Representatives that it
proposes to file one, "EFFECTIVE TIME" with respect to such additional
registration statement means the date and time as of which such registration
statement is filed and becomes effective pursuant to Rule 462(b). "EFFECTIVE
DATE" with respect to the initial registration statement or the additional
registration statement (if any) means the date of the Effective Time thereof.
The initial registration statement, as amended at its Effective Time,
including all information contained in the additional registration statement
(if any) and deemed to be a part of the initial registration statement as of
the Effective Time of the additional registration statement pursuant to the
General Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("RULE 430A(b)")
under the Act, is hereinafter referred to as the "INITIAL REGISTRATION
STATEMENT". The additional registration statement, as amended at its
Effective Time, including the contents of the initial registration statement
incorporated by reference therein and including all information (if any)
deemed to be a part of the additional registration statement as of its
Effective Time pursuant to Rule 430A(b), is hereinafter referred to as the
"ADDITIONAL REGISTRATION STATEMENT". The Initial Registration Statement and
the Additional Registration Statement are herein referred to collectively as
the "REGISTRATION STATEMENTS" and individually as a "REGISTRATION STATEMENT".
The form of prospectus relating to the Offered Securities, as first filed
with the Commission pursuant to and in accordance with Rule 424(b) ("RULE
424(b)") under the Act or (if no such filing is required) as included in a
Registration Statement, is hereinafter referred to as the "PROSPECTUS". No
document has been or will be prepared or distributed in reliance on Rule 434
under the Act.
(b) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement: (i) on the
Effective Date of the Initial Registration Statement, the Initial Registration
Statement conformed in all respects to the requirements of the Act and the
rules and regulations of the Commission ("RULES AND REGULATIONS") and did not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) on the Effective Date of the Additional Registration
Statement (if any), each Registration Statement conformed, or will conform, in
all respects to the requirements of the Act and the Rules and Regulations and
did not include, or will not include, any untrue statement of a material fact
and did not omit, or will not omit, to state any material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) on the date of this Agreement, the Initial Registration Statement and, if
the Effective Time of the Additional Registration Statement is prior to the
execution and delivery of this Agreement, the Additional Registration Statement
each conforms, and at the time of filing of the Prospectus pursuant to Rule
424(b) or (if no such filing is required) at the Effective Date of the
Additional Registration Statement in which the Prospectus is included, each
Registration Statement and the Prospectus will conform, in all respects to the
requirements of the Act and the Rules and Regulations, and neither of such
documents includes, or will include, any untrue statement of a material fact or
omits, or will omit, to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. If the Effective
Time of the Initial Registration Statement is subsequent to the execution and
delivery of this Agreement: on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement and the Prospectus will conform
in all respects to the requirements of the Act and the Rules and Regulations,
neither of such documents will include any untrue statement of a material fact
or will omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and no Additional
Registration Statement has
- 2 -
<PAGE>
been or will be filed. The two preceding sentences do not apply to statements
in or omissions from a Registration Statement or the Prospectus based upon
written information furnished to the Company by any Underwriter through the
Representatives specifically for use therein, it being understood and agreed
that the only such information is that described as such in Section 7(b)
hereof.
(c) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus; and the Company is duly qualified to
do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification.
(d) Each subsidiary of the Company has been duly incorporated
and is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus; and each subsidiary of the Company is duly qualified to do business
as a foreign corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business requires such
qualification; all of the issued and outstanding capital stock of each
subsidiary of the Company has been duly authorized and validly issued and is
fully paid and nonassessable; and the capital stock of each subsidiary owned by
the Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects.
(e) The Offered Securities and all other outstanding shares
of capital stock of the Company have been duly authorized; all outstanding
shares of capital stock of the Company are, and, when the Offered Securities
have been delivered and paid for in accordance with this Agreement on each
Closing Date (as defined below), such Offered Securities will have been,
validly issued, fully paid and nonassessable and will conform to the
description thereof contained in the Prospectus; and the stockholders of the
Company have no preemptive rights with respect to the Securities.
(f) The Offered Securities have been approved for listing on
The Nasdaq Stock Market's National Market, subject to notice of issuance.
(g) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any person that
would give rise to a valid claim against the Company or any Underwriter for a
brokerage commission, finder's fee or other like payment in connection with
this offering.
(h) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company owned or
to be owned by such person or to require the Company to include such securities
in the securities registered pursuant to a Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Act which have not been fully satisfied or waived.
(i) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in connection
with the issuance and sale of the Offered Securities by the Company, except
such as have been obtained and made under the Act and such as may be required
under state securities laws.
(j) The execution, delivery and performance of this
Agreement, and the issuance and sale of the Offered Securities will not result
in a breach or violation of any of the terms and provisions of, or constitute a
default under, any statute, any rule, regulation or order of any governmental
agency or body or any court, domestic or foreign, having jurisdiction over the
Company or any subsidiary of the Company or any of their properties, or any
agreement or instrument to which the Company or any such subsidiary is a party
or by which the Company or any such subsidiary is bound or to which any of the
properties of the Company or any such subsidiary is subject, or the charter or
by-laws of the
- 3 -
<PAGE>
Company or any such subsidiary, and the Company has full power and authority
to authorize, issue and sell the Offered Securities as contemplated by this
Agreement.
(k) This Agreement has been duly authorized, executed and
delivered by the Company.
(l) Except as disclosed in the Prospectus, the Company and
its subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by them; and
except as disclosed in the Prospectus, the Company and its subsidiaries hold
any leased real or personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or to be made
thereof by them.
(m) The Company and its subsidiaries possess all material
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by them and
have not received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a material adverse effect on the condition (financial or
other), business, properties or results of operations of the Company and its
subsidiaries taken as a whole ("MATERIAL ADVERSE EFFECT").
(n) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that might
have a Material Adverse Effect.
(o) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and other rights
to inventions, know-how, patents, copyrights, confidential information and
other intellectual property, including applications licensed directly from
third parties (collectively, "INTELLECTUAL PROPERTY RIGHTS") necessary to
conduct the business now operated by them, or presently employed by them, and
have not received any notice of infringement of or conflict with asserted
rights of others with respect to any intellectual property rights that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect. The
discoveries, inventions, products or processes of the Company referred to in
the Prospectus do not, to the Company's knowledge, infringe or conflict with
any intellectual property right of any third party, where such infringement or
conflict could have a Material Adverse Effect.
(p) Except as disclosed in the Prospectus, neither the
Company nor any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or
toxic substances or relating to the protection or restoration of the
environment or human exposure to hazardous or toxic substances (collectively,
"ENVIRONMENTAL LAWS"), owns or operates any real property contaminated with any
substance that is subject to any environmental laws, is liable for any off-site
disposal or contamination pursuant to any environmental laws, or is subject to
any claim relating to any environmental laws, which violation, contamination,
liability or claim would individually or in the aggregate have a Material
Adverse Effect; and the Company is not aware of any pending investigation which
might lead to such a claim.
(q) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting the Company, any of
its subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect, or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale of the
Offered Securities; and no such actions, suits or proceedings are threatened
or, to the Company's knowledge, contemplated.
(r) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of the
Company and its consolidated subsidiaries as of the dates shown and their
results of operations and cash flows for the periods shown, and, except as
otherwise disclosed in the Prospectus, such financial statements have been
prepared in conformity with the generally accepted accounting principles in the
United States applied on a consistent basis and the schedules included in each
Registration Statement present fairly the information
- 4 -
<PAGE>
required to be stated therein; and the assumptions used in preparing the pro
forma financial statements included in each Registration Statement and the
Prospectus provide a reasonable basis for presenting the significant effects
directly attributable to the transactions or events described therein, the
related pro forma adjustments give appropriate effect to those assumptions,
and the pro forma columns therein reflect the proper application of those
adjustments to the corresponding historical financial statement amounts.
(s) Except as disclosed in the Prospectus, since the date of
the latest audited financial statements included in the Prospectus there has
been no material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole, and, except as disclosed in or contemplated by
the Prospectus, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
(t) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment company" as
defined in the Investment Company Act of 1940.
(u) The Company (i) has notified each holder of a currently
outstanding option issued under the 1995 Equity Incentive Plan, 1999 Equity
Incentive Plan and the 1999 Employee Stock Purchase Plan (collectively, the
"PLANS") and each person who has acquired Securities pursuant to the exercise
of any option or other rights granted under such Plans that pursuant to the
terms of such Plans, none of such options or shares may be sold or otherwise
transferred or disposed of for a period of 180 days after the date of the
initial public offering of the Offered Securities and (ii) has imposed a
stop-transfer instruction with the Company's transfer agent in order to enforce
the foregoing lock-up provision imposed pursuant to the Plans.
(v) Except as disclosed in the Prospectus, all outstanding
Securities, and all securities convertible into or exercisable or exchangeable
for Securities, are subject to valid and binding agreements (collectively,
"LOCK-UP AGREEMENTS") that restrict the holders thereof from selling, making
any short sale of, granting any option for the purchase of, or otherwise
transferring or disposing of, any of such Securities, or any such securities
convertible into or exercisable or exchangeable for Securities, for a period of
180 days after the date of the Prospectus without the prior written consent of
Credit Suisse First Boston Corporation ("CSFBC").
(w) The Company (i) has notified each stockholder who is
party to the Third Amended and Restated Investor Rights Agreement dated
July 28, 1998 (the "RIGHTS AGREEMENT"), that pursuant to the terms of the
Rights Agreement, none of the shares of the Company's capital stock held by
such stockholder may be sold or otherwise transferred or disposed of for a
period of 180 days after the effective date of the registration statement
relating to the initial public offering of the Offered Securities and (ii) has
imposed a stop-transfer instruction with the Company's transfer agent in order
to enforce the foregoing lock-up provision imposed pursuant to the Rights
Agreement.
(x) Furthermore, the Company represents and warrants to the
Underwriters that (i) the Registration Statement, the Prospectus and any
preliminary prospectus comply, and any further amendments or supplements
thereto will comply, with any applicable laws or regulations of foreign
jurisdictions in which the Prospectus or any preliminary prospectus, as amended
or supplemented, if applicable, are distributed in connection with the Directed
Share Program, and that (ii) no authorization, approval, consent, license,
order, registration or qualification of or with any government, governmental
instrumentality or court, other than such as have been obtained, is necessary
under the securities law and regulations of foreign jurisdictions in which the
Directed Shares are offered outside the United States.
(y) The Company has not offered, or caused the Underwriters
to offer, any offered Securities to any person pursuant to the Directed Share
Program with the specific intent to unlawfully influence (i) a customer or
supplier of the Company to alter the customer's or supplier's level or type of
business with the Company or (ii) a trade journalist or publication to write or
publish favorable information about the Company or its products.
3. PURCHASE, SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
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Underwriters, and the Underwriters agree, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the
respective numbers of shares of Firm Securities set forth opposite the names of
the Underwriters in SCHEDULE A hereto.
The Company will deliver the Firm Securities to the Representatives for
the accounts of the Underwriters, at the office of CSFBC, Eleven Madison
Avenue, New York, New York 10010-3629, against payment of the purchase price
in Federal (same day) funds by official bank check or checks or wire transfer
to an account at a bank acceptable to CSFBC drawn to the order of the Company
at the office of Fenwick & West LLP, Two Palo Alto Square, Palo Alto, CA
94306 at _____ A.M., New York time, on ________________, 1999, or at such
other time not later than seven full business days thereafter as CSFBC and
the Company determine, such time being herein referred to as the "FIRST
CLOSING DATE". For purposes of Rule 15c6-1 under the Securities Exchange Act
of 1934, the First Closing Date (if later than the otherwise applicable
settlement date) shall be the settlement date for payment of funds and
delivery of securities for all the Offered Securities sold pursuant to the
offering. The certificates for the Firm Securities so to be delivered will be
in definitive form, in such denominations and registered in such names as
CSFBC requests and will be made available for checking and packaging at the
above office of CSFBC in New York at least 24 hours prior to the First
Closing Date.
In addition, upon written notice from CSFBC given to the Company from
time to time not more than 30 days subsequent to the date of the Prospectus,
the Underwriters may purchase all or less than all of the Optional Securities
at the purchase price per Security to be paid for the Firm Securities. The
Company agrees to sell to the Underwriters the number of shares of Optional
Securities specified in such notice and the Underwriters agree, severally and
not jointly, to purchase such Optional Securities. Such Optional Securities
shall be purchased for the account of each Underwriter in the same proportion
as the number of shares of Firm Securities set forth opposite such
Underwriter's name bears to the total number of shares of Firm Securities
(subject to adjustment by CSFBC to eliminate fractions) and may be purchased
by the Underwriters only for the purpose of covering over-allotments made in
connection with the sale of the Firm Securities. No Optional Securities shall
be sold or delivered unless the Firm Securities previously have been, or
simultaneously are, sold and delivered. The right to purchase the Optional
Securities or any portion thereof may be exercised from time to time and to
the extent not previously exercised may be surrendered and terminated at any
time upon notice by CSFBC to the Company.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "OPTIONAL CLOSING DATE", which may be the
First Closing Date (the First Closing Date and each Optional Closing Date, if
any, being sometimes referred to as a "CLOSING DATE"), shall be determined by
CSFBC but shall be not later than five full business days after written
notice of election to purchase Optional Securities is given. The Company will
deliver the Optional Securities being purchased on each Optional Closing Date
to the Representatives for the accounts of the several Underwriters, at the
above office of CSFBC in New York, against payment of the purchase price
therefor in Federal (same day) funds by official bank check or checks or wire
transfer to an account at a bank acceptable to CSFBC drawn to the order of
the Company, at the above office of Fenwick & West LLP. The certificates
for the Optional Securities being purchased on each Optional Closing Date
will be in definitive form, in such denominations and registered in such
names as CSFBC requests upon reasonable notice prior to such Optional Closing
Date and will be made available for checking and packaging at the above
office of CSFBC in New York at a reasonable time in advance of such Optional
Closing Date.
4. OFFERING BY UNDERWRITERS. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. CERTAIN AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the Company
will file the Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by CSFBC,
subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the second
business day following the execution and delivery of this Agreement or (B) the
fifteenth business day after the Effective Date of the Initial Registration
Statement.
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<PAGE>
The Company will advise CSFBC promptly of any such filing pursuant to
Rule 424(b). If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion of the Offered
Securities under the Act but the Effective Time thereof has not occurred as
of such execution and delivery, the Company will file the additional
registration statement or, if filed, will file a post-effective amendment
thereto with the Commission pursuant to and in accordance with Rule 462(b) on
or prior to 10:00 P.M., New York time, on the date of this Agreement or, if
earlier, on or prior to the time the Prospectus is printed and distributed to
any Underwriter, or will make such filing at such later date as shall have
been consented to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration statement as
filed or the related prospectus or the Initial Registration Statement, the
Additional Registration Statement (if any) or the Prospectus and will not
effect such amendment or supplementation without CSFBC's consent; and the
Company will also advise CSFBC promptly of the effectiveness of each
Registration Statement (if its Effective Time is subsequent to the execution
and delivery of this Agreement) and of any amendment or supplementation of a
Registration Statement or the Prospectus and of the institution by the
Commission of any stop order proceedings in respect of a Registration Statement
and will use its best efforts to prevent the issuance of any such stop order
and to obtain as soon as possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with sales
by any Underwriter or dealer, any event occurs as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Act, the Company will promptly notify CSFBC of such event
and will promptly prepare and file with the Commission, at its own expense, an
amendment or supplement which will correct such statement or omission or an
amendment which will effect such compliance. Neither CSFBC's consent to, nor
the Underwriters' delivery of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 6.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Company will make generally available
to its securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration Statement
(or, if later, the Effective Date of the Additional Registration Statement)
which will satisfy the provisions of Section 11(a) of the Act. For the purpose
of the preceding sentence, "AVAILABILITY DATE" means the 45th day after the end
of the fourth fiscal quarter following the fiscal quarter that includes such
Effective Date, except that, if such fourth fiscal quarter is the last quarter
of the Company's fiscal year, "AVAILABILITY DATE" means the 90th day after the
end of such fourth fiscal quarter.
(e) The Company will furnish to the Representatives copies of
each Registration Statement (4 of which will be signed and will include all
exhibits), each related preliminary prospectus, and, so long as a prospectus
relating to the Offered Securities is required to be delivered under the Act in
connection with sales by any Underwriter or dealer, the Prospectus and all
amendments and supplements to such documents, in each case in such quantities
as CSFBC requests. The Prospectus shall be so furnished on or prior to 3:00
P.M., New York time, on the business day following the later of the execution
and delivery of this Agreement or the Effective Time of the Initial
Registration Statement. All other documents shall be so furnished as soon as
available. The Company will pay the expenses of printing and distributing to
the Underwriters all such documents.
(f) The Company will arrange for the qualification of the
Offered Securities for sale under the laws of such jurisdictions as CSFBC
designates and will continue such qualifications in effect so long as required
for the distribution.
(g) During the period of five years hereafter, the Company
will furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year, a copy
of its annual report to stockholders for such year; and the Company will
furnish to the Representatives (i) as soon as available, a copy of each report
and any definitive proxy statement of the Company filed with the Commission
under the Securities
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<PAGE>
Exchange Act of 1934 or mailed to stockholders, and (ii) from time to time,
such other information concerning the Company as CSFBC may reasonably request.
(h) The Company will pay all expenses incident to the
performance of its obligations under this Agreement, for any filing fees and
other expenses (including fees and disbursements of counsel) incurred in
connection with qualification of the Offered Securities for sale under the laws
of such jurisdictions as CSFBC designates and the printing of memoranda
relating thereto, for the filing fee incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review by
the National Association of Securities Dealers, Inc. of the Offered Securities,
for any travel expenses of the Company's officers and employees and any other
expenses of the Company in connection with attending or hosting meetings with
prospective purchasers of the Offered Securities and for expenses incurred in
distributing preliminary prospectuses and the Prospectus (including any
amendments and supplements thereto) to the Underwriters.
(i) For a period of 180 days after the date of the initial
public offering of the Offered Securities, the Company will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, or
file with the Commission a registration statement under the Act relating to,
any additional shares of its Securities or securities convertible into or
exchangeable or exercisable for any shares of its Securities, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of CSFBC, except issuances of
Securities pursuant to the conversion or exchange of convertible or
exchangeable securities or the exercise of warrants or options, in each case
outstanding on the date hereof, grants of employee stock options or the
issuance of other Securities pursuant to the terms of a Plan in effect on the
date hereof, or issuances of Securities pursuant to the exercise of such
options.
(j) The Company agrees to use its best efforts to cause (i)
each of its directors, officers and shareholders and (ii) each person who
acquires Securities of the Company pursuant to the exercise of any option or
other rights granted under the Plans to sign an agreement that restricts such
person from selling, making any short sale of, granting any option for the
purchase of, or otherwise transferring or disposing of, any of such Securities,
or any such securities convertible into or exercisable or exchangeable for
Securities, for a period of 180 days after the date of the Prospectus without
the prior written consent of CSFBC; and the Company will issue and impose a
stop-transfer instruction with the Company's transfer agent in order to enforce
the foregoing lock-up agreements.
(k) The Company will (i) enforce the terms of each Lock-up
Agreement, and (ii) issue stop-transfer instructions to the transfer agent for
the Securities with respect to any transaction or contemplated transaction that
would constitute a breach of or default under the applicable Lock-up Agreement.
In addition, except with the prior written consent of CSFBC, the Company agrees
(i) not to amend or terminate, or waive any right under, any Lock-up Agreement,
or take any other action that would directly or indirectly have the same effect
as an amendment or termination, or waiver of any right under any Lock-up
Agreement, that would permit any holder of Securities, or any securities
convertible into, or exercisable or exchangeable for, Securities, to make any
short sale of, grant any option for the purchase of, or otherwise transfer or
dispose of, any such Securities or other securities, prior to the expiration of
the 180 days after the date of the Prospectus and (ii) not to consent to any
sale, short sale, grant of an option for the purchase of, or other disposition
or transfer of shares of Securities, or securities convertible into or
exercisable or exchangeable for Securities, subject to a Lock-up Agreement.
(l) In connection with the Directed Share Program, the
Company will ensure that the Directed Shares will be restricted to the extent
required by the National Association of Securities Dealers, Inc. (the "NASD")
or the NASD rules from sale, transfer, assignment, pledge or hypothecation for
a period of three months following the date of the effectiveness of the
Registration Statement. The Designated Underwriter will notify the Company as
to which Participants will need to be so restricted. The Company will direct
the transfer agent to place stop transfer restrictions upon such securities for
such period of time.
(m) The Company will pay all fees and disbursements of
counsel incurred by the Underwriters in connection with the Directed Shares
Program and stamp duties, similar taxes or duties or other taxes, if any,
incurred by the Underwriters in connection with the Directed Share Program.
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<PAGE>
Furthermore, the Company covenants with the Underwriters that the Company
will comply with all applicable securities and other applicable laws, rules
and regulations in each foreign jurisdiction in which the Directed Shares are
offered in connection with the Directed Share Program.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations of
the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of Company officers made pursuant to the provisions hereof, to the performance
by the Company of its obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a letter, dated
the date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this Agreement,
shall be on or prior to the date of this Agreement (but in no event earlier than
the Effective Time) or, if the Effective Time of the Initial Registration
Statement is subsequent to the execution and delivery of this Agreement, shall
be prior to the filing of the amendment or post-effective amendment to the
registration statement to be filed shortly prior to such Effective Time), of
PricewaterhouseCoopers LLP confirming that they are independent public
accountants within the meaning of the Act and the applicable published Rules and
Regulations thereunder and stating to the effect that:
(i) in their opinion the financial statements and
schedules examined by them and included in the Registration Statements comply as
to form in all material respects with the applicable accounting requirements of
the Act and the related published Rules and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of interim
financial information as described in Statement of Auditing Standards No. 71,
Interim Financial Information, on the unaudited financial statements (including
each of the quarters presented) included in the Registration Statements;
(iii) on the basis of the review referred to in
clause (ii) above, a reading of the latest available interim financial
statements of the Company, inquiries of officials of the Company who have
responsibility for financial and accounting matters and other specified
procedures, nothing came to their attention that caused them to believe that:
(A) the unaudited financial statements included in the
Registration Statements do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the related
published Rules and Regulations or any material modifications should be made
to such unaudited financial statements for them to be in conformity with
generally accepted accounting principles;
(B) the unaudited consolidated total revenue, loss from
operations, net loss and net loss per share amounts for the three-month
periods ended March 31, 1998, June 30, 1998, September 30, 1998, December 31,
1998, March 31, 1999 and June 30, 1999 included in the Prospectus do not
agree with the amounts set forth in the unaudited consolidated financial
statements for those same periods or were not determined on a basis
substantially consistent with that of the corresponding amounts in the
audited statements of income;
(C) at the date of the latest available balance sheet read
by such accountants, or at a subsequent specified date not more than three
business days prior to the date of such letter, there was any change in the
capital stock or any increase in short-term indebtedness or long-term debt of
the Company and its consolidated subsidiaries or, at the date of the latest
available balance sheet read by such accountants, there was any decrease in
consolidated total current assets, total assets, or total stockholders'
equity, as compared with amounts shown on the latest balance sheet included
in the Prospectus; or
(D) for the period from the closing date of the latest
income statement included in the Prospectus to the closing date of the latest
available income statement read by such accountants there were any decreases,
as compared with the corresponding period of the previous year and with the
period of corresponding length ended the date
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<PAGE>
of the latest income statement included in the Prospectus, in consolidated
total revenues or increases, as compared with the corresponding period of the
previous year and with the period of corresponding length ended the date of
the latest income statement included in the Prospectus, in consolidated net
operating loss, or in the total or per share amounts of consolidated net loss,
except in all cases set forth in clauses (C) and (D) above
for changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial information
contained in the Registration Statements (in each case to the extent that such
dollar amounts, percentages and other financial and statistical information are
derived from the general accounting records of the Company and its subsidiaries
subject to the internal controls of the Company's accounting system or are
derived directly from such records by analysis or computation) with the results
obtained from inquiries, a reading of such general accounting records and other
procedures specified in such letter and have found such dollar amounts,
percentages and other financial and statistical information to be in agreement
with such results, except as otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement, "REGISTRATION STATEMENTS" shall mean the initial registration
statement as proposed to be amended by the amendment or post-effective
amendment to be filed shortly prior to its Effective Time, (ii) if the
Effective Time of the Initial Registration Statement is prior to the
execution and delivery of this Agreement but the Effective Time of the
Additional Registration is subsequent to such execution and delivery,
"REGISTRATION STATEMENTS" shall mean the Initial Registration Statement and
the additional registration statement as proposed to be filed or as proposed
to be amended by the post-effective amendment to be filed shortly prior to
its Effective Time, and (iii) "PROSPECTUS" shall mean the prospectus included
in the Registration Statements.
The Company shall have received from PricewaterhouseCoopers LLP (and
furnished to the Representatives) an examination report with respect to
Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company for the three fiscal years ending December 31, 1996,
December 31, 1997, and December 31, 1998, respectively, and review report with
respect to Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Company for the six-month period ending June 30,
1999, and the corresponding period for the prior fiscal year, each in accordance
with Statement on Standards for Attestation Engagement No. 8 issued by the
Auditing Standards Board of the American Institute of Certified Public
Accountants, and such examination report shall be included in the Registration
Statement.
(b) If the Effective Time of the Initial Registration
Statement is not prior to the execution and delivery of this Agreement, such
Effective Time shall have occurred not later than 10:00 P.M., New York time, on
the date of this Agreement or such later date as shall have been consented to by
CSFBC. If the Effective Time of the Additional Registration Statement (if any)
is not prior to the execution and delivery of this Agreement, such Effective
Time shall have occurred not later than 10:00 P.M., New York time, on the date
of this Agreement or, if earlier, the time the Prospectus is printed and
distributed to any Underwriter, or shall have occurred at such later date as
shall have been consented to by CSFBC. If the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this Agreement,
the Prospectus shall have been filed with the Commission in accordance with the
Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing
Date, no stop order suspending the effectiveness of a Registration Statement
shall have been issued and no proceedings for that purpose shall have been
instituted or, to the knowledge of the Company or the Representatives, shall be
contemplated by the Commission.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any development or
event involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as one enterprise which, in the judgment of a majority in
interest of the Underwriters including the Representatives, is material and
adverse and makes it impractical or inadvisable to proceed with completion of
the public offering or the sale of and payment for the Offered Securities;
(ii) any downgrading in the rating of any debt securities of the Company by any
"nationally recognized statistical rating
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<PAGE>
organization" (as defined for purposes of Rule 436(g) under the Act), or any
public announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any material
suspension or material limitation of trading in securities generally on the
New York Stock Exchange, or any setting of minimum prices for trading on such
exchange, or any suspension of trading of any securities of the Company on
any exchange or in the over-the-counter market; (iv) any banking moratorium
declared by U.S. Federal or New York authorities; or (v) any outbreak or
escalation of major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of a majority in
interest of the Underwriters including the Representatives, the effect of any
such outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public offering
or the sale of and payment for the Offered Securities.
(d) The Representatives shall have received an opinion, dated
such Closing Date, of Fenwick & West LLP, counsel for the Company, to the effect
that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct its
business as described in the Prospectus; and the Company is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business requires
such qualification;
(ii) Each subsidiary of the Company has been duly
incorporated and is an existing corporation in good standing under the laws of
the jurisdiction of its incorporation, with power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus; and each subsidiary of the Company is duly qualified to do business
as a foreign corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business requires such
qualification; all of the issued and outstanding capital stock of each
subsidiary of the Company has been duly authorized and validly issued and is
fully paid and nonassessable, and the capital stock of each subsidiary owned by
the Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects;
(iii) The Offered Securities delivered on such Closing
Date and all other outstanding shares of the capital stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
conform to the description thereof contained in the Prospectus; and the
stockholders of the Company have no preemptive rights with respect to the
Securities;
(iv) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings known to such counsel between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the Company to
include such securities in the securities registered pursuant to the
Registration Statement or in any securities being registered pursuant to any
other registration statement filed by the Company under the Act;
(v) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment company" as
defined in the Investment Company Act of 1940.
(vi) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement in connection
with the issuance or sale of the Offered Securities by the Company, except such
as have been obtained and made under the Act and such as may be required under
state securities laws;
(vii) The execution, delivery and performance of this
Agreement and the issuance and sale of the Offered Securities will not result in
a breach or violation of any of the terms and provisions of, or constitute a
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<PAGE>
default under, any statute, any rule, regulation or order of any governmental
agency or body or any court having jurisdiction over the Company or any
subsidiary of the Company or any of their properties, or any agreement or
instrument to which the Company or any such subsidiary is a party or by which
the Company or any such subsidiary is bound or to which any of the properties
of the Company or any such subsidiary is subject, or the charter or by-laws
of the Company or any such subsidiary, and the Company has full power and
authority to authorize, issue and sell the Offered Securities as contemplated
by this Agreement;
(viii) The Initial Registration Statement was
declared effective under the Act as of the date and time specified in such
opinion, the Additional Registration Statement (if any) was filed and became
effective under the Act as of the date and time (if determinable) specified in
such opinion, the Prospectus either was filed with the Commission pursuant to
the subparagraph of Rule 424(b) specified in such opinion on the date specified
therein or was included in the Initial Registration Statement or the Additional
Registration Statement (as the case may be), and, to the best of the knowledge
of such counsel, no stop order suspending the effectiveness of a Registration
Statement or any part thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Act, and
each Registration Statement and the Prospectus, and each amendment or supplement
thereto, as of their respective effective or issue dates, complied as to form in
all material respects with the requirements of the Act and the Rules and
Regulations; such counsel have no reason to believe that any part of a
Registration Statement or any amendment thereto, as of its effective date or as
of such Closing Date, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto, as of its issue date or as of such Closing
Date, contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; the descriptions
in the Registration Statements and Prospectus of statutes, legal and
governmental proceedings and contracts and other documents are accurate and
fairly present the information required to be shown; and such counsel do not
know of any legal or governmental proceedings required to be described in a
Registration Statement or the Prospectus which are not described as required or
of any contracts or documents of a character required to be described in a
Registration Statement or the Prospectus or to be filed as exhibits to a
Registration Statement which are not described and filed as required; it being
understood that such counsel need express no opinion as to the financial
statements or other financial data contained in the Registration Statements or
the Prospectus; and
(ix) This Agreement has been duly authorized, executed
and delivered by the Company.
(e) The Representatives shall have received from Wilson
Sonsini Goodrich & Rosati, Professional Corporation, counsel for the
Underwriters, such opinion or opinions, dated such Closing Date, with respect to
the incorporation of the Company, the validity of the Offered Securities
delivered on such Closing Date, the Registration Statements, the Prospectus and
other related matters as the Representatives may require, and the Company shall
have furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(f) The Representatives shall have received a certificate,
dated such Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to the
best of their knowledge after reasonable investigation, shall state that: the
representations and warranties of the Company in this Agreement are true and
correct; the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
such Closing Date; no stop order suspending the effectiveness of any
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are contemplated by the Commission; the Additional
Registration Statement (if any) satisfying the requirements of subparagraphs (1)
and (3) of Rule 462(b) was filed pursuant to Rule 462(b), including payment of
the applicable filing fee in accordance with Rule 111(a) or (b) under the Act,
prior to the time the Prospectus was printed and distributed to any Underwriter;
and, subsequent to the date of the most recent financial statements in the
Prospectus, there has been no material adverse change, nor any development or
event involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole except as set forth in or
contemplated by the Prospectus or as described in such certificate.
- 12 -
<PAGE>
(g) The Representatives shall have received a letter, dated
such Closing Date, of PricewaterhouseCoopers LLP which meets the requirements of
subsection (a) of this Section, except that the specified date referred to in
such subsection will be a date not more than three days prior to such Closing
Date for the purposes of this subsection.
The Company will furnish the Representatives with such conformed copies
of such opinions, certificates, letters and documents as the Representatives
reasonably request. CSFBC may in its sole discretion waive on behalf of the
Underwriters compliance with any conditions to the obligations of the
Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company will indemnify and hold harmless each
Underwriter, its partners, directors and officers and each person, if any, who
controls such Underwriter within the meaning of Section 15 of the Act, against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement, the Prospectus, or any
amendment or supplement thereto, or any related preliminary prospectus, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through the Representatives specifically for use
therein, it being understood and agreed that the only such information furnished
by any Underwriter consists of the information described as such in subsection
(b) below.
The Company agrees to indemnify and hold harmless the Designated
Underwriter and each person, if any, who controls the Designated Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act (the "DESIGNATED ENTITIES"), from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) caused by any untrue statement or
alleged untrue statement of a material fact contained in any material
prepared by or with the consent of the Company for distribution to
Participants in connection with the Directed Share Program or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
(ii) caused by the failure of any Participant to pay for and accept delivery
of Directed Shares that the Participant agreed to purchase; or (iii) related
to, arising out of, or in connection with the Directed Share Program, other
than losses, claims, damages or liabilities (or expenses relating thereto)
that are finally judicially determined to have resulted from the bad faith or
gross negligence of the Designated Entities.
(b) Each Underwriter will severally and not jointly indemnify
and hold harmless the Company, its directors and officers and each person, if
any who controls the Company within the meaning of Section 15 of the Act,
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter through the Representatives specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred, it being understood
and agreed that the
- 13 -
<PAGE>
only such information furnished by any Underwriter consists of the following
information in the Prospectus furnished on behalf of each Underwriter: the
concession and reallowance figures appearing in the fourth paragraph under
the caption "Underwriting" and the information contained in the sixth and
twelfth paragraphs under the caption "Underwriting."
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. Notwithstanding anything
contained herein to the contrary, if indemnity may be sought pursuant to the
last paragraph in Section 7(a) hereof in respect of such action or proceeding,
then in addition to such separate firm for the indemnified parties, the
indemnifying party shall be liable for the reasonable fees and expenses of not
more than one separate firm (in addition to any local counsel) for the
Designated Underwriter for the defense of any losses, claims, damages and
liabilities arising out of the Directed Share Program, and all persons, if any,
who control the Designated Underwriter within the meaning of either Section 15
of the Act or Section 20 of the Exchange Act. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action and does not include a statement as
to, or an admission of, fault, culpability or a failure to act by or on behalf
of an indemnified party.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other from the offering
of the Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriters. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to in
the first sentence of this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
- 14 -
<PAGE>
(e) The obligations of the Company under this Section shall
be in addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each officer of the Company
who has signed a Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act.
8. DEFAULT OF UNDERWRITERS. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Underwriters, but if no such
arrangements are made by such Closing Date, the non-defaulting Underwriters
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Underwriters
agreed but failed to purchase on such Closing Date. If any Underwriter or
Underwriters so default and the aggregate number of shares of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
number of shares of Offered Securities that the Underwriters are obligated to
purchase on such Closing Date and arrangements satisfactory to CSFBC and the
Company for the purchase of such Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company, except
as provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the several Underwriters set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Underwriter, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company and the Underwriters pursuant to Section 7 shall
remain in effect, and if any Offered Securities have been purchased hereunder
the representations and warranties in Section 2 and all obligations under
Section 5 shall also remain in effect. If the purchase of the Offered Securities
by the Underwriters is not consummated for any reason other than solely because
of the termination of this Agreement pursuant to Section 8 or the occurrence of
any event specified in clause (iii), (iv) or (v) of Section 6(c), the Company
will reimburse the Underwriters for all out-of-pocket expenses (including fees
and disbursements of counsel) reasonably incurred by them in connection with the
offering of the Offered Securities.
10. NOTICES. All communications hereunder will be in writing and, if sent
to the Underwriters, will be mailed, delivered or telegraphed and confirmed to
the Representatives, c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at 10131 Bubb Road,
Cupertino, California 95014, Attention: David D. Lee; provided, however, that
any notice to an Underwriter pursuant to Section 7 will be mailed, delivered or
telegraphed and confirmed to such Underwriter.
11. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 7, and no other
person will have any right or obligation hereunder.
- 15 -
<PAGE>
12. REPRESENTATION OF UNDERWRITERS. The Representatives will act for the
several Underwriters in connection with this financing, and any action under
this Agreement taken by the Representatives jointly or by CSFBC on behalf of the
Representatives will be binding upon all the Underwriters.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York
in any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 16 -
<PAGE>
If the foregoing is in accordance with the Representatives' understanding
of our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement between the Company and the
several Underwriters in accordance with its terms.
Very truly yours,
SILICON IMAGE, INC.
By:
--------------------------------------
David D. Lee
Chairman of the Board of Directors
and Chief Executive Officer
The foregoing Underwriting Agreement is hereby
Confirmed and accepted as of the date first written
Above.
CREDIT SUISSE FIRST BOSTON CORPORATION
BANCBOSTON ROBERTSON STEPHENS INC.
DAIN RAUSCHER WESSELS
Acting on behalf of themselves and as the
Representatives of the several Underwriters
By CREDIT SUISSE FIRST BOSTON CORPORATION
By:
-----------------------------------------
John Hodge
Managing Director
[SIGNATURE PAGE TO UNDERWRITING AGREEMENT]
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF
FIRM SECURITIES
---------------
<S> <C>
Credit Suisse First Boston Corporation
BancBoston Robertson Stephens Inc.
Dain Rauscher Wessels
----------------
Total............................
----------------
----------------
</TABLE>
A - 1
<PAGE>
Exhibit 3.02
FIRST AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SILICON IMAGE, INC.
(Originally incorporated on June 11, 1999 under the name Silicon Image, Inc.
(Delaware))
Silicon Image, Inc. (Delaware), a Delaware corporation, hereby
certifies that the First Amended and Restated Certificate of Incorporation of
the corporation attached hereto as EXHIBIT "A", which is incorporated herein by
this reference, has been duly adopted by the corporation's Board of Directors
and stockholders in accordance with Sections 242 and 245 of the Delaware General
Corporation Law, with the approval of the corporation's stockholders having been
given by written consent without a meeting in accordance with Section 228 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, said corporation has caused this First Amended and
Restated Certificate of Incorporation to be signed by its by duly authorized
officer.
Dated: ______________, 1999
SILICON IMAGE, INC. (DELAWARE)
_______________________________________
David D. Lee, President
<PAGE>
EXHIBIT "A"
FIRST AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SILICON IMAGE, INC.
ARTICLE I
The name of the corporation is Silicon Image, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 15 East North Street, City of Dover, County of Kent. The name of its
registered agent at that address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the
corporation has authority to issue is 85,065,000 shares, consisting of two
classes: 75,000,000 shares of Common Stock, $0.001 par value per share, and
10,065,000 shares of Preferred Stock, $0.001 par value per share. Of the
10,065,000 shares of Preferred Stock, par value $0.001, authorized to be issued
by the corporation, 1,565,000 shares are hereby designated "Series A Preferred
Stock," 400,000 shares are hereby designated "Series B Preferred Stock,"
4,100,000 shares are hereby designated "Series C Preferred Stock" and 4,000,000
shares are hereby designated "Series D Preferred Stock." The rights,
preferences, privileges and restrictions granted to and imposed upon the
respective classes and series of the corporation's capital stock are set forth
below:
1. DEFINITIONS. For purposes of this Article IV, the following
definitions shall apply:
1.1 "BOARD" shall mean the Board of Directors of the
Company.
1.2 "COMPANY" shall mean this corporation.
1.3 "COMMON STOCK" shall mean the Common Stock, no par
value, of the Company.
1.4 "COMMON STOCK DIVIDEND" shall mean a stock
dividend declared and paid on the Common Stock that is payable in shares of
Common Stock.
1
<PAGE>
1.5 "DIVIDEND RATE" shall mean $0.05 per share per annum for
the Series A Preferred Stock, $0.275 per share per annum for the Series B
Preferred Stock, $0.0625 per share per annum for the Series C Preferred Stock
and $0.175 per share per annum for the Series D Preferred Stock.
1.6 "ORIGINAL ISSUE DATE" shall mean, for the Series A
Preferred Stock, the date on which the first share of Series A Preferred Stock
is issued by the Company, for the Series B Preferred Stock, the date on which
the first share of Series B Preferred Stock is issued by the Company, for the
Series C Preferred Stock, the date on which the first share of Series C
Preferred Stock is issued by the Company and for the Series D Preferred Stock
the date on which the first share of Series D Preferred Stock is issued by the
Company.
1.7 "ORIGINAL ISSUE PRICE" shall mean $1.00 per share for the
Series A Preferred Stock, $5.50 per share for the Series B Preferred Stock,
$1.25 per share for the Series C Preferred Stock and $3.50 per share for the
Series D Preferred Stock.
1.8 "PERMITTED REPURCHASES" shall mean the repurchase by the
Company of shares of Common Stock held by employees, officers, directors,
consultants, independent contractors, advisors, or other persons performing
services for the Company or a subsidiary that are subject to the Company's
standard form restricted stock purchase agreement or the Company's standard form
stock option exercise agreement under which the Company has the option to
repurchase such shares: (i) at cost, upon the occurrence of certain events, such
as the termination of employment or services; or (ii) at any price pursuant to
the Company's exercise of a right of first refusal to repurchase such shares.
1.9 "PREFERRED STOCK" shall mean the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock and the
Series D Preferred Stock, collectively.
1.10 "SERIES A PREFERRED STOCK" shall mean the Series A
Preferred Stock, $0.001 par value per share, of the Company.
1.11 "SERIES B PREFERRED STOCK" shall mean the Series B
Preferred Stock, $0.001 par value per share, of the Company.
1.12 "SERIES C PREFERRED STOCK" shall mean the Series C
Preferred Stock, $0.001 par value per share, of the Company.
1.13 "SERIES D PREFERRED STOCK" shall mean the Series D
Preferred Stock, $0.001 par value per share, of the Company.
1.14 "SUBSIDIARY" shall mean any corporation of which at least
fifty percent (50%) of the outstanding voting stock is at the time owned
directly or indirectly by the Company or by one or more of such subsidiary
corporations.
2
<PAGE>
2. DIVIDEND RIGHTS.
2.1 DIVIDEND PREFERENCE. In each calendar year, the holders of
the then outstanding Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock shall be entitled to receive,
when, as and if declared by the Board, out of any funds and assets of the
Company legally available therefor, noncumulative dividends at the annual
Dividend Rate for each such series of Preferred Stock, prior and in preference
to the payment of any dividends on the Common Stock in such calendar year (other
than a Common Stock Dividend). No dividends (other than a Common Stock Dividend)
shall be paid with respect to the Common Stock during any calendar year unless
dividends in the total amount of the annual Dividend Rate for the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall have first been paid or declared and set apart for payment
to the holders of the Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock and Series D Preferred Stock, respectively, during
that calendar year; PROVIDED, HOWEVER, that this restriction shall not apply to
Permitted Repurchases. Payments of any dividends to the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall be paid pro rata, on an equal priority, pari passu basis
according to their respective dividend preferences as set forth herein.
Dividends on the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock and Series D Preferred Stock shall not be mandatory or
cumulative, and no rights or interest shall accrue to the holders of the Series
A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock or
Series D Preferred Stock by reason of the fact that the Company shall fail to
declare dividends on the Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock or Series D Preferred Stock in the amount of the
annual Dividend Rate for each such series or in any other amount in any calendar
year or any fiscal year of the Company, whether or not the earnings of the
Company in any calendar year or fiscal year were sufficient to pay such
dividends in whole or in part.
2.2 PARTICIPATION RIGHTS. If, after dividends in the full
preferential amounts specified in this Section 2 for the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Sock and the Series
D Preferred Stock have been paid or declared and set apart in any calendar year
of the Company, the Board shall declare additional dividends out of funds
legally available therefor in that calendar year, then such additional dividends
shall be declared pro rata on the Common Stock, the Series A Preferred Stock,
the Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock on a pari passu basis according to the number of shares of
Common Stock held by such holders, where each holder of shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and/or
Series D Preferred Stock is to be treated for this purpose as holding the
greatest whole number of shares of Common Stock then issuable upon conversion of
all shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and/or Series D Preferred Stock, as the case may be, held by
such holder pursuant to Section 5.
2.3 NON-CASH DIVIDENDS. Whenever a dividend provided for in
this Section 2 shall be payable in property other than cash, the value of such
dividend shall be deemed to be the fair market value of such property as
determined in good faith by the Board.
3
<PAGE>
2.4 NO PAYMENT ON CONVERSION. If the Company shall have
declared but unpaid dividends with respect to any Preferred Stock upon its
conversion as provided in Section 5, then all such declared but unpaid dividends
on such converted shares shall be canceled.
3. LIQUIDATION RIGHTS. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary,
the funds and assets of the Company that may be legally distributed to the
Company's stockholders (the "AVAILABLE FUNDS AND ASSETS") shall be
distributed to stockholders in the following manner:
3.1 LIQUIDATION PREFERENCES. The holders of each share of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock then outstanding shall be entitled to be paid, out of
the Available Funds and Assets, prior and in preference to any payment or
distribution (or any setting apart of any payment or distribution) of any
Available Funds and Assets on any shares of Common Stock, an amount per share
equal to the Original Issue Price for each such series of Preferred Stock,
respectively, plus all declared but unpaid dividends thereon. If upon any
liquidation, dissolution or winding up of the Company, the Available Funds and
Assets shall be insufficient to permit the payment to holders of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
Series D Preferred Stock of their full preferential amounts described in this
subsection, then all the remaining Available Funds and Assets shall be
distributed among the holders of the then outstanding Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
pro rata, on an equal priority, pari passu basis, according to their respective
liquidation preferences as set forth herein.
3.2 REMAINING ASSETS. If there are any Available Funds and
Assets remaining after the payment or distribution (or the setting aside for
payment or distribution) to the holders of the Preferred Stock of their full
preferential amounts described above in this Section 3, then all such remaining
Available Funds and Assets shall be distributed among the holders of the then
outstanding Common Stock and the Series D Preferred Stock pro rata according to
the number of shares of Common Stock held by such holders where, for this
purpose, holders of shares of Series D Preferred Stock will be deemed to hold
(in lien of their Series D Preferred Stock) the greatest whole number of shares
of Common Stock then issuable upon conversion in full of such shares of Series D
Preferred Stock pursuant to Section 5, until such time as each holder of then
outstanding Series D Preferred Stock shall have received, in distributions made
under this Section 3, an aggregate amount equal to $7.875 (such aggregate dollar
amount to include all amounts previously paid to such holder pursuant to
subsection 3.1). After such distribution has been made to all holders of Series
D Preferred Stock, then the holders of the outstanding Common Stock shall be
entitled to receive all the remaining Available Funds and Assets (if any) pro
rata according to the number of outstanding shares of Common Stock then held by
each of them.
3.3 MERGER OR SALE OF ASSETS. An (i) acquisition of the
Company by means of any transaction or series of transactions resulting in the
consolidation or merger of the Company with or into any other entity in which
the holders of the Company's outstanding shares immediately before such
consolidation or merger do not, immediately after such consolidation or merger,
retain voting rights representing a majority of the voting power of the
surviving entity of
4
<PAGE>
such consolidation or merger; or (ii) a sale of all or substantially all of
the assets of the Company, shall each be deemed to be a liquidation,
dissolution or winding up of the Company within the meaning of this Section 3.
3.4 NON-CASH CONSIDERATION. If any assets of the Company
distributed to stockholders in connection with any liquidation, dissolution, or
winding up of the Company are other than cash, then the value of such assets
shall be their fair market value as determined by the Board, EXCEPT THAT any
securities to be distributed to stockholders in a liquidation, dissolution, or
winding up of the Company shall be valued as follows:
(a) The method of valuation of securities not subject to
investment letter or other similar restrictions on free marketability shall
be as follows:
(i) if the securities are then traded on a national
securities exchange or the Nasdaq National Market (or a similar national
quotation system), then the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the 30-day
period ending three (3) days prior to the distribution; and
(ii) if actively traded over-the-counter, then the
value shall be deemed to be the average of the closing bid prices over the
30-day period ending three (3) days prior to the closing of such merger,
consolidation or sale; and
(iii) if there is no active public market, then the
value shall be the fair market value thereof, as determined in good faith by
the Board of Directors of the Company.
(b) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to
make an appropriate discount from the market value determined as above in
subparagraphs (a)(i), (ii), or (iii) of this subsection to reflect the
approximate fair market value thereof, as determined in good faith by the
Board.
4. VOTING RIGHTS.
4.1 COMMON STOCK. Each holder of shares of Common Stock
shall be entitled to one (1) vote for each share thereof held.
4.2 PREFERRED STOCK. Each holder of shares of Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which such shares of Preferred Stock could be converted
pursuant to the provisions of Section 5 below at the record date for the
determination of the stockholders entitled to vote on such matters or, if no
such record date is established, the date such vote is taken or any written
consent of stockholders is solicited.
4.3 GENERAL. Subject to the foregoing provisions of this
Section 4, each holder of Preferred Stock shall have full voting rights and
powers equal to the voting rights and powers of the holders of Common Stock, and
shall be entitled to notice of any stockholders' meeting in accordance with the
bylaws of the Company (as in effect at the time in question) and applicable law,
and shall be entitled to vote, together with the holders of Common Stock, with
respect to
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any question upon which holders of Common Stock have the right to vote,
except as may be otherwise provided by applicable law. Except as required by
law, the holders of Preferred Stock and the holders of Common Stock shall
vote together and not as separate classes.
4.4 BOARD SIZE. The authorized number of directors of the
Company's Board shall be a minimum of four (4) and a maximum of seven (7). The
Board may vary the authorized number of directors by resolution within the range
of the minimum and the maximum authorized numbers of directors.
4.5 BOARD OF DIRECTORS ELECTION AND REMOVAL.
(a) ELECTION. So long as at least 200,000 shares of
Series A Preferred Stock and/or Series B Preferred Stock are outstanding, the
holders of the Series A Preferred Stock and Series B Preferred Stock, voting
together as a separate class (with cumulative voting rights as among
themselves in accordance with Section 708 of the California Corporations
Code), shall be entitled to elect one (1) director of the Company (the
"SERIES A AND B DIRECTOR"). So long as at least 400,000 shares of Series C
Preferred Stock are outstanding, the holders of the Series C Preferred Stock,
voting as a separate series (with cumulative voting rights as among
themselves in accordance with Section 708 of the California Corporations
Code), shall be entitled to elect one (1) director of the Company (the
"SERIES C DIRECTOR"). So long as at least 400,000 shares of Series D
Preferred Stock are outstanding, the holders of the Series D Preferred Stock
voting as a separate series (with cumulative voting rights as among
themselves in accordance with Section 708 of the California Corporations
Code), shall be entitled to elect one (1) director of the Company (the
"SERIES D DIRECTOR"). The holders of the Common Stock, voting as a separate
class (with cumulative voting rights as among themselves in accordance with
Section 708 of the California Corporations Code), shall be entitled to elect
two (2) directors of the Company (the "COMMON DIRECTORS"). The holders of the
Preferred Stock and the Common Stock, voting together as a single class (with
cumulative voting rights as among themselves in accordance with Section 708
of the California Corporations Code) shall be entitled to elect the remaining
directors of the Company (the "AT-LARGE DIRECTORS").
(b) QUORUM; REQUIRED VOTE.
(i) QUORUM. At any meeting held for the purpose
of electing directors, the presence in person or by proxy of the holders of a
majority of the shares of (i) the Series A Preferred Stock and Series B
Preferred Stock for purposes of electing the Series A and B Director, (ii)
the Series C Preferred Stock for purposes of electing the Series C Director,
(iii) the Series D Preferred Stock for the purpose of electing the Series D
Director, (iv) the Common Stock for purposes of electing the Common
Directors, and (iv) the Preferred Stock and Common Stock for purposes of
electing the At-Large Directors, shall constitute a quorum for the election
of the Series A and B Director, the Series C Director, the Series D Director,
the Common Directors and the At-Large Directors, respectively.
(ii) REQUIRED VOTE. With respect to the election
of the Series A and B Director, the Series C Director, the Series D Director,
the Common Directors and the At-Large Directors, that candidate or those
candidates (as applicable) shall be elected who either: (i) in the case of
any such vote of the holders of the applicable class or series of stock, as
described
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in paragraph 4.5(a) above (the "SPECIFIED STOCK") conducted at a meeting of
the stockholders, receive the highest number of affirmative votes of the
outstanding shares of such Specified Stock, up to the number of directors to
be elected by such Specified Stock; or (ii) in the case of any such vote
taken by written consent without a meeting, are elected by the unanimous
written consent of the holders of shares of such Specified Stock.
(c) VACANCY. If there shall be any vacancy in the
office of a director elected by the holders of any Specified Stock pursuant
to subsection 4.5(a), then a successor to hold office for the unexpired term
of such director may be elected by either: (i) the remaining director or
directors (if any) in office that were so elected by the holders of such
Specified Stock, by the affirmative vote of a majority of such directors (or
by the sole remaining director elected by the holders of such Specified Stock
if there be but one), or (ii) the affirmative vote of the holders of the
shares of such Specified Stock that are entitled to elect such director under
subsection 4.5(a).
(d) REMOVAL. Subject to Section 303 of the
Corporations Code, any director who shall have been elected to the Board by
the holders of any Specified Stock pursuant to subsection 4.5(a) or by any
director or directors elected by holders of any Specified Stock as provided
in subsection 4.5(c), may be removed during his or her term of office, either
with or without cause, by, and only by, the affirmative vote of shares
representing a majority of the voting power of all the outstanding shares of
such Specified Stock entitled to vote, given either at a meeting of such
stockholders duly called for that purpose or pursuant to a written consent of
stockholders without a meeting, and any vacancy created by such removal may
be filled only in the manner provided in this subsection 4.5(d).
(e) PROCEDURES. Any meeting of the holders of any
Specified Stock, and any action taken by the holders of any Specified Stock
by written consent without a meeting, in order to elect or remove a director
under this subsection 4.5, shall be held in accordance with the procedures
and provisions of the Company's Bylaws, the California Corporations Code and
applicable law regarding stockholder meetings and stockholder actions by
written consent, as such are then in effect (including but not limited to
procedures and provisions for determining the record date for shares entitled
to vote).
(f) TERMINATION. Notwithstanding anything in this
subsection 4.5 to the contrary, the provisions of this subsection 4.5 shall
cease to be of any further force or effect upon: (i) an acquisition of the
Company by means of any transaction or series of transactions resulting in
the consolidation or merger of the Company with or into any other entity in
which the holders of the Company's outstanding shares immediately before such
consolidation or merger do not, immediately after such consolidation or
merger, retain voting rights representing a majority of the voting power of
the surviving entity of such consolidation or merger; (ii) a sale of all or
substantially all of the Company's assets; or (iii) the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement filed under the Securities Act of 1933, as amended, covering the
offer and sale of Common Stock for the account of the Company in which the
aggregate public offering price (before deduction of underwriters' discounts
and commissions) equals or exceeds $10,000,000, and the public offering price
per share of which equals or exceeds $6.00 (such price per share of Common
Stock to be appropriately adjusted to reflect Common Stock Events (as defined
in Subsection 5.4)).
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5. CONVERSION RIGHTS. The outstanding shares of Preferred
Stock shall be convertible into Common Stock as follows:
5.1 OPTIONAL CONVERSION.
(a) At the option of the holder thereof, each share
of Preferred Stock shall be convertible at any time into fully paid and
nonassessable shares of Common Stock as provided herein.
(b) Each holder of Preferred Stock who elects to
convert the same into shares of Common Stock shall surrender the certificate
or certificates therefor, duly endorsed, at the office of the Company or any
transfer agent for the Preferred Stock or Common Stock, and shall give
written notice to the Company at such office that such holder elects to
convert the same and shall state therein the number of shares of Preferred
Stock being converted. Thereupon the Company shall promptly issue and deliver
at such office to such holder a certificate or certificates for the number of
shares of Common Stock to which such holder is entitled upon such conversion.
Such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the certificate or
certificates representing the shares of Preferred Stock to be converted, and
the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such
shares of Common Stock on such date.
5.2 AUTOMATIC CONVERSION.
(a) Each share of Preferred Stock shall automatically
be converted into fully paid and nonassessable shares of Common Stock, as
provided herein: (i) immediately prior to the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
filed under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Company in which the aggregate
public offering price (before deduction of underwriters' discounts and
commissions) equals or exceeds $10,000,000 and the public offering price per
share of which equals or exceeds $6.00 (such price per share of Common Stock
to be appropriately adjusted to reflect Common Stock Events (as defined in
subsection 5.4)); or (ii) upon the Company's receipt of written consents to
the conversion of all then outstanding Preferred Stock under this Section 5
from (1) holders of not less than a majority of the then outstanding shares
of Series C Preferred Stock, (2) holders of not less than a majority of the
then outstanding Series D Preferred Stock, and (3) holders of not less than a
majority of the then outstanding shares of Preferred Stock voting together as
a single class on an as-converted basis.
(b) Upon the occurrence of any event specified in
subparagraph 5.2(a) above, the outstanding shares of Preferred Stock shall be
converted into Common Stock automatically without the need for any further
action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Company or its transfer
agent; PROVIDED, HOWEVER, that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such
conversion unless the certificates evidencing such shares of Preferred Stock
are either delivered to the Company or its transfer
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agent as provided below, or the holder notifies the Company or its transfer
agent that such certificates have been lost, stolen or destroyed and executes
an agreement satisfactory to the Company to indemnify the Company from any
loss incurred by it in connection with such certificates. Upon the occurrence
of such automatic conversion of the Preferred Stock, the holders of Preferred
Stock shall surrender the certificates representing such shares at the office
of the Company or any transfer agent for the Preferred Stock or Common Stock.
Thereupon, there shall be issued and delivered to such holder promptly at
such office and in its name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of
Common Stock into which the shares of Preferred Stock surrendered were
convertible on the date on which such automatic conversion occurred.
5.3 CONVERSION PRICE. Each share of outstanding Preferred
Stock shall be convertible in accordance with subsection 5.1 or subsection 5.2
above into the number of shares of Common Stock which results from dividing the
conversion price for such series of Preferred Stock that is in effect at the
time of conversion (the "CONVERSION PRICE") into the Original Issue Price for
such series of Preferred Stock. The initial Conversion Price for the Series A
Preferred Stock shall be the Original Issue Price for the Series A Preferred
Stock, the initial conversion price for the Series B Preferred Stock shall be
the Original Issue Price of the Series B Preferred Stock, the initial Conversion
Price for the Series C Preferred Stock shall be the Original Issue Price for the
Series C Preferred Stock and the initial Conversion Price for the Series D
Preferred Stock shall be the Original Issue Price for the Series D Preferred
Stock. The Conversion Price of each series of Preferred Stock shall be subject
to adjustment from time to time as provided below.
5.4 ADJUSTMENT UPON COMMON STOCK EVENT. Upon the happening of
a Common Stock Event (as hereinafter defined), the Conversion Price of the
Series A Preferred Stock, the Conversion Price for the Series B Preferred Stock,
the Conversion Price for the Series C Preferred Stock and the Conversion Price
for the Series D Preferred Stock shall, simultaneously with the happening of
such Common Stock Event, be adjusted by multiplying the Conversion Price of such
series of Preferred Stock in effect immediately prior to such Common Stock Event
by a fraction, (i) the numerator of which shall be the number of shares of
Common Stock issued and outstanding immediately prior to such Common Stock
Event, and (ii) the denominator of which shall be the number of shares of Common
Stock issued and outstanding immediately after such Common Stock Event, and the
product so obtained shall thereafter be the Conversion Price for such series of
Preferred Stock. The Conversion Price for a series of Preferred Stock shall be
readjusted in the same manner upon the happening of each subsequent Common Stock
Event. As used herein, the term "COMMON STOCK EVENT" shall mean (i) the issue by
the Company of additional shares of Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) a subdivision of the outstanding
shares of Common Stock into a greater number of shares of Common Stock, or (iii)
a combination of the outstanding shares of Common Stock into a smaller number of
shares of Common Stock.
5.5 ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If at
any time or from time to time after the Original Issue Date the Company pays a
dividend or makes another distribution to the holders of the Common Stock
payable in securities of the Company other than shares of Common Stock, then in
each such event provision shall be made so that the holders of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
the
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Series D Preferred Stock shall receive upon conversion thereof, in addition
to the number of shares of Common Stock receivable upon conversion thereof,
the amount of securities of the Company which they would have received had
their Preferred Stock been converted into Common Stock on the date of such
event (or such record date, as applicable) and had they thereafter, during
the period from the date of such event (or such record date, as applicable)
to and including the conversion date, retained such securities receivable by
them as aforesaid during such period, subject to all other adjustments called
for during such period under this Section 5 with respect to the rights of the
holders of the Preferred Stock or with respect to such other securities by
their terms.
5.6 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue
Date the Common Stock issuable upon the conversion of the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock and the
Series D Preferred Stock is changed into the same or a different number of
shares of any class or classes of stock, whether by recapitalization,
reclassification or otherwise (OTHER THAN by a Common Stock Event or a stock
dividend, reorganization, merger, consolidation or sale of assets provided
for elsewhere in this Section 5), then in any such event each holder of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock shall have the right thereafter to convert such
stock into the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change by
holders of the number of shares of Common Stock into which such shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock could have been converted immediately prior to
such recapitalization, reclassification or change, all subject to further
adjustment as provided herein or with respect to such other securities or
property by the terms thereof.
5.7 SALE OF SHARES BELOW CONVERSION PRICE.
(a) ADJUSTMENT FORMULA. If at any time or from time
to time after the Original Issue Date the Company issues or sells, or is
deemed by the provisions of this subsection 5.7 to have issued or sold,
Additional Shares of Common Stock (as hereinafter defined), otherwise than in
connection with a Common Stock Event as provided in subsection 5.4, a
dividend or distribution as provided in subsection 5.5 or a recapitalization,
reclassification or other change as provided in subsection 5.6, for an
Effective Price (as hereinafter defined) that is less than the Conversion
Price for the Series B Preferred Stock and/or Series D Preferred Stock in
effect immediately prior to such issue or sale, then, and in each such case,
the Conversion Price for the Series B Preferred Stock and/or Series D
Preferred Stock shall be reduced, as of the close of business on the date of
such issue or sale, to the price obtained by multiplying such Conversion
Price by a fraction:
(i) The numerator of which shall be the sum of
(A) the number of Common Stock Equivalents Outstanding (as hereinafter
defined) immediately prior to such issue or sale of Additional Shares of
Common Stock plus (B) the quotient obtained by dividing the Aggregate
Consideration Received (as hereinafter defined) by the Company for the total
number of Additional Shares of Common Stock so issued or sold (or deemed so
issued and sold) by the Conversion Price for such series of Preferred Stock
in effect immediately prior to such issue or sale; and
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(ii) The denominator of which shall be the sum of
(A) the number of Common Stock Equivalents Outstanding immediately prior to
such issue or sale plus (B) the number of Additional Shares of Common Stock
so issued or sold (or deemed so issued and sold).
(b) CERTAIN DEFINITIONS. For the purpose of making
any adjustment required under this subsection 5.7:
(i) "ADDITIONAL SHARES OF COMMON STOCK" shall
mean all shares of Common Stock issued by the Company, whether or not
subsequently reacquired or retired by the Company, other than: (A) shares of
Common Stock issued or issuable upon conversion of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock; (B) shares of Common Stock (or options, warrants or rights therefor)
issued to employees, officers, or directors of, or contractors, consultants,
equipment lessors, institutional lenders or advisers to, the Company or any
Subsidiary pursuant to stock purchase or stock option plans, stock bonuses or
awards, warrants, contracts or other arrangements that are approved by the
Board; and (C) a warrant for 285,714 shares of Common Stock issued to Intel
Corporation and shares of Common Stock issuable upon exercise thereof;
(ii) The "AGGREGATE CONSIDERATION RECEIVED" by
the Company for any issue or sale (or deemed issue or sale) of securities
shall (A) to the extent it consists of cash, be computed at the gross amount
of cash received by the Company before deduction of any underwriting or
similar commissions, compensation or concessions paid or allowed by the
Company in connection with such issue or sale and without deduction of any
expenses payable by the Company; (B) to the extent it consists of property
other than cash, be computed at the fair value of that property as determined
in good faith by the Board; and (C) if Additional Shares of Common Stock,
Convertible Securities or Rights or Options to purchase either Additional
Shares of Common Stock or Convertible Securities are issued or sold together
with other stock or securities or other assets of the Company for a
consideration which covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith by
the Board to be allocable to such Additional Shares of Common Stock,
Convertible Securities or Rights or Options.
(iii) "COMMON STOCK EQUIVALENTS OUTSTANDING"
shall mean the number of shares of Common Stock that is equal to the sum of
(A) all shares of Common Stock of the Company that are outstanding at the
time in question, plus (B) all shares of Common Stock of the Company issuable
upon conversion of all shares of Preferred Stock or other Convertible
Securities that are outstanding at the time in question, plus (C) all shares
of Common Stock of the Company that are issuable upon the exercise of Rights
or Options that are outstanding at the time in question assuming the full
conversion or exchange into Common Stock of all such Rights or Options that
are Rights or Options to purchase or acquire Convertible Securities into or
for Common Stock.
(iv) "CONVERTIBLE SECURITIES" shall mean stock
or other securities convertible into or exchangeable for shares of Common
Stock.
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(v) The "EFFECTIVE PRICE" of Additional Shares
of Common Stock shall mean the quotient determined by dividing the total
number of Additional Shares of Common Stock issued or sold, or deemed to have
been issued or sold, by the Company under this subsection 5.7, into the
Aggregate Consideration Received, or deemed to have been received, by the
Company under this subsection 5.7, for the issue of such Additional Shares of
Common Stock; and
(vi) "RIGHTS OR OPTIONS" shall mean warrants,
options or other rights to purchase or acquire shares of Common Stock or
Convertible Securities.
(c) DEEMED ISSUANCES. For the purpose of making any
adjustment to the Conversion Price of the Series B Preferred Stock or Series
D Preferred Stock required under this subsection 5.7, if the Company issues
or sells any Rights or Options or Convertible Securities and if the Effective
Price of the shares of Common Stock issuable upon exercise of such Rights or
Options and/or the conversion or exchange of Convertible Securities (computed
without reference to any additional or similar protective or antidilution
clauses) is less than the Conversion Price then in effect for a series of
Preferred Stock, then the Company shall be deemed to have issued, at the time
of the issuance of such Rights, Options or Convertible Securities, that
number of Additional Shares of Common Stock that is equal to the maximum
number of shares of Common Stock issuable upon exercise or conversion of such
Rights, Options or Convertible Securities upon their issuance and to have
received, as the Aggregate Consideration Received for the issuance of such
shares, an amount equal to the total amount of the consideration, if any,
received by the Company for the issuance of such Rights or Options or
Convertible Securities, plus, in the case of such Rights or Options, the
minimum amounts of consideration, if any, payable to the Company upon the
exercise in full of such Rights or Options, plus, in the case of Convertible
Securities, the minimum amounts of consideration, if any, payable to the
Company (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) upon the conversion or exchange thereof;
PROVIDED THAT:
(i) if the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution or
similar protective clauses, then the Company shall be deemed to have received
the minimum amounts of consideration without reference to such clauses;
(ii) if the minimum amount of consideration
payable to the Company upon the exercise of Rights or Options or the
conversion or exchange of Convertible Securities is reduced over time or upon
the occurrence or non-occurrence of specified events other than by reason of
antidilution or similar protective adjustments, then the Effective Price
shall be recalculated using the figure to which such minimum amount of
consideration is reduced; and
(iii) if the minimum amount of consideration
payable to the Company upon the exercise of such Rights or Options or the
conversion or exchange of Convertible Securities is subsequently increased,
then the Effective Price shall again be recalculated using the increased
minimum amount of consideration payable to the Company upon the exercise of
such Rights or Options or the conversion or exchange of such Convertible
Securities.
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No further adjustment of the Conversion Price, adjusted upon the issuance of
such Rights or Options or Convertible Securities, shall be made as a result of
the actual issuance of shares of Common Stock on the exercise of any such Rights
or Options or the conversion or exchange of any such Convertible Securities. If
any such Rights or Options or the conversion rights represented by any such
Convertible Securities shall expire without having been fully exercised, then
the Conversion Price as adjusted upon the issuance of such Rights or Options or
Convertible Securities shall be readjusted to the Conversion Price which would
have been in effect had an adjustment been made on the basis that the only
shares of Common Stock so issued were the shares of Common Stock, if any, that
there actually issued or sold on the exercise of such Rights or Options or
rights of conversion or exchange of such Convertible Securities, and such shares
of Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise, plus the consideration, if any,
actually received by the Company for the granting of all such Rights or Options,
whether or not exercised, plus the consideration received for issuing or selling
all such Convertible Securities actually converted or exchanged, plus the
consideration, if any, actually received by the Company (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion or exchange of such Convertible Securities,
provided that such readjustment shall not apply to prior conversions of
Preferred Stock.
5.8 CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Conversion Price for a series of Preferred
Stock, the Company, at its expense, shall cause its Chief Financial Officer
to compute such adjustment or readjustment in accordance with the provisions
hereof and prepare a certificate showing such adjustment or readjustment, and
shall mail such certificate, by first class mail, postage prepaid, to each
registered holder of the Preferred Stock at the holder's address as shown in
the Company's books.
5.9 FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon any conversion of Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the Company
shall pay the holder cash equal to the product of such fraction multiplied by
the Common Stock's fair market value as determined in good faith by the Board as
of the date of conversion.
5.10 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Preferred Stock, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
5.11 NOTICES. Any notice required by the provisions of this
Section 5 to be given to the holders of shares of the Preferred Stock shall be
deemed given upon the earlier of actual receipt or deposit in the United States
mail, by certified or registered mail, return receipt requested, postage
prepaid, addressed to each holder of record at the address of such holder
appearing on the books of the Company, PROVIDED HOWEVER, that if the address of
such holder is
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overseas, any notice required pursuant to this Section must be by return
receipt express courier, postage prepaid.
5.12 NO IMPAIRMENT. The Company shall not avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but shall at all times in good faith assist
in carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Preferred Stock
against impairment.
5.13 NO ADJUSTMENT. Notwithstanding anything to the contrary
set forth herein, the Company shall not be required to make any adjustment to
the Conversion Price of the Series B Preferred Stock or Series D Preferred Stock
in the case of the issuance of any shares of Common Stock or Preferred Stock,
Rights, Options, Convertible Securities or other securities issued in or
pursuant to the merger of Silicon Image, Inc., a California corporation, with
and into the Company.
6. RESTRICTIONS AND LIMITATIONS.
6.1 CLASS PROTECTIVE PROVISIONS. So long as at least 150,000
shares of Series A Preferred Stock, at least 40,000 shares of Series B Preferred
Stock, at least 400,000 shares of Series C Preferred Stock or at least 400,000
shares of Series D Preferred Stock remain outstanding, the Company shall not,
without the approval, by vote or written consent, of the holders of a majority
of Preferred Stock then outstanding, voting as a single class:
(1) amend its Articles of Incorporation in any manner
that would alter or change any of the rights, preferences, privileges, or
restrictions of the Preferred Stock;
(2) amend its Articles of Incorporation in any other
manner that would materially and adversely affect the rights, preferences,
and privileges of any series of Preferred Stock;
(3) reclassify any outstanding shares of securities
of the Company into shares having rights, preferences, or privileges senior
to or on a parity with any series of Preferred Stock;
(4) merge or consolidate with or into any corporation
if such merger or consolidation otherwise requires stockholder approval and
would result in the stockholders of the Company immediately prior to such
merger or consolidation holding less than majority of the voting power of the
stock of the surviving corporation immediately after such merger or
consolidation;
(5) sell all or substantially all the Company's
assets in a single transaction or series of related transactions;
(6) liquidate or dissolve; or
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(7) declare or pay any dividends (other than
dividends payable solely in shares of its own Common Stock) on or declare or
make any other distribution (other than Permitted Repurchases), directly or
indirectly, on account of any shares of Common Stock now or hereafter
outstanding.
6.2 SERIES C PROTECTIVE PROVISIONS. So long as at least
2,000,000 shares of Series C Preferred Stock remain outstanding, the Company
shall not, without the approval, by vote or written consent, of the holders
of a majority of the Series C Preferred Stock then outstanding, voting as a
single class:
(1) amend its Articles of Incorporation so as to
alter or change the rights, preferences or privileges of the Series C
Preferred Stock;
(2) amend its Articles of Incorporation so as to
increase or decrease the authorized number of shares of Series C Preferred
Stock;
(3) create (by reclassification or otherwise) or
issue any new class or series of shares having any rights, preferences or
privileges senior to or on a parity with the Series C Preferred Stock;
(4) take any action that results in the redemption of
any shares of Preferred Stock or Common Stock (except for Permitted
Repurchases); or
(5) take any action that requires the consent of
holder of a majority of Preferred Stock under paragraphs (4), (5), (6) or (7)
of Section 6.1 above.
6.3 SERIES D PROTECTIVE PROVISIONS. So long as at least
1,000,000 shares of Series D Preferred Stock remain outstanding, the Company
shall not, without the approval, by vote or written consent, of the holders
of a majority of the Series D Preferred Stock then outstanding, voting as a
single class:
(1) amend its Articles of Incorporation so as to
alter or change the rights, preferences or privileges of the Series D
Preferred Stock;
(2) amend its Articles of Incorporation so as to
increase or decrease the authorized number of shares of Series D Preferred
Stock;
(3) create (by reclassification or otherwise) or
issue any new class or series of shares having any rights, preferences or
privileges senior to or on a parity with the Series D Preferred Stock;
(4) take any action that results in the redemption of
any shares of Preferred Stock or Common Stock (except for Permitted
Repurchases); or
(5) take any action that requires the consent of
holder of a majority of Preferred Stock under paragraphs (4), (5), (6) or (7)
of Section 6.1 above.
15
<PAGE>
7. REDEMPTION. The Preferred Stock shall not be redeemable.
16
<PAGE>
8. MISCELLANEOUS.
8.1 NO REISSUANCE OF PREFERRED STOCK. No share or shares of
Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Company shall be
authorized to issue.
8.2 CONSENT TO CERTAIN TRANSACTIONS. Each holder of shares
of Preferred Stock shall, by virtue of its acceptance of a stock certificate
evidencing Preferred Stock, be deemed to have consented, for purposes of
Sections 502, 503, and 506 of the California Corporations Code, to all
Permitted Repurchases.
ARTICLE V
The Board of Directors of the corporation shall have the power to
adopt, amend or repeal the Bylaws of the corporation.
ARTICLE VI
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
(A) The conduct of the affairs of the corporation shall be managed
under the direction of the Board of Directors. The number of directors shall be
fixed from time to time exclusively by resolution of the Board of Directors.
(B) Notwithstanding the foregoing provision of this Article VI, each
director shall hold office until such director's successor is elected and
qualified, or until such director's earlier death, resignation or removal. No
decrease in the authorized number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(C) Subject to the rights of the holders of any series of Preferred
Stock, any vacancy occurring in the Board of Directors for any cause, and any
newly created directorship resulting from any increase in the authorized number
of directors, shall, unless (i) the Board of Directors determines by resolution
that any such vacancies or newly created directorships shall be filled by the
stockholders, or (ii) as otherwise provided by law, be filled only by the
affirmative vote of a majority of the directors then in office, although less
than a quorum, or by a sole remaining director, and not by the stockholders. Any
director elected in accordance with the preceding sentence shall hold office for
the remainder of the full term of the director for which the vacancy was created
or occurred.
(D) Subject to the rights of the holders of any series of Preferred
Stock, any director or the entire Board of Directors may be removed by the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the shares
then entitled to vote at an election of directors.
17
<PAGE>
(E) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the corporation's initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock to the public (the "INITIAL PUBLIC
OFFERING"), the directors shall be divided, with respect to the time for which
they severally hold office, into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors,
with the number of directors in each class to be divided as equally as
reasonably possible. The term of office of the Class I directors shall expire at
the corporation's first annual meeting of stockholders following the closing of
the Initial Public Offering, the term of office of the Class II directors shall
expire at the corporation's second annual meeting of stockholders following the
closing of the Initial Public Offering, and the term of office of the Class III
directors shall expire at the corporation's third annual meeting of stockholders
following the closing of the Initial Public Offering. At each annual meeting of
stockholders commencing with the first annual meeting of stockholders following
the closing of the Initial Public Offering, directors elected to succeed those
directors of the class whose terms then expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders after
their election. Prior to the closing of the Initial Public Offering, or in the
event the corporation is prohibited from dividing its board of directors through
the operation of Section 2115 of the California General Corporation Law
following the record date of the corporation's first annual meeting of
stockholders following the closing of the Initial Public Offering, each director
shall hold office until the next annual meeting of stockholders and until such
director's successor is elected and qualified, or until such director's earlier
death, resignation or removal.
(F) Election of directors need not be by written ballot unless the
Bylaws of the corporation shall so provide.
(G) Following the closing of the Initial Public Offering, no action
shall be taken by the stockholders of the corporation except at an annual or
special meeting of stockholders called in accordance with the Bylaws of the
corporation, and no action shall be taken by the stockholders by written
consent.
(H) Advance notice of stockholder nominations for the election of
directors of the corporation and of business to be brought by stockholders
before any meeting of stockholders of the corporation shall be given in the
manner provided in the Bylaws of the corporation. Business transacted at special
meetings of stockholders shall be confined to the purpose or purposes stated in
the notice of meeting.
(I) Subject to Section 6.5 of the Bylaws of the corporation, following
the closing of the Initial Public Offering, stockholders of the corporation
holding at least sixty-six and two-thirds percent (66-2/3%) of the corporation's
outstanding voting stock then entitled to vote at an election of directors shall
have the power to adopt, amend or repeal Bylaws of the corporation.
(J) Following the closing of the Initial Public Offering, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the corporation's outstanding voting stock then entitled to vote at
an election of directors, voting together as a single class,
18
<PAGE>
shall be required to alter, change, amend, repeal or adopt any provision
inconsistent with this Article VI.
ARTICLE VII
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with this
Article VII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
19
<PAGE>
Exhibit 3.03
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SILICON IMAGE, INC.
(Originally incorporated on June 11, 1999 under the name Silicon Image, Inc.
(Delaware))
Silicon Image, Inc., a Delaware corporation, hereby certifies that the
Second Amended and Restated Certificate of Incorporation of the corporation
attached hereto as EXHIBIT "A", which is incorporated herein by this reference,
has been duly adopted by the corporation's Board of Directors and stockholders
in accordance with Sections 242 and 245 of the Delaware General Corporation Law,
with the approval of the corporation's stockholders having been given by written
consent without a meeting in accordance with Section 228 of the Delaware General
Corporation Law.
IN WITNESS WHEREOF, said corporation has caused this Second Amended and
Restated Certificate of Incorporation to be signed by its by duly authorized
officer.
Dated: _______________, 1999
SILICON IMAGE, INC.
___________________________________
David D. Lee, President
<PAGE>
EXHIBIT "A"
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SILICON IMAGE, INC.
ARTICLE I
The name of the corporation is Silicon Image, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 15 East North Street, City of Dover, County of Kent. The name of its
registered agent at that address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the
corporation has authority to issue is 80,000,000 shares, consisting of two
classes: 75,000,000 shares of Common Stock, $0.001 par value per share, and
5,000,000 shares of Preferred Stock, $0.001 par value per share.
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of
the shares of Preferred Stock in one or more series, and, by filing a
Certificate of Designation pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, to fix the designation, powers, preferences and rights of the
shares of each such series and any qualifications, limitations or restrictions
thereof, and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding). The number
of authorized shares of Preferred Stock may also be increased or decreased (but
not below the number of shares thereof then outstanding) by the affirmative vote
of the holders of a majority of the stock of the corporation entitled to vote,
unless a vote of any other holders is required pursuant to a Certificate or
Certificates establishing a series of Preferred Stock.
Except as otherwise expressly provided in any Certificate of
Designation designating any series of Preferred Stock pursuant to the foregoing
provisions of this Article IV, any new series of Preferred Stock may be
designated, fixed and determined as provided herein by the Board of Directors
without approval of the holders of Common Stock or the holders of Preferred
Stock, or any series thereof, and any such new series may have powers,
preferences and rights, including, without limitation, voting rights, dividend
rights, liquidation rights, redemption rights and conversion rights, senior to,
junior to or pari passu with the rights of the Common Stock, the Preferred
Stock, or any future class or series of Preferred Stock or Common Stock.
1
<PAGE>
ARTICLE V
The Board of Directors of the corporation shall have the power to
adopt, amend or repeal the Bylaws of the corporation.
ARTICLE VI
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
(A) The conduct of the affairs of the corporation shall be managed
under the direction of the Board of Directors. The number of directors shall be
fixed from time to time exclusively by resolution of the Board of Directors.
(B) Notwithstanding the foregoing provision of this Article VI, each
director shall hold office until such director's successor is elected and
qualified, or until such director's earlier death, resignation or removal. No
decrease in the authorized number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(C) Subject to the rights of the holders of any series of Preferred
Stock, any vacancy occurring in the Board of Directors for any cause, and any
newly created directorship resulting from any increase in the authorized number
of directors, shall, unless (i) the Board of Directors determines by resolution
that any such vacancies or newly created directorships shall be filled by the
stockholders, or (ii) as otherwise provided by law, be filled only by the
affirmative vote of a majority of the directors then in office, although less
than a quorum, or by a sole remaining director, and not by the stockholders. Any
director elected in accordance with the preceding sentence shall hold office for
the remainder of the full term of the director for which the vacancy was created
or occurred.
(D) Subject to the rights of the holders of any series of Preferred
Stock, any director or the entire Board of Directors may be removed by the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the shares
then entitled to vote at an election of directors.
(E) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, the directors
shall be divided, with respect to the time for which they severally hold office,
into three classes designated as Class I, Class II and Class III, respectively.
Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors, with the number of directors in
each class to be divided as equally as reasonably possible. The term of office
of the Class I directors shall expire at the corporation's first annual meeting
of stockholders following the closing of the corporation's initial public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock to the
public (the "INITIAL PUBLIC OFFERING"), the term of office of the Class II
directors shall expire at the corporation's second annual meeting of
stockholders following the closing of the Initial Public Offering, and the term
of office of the Class III directors shall expire at the corporation's third
annual meeting of stockholders following the closing of the Initial Public
Offering. At each annual meeting of
2
<PAGE>
stockholders commencing with the first annual meeting of stockholders
following the closing of the Initial Public Offering, directors elected to
succeed those directors of the class whose terms then expire shall be elected
for a term of office to expire at the third succeeding annual meeting of
stockholders after their election. Prior to the closing of the Initial Public
Offering, or in the event the corporation is prohibited from dividing its
board of directors through the operation of Section 2115 of the California
General Corporation Law following the record date of the corporation's first
annual meeting of stockholders following the closing of the Initial Public
Offering, each director shall hold office until the next annual meeting of
stockholders and until such director's successor is elected and qualified, or
until such director's earlier death, resignation or removal.
(F) Election of directors need not be by written ballot unless the
Bylaws of the corporation shall so provide.
(G) No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws of the corporation, and no action shall be taken by the stockholders
by written consent.
(H) Advance notice of stockholder nominations for the election of
directors of the corporation and of business to be brought by stockholders
before any meeting of stockholders of the corporation shall be given in the
manner provided in the Bylaws of the corporation. Business transacted at special
meetings of stockholders shall be confined to the purpose or purposes stated in
the notice of meeting.
(I) Subject to Section 6.5 of the Bylaws of the corporation,
stockholders of the corporation holding at least sixty-six and two-thirds
percent (66-2/3%) of the corporation's outstanding voting stock then entitled to
vote at an election of directors shall have the power to adopt, amend or repeal
Bylaws of the corporation.
(J) The affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the corporation's outstanding voting stock then
entitled to vote at an election of directors, voting together as a single class,
shall be required to alter, change, amend, repeal or adopt any provision
inconsistent with this Article VI.
ARTICLE VII
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with this
Article VII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
3
<PAGE>
Exhibit 3.04
BYLAWS
OF
SILICON IMAGE, INC. (DELAWARE)
(a Delaware corporation)
As Adopted June 11, 1999
<PAGE>
BYLAWS
OF
SILICON IMAGE, INC. (DELAWARE)
(a Delaware corporation)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - STOCKHOLDERS......................................................................... 1
Section 1.1: Annual Meetings...................................................... 1
Section 1.2: Special Meetings..................................................... 1
Section 1.3: Notice of Meetings................................................... 1
Section 1.4: Adjournments......................................................... 1
Section 1.5: Quorum............................................................... 1
Section 1.6: Organization......................................................... 2
Section 1.7: Voting; Proxies...................................................... 2
Section 1.8: Fixing Date for Determination of Stockholders
of Record............................................................ 2
Section 1.9: List of Stockholders Entitled to Vote................................ 3
Section 1.10: Action by Written Consent of Stockholders............................. 3
Section 1.11: Inspectors of Elections.............................................. 4
ARTICLE II - BOARD OF DIRECTORS.................................................................. 5
Section 2.1: Number; Qualifications............................................... 5
Section 2.2: Election; Resignation; Removal; Vacancies............................ 5
Section 2.3: Regular Meetings..................................................... 5
</TABLE>
i
<PAGE>
BYLAWS
OF
SILICON IMAGE, INC. (DELAWARE)
(a Delaware corporation)
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 2.4: Special Meetings..................................................... 5
Section 2.5: Telephonic Meetings Permitted........................................ 6
Section 2.6: Quorum; Vote Required for Action..................................... 6
Section 2.7: Organization......................................................... 6
Section 2.8: Written Action by Directors.......................................... 6
Section 2.9: Powers............................................................... 6
Section 2.10: Compensation of Directors............................................ 6
ARTICLE III - COMMITTEES......................................................................... 7
Section 3.1: Committees........................................................... 7
Section 3.2: Committee Rules...................................................... 7
ARTICLE IV - OFFICERS............................................................................ 7
Section 4.1: Generally............................................................ 7
Section 4.2: Chief Executive Officer.............................................. 8
Section 4.3: Chairperson of the Board............................................. 8
Section 4.4: President............................................................ 8
Section 4.5: Vice President....................................................... 9
Section 4.6: Chief Financial Officer.............................................. 9
Section 4.7: Treasurer............................................................ 9
Section 4.8: Secretary............................................................ 9
</TABLE>
ii
<PAGE>
BYLAWS
OF
SILICON IMAGE, INC. (DELAWARE)
(a Delaware corporation)
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 4.9: Delegation of Authority.............................................. 9
Section 4.10: Removal.............................................................. 9
ARTICLE V - STOCK................................................................................ 9
Section 5.l: Certificates......................................................... 9
Section 5.2: Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificate.......................................... 9
Section 5.3: Other Regulations.................................................... 10
ARTICLE VI - INDEMNIFICATION..................................................................... 10
Section 6.1: Indemnification of Officers and Directors............................ 10
Section 6.2: Advance of Expenses.................................................. 10
Section 6.3: Non-Exclusivity of Rights............................................ 11
Section 6.4: Indemnification Contracts............................................ 11
Section 6.5: Effect of Amendment.................................................. 11
ARTICLE VII - NOTICES............................................................................ 11
Section 7.l: Notice............................................................... 11
Section 7.2: Waiver of Notice..................................................... 12
ARTICLE VIII - INTERESTED DIRECTORS.............................................................. 12
Section 8.1: Interested Directors; Quorum......................................... 12
</TABLE>
iii
<PAGE>
BYLAWS
OF
SILICON IMAGE, INC. (DELAWARE)
(a Delaware corporation)
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE IX - MISCELLANEOUS....................................................................... 12
Section 9.1: Fiscal Year.......................................................... 12
Section 9.2: Seal................................................................. 12
Section 9.3: Form of Records...................................................... 13
Section 9.4: Reliance Upon Books and Records...................................... 13
Section 9.5: Certificate of Incorporation Governs................................. 13
Section 9.6: Severability......................................................... 13
ARTICLE X - AMENDMENT............................................................................ 13
Section 10.1: Amendments........................................................... 13
</TABLE>
iv
<PAGE>
BYLAWS
OF
SILICON IMAGE, INC. (DELAWARE)
(a Delaware corporation)
As Adopted June 11, 1999
ARTICLE I
STOCKHOLDERS
SECTION 1.1: ANNUAL MEETINGS. Unless directors are elected by written
consent in lieu of an annual meeting as permitted by Section 211 of the Delaware
General Corporation Law, an annual meeting of stockholders shall be held for the
election of directors at such date, time and place, either within or without the
State of Delaware, as the Board of Directors shall each year fix. Any other
proper business may be transacted at the annual meeting.
SECTION 1.2: SPECIAL MEETINGS. Special meetings of stockholders for
any purpose or purposes may be called at any time by the Board of Directors,
the Chairperson of the Board of Directors, the Chief Executive Officer, the
President, the holders of shares of the Corporation that are entitled to cast
not less than ten percent (10%) of the total number of votes entitled to be
cast by all stockholders at such meeting, or by a majority of the members of
the Board of Directors. Special meetings may not be called by any other
person or persons.
SECTION 1.3: NOTICE OF MEETINGS. Written notice of all meetings of
stockholders shall be given stating the place, date and time of the meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by applicable law or the Certificate of
Incorporation of the Corporation, such notice shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder of record entitled to vote at such meeting.
SECTION 1.4: ADJOURNMENTS. Any meeting of stockholders may adjourn
from time to time to reconvene at the same or another place, and notice need
not be given of any such adjourned meeting if the time, date and place
thereof are announced at the meeting at which the adjournment is taken;
PROVIDED, HOWEVER, that if the adjournment is for more than thirty (30) days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, then a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. At the adjourned
meeting the Corporation may transact any business that might have been
transacted at the original meeting.
SECTION 1.5: QUORUM. At each meeting of stockholders the holders of a
majority of the shares of stock entitled to vote at the meeting, present in
person or represented by proxy, shall
<PAGE>
constitute a quorum for the transaction of business, except if otherwise
required by applicable law. If a quorum shall fail to attend any meeting, the
chairperson of the meeting or the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, at the meeting may
adjourn the meeting. Shares of the Corporation's stock belonging to the
Corporation (or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation are held,
directly or indirectly, by the Corporation), shall neither be entitled to
vote nor be counted for quorum purposes; PROVIDED, HOWEVER, that the
foregoing shall not limit the right of the Corporation or any other
corporation to vote any shares of the Corporation's stock held by it in a
fiduciary capacity.
SECTION 1.6: ORGANIZATION. Meetings of stockholders shall be presided
over by such person as the Board of Directors may designate, or, in the absence
of such a person, the Chairperson of the Board of Directors, or, in the absence
of such person, the President of the Corporation, or, in the absence of such
person, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, at the meeting. Such
person shall be chairperson of the meeting and, subject to Section 1.11 hereof,
shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seems to him or her to be in order. The Secretary of the Corporation shall
act as secretary of the meeting, but in such person's absence the chairperson of
the meeting may appoint any person to act as secretary of the meeting.
SECTION 1.7: VOTING; PROXIES. Unless otherwise provided by law or the
Certificate of Incorporation, and subject to the provisions of Section 1.8 of
these Bylaws, each stockholder shall be entitled to one (1) vote for each share
of stock held by such stockholder. Each stockholder entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may authorize another person or persons to act for
such stockholder by proxy. Such a proxy may be prepared, transmitted and
delivered in any manner permitted by applicable law. Voting at meetings of
stockholders need not be by written ballot unless such is demanded at the
meeting before voting begins by a stockholder or stockholders holding shares
representing at least one percent (1%) of the votes entitled to vote at such
meeting, or by such stockholder's or stockholders' proxy; PROVIDED, HOWEVER,
that an election of directors shall be by written ballot if demand is so made by
any stockholder at the meeting before voting begins. If a vote is to be taken by
written ballot, then each such ballot shall state the name of the stockholder or
proxy voting and such other information as the chairperson of the meeting deems
appropriate. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Unless otherwise provided by applicable law,
the Certificate of Incorporation or these Bylaws, every matter other than the
election of directors shall be decided by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote thereon that are present in
person or represented by proxy at the meeting and are voted for or against the
matter.
SECTION 1.8: FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing
-2-
<PAGE>
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a
record date, which shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors and which shall
not be more than sixty (60) nor less than ten (10) days before the date of
such meeting, nor more than sixty (60) days prior to any other action. If no
record date is fixed by the Board of Directors, then the record date shall be
as provided by applicable law. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of
Directors may fix a new record date for the adjourned meeting.
SECTION 1.9: LIST OF STOCKHOLDERS ENTITLED TO VOTE. A complete list of
stockholders entitled to vote at any meeting of stockholders, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present at the meeting.
SECTION 1.10: ACTION BY WRITTEN CONSENT OF STOCKHOLDERS.
(a) PROCEDURE. Unless otherwise provided by the Certificate of
Incorporation, any action required or permitted to be taken at any annual or
special meeting of the stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted. Written stockholder consents shall bear the date of signature
of each stockholder who signs the consent and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware, to
its principal place of business or to any officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. No written consent
shall be effective to take the action set forth therein unless, within sixty
(60) days of the earliest dated consent delivered to the Corporation in the
manner provided above, written consents signed by a sufficient number of
stockholders to take the action set forth therein are delivered to the
Corporation in the manner provided above.
(b) NOTICE OF CONSENT. Prompt notice of the taking of corporate action
by stockholders without a meeting by less than unanimous written consent of the
stockholders shall be given to those stockholders who have not consented thereto
in writing and who, if the action had been taken at a meeting, would have been
entitled to notice of the meeting if the record date for such meeting had been
the date that written consents signed by a sufficient number of holders to take
the action were delivered to the Corporation. In the case of a
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Certificate Action (as defined below), if the Delaware General Corporation
Law so requires, such notice shall be given prior to filing of the
certificate in question. If the action which is consented to requires the
filing of a certificate under the Delaware General Corporation Law (a
"CERTIFICATE ACTION"), then if the Delaware General Corporation Law so
requires, the certificate so filed shall state that written stockholder
consent has been given in accordance with Section 228 of the Delaware General
Corporation Law and that written notice of the taking of corporate action by
stockholders without a meeting as described herein has been given as provided
in such section.
SECTION 1.11: INSPECTORS OF ELECTIONS.
(a) APPLICABILITY. Unless otherwise provided in the Corporation's
Certificate of Incorporation or required by the Delaware General Corporation
Law, the following provisions of this Section 1.11 shall apply only if and when
the Corporation has a class of voting stock that is: (i) listed on a national
securities exchange; (ii) authorized for quotation on an automated interdealer
quotation system of a registered national securities association; or (iii) held
of record by more than 2,000 stockholders; in all other cases, observance of the
provisions of this Section 1.11 shall be optional, and at the discretion of the
Corporation.
(b) APPOINTMENT. The Corporation shall, in advance of any meeting of
stockholders, appoint one or more inspectors of election to act at the meeting
and make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting of stockholders, the person
presiding at the meeting shall appoint one or more inspectors to act at the
meeting.
(c) INSPECTOR'S OATH. Each inspector of election, before entering upon
the discharge of his duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
such inspector's ability.
(d) DUTIES OF INSPECTORS. At a meeting of stockholders, the inspectors
of election shall (i) ascertain the number of shares outstanding and the voting
power of each share, (ii) determine the shares represented at a meeting and the
validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period of time a record of the disposition
of any challenges made to any determination by the inspectors, and (v) certify
their determination of the number of shares represented at the meeting, and
their count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors.
(e) OPENING AND CLOSING OF POLLS. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced by the inspectors at the meeting. No ballot,
proxies or votes, nor any revocations thereof or changes thereto, shall be
accepted by the inspectors after the closing of the polls unless the Court of
Chancery upon application by a stockholder shall determine otherwise.
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(f) DETERMINATIONS. In determining the validity and counting of proxies
and ballots, the inspectors shall be limited to an examination of the proxies,
any envelopes submitted with those proxies, any information provided in
connection with proxies in accordance with Section 212(c)(2) of the Delaware
General Corporation Law, ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable information
for the limited purpose of reconciling proxies and ballots submitted by or on
behalf of banks, brokers, their nominees or similar persons which represent more
votes than the holder of a proxy is authorized by the record owner to cast or
more votes than the stockholder holds of record. If the inspectors consider
other reliable information for the limited purpose permitted herein, the
inspectors at the time they make their certification of their determinations
pursuant to this Section 1.11 shall specify the precise information considered
by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1: NUMBER; QUALIFICATIONS. The Board of Directors shall
consist of one or more members. The initial number of directors shall be one
(1), and thereafter shall be fixed from time to time by resolution of the Board
of Directors. No decrease in the authorized number of directors constituting the
Board of Directors shall shorten the term of any incumbent director. Directors
need not be stockholders of the Corporation.
SECTION 2.2: ELECTION; RESIGNATION; REMOVAL; VACANCIES. The Board of
Directors shall initially consist of the person or persons elected by the
incorporator or named in the Corporation's initial Certificate of Incorporation.
Each director shall hold office until such director's successor is elected and
qualified, or until such director's earlier death, resignation or removal. Any
director may resign at any time upon written notice to the Corporation. Subject
to the rights of any holders of Preferred Stock then outstanding: (i) any
director or the entire Board of Directors may be removed, with or without cause,
by the holders of a majority of the shares then entitled to vote at an election
of directors and (ii) any vacancy occurring in the Board of Directors for any
cause, and any newly created directorship resulting from any increase in the
authorized number of directors to be elected by all stockholders having the
right to vote as a single class, may be filled by the stockholders, by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
SECTION 2.3: REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places, within or without the State of Delaware,
and at such times as the Board of Directors may from time to time determine.
Notice of regular meetings need not be given if the date, times and places
thereof are fixed by resolution of the Board of Directors.
SECTION 2.4: SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairperson of the Board of Directors, the
President or a majority of the members of the Board of Directors then in office
and may be held at any time, date or place, within or
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without the State of Delaware, as the person or persons calling the meeting
shall fix. Notice of the time, date and place of such meeting shall be given,
orally or in writing, by the person or persons calling the meeting to all
directors at least four (4) days before the meeting if the notice is mailed,
or at least twenty-four (24) hours before the meeting if such notice is given
by telephone, hand delivery, telegram, telex, mailgram, facsimile or similar
communication method. Unless otherwise indicated in the notice, any and all
business may be transacted at a special meeting.
SECTION 2.5: TELEPHONIC MEETINGS PERMITTED. Members of the Board of
Directors, or any committee of the Board, may participate in a meeting of the
Board or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
conference telephone or similar communications equipment shall constitute
presence in person at such meeting.
SECTION 2.6: QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the
Board of Directors a majority of the total number of authorized directors shall
constitute a quorum for the transaction of business. Except as otherwise
provided herein or in the Certificate of Incorporation, or required by law, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
SECTION 2.7: ORGANIZATION. Meetings of the Board of Directors shall be
presided over by the Chairperson of the Board of Directors, or in such person's
absence by the President, or in such person's absence by a chairperson chosen at
the meeting. The Secretary shall act as secretary of the meeting, but in such
person's absence the chairperson of the meeting may appoint any person to act as
secretary of the meeting.
SECTION 2.8: WRITTEN ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or committee,
respectively.
SECTION 2.9: POWERS. The Board of Directors may, except as otherwise
required by law or the Certificate of Incorporation, exercise all such powers
and do all such acts and things as may be exercised or done by the Corporation.
SECTION 2.10: COMPENSATION OF DIRECTORS. Directors, as such, may
receive, pursuant to a resolution of the Board of Directors, fees and other
compensation for their services as directors, including without limitation their
services as members of committees of the Board of Directors.
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ARTICLE III
COMMITTEES
SECTION 3.1: COMMITTEES. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting of
such committee who are not disqualified from voting, whether or not such member
or members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in a resolution
of the Board of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers that may require it; but no such committee shall have the
power or authority in reference to the following matters: (i) approving or
adopting, or recommending to the stockholders, any action or matter expressly
required by the Delaware General Corporation Law to be submitted to stockholders
for approval or (ii) adopting, amending or repealing any bylaw of the
Corporation.
SECTION 3.2: COMMITTEE RULES. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
ARTICLE IV
OFFICERS
SECTION 4.1: GENERALLY. The officers of the Corporation shall consist
of a Chief Executive Officer and/or a President, a Secretary, a Treasurer and
such other officers as may from time to time be appointed by the Board of
Directors. All officers shall be elected by the Board of Directors; PROVIDED,
HOWEVER, that the Board of Directors may empower the Chief Executive Officer of
the Corporation to appoint officers other than the Chairperson of the Board, the
Chief Executive Officer, the President, the Chief Financial Officer or the
Treasurer. Each officer shall hold office until such person's successor is
elected and qualified or until such person's earlier resignation or removal. Any
number of offices may be held by the same person. Any officer may resign at any
time upon written notice to the Corporation. Any vacancy occurring in any office
of the Corporation by death, resignation, removal or otherwise may be filled by
the Board of Directors.
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SECTION 4.2: CHIEF EXECUTIVE OFFICER. Subject to the control of the
Board of Directors and such supervisory powers, if any, as may be given by the
Board of Directors, the powers and duties of the Chief Executive Officer of the
Corporation are:
(a) To act as the general manager and, subject to the control of the
Board of Directors, to have general supervision, direction and control of the
business and affairs of the Corporation;
(b) To preside at all meetings of the stockholders;
(c) To call meetings of the stockholders to be held at such times and,
subject to the limitations prescribed by law or by these Bylaws, at such places
as he or she shall deem proper; and
(d) To affix the signature of the Corporation to all deeds,
conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and
other papers and instruments in writing which have been authorized by the Board
of Directors or which, in the judgment of the Chief Executive Officer, should be
executed on behalf of the Corporation; to sign certificates for shares of stock
of the Corporation; and, subject to the direction of the Board of Directors, to
have general charge of the property of the Corporation and to supervise and
control all officers, agents and employees of the Corporation.
The President shall be the Chief Executive Officer of the Corporation unless the
Board of Directors shall designate another officer to be the Chief Executive
Officer. If there is no President, and the Board of Directors has not designated
any other officer to be the Chief Executive Officer, then the Chairperson of the
Board of Directors shall be the Chief Executive Officer.
SECTION 4.3: CHAIRPERSON OF THE BOARD. The Chairperson of the Board of
Directors shall have the power to preside at all meetings of the Board of
Directors and shall have such other powers and duties as provided in these
Bylaws and as the Board of Directors may from time to time prescribe.
SECTION 4.4: PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation unless the Board of Directors shall have designated
another officer as the Chief Executive Officer of the Corporation. Subject to
the provisions of these Bylaws and to the direction of the Board of Directors,
and subject to the supervisory powers of the Chief Executive Officer (if the
Chief Executive Officer is an officer other than the President), and subject to
such supervisory powers and authority as may be given by the Board of Directors
to the Chairperson of the Board of Directors, and/or to any other officer, the
President shall have the responsibility for the general management the control
of the business and affairs of the Corporation and the general supervision and
direction of all of the officers, employees and agents of the Corporation (other
than the Chief Executive Officer, if the Chief Executive Officer is an officer
other than the President) and shall perform all duties and have all powers that
are commonly incident to the office of President or that are delegated to the
President by the Board of Directors.
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SECTION 4.5: VICE PRESIDENT. Each Vice President shall have all such
powers and duties as are commonly incident to the office of Vice President, or
that are delegated to him or her by the Board of Directors or the Chief
Executive Officer. A Vice President may be designated by the Board to perform
the duties and exercise the powers of the Chief Executive Officer in the event
of the Chief Executive Officer's absence or disability.
SECTION 4.6: CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall be the Treasurer of the Corporation unless the Board of Directors shall
have designated another officer as the Treasurer of the Corporation. Subject
to the direction of the Board of Directors and the Chief Executive Officer,
the Chief Financial Officer shall perform all duties and have all powers that
are commonly incident to the office of Chief Financial Officer.
SECTION 4.7: TREASURER. The Treasurer shall have custody of all monies
and securities of the Corporation. The Treasurer shall make such disbursements
of the funds of the Corporation as are authorized and shall render from time to
time an account of all such transactions. The Treasurer shall also perform such
other duties and have such other powers as are commonly incident to the office
of Treasurer, or as the Board of Directors or the Chief Executive Officer may
from time to time prescribe.
SECTION 4.8: SECRETARY. The Secretary shall issue or cause to be
issued all authorized notices for, and shall keep, or cause to be kept,
minutes of all meetings of the stockholders and the Board of Directors. The
Secretary shall have charge of the corporate minute books and similar records
and shall perform such other duties and have such other powers as are
commonly incident to the office of Secretary, or as the Board of Directors or
the Chief Executive Officer may from time to time prescribe.
SECTION 4.9: DELEGATION OF AUTHORITY. The Board of Directors may
from time to time delegate the powers or duties of any officer to any other
officers or agents, notwithstanding any provision hereof.
SECTION 4.10: REMOVAL. Any officer of the Corporation shall serve at
the pleasure of the Board of Directors and may be removed at any time, with or
without cause, by the Board of Directors. Such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation.
ARTICLE V
STOCK
SECTION 5.1: CERTIFICATES. Every holder of stock shall be entitled
to have a certificate signed by or in the name of the Corporation by the
Chairperson or Vice-Chairperson of the Board of Directors, or the President
or a Vice President, and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, of the Corporation, certifying the
number of shares owned by such stockholder in the Corporation. Any or all of
the signatures on the certificate may be a facsimile.
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SECTION 5.2: LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF
NEW CERTIFICATES. The Corporation may issue a new certificate of stock in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to agree
to indemnify the Corporation and/or to give the Corporation a bond sufficient to
indemnify it, against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 5.3: OTHER REGULATIONS. The issue, transfer, conversion and
registration of stock certificates shall be governed by such other regulations
as the Board of Directors may establish.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1: INDEMNIFICATION OF OFFICERS AND DIRECTORS. Each person
who was or is made a party to, or is threatened to be made a party to, or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "PROCEEDING"), by reason of the fact that
such person (or a person of whom such person is the legal representative), is
or was a director or officer of the Corporation or a Reincorporated
Predecessor (as defined below) or is or was serving at the request of the
Corporation or a Reincorporated Predecessor (as defined below) as a director
or officer of another corporation, or of a partnership, joint venture, trust
or other enterprise, including service with respect to employee benefit
plans, shall be indemnified and held harmless by the Corporation to the
fullest extent permitted by the Delaware General Corporation Law, against all
expenses, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes and penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith, provided such person acted in good faith and in a manner which the
person reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe the person's conduct was unlawful. Such
indemnification shall continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of such person's heirs, executors
and administrators. Notwithstanding the foregoing, the Corporation shall
indemnify any such person seeking indemnity in connection with a Proceeding
(or part thereof) initiated by such person only if such Proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation. As used
herein, the term "REINCORPORATED PREDECESSOR" means a corporation that is
merged with and into the Corporation in a statutory merger where (a) the
Corporation is the surviving corporation of such merger; (b) the primary
purpose of such merger is to change the corporate domicile of the
Reincorporated Predecessor to Delaware.
SECTION 6.2: ADVANCE OF EXPENSES. The Corporation shall pay all
expenses (including attorneys' fees) incurred by such a director or officer in
defending any such Proceeding as they are incurred in advance of its final
disposition; PROVIDED, HOWEVER, that if the Delaware General Corporation Law
then so requires, the payment of such expenses incurred by such a director or
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officer in advance of the final disposition of such Proceeding shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article VI or otherwise; and PROVIDED, FURTHER, that the Corporation shall
not be required to advance any expenses to a person against whom the Corporation
directly brings a claim, in a Proceeding, alleging that such person has breached
such person's duty of loyalty to the Corporation, committed an act or omission
not in good faith or that involves intentional misconduct or a knowing violation
of law, or derived an improper personal benefit from a transaction.
SECTION 6.3: NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person in this Article VI shall not be exclusive of any other right that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders
or disinterested directors, or otherwise. Additionally, nothing in this Article
VI shall limit the ability of the Corporation, in its discretion, to indemnify
or advance expenses to persons whom the Corporation is not obligated to
indemnify or advance expenses pursuant to this Article VI.
SECTION 6.4: INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized to cause the Corporation to enter into indemnification contracts with
any director, officer, employee or agent of the Corporation, or any person
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing indemnification rights
to such person. Such rights may be greater than those provided in this Article
VI.
SECTION 6.5: EFFECT OF AMENDMENT. Any amendment, repeal or
modification of any provision of this Article VI shall be prospective only,
and shall not adversely affect any right or protection conferred on a person
pursuant to this Article VI and existing at the time of such amendment,
repeal or modification.
ARTICLE VII
NOTICES
SECTION 7.1: NOTICE. Except as otherwise specifically provided
herein or required by law, all notices required to be given pursuant to these
Bylaws shall be in writing and may in every instance be effectively given by
hand delivery (including use of a delivery service), by depositing such
notice in the mail, postage prepaid, or by sending such notice by prepaid
telegram, telex, overnight express courier, mailgram or facsimile. Any such
notice shall be addressed to the person to whom notice is to be given at such
person's address as it appears on the records of the Corporation. The notice
shall be deemed given (i) in the case of hand delivery, when received by the
person to whom notice is to be given or by any person accepting such notice
on behalf of such person, (ii) in the case of delivery by mail, upon deposit
in the mail, (iii) in the case of delivery by overnight express courier, when
dispatched, and (iv) in the case of delivery via telegram, telex, mailgram or
facsimile, when dispatched.
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SECTION 7.2: WAIVER OF NOTICE. Whenever notice is required to be given
under any provision of these Bylaws, a written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE VIII
INTERESTED DIRECTORS
SECTION 8.1: INTERESTED DIRECTORS; QUORUM. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof that
authorizes the contract or transaction, or solely because his, her or their
votes are counted for such purpose, if: (i) the material facts as to his, her or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; (ii) the material
facts as to his, her or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof, or the stockholders. Interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1: FISCAL YEAR. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
SECTION 9.2: SEAL. The Board of Directors may provide for a corporate
seal, which shall have the name of the Corporation inscribed thereon and shall
otherwise be in such form as may be approved from time to time by the Board of
Directors.
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SECTION 9.3: FORM OF RECORDS. Any records maintained by the
Corporation in the regular course of its business, including its stock
ledger, books of account and minute books, may be kept on, or be in the form
of, magnetic tape, diskettes, photographs, microphotographs or any other
information storage device, provided that the records so kept can be
converted into clearly legible form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any person entitled
to inspect the same.
SECTION 9.4: RELIANCE UPON BOOKS AND RECORDS. A member of the Board of
Directors, or a member of any committee designated by the Board of Directors
shall, in the performance of such person's duties, be fully protected in relying
in good faith upon records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of the
Corporation's officers or employees, or committees of the Board of Directors, or
by any other person as to matters the member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
SECTION 9.5: CERTIFICATE OF INCORPORATION GOVERNS. In the event of any
conflict between the provisions of the Corporation's Certificate of
Incorporation and Bylaws, the provisions of the Certificate of Incorporation
shall govern.
SECTION 9.6: SEVERABILITY. If any provision of these Bylaws shall be
held to be invalid, illegal, unenforceable or in conflict with the provisions of
the Corporation's Certificate of Incorporation, then such provision shall
nonetheless be enforced to the maximum extent possible consistent with such
holding and the remaining provisions of these Bylaws (including without
limitation, all portions of any section of these Bylaws containing any such
provision held to be invalid, illegal, unenforceable or in conflict with the
Certificate of Incorporation, that are not themselves invalid, illegal,
unenforceable or in conflict with the Certificate of Incorporation) shall remain
in full force and effect.
ARTICLE X
AMENDMENT
SECTION 10.1: AMENDMENTS. Stockholders of the Corporation holding a
majority of the Corporation's outstanding voting stock then entitled to vote at
an election of directors shall have the power to adopt, amend or repeal Bylaws
To the extent provided in the Corporation's Certificate of Incorporation, the
Board of Directors of the Corporation shall also have the power to adopt, amend
or repeal Bylaws of the Corporation.
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Exhibit 3.05
RESTATED BYLAWS
OF
SILICON IMAGE, INC.
(a Delaware corporation)
As Adopted ____________, 1999
<PAGE>
RESTATED BYLAWS
OF
SILICON IMAGE, INC.
a Delaware corporation
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I - STOCKHOLDERS
Section 1.1: Annual Meetings....................................................... 1
Section 1.2: Special Meetings...................................................... 1
Section 1.3: Notice of Meetings.................................................... 1
Section 1.4: Adjournments.......................................................... 1
Section 1.5: Quorum................................................................ 2
Section 1.6: Organization.......................................................... 2
Section 1.7: Voting; Proxies....................................................... 2
Section 1.8: Fixing Date for Determination of Stockholders of Record............... 2
Section 1.9: List of Stockholders Entitled to Vote................................. 3
Section 1.10: Inspectors of Elections............................................... 3
Section 1.11: Notice of Stockholder Business; Nominations........................... 4
ARTICLE II - BOARD OF DIRECTORS
Section 2.1: Number; Qualifications................................................ 6
Section 2.2: Election; Resignation; Removal; Vacancies............................. 6
Section 2.3: Regular Meetings...................................................... 7
Section 2.4: Special Meetings..................................................... 7
Section 2.5: Telephonic Meetings Permitted........................................ 7
Section 2.6: Quorum; Vote Required for Action..................................... 8
</TABLE>
i
<PAGE>
RESTATED BYLAWS
OF
SILICON IMAGE, INC.
a Delaware corporation
TABLE OF CONTENTS (CONT'D)
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Section 2.7: Organization......................................................... 8
Section 2.8: Written Action by Directors.......................................... 8
Section 2.9: Powers............................................................... 8
Section 2.10: Compensation of Directors............................................ 8
ARTICLE III - COMMITTEES
Section 3.1: Committees........................................................... 8
Section 3.2: Committee Rules...................................................... 9
ARTICLE IV - OFFICERS
Section 4.1: Generally............................................................ 9
Section 4.2: Chief Executive Officer.............................................. 9
Section 4.3: Chairperson of the Board............................................. 10
Section 4.4: President............................................................ 10
Section 4.5: Vice President....................................................... 10
Section 4.6: Chief Financial Officer.............................................. 10
Section 4.7: Treasurer............................................................ 10
Section 4.8: Secretary............................................................ 10
Section 4.9: Delegation of Authority.............................................. 10
Section 4.10: Removal.............................................................. 11
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RESTATED BYLAWS
OF
SILICON IMAGE, INC.
a Delaware corporation
TABLE OF CONTENTS (CONT'D)
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ARTICLE V - STOCK
Section 5.l: Certificates......................................................... 11
Section 5.2: Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificate.......................................... 11
Section 5.3: Other Regulations.................................................... 11
ARTICLE VI - INDEMNIFICATION
Section 6.1: Indemnification of Officers and Directors............................ 11
Section 6.2: Advance of Expenses.................................................. 12
Section 6.3: Non-Exclusivity of Rights............................................ 12
Section 6.4: Indemnification Contracts............................................ 12
Section 6.5: Effect of Amendment.................................................. 12
ARTICLE VII - NOTICES
Section 7.l: Notice............................................................... 13
Section 7.2: Waiver of Notice..................................................... 13
ARTICLE VIII - INTERESTED DIRECTORS
Section 8.1: Interested Directors; Quorum......................................... 13
ARTICLE IX - MISCELLANEOUS....................................................................... 14
Section 9.1: Fiscal Year.......................................................... 14
Section 9.2: Seal................................................................. 14
Section 9.3: Form of Records...................................................... 14
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RESTATED BYLAWS
OF
SILICON IMAGE, INC.
a Delaware corporation
TABLE OF CONTENTS (CONT'D)
<TABLE>
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Section 9.4: Reliance Upon Books and Records...................................... 14
Section 9.5: Certificate of Incorporation Governs................................. 14
Section 9.6: Severability......................................................... 14
ARTICLE X - AMENDMENT
Section 10.1: Amendments........................................................... 14
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RESTATED BYLAWS
OF
SILICON IMAGE, INC.
(a Delaware corporation)
As Adopted _____________, 1999
ARTICLE I
STOCKHOLDERS
SECTION 1.1: ANNUAL MEETINGS. Unless directors are elected by written
consent in lieu of an annual meeting as permitted by Section 211 of the Delaware
General Corporation Law, an annual meeting of stockholders shall be held for the
election of directors at such date, time and place, either within or without the
State of Delaware, as the Board of Directors shall each year fix. Any other
proper business may be transacted at the annual meeting.
SECTION 1.2: SPECIAL MEETINGS. Special meetings of stockholders for
any purpose or purposes may be called at any time by the Board of Directors,
and shall be called upon the request of the Chairperson of the Board of
Directors, the Chief Executive Officer, the President, or by a majority of
the members of the Board of Directors. Special meetings may not be called by
any other person or persons. If a special meeting of stockholders is called
at the request of any person or persons OTHER THAN by a majority of the
members of the Board of Directors, then such person or persons shall request
such meeting by delivering a written request to call such meeting to each
member of the Board of Directors, and the Board of Directors shall then
determine the time, date and place of such special meeting, which shall be
held not more than one hundred twenty (120) nor less than thirty-five (35)
days after the written request to call such special meeting was delivered to
each member of the Board of Directors.
SECTION 1.3: NOTICE OF MEETINGS. Written notice of all meetings of
stockholders shall be given stating the place, date and time of the meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by applicable law or the Certificate of
Incorporation of the Corporation, such notice shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder of record entitled to vote at such meeting.
SECTION 1.4: ADJOURNMENTS. Any meeting of stockholders may adjourn
from time to time to reconvene at the same or another place, and notice need
not be given of any such adjourned meeting if the time, date and place
thereof are announced at the meeting at which the adjournment is taken;
PROVIDED, HOWEVER, that if the adjournment is for more than thirty (30) days,
or if after the adjournment a new record date is fixed for the adjourned
meeting, then a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. At the adjourned
meeting the Corporation may transact any business that might have been
transacted at the original meeting.
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SECTION 1.5: QUORUM. At each meeting of stockholders the holders of a
majority of the shares of stock entitled to vote at the meeting, present in
person or represented by proxy, shall constitute a quorum for the transaction of
business, except if otherwise required by applicable law. If a quorum shall fail
to attend any meeting, the chairperson of the meeting or the holders of a
majority of the shares entitled to vote who are present, in person or by proxy,
at the meeting may adjourn the meeting. Shares of the Corporation's stock
belonging to the Corporation (or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
are held, directly or indirectly, by the Corporation), shall neither be entitled
to vote nor be counted for quorum purposes; PROVIDED, HOWEVER, that the
foregoing shall not limit the right of the Corporation or any other corporation
to vote any shares of the Corporation's stock held by it in a fiduciary
capacity.
SECTION 1.6: ORGANIZATION. Meetings of stockholders shall be presided
over by such person as the Board of Directors may designate, or, in the absence
of such a person, the Chairperson of the Board of Directors, or, in the absence
of such person, the President of the Corporation, or, in the absence of such
person, such person as may be chosen by the holders of a majority of the shares
entitled to vote who are present, in person or by proxy, at the meeting. Such
person shall be chairperson of the meeting and, subject to Section 1.10 hereof,
shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seems to him or her to be in order. The Secretary of the Corporation shall
act as secretary of the meeting, but in such person's absence the chairperson of
the meeting may appoint any person to act as secretary of the meeting.
SECTION 1.7: VOTING; PROXIES. Unless otherwise provided by law or the
Certificate of Incorporation, and subject to the provisions of Section 1.8 of
these Bylaws, each stockholder shall be entitled to one (1) vote for each share
of stock held by such stockholder. Each stockholder entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may authorize another person or persons to act for
such stockholder by proxy. Such a proxy may be prepared, transmitted and
delivered in any manner permitted by applicable law. Voting at meetings of
stockholders need not be by written ballot unless such is demanded at the
meeting before voting begins by a stockholder or stockholders holding shares
representing at least one percent (1%) of the votes entitled to vote at such
meeting, or by such stockholder's or stockholders' proxy; PROVIDED, HOWEVER,
that an election of directors shall be by written ballot if demand is so made by
any stockholder at the meeting before voting begins. If a vote is to be taken by
written ballot, then each such ballot shall state the name of the stockholder or
proxy voting and such other information as the chairperson of the meeting deems
appropriate. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Unless otherwise provided by applicable law,
the Certificate of Incorporation or these Bylaws, every matter other than the
election of directors shall be decided by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote thereon that are present in
person or represented by proxy at the meeting and are voted for or against the
matter.
SECTION 1.8: FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other
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distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a
record date, which shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors and which shall
not be more than sixty (60) nor less than ten (10) days before the date of
such meeting, nor more than sixty (60) days prior to any other action. If no
record date is fixed by the Board of Directors, then the record date shall be
as provided by applicable law. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; PROVIDED, HOWEVER, that the Board of
Directors may fix a new record date for the adjourned meeting.
SECTION 1.9: LIST OF STOCKHOLDERS ENTITLED TO VOTE. A complete list of
stockholders entitled to vote at any meeting of stockholders, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present at the meeting.
SECTION 1.10: INSPECTORS OF ELECTIONS.
(a) APPLICABILITY. Unless otherwise provided in the
Corporation's Certificate of Incorporation or required by the Delaware
General Corporation Law, the following provisions of this Section 1.10 shall
apply only if and when the Corporation has a class of voting stock that is:
(i) listed on a national securities exchange; (ii) authorized for quotation
on an automated interdealer quotation system of a registered national
securities association; or (iii) held of record by more than 2,000
stockholders; in all other cases, observance of the provisions of this
Section 1.10 shall be optional, and at the discretion of the Corporation.
(b) APPOINTMENT. The Corporation shall, in advance of any
meeting of stockholders, appoint one or more inspectors of election to act at
the meeting and make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any inspector who
fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting.
(c) INSPECTOR'S OATH. Each inspector of election, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of such inspector's ability.
(d) DUTIES OF INSPECTORS. At a meeting of stockholders, the
inspectors of election shall (i) ascertain the number of shares outstanding
and the voting power of each share, (ii) determine the shares represented at
a meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period of time a record
of the disposition of any challenges made to any determination by the
inspectors, and (v) certify their determination of the number of shares
represented at the meeting, and their count of all votes and
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ballots. The inspectors may appoint or retain other persons or entities to
assist the inspectors in the performance of the duties of the inspectors.
(e) OPENING AND CLOSING OF POLLS. The date and time of the
opening and the closing of the polls for each matter upon which the
stockholders will vote at a meeting shall be announced by the chairperson of
the meeting. No ballot, proxies or votes, nor any revocations thereof or
changes thereto, shall be accepted by the inspectors after the closing of the
polls unless the Court of Chancery upon application by a stockholder shall
determine otherwise.
(f) DETERMINATIONS. In determining the validity and counting of
proxies and ballots, the inspectors shall be limited to an examination of the
proxies, any envelopes submitted with those proxies, any information provided
in connection with proxies in accordance with Section 212(c)(2) of the
Delaware General Corporation Law, ballots and the regular books and records
of the Corporation, except that the inspectors may consider other reliable
information for the limited purpose of reconciling proxies and ballots
submitted by or on behalf of banks, brokers, their nominees or similar
persons which represent more votes than the holder of a proxy is authorized
by the record owner to cast or more votes than the stockholder holds of
record. If the inspectors consider other reliable information for the limited
purpose permitted herein, the inspectors at the time they make their
certification of their determinations pursuant to this Section 1.10 shall
specify the precise information considered by them, including the person or
persons from whom they obtained the information, when the information was
obtained, the means by which the information was obtained and the basis for
the inspectors' belief that such information is accurate and reliable.
SECTION 1.11: NOTICE OF STOCKHOLDER BUSINESS; NOMINATIONS.
(a) ANNUAL MEETING OF STOCKHOLDERS.
(i) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the stockholders
shall be made at an annual meeting of stockholders (A) pursuant to the
Corporation's notice of such meeting, (B) by or at the direction of the Board
of Directors or (C) by any stockholder of the Corporation who was a
stockholder of record at the time of giving of the notice provided for in
this Section 1.11, who is entitled to vote at such meeting and who complies
with the notice procedures set forth in this Section 1.11.
(ii) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause (C) of
subparagraph (a)(i) of this Section 1.11, the stockholder must have given
timely notice thereof in writing to the Secretary of the Corporation and such
other business must otherwise be a proper matter for stockholder action. To
be timely, a stockholder's notice must be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding
year's annual meeting (except in the case of the 2000 annual meeting, for
which such notice shall be timely if delivered in the same time period as if
such meeting were a special meeting governed by subparagraph (b) of this
Section 1.11); PROVIDED, HOWEVER, that in the event that the date of the
annual meeting is more than thirty (30) days before or more than sixty (60)
days after such anniversary date, notice by the stockholder to be timely must
be so delivered not earlier than the close of business on the ninetieth
(90th) day prior to such annual meeting and not later than the
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close of business on the later of the sixtieth (60th) day prior to such
annual meeting or the close of business on the tenth (10th) day following the
day on which public announcement of the date of such meeting is first made by
the Corporation. Such stockholder's notice shall set forth: (a) as to each
person whom the stockholder proposes to nominate for election or reelection
as a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), including
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected; (b) as to any other business
that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest
in such business of such stockholder and the beneficial owner, if any, on
whose behalf the proposal is made; and (c) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (1) the name and address of such stockholder, as they appear
on the Corporation's books, and of such beneficial owner, and (2) the class
and number of shares of the Corporation that are owned beneficially and held
of record by such stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of
subparagraph (a)(ii) of this Section 1.11 to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the Corporation
is increased and there is no public announcement by the Corporation naming all
of the nominees for director or specifying the size of the increased board of
directors at least seventy (70) days prior to the first anniversary of the
preceding year's annual meeting (or, if the annual meeting is held more than
thirty (30) days before or sixty (60) days after such anniversary date, at least
seventy (70) days prior to such annual meeting), a stockholder's notice required
by this Section 1.11 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary of the Corporation at the principal executive office
of the Corporation not later than the close of business on the tenth (10th) day
following the day on which such public announcement is first made by the
Corporation.
(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of such meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of such meeting (i) by or at the direction of the Board of
Directors or (ii) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice of
the special meeting, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 1.11. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by subparagraph (a)(ii) of this Section 1.11 shall
be delivered to the Secretary of the Corporation at the principal executive
offices of the Corporation not earlier than the ninetieth (90th) day prior to
such special meeting and not later than the close of business on the later of
the sixtieth (60th) day prior to such special meeting or the tenth (10th)
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day following the day on which public announcement is first made of the date
of the special meeting and of the nominees proposed by the Board of Directors
to be elected at such meeting.
(c) GENERAL.
(i) Only such persons who are nominated in accordance
with the procedures set forth in this Section 1.11 shall be eligible to serve
as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 1.11. Except as otherwise provided
by law or these Bylaws, the chairperson of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Section 1.11 and, if any
proposed nomination or business is not in compliance herewith, to declare
that such defective proposal or nomination shall be disregarded.
(ii) For purposes of this Section 1.11, the term "PUBLIC
ANNOUNCEMENT" shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section
1.11, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth herein. Nothing in this Section 1.11 shall be deemed to affect
any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1: NUMBER; QUALIFICATIONS. The Board of Directors shall
consist of one or more members. The initial number of directors shall be six
(6), and thereafter shall be fixed from time to time by resolution of the Board
of Directors. No decrease in the authorized number of directors constituting the
Board of Directors shall shorten the term of any incumbent director. Directors
need not be stockholders of the Corporation.
SECTION 2.2: ELECTION; RESIGNATION; REMOVAL; VACANCIES. The Board of
Directors shall initially consist of the person or persons elected by the
incorporator or named in the Corporation's initial Certificate of Incorporation.
Subject to the rights of the holders of any series of Preferred Stock to elect
additional directors under specified circumstances, following the closing of the
corporation's initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock to the public (the "INITIAL PUBLIC OFFERING"), the
directors shall be divided, with respect to the time for which they severally
hold office, into three classes designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors, with the number of
directors in each class to be divided as equally as reasonably possible. The
term of office of the Class I directors shall expire at the corporation's first
annual meeting of stockholders following the closing of the Initial Public
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Offering, the term of office of the Class II directors shall expire at the
corporation's second annual meeting of stockholders following the closing of the
Initial Public Offering, and the term of office of the Class III directors shall
expire at the corporation's third annual meeting of stockholders following the
closing of the Initial Public Offering. At each annual meeting of stockholders
commencing with the first annual meeting of stockholders following the closing
of the Initial Public Offering, directors elected to succeed those directors of
the class whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election. Prior to the closing of the Initial Public Offering, or in the event
the corporation is prohibited from dividing its board of directors through the
operation of Section 2115 of the California General Corporation Law following
the record date of the corporation's first annual meeting of stockholders
following the closing of the Initial Public Offering, each director shall hold
office until the next annual meeting of stockholders and until such director's
successor is elected and qualified, or until such director's earlier death,
resignation or removal. Any director may resign at any time upon written notice
to the Corporation. Subject to the rights of the holders of any series of
Preferred Stock, any director or the entire Board of Directors may be removed by
the holders of at least sixty-six and two-thirds percent (66-2/3%) of the shares
then entitled to vote at an election of directors. Subject to the rights of the
holders of any series of Preferred Stock, any vacancy occurring in the Board of
Directors for any cause, and any newly created directorship resulting from any
increase in the authorized number of directors, shall, unless otherwise provided
by law, be filled only by the affirmative vote of a majority of the directors
then in office, although less than a quorum, or by a sole remaining director,
and not by the stockholders.
SECTION 2.3: REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places, within or without the State of Delaware,
and at such times as the Board of Directors may from time to time determine.
Notice of regular meetings need not be given if the date, times and places
thereof are fixed by resolution of the Board of Directors.
SECTION 2.4: SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairperson of the Board of Directors, the
President or a majority of the members of the Board of Directors then in office
and may be held at any time, date or place, within or without the State of
Delaware, as the person or persons calling the meeting shall fix. Notice of the
time, date and place of such meeting shall be given, orally or in writing, by
the person or persons calling the meeting to all directors at least four (4)
days before the meeting if the notice is mailed, or at least twenty-four (24)
hours before the meeting if such notice is given by telephone, hand delivery,
telegram, telex, mailgram, facsimile or similar communication method. Unless
otherwise indicated in the notice, any and all business may be transacted at a
special meeting.
SECTION 2.5: TELEPHONIC MEETINGS PERMITTED. Members of the Board of
Directors, or any committee of the Board, may participate in a meeting of the
Board or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
conference telephone or similar communications equipment shall constitute
presence in person at such meeting.
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SECTION 2.6: QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the
Board of Directors a majority of the total number of authorized directors shall
constitute a quorum for the transaction of business. Except as otherwise
provided herein or in the Certificate of Incorporation, or required by law, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
SECTION 2.7: ORGANIZATION. Meetings of the Board of Directors shall be
presided over by the Chairperson of the Board of Directors, or in such person's
absence by the President, or in such person's absence by a chairperson chosen at
the meeting. The Secretary shall act as secretary of the meeting, but in such
person's absence the chairperson of the meeting may appoint any person to act as
secretary of the meeting.
SECTION 2.8: WRITTEN ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or committee,
respectively.
SECTION 2.9: POWERS. The Board of Directors may, except as otherwise
required by law or the Certificate of Incorporation, exercise all such powers
and do all such acts and things as may be exercised or done by the Corporation.
SECTION 2.10: COMPENSATION OF DIRECTORS. Directors, as such, may
receive, pursuant to a resolution of the Board of Directors, fees and other
compensation for their services as directors, including without limitation their
services as members of committees of the Board of Directors.
ARTICLE III
COMMITTEES
SECTION 3.1: COMMITTEES. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting of
such committee who are not disqualified from voting, whether or not such member
or members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in a resolution
of the Board of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers that may require it; but no such committee shall have the
power or authority in reference to the following matters: (i) approving or
adopting, or recommending to the stockholders, any action or matter expressly
required by the Delaware General Corporation Law to be submitted to stockholders
for approval or (ii) adopting, amending or repealing any bylaw of the
Corporation.
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SECTION 3.2: COMMITTEE RULES. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
ARTICLE IV
OFFICERS
SECTION 4.1: GENERALLY. The officers of the Corporation shall consist
of a Chief Executive Officer and/or a President, a Secretary, a Treasurer and
such other officers as may from time to time be appointed by the Board of
Directors. All officers shall be elected by the Board of Directors; PROVIDED,
HOWEVER, that the Board of Directors may empower the Chief Executive Officer of
the Corporation to appoint officers other than the Chairperson of the Board, the
Chief Executive Officer, the President, the Chief Financial Officer or the
Treasurer. Each officer shall hold office until such person's successor is
elected and qualified or until such person's earlier resignation or removal. Any
number of offices may be held by the same person. Any officer may resign at any
time upon written notice to the Corporation. Any vacancy occurring in any office
of the Corporation by death, resignation, removal or otherwise may be filled by
the Board of Directors.
SECTION 4.2: CHIEF EXECUTIVE OFFICER. Subject to the control of the
Board of Directors and such supervisory powers, if any, as may be given by
the Board of Directors, the powers and duties of the Chief Executive Officer
of the Corporation are:
(a) To act as the general manager and, subject to the control
of the Board of Directors, to have general supervision, direction and control
of the business and affairs of the Corporation;
(b) To preside at all meetings of the stockholders;
(c) To call meetings of the stockholders to be held at such
times and, subject to the limitations prescribed by law or by these Bylaws,
at such places as he or she shall deem proper; and
(d) To affix the signature of the Corporation to all deeds,
conveyances, mortgages, guarantees, leases, obligations, bonds, certificates
and other papers and instruments in writing which have been authorized by the
Board of Directors or which, in the judgment of the Chief Executive Officer,
should be executed on behalf of the Corporation; to sign certificates for
shares of stock of the Corporation; and, subject to the direction of the
Board of Directors, to have general charge of the property of the Corporation
and to supervise and control all officers, agents and employees of the
Corporation.
The President shall be the Chief Executive Officer of the
Corporation unless the Board of Directors shall designate another officer to be
the Chief Executive Officer. If there is no President, and the Board of
Directors has not designated any other officer to be the Chief Executive
Officer, then the Chairperson of the Board of Directors shall be the Chief
Executive Officer.
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SECTION 4.3: CHAIRPERSON OF THE BOARD. The Chairperson of the Board of
Directors shall have the power to preside at all meetings of the Board of
Directors and shall have such other powers and duties as provided in these
Bylaws and as the Board of Directors may from time to time prescribe.
SECTION 4.4: PRESIDENT. The President shall be the Chief Executive
Officer of the Corporation unless the Board of Directors shall have designated
another officer as the Chief Executive Officer of the Corporation. Subject to
the provisions of these Bylaws and to the direction of the Board of Directors,
and subject to the supervisory powers of the Chief Executive Officer (if the
Chief Executive Officer is an officer other than the President), and subject to
such supervisory powers and authority as may be given by the Board of Directors
to the Chairperson of the Board of Directors, and/or to any other officer, the
President shall have the responsibility for the general management the control
of the business and affairs of the Corporation and the general supervision and
direction of all of the officers, employees and agents of the Corporation (other
than the Chief Executive Officer, if the Chief Executive Officer is an officer
other than the President) and shall perform all duties and have all powers that
are commonly incident to the office of President or that are delegated to the
President by the Board of Directors.
SECTION 4.5: VICE PRESIDENT. Each Vice President shall have all such
powers and duties as are commonly incident to the office of Vice President, or
that are delegated to him or her by the Board of Directors or the Chief
Executive Officer. A Vice President may be designated by the Board to perform
the duties and exercise the powers of the Chief Executive Officer in the event
of the Chief Executive Officer's absence or disability.
SECTION 4.6: CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall be the Treasurer of the Corporation unless the Board of Directors shall
have designated another officer as the Treasurer of the Corporation. Subject
to the direction of the Board of Directors and the Chief Executive Officer,
the Chief Financial Officer shall perform all duties and have all powers that
are commonly incident to the office of Chief Financial Officer.
SECTION 4.7: TREASURER. The Treasurer shall have custody of all
monies and securities of the Corporation. The Treasurer shall make such
disbursements of the funds of the Corporation as are authorized and shall
render from time to time an account of all such transactions. The Treasurer
shall also perform such other duties and have such other powers as are
commonly incident to the office of Treasurer, or as the Board of Directors or
the Chief Executive Officer may from time to time prescribe.
SECTION 4.8: SECRETARY. The Secretary shall issue or cause to be
issued all authorized notices for, and shall keep, or cause to be kept,
minutes of all meetings of the stockholders and the Board of Directors. The
Secretary shall have charge of the corporate minute books and similar records
and shall perform such other duties and have such other powers as are
commonly incident to the office of Secretary, or as the Board of Directors or
the Chief Executive Officer may from time to time prescribe.
SECTION 4.9: DELEGATION OF AUTHORITY. The Board of Directors may
from time to time delegate the powers or duties of any officer to any other
officers or agents, notwithstanding any provision hereof.
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SECTION 4.10: REMOVAL. Any officer of the Corporation shall serve at
the pleasure of the Board of Directors and may be removed at any time, with or
without cause, by the Board of Directors. Such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation.
ARTICLE V
STOCK
SECTION 5.1: CERTIFICATES. Every holder of stock shall be entitled to
have a certificate signed by or in the name of the Corporation by the
Chairperson or Vice-Chairperson of the Board of Directors, or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary, of the Corporation, certifying the number of shares
owned by such stockholder in the Corporation. Any or all of the signatures on
the certificate may be a facsimile.
SECTION 5.2: LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF
NEW CERTIFICATES. The Corporation may issue a new certificate of stock in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to agree
to indemnify the Corporation and/or to give the Corporation a bond sufficient to
indemnify it, against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 5.3: OTHER REGULATIONS. The issue, transfer, conversion and
registration of stock certificates shall be governed by such other regulations
as the Board of Directors may establish.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1: INDEMNIFICATION OF OFFICERS AND DIRECTORS. Each person
who was or is made a party to, or is threatened to be made a party to, or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "PROCEEDING"), by reason of the fact that
such person (or a person of whom such person is the legal representative), is
or was a director or officer of the Corporation or a Reincorporated
Predecessor (as defined below) or is or was serving at the request of the
Corporation or a Reincorporated Predecessor (as defined below) as a director
or officer of another corporation, or of a partnership, joint venture, trust
or other enterprise, including service with respect to employee benefit
plans, shall be indemnified and held harmless by the Corporation to the
fullest extent permitted by the Delaware General Corporation Law, against all
expenses, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes and penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith, provided such person acted in good faith and in a manner which the
person reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe the person's conduct was unlawful. Such
indemnification shall continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of
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such person's heirs, executors and administrators. Notwithstanding the
foregoing, the Corporation shall indemnify any such person seeking indemnity
in connection with a Proceeding (or part thereof) initiated by such person
only if such Proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. As used herein, the term "REINCORPORATED
PREDECESSOR" means a corporation that is merged with and into the Corporation
in a statutory merger where (a) the Corporation is the surviving corporation
of such merger; (b) the primary purpose of such merger is to change the
corporate domicile of the Reincorporated Predecessor to Delaware.
SECTION 6.2: ADVANCE OF EXPENSES. The Corporation shall pay all
expenses (including attorneys' fees) incurred by such a director or officer in
defending any such Proceeding as they are incurred in advance of its final
disposition; PROVIDED, HOWEVER, that if the Delaware General Corporation Law
then so requires, the payment of such expenses incurred by such a director or
officer in advance of the final disposition of such Proceeding shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article VI or otherwise; and PROVIDED, FURTHER, that the Corporation shall
not be required to advance any expenses to a person against whom the Corporation
directly brings a claim, in a Proceeding, alleging that such person has breached
such person's duty of loyalty to the Corporation, committed an act or omission
not in good faith or that involves intentional misconduct or a knowing violation
of law, or derived an improper personal benefit from a transaction.
SECTION 6.3: NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person in this Article VI shall not be exclusive of any other right that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders
or disinterested directors, or otherwise. Additionally, nothing in this Article
VI shall limit the ability of the Corporation, in its discretion, to indemnify
or advance expenses to persons whom the Corporation is not obligated to
indemnify or advance expenses pursuant to this Article VI.
SECTION 6.4: INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized to cause the Corporation to enter into indemnification contracts with
any director, officer, employee or agent of the Corporation, or any person
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing indemnification rights
to such person. Such rights may be greater than those provided in this Article
VI.
SECTION 6.5: EFFECT OF AMENDMENT. Any amendment, repeal or
modification of any provision of this Article VI shall be prospective only,
and shall not adversely affect any right or protection conferred on a person
pursuant to this Article VI and existing at the time of such amendment,
repeal or modification.
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ARTICLE VII
NOTICES
SECTION 7.1: NOTICE. Except as otherwise specifically provided herein
or required by law, all notices required to be given pursuant to these Bylaws
shall be in writing and may in every instance be effectively given by hand
delivery (including use of a delivery service), by depositing such notice in the
mail, postage prepaid, or by sending such notice by prepaid telegram, telex,
overnight express courier, mailgram or facsimile. Any such notice shall be
addressed to the person to whom notice is to be given at such person's address
as it appears on the records of the Corporation. The notice shall be deemed
given (i) in the case of hand delivery, when received by the person to whom
notice is to be given or by any person accepting such notice on behalf of such
person, (ii) in the case of delivery by mail, upon deposit in the mail, (iii) in
the case of delivery by overnight express courier, when dispatched, and (iv) in
the case of delivery via telegram, telex, mailgram or facsimile, when
dispatched.
SECTION 7.2: WAIVER OF NOTICE. Whenever notice is required to be given
under any provision of these Bylaws, a written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE VIII
INTERESTED DIRECTORS
SECTION 8.1: INTERESTED DIRECTORS; QUORUM. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof that
authorizes the contract or transaction, or solely because his, her or their
votes are counted for such purpose, if: (i) the material facts as to his, her or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; (ii) the material
facts as to his, her or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof, or the stockholders. Interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1: FISCAL YEAR. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
SECTION 9.2: SEAL. The Board of Directors may provide for a corporate
seal, which shall have the name of the Corporation inscribed thereon and shall
otherwise be in such form as may be approved from time to time by the Board of
Directors.
SECTION 9.3: FORM OF RECORDS. Any records maintained by the
Corporation in the regular course of its business, including its stock
ledger, books of account and minute books, may be kept on, or be in the form
of, magnetic tape, diskettes, photographs, microphotographs or any other
information storage device, provided that the records so kept can be
converted into clearly legible form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any person entitled
to inspect the same.
SECTION 9.4: RELIANCE UPON BOOKS AND RECORDS. A member of the Board
of Directors, or a member of any committee designated by the Board of
Directors shall, in the performance of such person's duties, be fully
protected in relying in good faith upon records of the Corporation and upon
such information, opinions, reports or statements presented to the
Corporation by any of the Corporation's officers or employees, or committees
of the Board of Directors, or by any other person as to matters the member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of
the Corporation.
SECTION 9.5: CERTIFICATE OF INCORPORATION GOVERNS. In the event of
any conflict between the provisions of the Corporation's Certificate of
Incorporation and Bylaws, the provisions of the Certificate of Incorporation
shall govern.
SECTION 9.6: SEVERABILITY. If any provision of these Bylaws shall be
held to be invalid, illegal, unenforceable or in conflict with the provisions of
the Corporation's Certificate of Incorporation, then such provision shall
nonetheless be enforced to the maximum extent possible consistent with such
holding and the remaining provisions of these Bylaws (including without
limitation, all portions of any section of these Bylaws containing any such
provision held to be invalid, illegal, unenforceable or in conflict with the
Certificate of Incorporation, that are not themselves invalid, illegal,
unenforceable or in conflict with the Certificate of Incorporation) shall remain
in full force and effect.
ARTICLE X
AMENDMENT
SECTION 10.1: AMENDMENTS. Following the closing of the initial public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock to the
public (the "INITIAL PUBLIC OFFERING"), stockholders of the Corporation holding
at least sixty-six and two-thirds percent (66-2/3%) of the Corporation's
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outstanding voting stock then entitled to vote at an election of directors
shall have the power to adopt, amend or repeal Bylaws. Prior to the Initial
Public Offering, stockholders of the Corporation holding a majority of the
Corporation's outstanding voting stock then entitled to vote at an election
of directors shall have the power to adopt, amend or repeal Bylaws. To the
extent provided in the Corporation's Certificate of Incorporation, the Board
of Directors of the Corporation shall also have the power to adopt, amend or
repeal Bylaws of the Corporation.
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Exhibit 4.04
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
OF
SILICON IMAGE, INC.
This Third Amended and Restated Investors' Rights Agreement (this
"AGREEMENT") is made and entered into as of July 29, 1998 by and among Silicon
Image, Inc., a California corporation (the "COMPANY"), and the persons and
entities listed on Exhibit A attached hereto (the "INVESTORS"). This Agreement
supersedes and restates in its entirety that certain Second Amended and Restated
Investors' Rights Agreement made and entered into as of June 20, 1997 by and
among the Company and the "Prior Investors" (as defined below) (the "INVESTORS'
RIGHTS AGREEMENT").
R E C I T A L S
---------------
A. The Company has previously sold shares of its Series A
Preferred Stock (the "SERIES A STOCK"), Series B Preferred Stock (the "SERIES B
STOCK") and Series C Preferred Stock (the "SERIES C STOCK") to certain investors
(the "PRIOR INVESTORS") pursuant to a Series A Preferred Stock Purchase
Agreement dated as of October 6, 1995 (the "SERIES A AGREEMENT"), a Series B
Preferred Stock Purchase Agreement dated as of September 20, 1996 (the "SERIES B
AGREEMENT") and a Series C Preferred Stock Purchase Agreement dated as of June
20, 1997 (the "SERIES C AGREEMENT"). In connection with such sales, the Company
granted the Prior Investors certain rights, as set forth in the Investors'
Rights Agreement.
B. Certain investors (the "SERIES D INVESTORS") have purchased
from the Company shares of its Series D Preferred Stock ("SERIES D STOCK")
pursuant to that certain Series D Preferred Stock Purchase Agreement dated of
even date herewith by and among the Company and the Series D Investors (the
"SERIES D AGREEMENT").
C. This Agreement amends and restates the Investors' Rights
Agreement in its entirety. By their execution of this Agreement, the undersigned
Prior Investors agree, on behalf of all of the Prior Investors, to the amendment
and restatement of the Investors' Rights Agreement as provided herein and agree
to be bound by this Agreement.
D. The Prior Investors and Series D Investors will hereinafter
be referred to collectively as the "INVESTORS." The Series A Stock, Series B
Stock, Series C Stock and Series D Stock will hereinafter be referred to
collectively as the "PREFERRED STOCK."
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
<PAGE>
1. INFORMATION RIGHTS.
1.1 FINANCIAL INFORMATION.
(a) The Company covenants and agrees that, commencing
on the date of this Agreement, for so long as any Investor holds at least
100,000 shares of Preferred Stock issued under the Series A Agreement, the
Series B Agreement, the Series C Agreement and/or the Series D Agreement
and/or the equivalent number (on an as-converted basis) of shares of common
stock of the Company ("COMMON STOCK") issued upon the conversion of such
shares of Preferred Stock ("CONVERSION STOCK"), the Company will:
(i) ANNUAL REPORTS. Furnish to such Investor,
as soon as practicable and in any event within 120 days after the end of each
fiscal year of the Company, audited by independent auditors of national
recognition, annual financial statements, including an audited Balance Sheet
as of the end of such fiscal year, an audited Statement of Income and an
audited Statement of Cash Flows, all prepared substantially in accordance
with generally accepted accounting principles and practices by independent
auditors of national recognition; and
(ii) QUARTERLY REPORTS. Furnish to such
Investor as soon as practicable, and in any event within forty-five (45) days
of the end of each fiscal quarter of the Company (except the last quarter of
the Company's fiscal year), quarterly unaudited financial statements,
including an unaudited Balance Sheet as of the end of such fiscal quarter, an
unaudited Statement of Income and an unaudited Statement of Cash Flows, all
prepared substantially in accordance with generally accepted accounting
principles and practices.
(b) The Company further covenants and agrees that,
for so long as any Investor holds at least 2,000,000 shares of Series C Stock
issued under the Series C Agreement and/or 500,000 shares of Series D Stock
issued under the Series D Agreement and/or an equivalent number (on an
as-converted basis) of shares of Common Stock issued upon the conversion of
such shares of Series C Stock ("SERIES C CONVERSION STOCK") and/or Series D
Stock ("SERIES D CONVERSION STOCK"), the Company will, in addition to (a)(i)
and (a)(ii) above:
(i) MONTHLY REPORTS. Furnish to such Investor,
as soon as practicable and in any event within forty-five (45) days of the
end of each calendar month, such financial statements and operating reports
as it prepares for internal use by management;
(ii) ANNUAL BUDGET. Furnish to such Investor
within thirty (30) days prior to the beginning of the fiscal year, an annual
operating plan and budget for the next immediate fiscal year; and
(iii) INSPECTION RIGHTS. Permit such Investor,
at such Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's
affairs, finances and accounts with its officers, all at such reasonable
times as may be requested by such Investor.
1.2 CONFIDENTIALITY. Each Investor agrees to hold all
information received pursuant to this Section in confidence, and not to use
or disclose any of such information to any third party, except to the extent
such information may be made publicly available by the Company or otherwise
required by law.
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2. REGISTRATION RIGHTS.
2.1 DEFINITIONS. For purposes of this Section 2:
(a) REGISTRATION. The terms "REGISTER,"
"REGISTERED," and "REGISTRATION" refer to a registration effected by
preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement.
(b) REGISTRABLE SECURITIES. The term "REGISTRABLE
SECURITIES" means: (1) all the shares of Common Stock of the Company issued
or issuable upon the conversion of any shares of Series A Stock issued under
the Series A Agreement, any shares of Series B Stock issued under the Series
B Agreement, any shares of Series C Stock issued under the Series C
Agreement, or any shares of Series D Stock issued under the Series D
Agreement, as such agreements may hereafter be amended from time to time,
that are now owned or may hereafter be acquired by any Investor or any
permitted successors and assigns of Investor; and (2) any shares of Common
Stock of the Company issued as (or issuable upon the conversion or exercise
of any warrant, right or other security which is issued as) a dividend or
other distribution with respect to, or in exchange for or in replacement of,
all such shares of Common Stock described in clause (1) of this subsection
(b); EXCLUDING in all cases, however, any Registrable Securities sold by a
person in a transaction in which rights under this Section 2 are not assigned
in accordance with this Agreement or any Registrable Securities sold to the
public or sold pursuant to Rule 144 promulgated under the Securities Act;
PROVIDED, HOWEVER, that notwithstanding anything herein to the contrary, the
shares of Common Stock of the Company issued or issuable upon the conversion
of any shares of Series A Stock issued under the Series A Agreement and any
shares of Series B Stock issued under the Series B Agreement and any shares
of Common Stock described in clause (2) of this Section 2.1(b) that are
issued in respect to any such shares (which Shares are collectively
hereinafter referred to as the "EXCLUDED SECURITIES"), shall not be
Registrable Securities for purposes of Section 2.2 of this Agreement.
(c) REGISTRABLE SECURITIES THEN OUTSTANDING. The
number of shares of "REGISTRABLE SECURITIES THEN OUTSTANDING" shall mean the
number of shares of Common Stock which are Registrable Securities and (1) are
then issued and outstanding or (2) are then issuable pursuant to the exercise
or conversion of then outstanding and then exercisable options, warrants or
convertible securities.
(d) HOLDER. For purposes of this Section 2, the term
"HOLDER" means any person owning of record Registrable Securities that have
not been sold to the public or pursuant to Rule 144 promulgated under the
Securities Act or any assignee of record of such Registrable Securities to
whom rights under this Section 2 have been duly assigned in accordance with
this Agreement; PROVIDED, HOWEVER, that for purposes of this Agreement, a
record holder of shares of Series A Stock, Series B Stock, Series C Stock or
Series D Stock convertible into such Registrable Securities shall be deemed
to be the Holder of such Registrable Securities; PROVIDED, FURTHER, that a
holder of Excluded Securities (as defined in Section 2.1(b)) shall not be a
Holder with respect to such Excluded Securities for purposes of Sections 2.2
of this Agreement; and PROVIDED, FURTHER, that the Company shall in no event
be obligated to register shares of Series A Stock, Series B Stock, Series C
Stock or Series D Stock and that Holders of Registrable Securities will not
be required to convert their shares of Series A Stock, Series B Stock, Series
C Stock or Series D Stock into Common Stock in order to exercise the
registration rights granted hereunder, until immediately before the closing
of the offering to which the registration relates.
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(e) FORM S-3. The term "FORM S-3" means such form
under the Securities Act as is in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC
which permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(f) SEC. The term "SEC" or "COMMISSION" means the
U.S. Securities and Exchange Commission.
2.2 DEMAND REGISTRATION.
(a) REQUEST BY HOLDERS. If the Company shall receive
at any time after the earlier of (i) two (2) years after the date of this
Agreement, or (ii) ninety (90) days after the effective date of the Company's
initial public offering of its securities pursuant to a registration filed
under the Securities Act, a written request from the Holders of at least
fifty percent (50%) of the Registrable Securities (other than Excluded
Securities) then outstanding that the Company file a registration statement
under the Securities Act covering the registration of Registrable Securities
pursuant to this Section 2.2, then the Company shall, within ten (10)
business days of the receipt of such written request, give written notice of
such request ("REQUEST NOTICE") to all Holders, and effect, as soon as
practicable, the registration under the Securities Act of all Registrable
Securities (other than Excluded Securities) which Holders request to be
registered and included in such registration by written notice given such
Holders to the Company within twenty (20) days after receipt of the Request
Notice, subject only to the limitations of this Section 2.2; PROVIDED, that
the Registrable Securities (other than Excluded Securities) requested by all
Holders to be registered pursuant to such request must (i) be at least twenty
percent (20%) of all Registrable Securities (other than Excluded Securities)
then outstanding and (ii) have an anticipated aggregate public offering price
(before any underwriting discounts and commissions ) of not less than
$5,000,000, or $10,000,000 if such requested registration is the initial
public offering of the Company's stock registered under the Securities Act.
(b) UNDERWRITING. If the Holders initiating the
registration request under this Section 2.2 ("INITIATING HOLDERS") intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, then they shall so advise the Company as a part of their
request made pursuant to this Section 2.2 and the Company shall include such
information in the written notice referred to in subsection 2.2(a). In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall enter into an underwriting agreement in customary form with the
managing underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 2.2, if the
underwriter(s) advise(s) the Company in writing that marketing factors
require a limitation of the number of securities to be underwritten then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be registered and underwritten pursuant hereto, and the number of
Registrable Securities that may be included in the underwriting shall be
reduced as required by the underwriter(s) and allocated among the Holders of
Registrable Securities on a pro rata basis according to the number of
Registrable Securities then outstanding held by each Holder requesting
registration (including the Initiating Holders); PROVIDED, HOWEVER, that the
number of shares of Registrable Securities to be included in such
underwriting and registration shall not be
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reduced unless all other securities of the Company are first entirely
excluded from the underwriting and registration. Any Registrable Securities
excluded and withdrawn from such underwriting shall be withdrawn from the
registration.
(c) MAXIMUM NUMBER OF DEMAND REGISTRATIONS. The
Company is obligated to effect only two (2) such registrations pursuant to
this Section 2.2.
(d) DEFERRAL. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a registration
statement pursuant to this Section 2.2, a certificate signed by the President
or Chief Executive Officer of the Company stating that in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of
such registration statement, then the Company shall have the right to defer
such filing for a period of not more than 90 days after receipt of the
request of the Initiating Holders; PROVIDED, HOWEVER, that the Company may
not utilize this right more than once in any twelve (12) month period. In
addition, the Company will not be obligated to effect a registration if the
Company delivers notice within thirty (30) days of receipt of the Request
Notice to the Holders requesting the filing of a registration statement
pursuant to this Section 2.2, a certificate signed by the President or Chief
Executive Officer of the Company stating the Company's good faith intent to
file a registration statement for an initial public offering within ninety
(90) days.
(e) EXPENSES. All expenses incurred in connection
with a registration pursuant to this Section 2.2, including without
limitation all registration and qualification fees, printers' and accounting
fees, fees and disbursements of counsel for the Company, and the reasonable
fees and disbursements of one counsel for the selling Holders (but excluding
underwriters' discounts and commissions), shall be borne by the Company. Each
Holder participating in a registration pursuant to this Section 2.2 shall
bear such Holder's proportionate share (based on the total number of shares
sold in such registration other than for the account of the Company) of all
discounts, commissions or other amounts payable to underwriters or brokers in
connection with such offering. Notwithstanding the foregoing, the Company
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to this Section 2.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered, unless the Holders of a majority of
the Registrable Securities (other than Excluded Securities) then outstanding
agree to forfeit their right to one (1) demand registration pursuant to this
Section 2.2 (in which case such right shall be forfeited by all Holders of
Registrable Securities (other than Excluded Securities)); PROVIDED, FURTHER,
HOWEVER, that if at the time of such withdrawal, the Holders have learned of
a material adverse change in the condition, business, or prospects of the
Company not known to the Holders at the time of their request for such
registration and have withdrawn their request for a registration with
reasonable promptness after learning of such material adverse change, then
the Holders shall not be required to pay any of such expenses and shall
retain their rights pursuant to this Section 2.2.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all
Holders of Registrable Securities in writing at least thirty (30) days prior
to filing any registration statement under the Securities Act for purposes of
effecting a public offering of securities of the Company (including, but not
limited to, registration statements relating to secondary offerings of
securities of the Company, but EXCLUDING registration statements relating to
any employee benefit plan or a
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corporate reorganization) and will afford each such Holder an opportunity to
include in such registration statement all or any part of the Registrable
Securities then held by such Holder. Each Holder desiring to include in any
such registration statement all or any part of the Registrable Securities
held by such Holder shall, within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in writing,
and in such notice shall inform the Company of the number of Registrable
Securities such Holder wishes to include in such registration statement. If a
Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities
in any subsequent registration statement or registration statements as may be
filed by the Company with respect to offerings of its securities, all upon
the terms and conditions set forth herein.
(a) UNDERWRITING. If a registration statement under
which the Company gives notice under this Section 2.3 is for an underwritten
offering, then the Company shall so advise the Holders of Registrable
Securities. In such event, the right of any such Holder's Registrable
Securities to be included in a registration pursuant to this Section 2.3
shall be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the underwriting
to the extent provided herein. All Holders proposing to distribute their
Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriter(s) selected for such underwriting. Notwithstanding any other
provision of this Agreement, if the managing underwriter determine(s) in good
faith that marketing factors require a limitation of the number of shares to
be underwritten, then the managing underwriter(s) may exclude shares
(including Registrable Securities) from the registration and the
underwriting, and the number of shares that may be included in the
registration and the underwriting shall be allocated, FIRST, to the Company,
and SECOND, to each of the Holders requesting inclusion of their Registrable
Securities in such registration statement on a pro rata basis based on the
total number of Registrable Securities then held by each such Holder;
PROVIDED, HOWEVER, that the right of the underwriters to exclude shares
(including Registrable Securities) from the registration and underwriting as
described above shall be restricted so that (i) the number of Registrable
Securities included in any such registration is not reduced below twenty-five
(25%) of the shares included in the registration, except for a registration
relating to the Company's intital public offering from which all Registrable
Securities may be excluded, (ii) if the registration and the underwriting are
in connection with the Company's initial public offering, no party shall sell
shares in such initial public offering other than the Company or the
Holder(s), if any, invoking a demand registration under Section 2.2 above and
(iii) no shareholder of the Company shall be granted registration rights
under this Section 2.3 if inclusion of such shares would reduce the number of
shares of Registrable Securities of the Holders to be included in such
registration without the consent of the Holders of fifty-percent (50%) of the
Registrable Securities then held by the Holders. If any Holder disapproves of
the terms of any such underwriting, such Holder may elect to withdraw
therefrom by written notice to the Company and the underwriter, delivered at
least ten (10) business days prior to the effective date of the registration
statement. Any Registrable Securities excluded or withdrawn from such
underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partners
and shareholders of such Holder, or the estates and family members of any
such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "Holder", and any pro
rata reduction with respect to such "Holder" shall be based
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upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "Holder", as defined in this
sentence.
(b) EXPENSES. All expenses incurred in connection
with a registration pursuant to this Section 2.3 (excluding underwriters' and
brokers' discounts and commissions), including, without limitation all
federal and "blue sky" registration and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Company and
reasonable fees and disbursements of one counsel for the selling Holders
shall be borne by the Company.
2.4 FORM S-3 REGISTRATION. In case the Company shall
receive from any Holder or Holders of Registrable Securities a written
request or requests that the Company effect a registration on Form S-3 and
any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, then the Company will:
(a) NOTICE. Promptly give written notice of the
proposed registration and the Holder's or Holders' request therefor, and any
related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) REGISTRATION. As soon as practicable, effect
such registration and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and distribution of all
or such portion of such Holder's or Holders' Registrable Securities as are
specified in such request, together with all or such portion of the
Registrable Securities of any other Holder or Holders joining in such request
as are specified in a written request given within such twenty (20) days
after receive of such written notice from the Company; PROVIDED, HOWEVER,
that the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 2.4:
(1) if Form S-3 is not available for such
offering by the Holders;
(2) if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public of less than $500,000;
(3) if the Company shall furnish to the Holders
a certificate signed by the President or Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form
S-3 registration statement no more than once during any twelve month period
for a period of not more than 120 days after receipt of the request of the
Holder or Holders under this Section 2.4;
(4) if the Company has, within the twelve (12)
month period preceding the date of such request, already effected two (2)
registrations on form S-3 for the Holders pursuant to this Section 2.4; or
(5) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification
or compliance.
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(c) EXPENSES. Subject to the foregoing, the Company
shall file a Form S-3 registration statement covering the Registrable
Securities and other securities so requested to be registered pursuant to
this Section 2.4 as soon as practicable after receipt of the request or
requests of the Holders for such registration. The Company shall pay all
expenses incurred in connection with each registration requested pursuant to
this Section 2.4 (excluding underwriters' or brokers' discounts and
commissions), including without limitation all filing, registration and
qualification, printers' and accounting fees and the reasonable fees and
disbursements of one counsel for the selling Holder of Holders and one
counsel for the Company.
(d) NOT DEMAND REGISTRATION. Form S-3 registrations
shall not be deemed to be demand registrations as described in Section 2.2
above.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required to
effect the registration of any Registrable Securities under this Agreement,
the Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become effective, and, upon
the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to
ninety (90) days.
(b) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by
the Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter(s) of
such offering. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening
of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of
the circumstances then existing.
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(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters
in an underwritten public offering and reasonably satisfactory to a majority
in interest of the Holders requesting registration, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a "comfort" letter dated as of such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering and reasonably
satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
2.6 FURNISH INFORMATION. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to
Section 2.2, 2.3 or 2.4 that the selling Holders shall furnish to the Company
such information regarding themselves, the Registrable Securities held by
them, and the intended method of disposition of such securities as shall be
required to timely effect the registration of their Registrable Securities.
2.7 DELAY OF REGISTRATION. No Holder shall have any right
to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 2.
2.8 INDEMNIFICATION. In the event any Registrable
Securities are included in a registration statement under Section 2.2, 2.3 or
2.4:
(a) BY THE COMPANY. To the extent permitted by law,
the Company will indemnify and hold harmless each Holder, the partners,
officers and directors of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the
Securities Exchange Act of 1934, as amended, (the "1934 ACT"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the l934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "VIOLATION"):
(i) any untrue statement or alleged untrue
statement of a material fact contained in such
registration statement, including any preliminary
prospectus or final prospectus contained therein or
any amendments or supplements thereto;
(ii) the omission or alleged omission to state
therein a material fact required to be stated
therein, or necessary to make the statements therein
not misleading, or
(iii) any violation or alleged violation by the
Company of the Securities Act, the 1934 Act, any
federal or state securities
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law or any rule or regulation promulgated under the
Securities Act, the 1934 Act or any federal or state
securities law in connection with the offering
covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; PROVIDED HOWEVER, that the
indemnity agreement contained in this subsection 2.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) BY SELLING HOLDERS. To the extent permitted by
law, each selling Holder will indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed the registration
statement, each person, if any, who controls the Company within the meaning
of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder within
the meaning of the Securities Act or the 1934 Act, against any losses,
claims, damages or liabilities (joint or several) to which the Company or any
such director, officer, controlling person, underwriter or other such Holder,
partner or director, officer or controlling person of such other Holder may
become subject under the Securities Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or
other Holder, partner, officer, director or controlling person of such other
Holder in connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the indemnity agreement
contained in this subsection 2.8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; and PROVIDED FURTHER, that the total amounts
payable in indemnity by a Holder under this Section 2.8(b) in respect of any
Violation shall not exceed the net proceeds received by such Holder in the
registered offering out of which such Violation arises.
(c) NOTICE. Promptly after receipt by an indemnified
party under this Section 2.8 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim
in respect thereof is to be made against any indemnifying party under this
Section 2.8, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; PROVIDED, HOWEVER,
that an indemnified party shall have the right to retain its own counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by
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the counsel retained by the indemnifying party would be inappropriate due to
actual or potential conflict of interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.8, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
2.8.
(d) DEFECT ELIMINATED IN FINAL PROSPECTUS. The
foregoing indemnity agreements of the Company and Holders are subject to the
condition that, insofar as they relate to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with
the SEC at the time the registration statement in question becomes effective
or the amended prospectus filed with the SEC pursuant to SEC Rule 424(b) (the
"FINAL PROSPECTUS"), such indemnity agreement shall not inure to the benefit
of any person if a copy of the Final Prospectus was furnished to the
indemnified party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
(e) CONTRIBUTION. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any
case in which either (i) any Holder exercising rights under this Agreement,
or any controlling person of any such Holder, makes a claim for
indemnification pursuant to this Section 2.8 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 2.8 provides for indemnification
in such case, or (ii) contribution under the Securities Act may be required
on the part of any such selling Holder or any such controlling person in
circumstances for which indemnification is provided under this Section 2.8;
then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such
Holder is responsible for the portion represented by the percentage that the
public offering price of its Registrable Securities offered by and sold under
the registration statement bears to the public offering price of all
securities offered by and sold under such registration statement, and the
Company and other selling Holders are responsible for the remaining portion;
PROVIDED, HOWEVER, that, in any such case, (A) no such Holder will be
required to contribute any amount in excess of the public offering price of
all such Registrable Securities offered and sold by such Holder pursuant to
such registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty
of such fraudulent misrepresentation.
(f) SURVIVAL. The obligations of the Company and
Holders under this Section 2.8 shall survive the completion of any offering
of Registrable Securities in a registration statement, and otherwise.
2.9 RULE 144 REPORTING. With a view to making available
the benefits of certain rules and regulations of the Commission that may at
any time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock
of the Company, the Company agrees to:
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(a) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities Act,
at all times after the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public;
(b) Use its best efforts to file with the Commission
in a timely manner all reports and other documents required of the Company
under the Securities Act and the 1934 Act (at any time after it has become
subject to such reporting requirements); and
(c) So long as a Holder owns any Registrable
Securities, to furnish to the Holder forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements
of said Rule 144 (at any time after 90 days after the effective date of the
first registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the 1934 Act
(at any time after it has become subject to the reporting requirements of the
1934 Act), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company as a Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Holder to sell any such securities without registration
(at any time after the Company has become subject to the reporting
requirements of the 1934 Act).
2.10 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company
shall have no obligations pursuant to Sections 2.2, 2.3 or 2.4 with respect
to: (i) any request or requests for registration made by any Holder on a date
more than seven (7) years after the closing date of the Company's initial
public offering at a price per share of at least $6.00 per share and for a
total offering of at least $10,000,000 (before deduction of underwriters'
commissions and expenses); or (ii) any Registrable Securities proposed to be
sold by a Holder in a registration pursuant to Section 2.2, 2.3 or 2.4 if, in
the opinion of counsel to the Company, all such Registrable Securities
proposed to be sold by a Holder may be sold in a three-month period without
registration under the Securities Act pursuant to Rule 144 under the
Securities Act.
2.11 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From
and after the date of this Agreement, the Company shall not, without the
prior written consent of the Holders of a majority of the Registrable
Securities then outstanding, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder (a) to include such securities in any
registration filed under Section 2.3 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in
any such registration only to the extent that the inclusion of his securities
will not reduce the amount of the Registrable Securities of the Holders which
is included.
3. MARKET STAND-OFF AGREEMENT. Each Investor hereby agrees in
connection with any registration of the Company's securities under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), that, upon the
request of the Company or the underwriters managing any registered public
offering of the Company's securities, such Investor will not sell or
otherwise dispose of any Preferred Stock or Conversion Stock (or any shares
of the Company's Common Stock issued or issuable as a dividend or other
distribution with respect to, or in replacement of, such Preferred Stock or
Common Stock) without the prior written consent of the Company or such
managing underwriters, as the case may be, for a period of time after the
effective date of such registration requested by such managing underwriters,
but not to exceed 180 days (the "LOCK-UP PERIOD"), and subject to all
restrictions as the Company or the managing
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underwriters may specify for all executive officers and directors of the
Company, provided that the Lock up Period applicable to each Investor shall
not exceed the Lock up Period for all executive officers and directors of the
Company. In order to enforce the foregoing covenant, the Company shall have
the right to place restrictive legends on the certificates representing the
shares subject to this Section and to impose stop transfer instructions with
respect to such shares (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.
4. RIGHT OF FIRST REFUSAL.
4.1 GENERAL. Each Investor has the right of first refusal
to purchase such Investor's Pro Rata Share (as defined below), of all (or any
part) of any "New Securities" (as defined in Section 4.2) that the Company
may from time to time issue after the date of this Agreement. An Investor's
"PRO RATA SHARE" for purposes of this right of first refusal is the ratio of
(a) the number of shares of Preferred Stock and Conversion Stock held by such
Investor, to (b) a number of shares of Common Stock of the Company equal to
the sum of (i) the total number of shares of Common Stock of the Company then
outstanding, plus (ii) the total number of shares of Common Stock of the
Company into which all then outstanding shares of Preferred Stock of the
Company are then convertible, plus (iii) the number of shares of Common Stock
of the Company (A) reserved for issuance under stock purchase and stock
option plans of the Company, (B) subject to outstanding rights, options or
warrants (other than shares included in Subsection (A) above), and (C)
issuable upon the conversion or exchange of preferred stock or other
securities that are subject to outstanding rights, options or warrants.
4.2 NEW SECURITIES. "NEW SECURITIES" shall mean any
Common Stock or Preferred Stock of the Company, whether now authorized or
not, and rights, options or warrants to purchase such Common Stock or
Preferred Stock, and securities of any type whatsoever that are, or may
become, convertible or exchangeable into such Common Stock or Preferred
Stock; PROVIDED, HOWEVER, that the term "New Securities" DOES NOT INCLUDE:
(i) shares of the Company's Common Stock (and/or
options or warrants therefor) issued to employees, officers, or directors,
contractors, advisors or consultants of the Company pursuant to incentive
agreements or plans approved by the Board of Directors of the Company;
(ii) up to 4,000,000 shares of Series D Preferred
Stock issued under the Series D Agreement, as such agreement may be amended;
(iii) any securities issuable upon conversion of or
with respect to any then outstanding shares of Preferred Stock of the Company
or Common Stock or other securities issuable upon conversion thereof;
(iv) any securities issuable upon exercise of any
options, warrants or rights to purchase any securities of the Company
outstanding on the date of this Agreement ("WARRANT SECURITIES"), including
up to 50,000 shares of the Company's Common Stock subject to an option issued
to Ignatius Tjandrasuwita outside of any plan, and any securities issuable
upon the conversion of any Warrant Securities;
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(v) shares of the Company's Common Stock or
Preferred Stock issued in connection with any stock split or stock dividend;
(vi) any shares of the Company's Common Stock or
Preferred Stock (and/or options or warrants therefor) issued or issuable to
parties providing the Company with equipment leases, real property leases,
loans, credit lines, guaranties of indebtedness, cash price reductions or
similar financing provided such issuances are for other than equity financing
purposes; or
(vii) securities issued pursuant to the acquisition
of another corporation or entity by the Company by consolidation, merger,
purchase of all or substantially all of the assets, or other reorganization
in which the Company acquires, in a single transaction or series of related
transactions, all or substantially all of the assets of such other
corporation or entity or fifty percent (50%) or more of the voting power of
such other corporation or entity or fifty percent (50%) or more of the equity
ownership of such other entity.
4.3 PROCEDURES. In the event that the Company proposes to
undertake an issuance of New Securities, it shall give to each Investor
written notice of its intention to issue New Securities (the "NOTICE"),
describing the type of New Securities and the price and the general terms
upon which the Company proposes to issue such New Securities. Each Investor
shall have ten (10) days from the date of mailing of any such Notice to agree
in writing to purchase such Investor's Pro Rata Share of such New Securities
for the price and upon the general terms specified in the Notice by giving
written notice to the Company and stating therein the quantity of New
Securities to be purchased (not to exceed such Investor's Pro Rata Share). A
written notice to the Company indicating an Investor's intention to exercise
its right of first refusal shall not be binding upon such Investor unless and
until the Company obtains binding commitments to purchase all of the New
Securities specified in the Notice on the terms stated in the Notice. If any
Investor fails to so agree in writing within such ten (10) day period to
purchase such Investor's full Pro Rata Share of an offering of New Securities
(a "NONPURCHASING INVESTOR"), then such Nonpurchasing Investor shall forfeit
the right hereunder to purchase that part of its Pro Rata Share of such New
Securities that he did not so agree to purchase and the Company shall
promptly give each Investor who has timely agreed to purchase his full Pro
Rata Share of such offering of New Securities (a "PURCHASING INVESTOR")
written notice of the failure of any Nonpurchasing Investor to purchase such
Nonpurchasing Investor's full Pro Rata Share of such offering of New
Securities (the "OVERALLOTMENT NOTICE"). Each Purchasing Investor shall have
a right of overallotment such that such Purchasing Investor may agree to
purchase a portion of the Nonpurchasing Investors' unpurchased Pro Rata
Shares of such offering on a pro rata basis according to the relative Pro
Rata Shares of the Purchasing Investors, at any time within five (5) days
after receiving the Overallotment Notice.
4.4 FAILURE TO EXERCISE. In the event that the Investors
fail to exercise in full the right of first refusal within such ten (10) plus
five (5) day period, then the Company shall have 60 days thereafter to sell
the New Securities with respect to which the Investors' rights of first
refusal hereunder were not exercised, at a price and upon general terms not
materially more favorable to the purchasers thereof than specified in the
Company's Notice to the Investors. In the event that the Company has not
issued and sold the New Securities within such 60 day period, then the
Company shall not thereafter issue or sell any New Securities without again
first offering such New Securities to the Investors pursuant to this Section
4.
14
<PAGE>
5. ASSIGNMENT, AMENDMENT AND TERMINATION.
5.1 ASSIGNMENT. Notwithstanding anything herein to the
contrary:
(a) INFORMATION RIGHTS. The rights of an Investor
under Section 1.1(a) hereof may be assigned only to a party who acquires from
an Investor (or an Investor's permitted assigns) at least 100,000 shares of
Preferred Stock and/or an equivalent number (on an as-converted basis) of
shares of Conversion Stock. The rights of an Investor under Section 1.1(b)
hereof may be assigned only to a party who acquires from an Investor (or an
Investor's permitted assigns) at least 2,000,000 shares of Series C Stock
and/or an equivalent number (on an as-converted basis) of shares of Series C
Conversion Stock and/or at least 500,000 shares of Series D Stock and/or an
equivalent number (on an as-converted basis) of shares of Series D Conversion
stock.
(b) REGISTRATION RIGHTS; REFUSAL RIGHTS.
(1) Registration rights under Section 2 above
may be assigned by a Holder that is a partnership to a partner or retired
partner, and by a Holder that is an individual to such individual's estate
or, by gift, will or intestate succession, to a spouse or lineal descendant
or ancestors or any trust for any of the foregoing.
(2) Except as set forth in the preceding clause
(1), the registration rights of a Holder under Sections 2.3 and 2.4 hereof
and the rights of first refusal of an Investor under Section 4 hereof may be
assigned only to a party who acquires at least 10,000 shares of Series A
Stock issued under the Series A Agreement and/or 10,000 shares of Series B
Stock issued under the Series B Agreement and/or 10,000 shares of Series C
Stock issued under the Series C Agreement and/or 10,000 shares of Series D
Stock issued under the Series D Agreement and/or an equivalent number (on an
as-converted basis) of shares of Conversion Stock issued upon conversion
thereof.
(3) Except as set forth in the preceding clause
(1), the registration rights of a Holder under Section 2.2 hereof may be
assigned only to a party who acquires at least 500,000 shares of Series C
Stock issued under the Series C Agreement or at least 500,000 shares of
Series D Stock issued under the Series D Agreement and/or an equivalent
number (on an as-converted basis) of shares of Conversion Stock issued upon
conversion thereof.
(4) In each case, no party may be assigned any
of the foregoing rights unless the Company is given written notice by the
assigning party at the time of such assignment stating the name and address
of the assignee and identifying the securities of the Company as to which the
rights in question are being assigned, and any such assignee shall receive
such assigned rights subject to all the terms and conditions of this
Agreement, including without limitation the provisions of this Section 5.
5.2 AMENDMENT OF RIGHTS. Any provision of this Agreement
applying solely to Holders of Series C Stock and/or Series C Conversion Stock
and Series D Stock and/or Series D Conversion Stock (including without
limitation Section 1.1(b), Section 2.2 and so much of Section 5.1 as applies
to the transfer of such rights) may be amended and the observance thereof may
be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Holders holding shares of
15
<PAGE>
Series C Stock and/or Series C Conversion Stock representing and/or
convertible into a majority of shares of Series C Stock and Series C
Conversion Stock then outstanding, and the written consent of the Company and
holders holding shares of Series D Stock and/or Series D Conversion Stock
representing and/or convertible into fifty-five (55%) of shares of Series D
Stock and Series D Conversion Stock then outstanding. Any other provision of
this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Holders
holding shares of Series A Stock, Series B Stock, Series C Stock, Series D
Stock and/or Conversion Stock representing and/or convertible into fifty-five
(55%) of all the Investors' Shares (as defined below). As used herein, the
term "INVESTORS' SHARES" shall mean the shares of Common Stock then issuable
upon conversion of all then outstanding shares of Series A Stock issued under
the Series A Agreement and all then outstanding shares of Series B Stock
issued under the Series B Agreement and all then outstanding shares of Series
C Stock issued under the Series C Agreement and all then outstanding shares
of Series D Stock issued under the Series D Agreement plus all then
outstanding shares of Conversion Stock that were issued upon the conversion
of any shares of Series A Stock issued under the Series A Agreement, shares
of Series B Stock issued under the Series B Agreement, shares of Series C
Stock issued under the Series C Agreement and shares of Series D issued under
the Series D Agreement. Any amendment or waiver effected in accordance with
this Section 5.2 shall be binding upon each Investor, each permitted
successor or assignee of such Investor and the Company.
5.3 TERMINATION OF RIGHTS. The Company's obligations
under Section 1 (other than Section 1.1(a)) and Section 4 of this Agreement
will terminate immediately before the closing of the Company's initial public
offering of Common Stock pursuant to an effective registration statement
filed under the Securities Act. Alternatively, the Company's obligations
under Section 1 of this Agreement will terminate immediately before the
closing of an acquisition of the Company by another corporation or entity by
consolidation, merger, acquisition of all or substantially all the assets of
the Company, or other reorganization, where the corporation or other entity
surviving the transaction has a class of stock registered under the
Securities Exchange Act of 1934, as amended.
5.4 NEW INVESTORS. Notwithstanding anything herein to the
contrary, if pursuant to Section 2.2 of the Series D Agreement, additional
parties may purchase shares of Series D Stock as "New Investors" thereunder,
then each such New Investor shall become a party to this Agreement as an
"Investor" hereunder, without the need any consent, approval or signature of
any Investor when such New Investor has both; (i) purchased shares of Series
D Stock under the Series D Agreement and paid the Company all consideration
payable for such shares and (ii) executed one or more counterpart signature
pages to this Agreement as an "Investor", with the Company's consent.
6. GENERAL PROVISIONS.
6.1 NOTICES. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to
have been duly given if (1) personally delivered or (2) if deposited in the
U.S. mail by registered or certified mail, return receipt requested, postage
prepaid, or (3) if deposited with a return receipt express courier, as
follows:
16
<PAGE>
(a) if to an Investor, at such Investor's respective
address as set forth on Exhibit A hereto.
(b) if to the Company, at 10131 Bubb Road, Cupertino,
California.
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given when personally delivered or when deposited in the
mail in the manner set forth above.
6.2 ENTIRE AGREEMENT. This Agreement, together with all
the Exhibits hereto, constitutes and contains the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings, duties or obligations between the parties respecting the
subject matter hereof.
6.3 GOVERNING LAW. This Agreement shall be governed by
and construed exclusively in accordance with the internal laws of the State
of California as applied to agreements among California residents entered
into and to be performed entirely within California, excluding that body of
law relating to conflict of laws and choice of law.
6.4 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, then such
provision(s) shall be excluded from this Agreement and the balance of this
Agreement shall be interpreted as if such provision(s) were so excluded and
shall be enforceable in accordance with its terms.
6.5 THIRD PARTIES. Nothing in this Agreement, express or
implied, is intended to confer upon any person, other than the parties hereto
and their successors and assigns, any rights or remedies under or by reason
of this Agreement.
6.6 SUCCESSORS AND ASSIGNS. Subject to the provisions of
Section 5.1, the provisions of this Agreement shall inure to the benefit of,
and shall be binding upon, the successors and permitted assigns of the
parties hereto.
6.7 CAPTIONS. The captions to sections of this Agreement
have been inserted for identification and reference purposes only and shall
not be used to construe or interpret this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.9 COSTS AND ATTORNEYS' FEES. In the event that any
action, suit or other proceeding is instituted concerning or arising out of
this Agreement or any transaction contemplated hereunder, the prevailing
party shall recover all of such party's costs and attorneys' fees incurred in
each such action, suit or other proceeding, including any and all appeals or
petitions therefrom.
6.10 ADJUSTMENTS FOR STOCK SPLITS, ETC. Wherever in this
Agreement there is a reference to a specific number of shares of Common Stock
or Preferred Stock of the Company of any class or series, then, upon the
occurrence of any subdivision, combination or stock dividend of such class or
series of stock, the specific number of shares so referenced in this
17
<PAGE>
Agreement shall automatically be proportionally adjusted to reflect the
effect on the outstanding shares of such class or series of stock by such
subdivision, combination or stock dividend.
6.11 AGGREGATION OF STOCK. All shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose
of determining the availability of any rights under this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
THE COMPANY: INVESTORS:
Silicon Image, Inc. InveStar Semiconductor Development
Fund, Inc.
By: /s/ David D. Lee By: /s/ Kandie Hsieh
-------------------------------- ----------------------------------
David D. Lee
Title: Chief Executive Officer Title: Controller
-------------------------------
InveStar Excelsus Venture Capital
(Int'l) Inc., LDC
By: /s/ Kandie Hsieh
----------------------------------
Title: Controller
-------------------------------
Forefront Venture Partners L.P.
By: /s/ Herbert Chang
----------------------------------
Title: Partner
-------------------------------
[SIGNATURE PAGE TO SILICON IMAGE, INC. THIRD AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
August Capital, L.P. for itself and as
nominee for August Capital Strategic
Partners, L.P. and August Capital
Associates, L.P.
By: August Capital Management LLC,
general partner
By: /s/ Mark G. Wilson
------------------------------------
Mark G. Wilson, Member
Fenwick & West Investments 1998
By: /s/ Laird H. Simons
------------------------------------
Name: Laird H. Simons
----------------------------------
Title: Partner
---------------------------------
Velocity Technology and Communications
Trust B
By: /s/ Andrew Kessler
------------------------------------
Name: Andrew Kessler
----------------------------------
Title: Investment Advisor
---------------------------------
/s/ Ronald Schmidt
----------------------------------------
Ron Schmidt
/s/ William Wheeler
----------------------------------------
William Wheeler
/s/ Sung Cha
----------------------------------------
Sung Cha
[SIGNATURE PAGE TO SILCON IMAGE, INC. THIRD AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the undersigned parties hereto have executed this
Agreement as of the date first written above.
THE COMPANY: INVESTORS:
Silicon Image, Inc. Intel Corporation
By: By: /s/ Arvind Sodhani
------------------------------ -----------------------------------
David D. Lee
Title: Chief Executive Officer Print Name: Arvind Sodhani
---------------------------
Title: VP & Treasurer
--------------------------------
[SIGNATURE PAGE TO SILICON IMAGE, INC. THIRD AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF NUMBER OF SHARES OF NUMBER OF SHARES OF
SERIES A SERIES B SERIES C SERIES D
INVESTOR STOCK HELD STOCK HELD STOCK HELD STOCK HELD
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
InveStar Semiconductor 428,572
Development Fund, Inc.
Room 1201, TWTC Int'l
Trade Building 12F
333 Keelung Road, Section 1
Taipei, Taiwan
InveStar Excelsus Venture 285,714
Capital (Int'l) Inc., LDC
Room 1201, TWTC Int'l
Trade Building 12F
333 Keelung Road, Section 1
Taipei, Taiwan
Forefront Venture Partners L.P. 142,857
1737 North First Street,
Suite 650
San Jose, CA 95112
August Capital, L.P. 3,200,000 1,428,572
2480 Sand Hill Road,
Suite 101
Menlo Park, CA 94025
William R. Wheeler 350,000 142,494 142,000
19976 Merribrook Drive
Saratoga, CA 95070
Tel.: (408) 867-9597
Ronald Schmidt 46,068 10,000
272 Golden Hills Drive
Portola Valley, CA 94028
Fenwick & West 14,286
Investments 1998
Two Palo Alto Square
Palo Alto, CA 94306
Velocity Technology and 285,715
Communications Trust B
261 Hamilton Avenue
Suite 212
Palo Alto, CA 94301
Attn: Andrew Kessler
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF NUMBER OF SHARES OF NUMBER OF SHARES OF
SERIES A SERIES B SERIES C SERIES D
INVESTOR STOCK HELD STOCK HELD STOCK HELD STOCK HELD
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Dr. Sang-Chul Han 898,925 365,975
Kang Nam Cable System Inc.
Ryukyung Bldg. 239-1,
Noonhyun-dong,
Kangnam-ku,
Seoul, Korea 135-010
Tel.: 011-82-2-518-3000
Fax: 011-82-2-512-4208
or
c/o Young Jin Lee
1115 Huntington Drive,
Unit G
South Pasadena, CA 91030
Mr. Kyung-Suk Kang 36,075 14,687
Samho Garden 10-1208
Seocho-dong, Seocho-Ku
Seoul, Korea
Tel: 011-82-2-598-5944
Fax: 011-82-2-598-5943
Techno-Alliance Corporation 100,000
5-30-1 Takinoi
Funabashi-shi
Chiba-Pref., Japan 274
Tel./Fax: 0474-64-9020
copy to:
Mr. Yuichi Okabe, President
Techno-Alliance Corporation
Shin-Osaki Kangyo Bldg. 11F
6-4, Osaki 1-Chome
Shinagawa-Ku, Tokyo,
Japan, 141
Tel.: 011-81-474-63-3242
Fax: 011-81-474-64-9020
Ki Sub Lee 100,000 40,712
948 Clinton Road
Los Altos, CA 94024
Tel.:
Mr. Youkichi Den 40,000
2-11-15-101, Den-En-Chofu
Ota-Ku, Tokyo, Japan
Tsuyoshi Karasawa 10,000
390 Elan Village Ln. #315
San Jose, CA 95134
Tel: (408) 954-9042
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF NUMBER OF SHARES OF NUMBER OF SHARES OF
SERIES A SERIES B SERIES C SERIES D
INVESTOR STOCK HELD STOCK HELD STOCK HELD STOCK HELD
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rusmin Kudinar 30,000 12,214
32463 Capitola Court
Union City, CA 94587
Tel: (510) 487-7615
Korea Technology Investment 200,000 81,425
Corporation
Haeam Bldg. 15th Floor
983-3 Daichi-dong,
Kangnam-Ku
Seoul, Korea 135-280
Attn: Joy G. Yi
Tel.: 011-82-2-538-3111
Fax: 011-82-2-538-3113
Kim Law Firm (KTIC USA)
175 Nortech Parkway, Ste 200
San Jose, CA 94134
Tel.: (408) 988-0188
Fax: (408) 988-3110
Attn: Dr. Paul D. Kim
SsangYong (U.S.A.), Inc. 200,000 81,425
601 16th Street
Carlstadt, NJ 07072
Attn: S.W. Shim, Vice
President
or
115 West Century Road
Paramus, NJ 07652
Tel.: (201) 261-9400
Fax: (201) 262-8880
David A. Hodges 15,000
1272 Queens Road
Berkeley, CA 94708
Intel Corporation 857,143
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: Treasurer
Fax Number: (408) 765-6038
copies to:
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: General Counsel
Fax Number: (408) 765-1859
</TABLE>
<PAGE>
AMENDMENT NO. 1 TO THIRD AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
This Amendment No. 1 to the Third Amended and Restated Investors' Rights
Agreement (the "FIRST AMENDMENT") is dated as of October 15, 1998 and is entered
into by and between Silicon Image, Inc., a California corporation (the
"COMPANY") and the investors listed on Exhibit 1 hereto (the "AMENDING
INVESTORS").
R E C I T A L S:
- - - - - - - -
A. WHEREAS, the Company and certain investors (the "INVESTORS") entered
into a Third Amended and Restated Investors' Rights Agreement (the
"ORIGINAL AGREEMENT") dated as of July 29, 1998 (the "CLOSING DATE")
whereby the Company granted the Investors certain registration rights
for securities defined as "Registrable Securities" under the Original
Agreement.
B. WHEREAS, the Company and Intel Corporation entered into a certain
Warrant No. 1 (the "WARRANT") on September 16, 1998 to purchase
142,857 shares of Common Stock of the Company. The Warrant provided
that all Common Stock issuable upon exercise of the Warrant (the
"WARRANT SHARES") would be Registrable Securities under the Original
Agreement.
C. WHEREAS, the Company and the Amending Investors wish to amend the
definition of Registrable Securities under Section 2.1(b) of the
Original Agreement to include the Warrant Shares.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. AMENDMENT TO SECTION 2.1(b). Section 2.1(b) of the Original Agreement
is hereby amended and restated in its entirety as follows:
(b) REGISTRABLE SECURITIES. The term "REGISTRABLE SECURITIES" means:
(1) all the shares of Common Stock of the Company issued or issuable upon the
conversion of any shares of Series A Stock issued under the Series A Agreement,
any shares of Series B Stock issued under the Series B Agreement, any shares of
Series C Stock issued under the Series C Agreement, or any shares of Series D
Stock issued under the Series D Agreement, as such agreements may hereafter be
amended from time to time, that are now owned or may hereafter be acquired by
any Investor or any permitted successors and assigns of Investor; (2) all shares
of Common Stock of the Company issuable upon exercise of that certain Warrant
No. 1 to purchase 142,857 shares of Common Stock of the Company between the
Company and Intel Corporation dated September 16, 1998; and (3) any shares of
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
all such shares of Common Stock described in clauses (1) and (2) of this
subsection (b); EXCLUDING
<PAGE>
in all cases, however, any Registrable Securities sold by a person in a
transaction in which rights under this Section 2 are not assigned in
accordance with this Agreement or any Registrable Securities sold to the
public or sold pursuant to Rule 144 promulgated under the Securities Act;
PROVIDED, HOWEVER, that notwithstanding anything herein to the contrary, the
shares of Common Stock of the Company issued or issuable upon the conversion
of any shares of Series A Stock issued under the Series A Agreement and any
shares of Series B Stock issued under the Series B Agreement and any shares
of Common Stock described in clause (3) of this Section 2.1(b) that are
issued in respect to any such shares (which Shares are collectively
hereinafter referred to as the "EXCLUDED SECURITIES"), shall not be
Registrable Securities for purposes of Section 2.2 of this Agreement.
2. NO OTHER CHANGES. Except as amended as set forth in this First
Amendment, all other provisions of the Original Agreement shall continue in full
force and effect.
3. COUNTERPARTS. This First Amendment may be executed in one or more
counterparts, each of which shall be deemed and original, but which together
will constitute one and the same instrument.
4. GOVERNING LAW. This First Amendment will be governed by and construed
under the internal laws of the state of California as applied to agreements
among California residents entered into and performed entirely within
California, without reference to principles of conflict of laws or choice of
laws.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date first written above.
THE COMPANY: AMENDING INVESTORS:
Silicon Image, Inc. August Capital, L.P. for itself and as
nominee for August Capital Strategic
Partners, L.P. and August Capital
Associates, L.P.
By: /s/ David D. Lee
----------------------------
David D. Lee
Title: Chief Executive Officer By: August Capital Management LLC,
general partner
By: /s/ Mark G. Wilson
----------------------------------------
Mark G. Wilson, Member
InveStar Semiconductor Development Fund,
Inc.
By: /s/ Kandie Hsieh
----------------------------------------
Title: Controller
------------------------------------
InveStar Excelsus Venture Capital (Int'l)
Inc., LDC
By: /s/ Kandie Hsieh
----------------------------------------
Title: Controller
------------------------------------
Forefront Venture Partners L.P.
By: /s/ Herbert Chang
----------------------------------------
Title: Partner
------------------------------------
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO SILICON IMAGE, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment as of the
date first written above.
AMENDING INVESTORS:
------------------
/s/ Ronald V. Schmidt
----------------------------------
Ron Schmidt
/s/ William Wheeler
----------------------------------
William Wheeler
INTEL CORPORATION
By: /s/ Arvind Sodhani
------------------------------------
Name: Arvind Sodhani
------------------------------------
Title: Vice President and Treasurer
------------------------------------
F & W INVESTMENTS 1998
By: /s/ Laird Simons
------------------------------------
Name: Laird Simons
------------------------------------
Title: Partner
------------------------------------
VELOCITY TECHNOLOGY AND
COMMUNICATIONS TRUST B
By: /s/ Andrew Kessler
------------------------------------
Name: Andrew Kessler
------------------------------------
Title: Investment Advisor
------------------------------------
[SIGNATURE PAGE TO AMENDMENT NO. 1 TO SILICON IMAGE, INC.
THIRD AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT]
<PAGE>
EXHIBIT 1
---------
Amending Investors
August Capital, L.P.
InveStar Semiconductor Development Fund, Inc.
InveStar Excelsus Venture Capital (Int'l) Inc., LDC
Forefront Venture Partners L.P.
William Wheeler
Intel Corporation
Velocity Technology and Communications Trust B
Ron Schmidt
F&W Investments 1998
<PAGE>
Exhibit 10.01
INDEMNITY AGREEMENT
This Indemnity Agreement (this "AGREEMENT"), dated as of __________,
1999, is made by and between Silicon Image, Inc., a Delaware corporation (the
"COMPANY"), and _________________________, a director and/or officer of the
Company (the "INDEMNITEE").
RECITALS
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations
unless they are protected by comprehensive liability insurance and/or
indemnification, due to increased exposure to litigation costs and risks
resulting from their service to such corporations, and due to the fact that
the exposure frequently bears no reasonable relationship to the compensation
of such directors and officers;
B. Based on their experience as business managers, the Board of
Directors of the Company (the "BOARD") has concluded that, to retain and
attract talented and experienced individuals to serve as officers and
directors of the Company, and to encourage such individuals to take the
business risks necessary for the success of the Company, it is necessary for
the Company contractually to indemnify officers and directors and to assume
for itself maximum liability for expenses and damages in connection with
claims against such officers and directors in connection with their service
to the Company;
C. Section 145 of the General Corporation Law of Delaware, under
which the Company is organized (the "LAW"), empowers the Company to indemnify
by agreement its officers, directors, employees and agents, and persons who
serve, at the request of the Company, as directors, officers, employees or
agents of other corporations or enterprises, and expressly provides that the
indemnification provided by the Law is not exclusive; and
D. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or officer of the Company free from undue
concern for claims for damages arising out of or related to such services to
the Company.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS.
1.1 AGENT. For the purposes of this Agreement, "AGENT" of the
Company means any person who is or was a director or officer of the Company
or a subsidiary of the Company; or is or was serving at the request of, for
the convenience of, or to represent the interest of the Company or a
subsidiary of the Company as a director or officer of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise
or an affiliate of the Company; or was a director or officer of a foreign or
domestic corporation which was a predecessor corporation of the Company,
including, without limitation, Silicon Image, Inc., a California corporation,
or was a director or officer of another enterprise or affiliate of the
Company at the request of, for the convenience of, or to represent the
interests of such
1
<PAGE>
predecessor corporation. The term "ENTERPRISE" includes any employee benefit
plan of the Company, its subsidiaries, affiliates and predecessor
corporations.
1.2 EXPENSES. For purposes of this Agreement, "EXPENSES"
includes all direct and indirect costs of any type or nature whatsoever
(including, without limitation, all attorneys' fees and related disbursements
and other out-of-pocket costs) actually and reasonably incurred by the
Indemnitee in connection with the investigation, defense or appeal of a
proceeding or establishing or enforcing a right to indemnification or
advancement of expenses under this Agreement, Section 145 or otherwise;
PROVIDED, HOWEVER, that expenses shall not include any judgments, fines,
ERISA excise taxes or penalties or amounts paid in settlement of a proceeding.
1.3 PROCEEDING. For the purposes of this Agreement,
"PROCEEDING" means any threatened, pending or completed action, suit or other
proceeding, whether civil, criminal, administrative, investigative or any
other type whatsoever.
1.4 SUBSIDIARY. For purposes of this Agreement, "SUBSIDIARY"
means any corporation of which more than fifty percent (50%) of the
outstanding voting securities is owned directly or indirectly by the Company,
by the Company and one or more of its subsidiaries or by one or more of the
Company's subsidiaries.
2. AGREEMENT TO SERVE. The Indemnitee agrees to serve and/or
continue to serve as an agent of the Company, at the will of the Company (or
under separate agreement, if such agreement exists), in the capacity the
Indemnitee currently serves as an agent of the Company, faithfully and to the
best of his ability, so long as he is duly appointed or elected and qualified
in accordance with the applicable provisions of the charter documents of the
Company or any subsidiary of the Company; PROVIDED, HOWEVER, that the
Indemnitee may at any time and for any reason resign from such position
(subject to any contractual obligation that the Indemnitee may have assumed
apart from this Agreement), and the Company or any subsidiary shall have no
obligation under this Agreement to continue the Indemnitee in any such
position.
3. DIRECTORS' AND OFFICERS' INSURANCE. The Company shall, to the
extent that the Board determines it to be economically reasonable, maintain a
policy of directors' and officers' liability insurance ("D&O INSURANCE"), on
such terms and conditions as may be approved by the Board.
4. MANDATORY INDEMNIFICATION. Subject to Section 9 below, the
Company shall indemnify the Indemnitee:
4.1 THIRD PARTY ACTIONS. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any proceeding (other
than an action by or in the right of the Company) by reason of the fact that
he is or was an agent of the Company, or by reason of anything done or not
done by him in any such capacity, against any and all expenses and
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement)
actually and reasonably incurred by him in connection with the investigation,
defense, settlement or appeal of such proceeding if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful; and
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4.2 DERIVATIVE ACTIONS. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any proceeding by or in
the right of the Company to procure a judgment in its favor by reason of the
fact that he is or was an agent of the Company, or by reason of anything done
or not done by him in any such capacity, against any amounts paid in
settlement of any such proceeding and all expenses actually and reasonably
incurred by him in connection with the investigation, defense, settlement or
appeal of such proceeding if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Company; EXCEPT that no indemnification under this subsection shall be made
in respect of any claim, issue or matter as to which such person shall have
been finally adjudged to be liable to the Company by a court of competent
jurisdiction due to willful misconduct of a culpable nature in the
performance of his duty to the Company, unless and only to the extent that
the Court of Chancery or the court in which such proceeding was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such amounts which the Court of Chancery
or such other court shall deem proper; and
4.3 EXCEPTION FOR AMOUNTS COVERED BY INSURANCE. Notwithstanding
the foregoing, the Company shall not be obligated to indemnify the Indemnitee
for expenses or liabilities of any type whatsoever (including, but not
limited to, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) to the extent such have been paid directly to the
Indemnitee by D&O Insurance.
5. PARTIAL INDEMNIFICATION AND CONTRIBUTION.
5.1 PARTIAL INDEMNIFICATION. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the Company for
some or a portion of any expenses or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) incurred by him in the
investigation, defense, settlement or appeal of a proceeding but is not
entitled, however, to indemnification for all of the total amount thereof,
then the Company shall nevertheless indemnify the Indemnitee for such total
amount except as to the portion thereof to which the Indemnitee is not
entitled to indemnification.
5.2 CONTRIBUTION. If the Indemnitee is not entitled to the
indemnification provided in Section 4 for any reason other than the statutory
limitations set forth in the Law, then in respect of any threatened, pending
or completed proceeding in which the Company is jointly liable with the
Indemnitee (or would be if joined in such proceeding), the Company shall
contribute to the amount of expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred and
paid or payable by the Indemnitee in such proportion as is appropriate to
reflect (i) the relative benefits received by the Company on the one hand and
the Indemnitee on the other hand from the transaction from which such
proceeding arose and (ii) the relative fault of the Company on the one hand
and of the Indemnitee on the other hand in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the Indemnitee on the other hand shall be
determined by reference to, among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses,
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judgments, fines or settlement amounts. The Company agrees that it would not
be just and equitable if contribution pursuant to this Section 5 were
determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
6. MANDATORY ADVANCEMENT OF EXPENSES.
6.1 ADVANCEMENT. Subject to Section 9 below, the Company shall
advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the
fact that the Indemnitee is or was an agent of the Company or by reason of
anything done or not done by him in any such capacity. The Indemnitee hereby
undertakes to promptly repay such amounts advanced only if, and to the extent
that, it shall ultimately be determined that the Indemnitee is not entitled
to be indemnified by the Company under the provisions of this Agreement, the
Certificate of Incorporation or Bylaws of the Company, the Law or otherwise.
The advances to be made hereunder shall be paid by the Company to the
Indemnitee within thirty (30) days following delivery of a written request
therefor by the Indemnitee to the Company.
6.2 EXCEPTION. Notwithstanding the foregoing provisions of this
Section 6, the Company shall not be obligated to advance any expenses to the
Indemnitee arising from a lawsuit filed directly by the Company against the
Indemnitee if an absolute majority of the members of the Board reasonably
determines in good faith, within thirty (30) days of the Indemnitee's request
to be advanced expenses, that the facts known to them at the time such
determination is made demonstrate clearly and convincingly that the
Indemnitee acted in bad faith. If such a determination is made, the
Indemnitee may have such decision reviewed by another forum, in the manner
set forth in Sections 8.3, 8.4 and 8.5 hereof, with all references therein to
"indemnification" being deemed to refer to "advancement of expenses," and the
burden of proof shall be on the Company to demonstrate clearly and
convincingly that, based on the facts known at the time, the Indemnitee acted
in bad faith. The Company may not avail itself of this Section 6.2 as to a
given lawsuit if, at any time after the occurrence of the activities or
omissions that are the primary focus of the lawsuit, the Company has
undergone a change in control. For this purpose, a change in control shall
mean a given person or group of affiliated persons or groups increasing their
beneficial ownership interest in the Company by at least twenty (20)
percentage points without advance Board approval.
7. NOTICE AND OTHER INDEMNIFICATION PROCEDURES.
7.1 Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the
Indemnitee shall, if the Indemnitee believes that indemnification with
respect thereto may be sought from the Company under this Agreement, notify
the Company of the commencement or threat of commencement thereof.
7.2 If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 7.1 hereof, the Company has
D&O Insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on
behalf of the Indemnitee,
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all amounts payable as a result of such proceeding in accordance with the
terms of such D&O Insurance policies.
7.3 In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if
appropriate, shall be entitled to assume the defense of such proceeding, with
counsel approved by the Indemnitee (which approval shall not be unreasonably
withheld), upon the delivery to the Indemnitee of written notice of its
election to do so. After delivery of such notice, approval of such counsel by
the Indemnitee and the retention of such counsel by the Company, the Company
will not be liable to the Indemnitee under this Agreement for any fees of
counsel subsequently incurred by the Indemnitee with respect to the same
proceeding, PROVIDED that: (a) the Indemnitee shall have the right to employ
his own counsel in any such proceeding at the Indemnitee's expense; (b) the
Indemnitee shall have the right to employ his own counsel in connection with
any such proceeding, at the expense of the Company, if such counsel serves in
a review, observer, advice and counseling capacity and does not otherwise
materially control or participate in the defense of such proceeding; and (c)
if (i) the employment of counsel by the Indemnitee has been previously
authorized by the Company, (ii) the Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
the Indemnitee in the conduct of any such defense or (iii) the Company shall
not, in fact, have employed counsel to assume the defense of such proceeding,
then the fees and expenses of the Indemnitee's counsel shall be at the
expense of the Company.
8. DETERMINATION OF RIGHT TO INDEMNIFICATION.
8.1 To the extent the Indemnitee has been successful on the
merits or otherwise in defense of any proceeding referred to in Section 4.1
or 4.2 of this Agreement or in the defense of any claim, issue or matter
described therein, the Company shall indemnify the Indemnitee against
expenses actually and reasonably incurred by him in connection with the
investigation, defense or appeal of such proceeding, or such claim, issue or
matter, as the case may be.
8.2 In the event that Section 8.1 is inapplicable, or does not
apply to the entire proceeding, the Company shall nonetheless indemnify the
Indemnitee unless the Company shall prove by clear and convincing evidence to
a forum listed in Section 8.3 below that the Indemnitee has not met the
applicable standard of conduct required to entitle the Indemnitee to such
indemnification.
8.3 The Indemnitee shall be entitled to select the forum in
which the validity of the Company's claim under Section 8.2 hereof that the
Indemnitee is not entitled to indemnification will be heard from among the
following, EXCEPT that the Indemnitee can select a forum consisting of the
stockholders of the Company only with the approval of the Company:
(a) A quorum of the Board consisting of directors who are
not parties to the proceeding for which indemnification is being sought;
(b) The stockholders of the Company;
(c) Legal counsel mutually agreed upon by the Indemnitee
and the Board, which counsel shall make such determination in a written
opinion;
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(d) A panel of three arbitrators, one of whom is selected
by the Company, another of whom is selected by the Indemnitee and the last of
whom is selected by the first two arbitrators so selected; or
(e) The Court of Chancery of Delaware or other court
having jurisdiction of subject matter and the parties.
8.4 As soon as practicable, and in no event later than thirty
(30) days after the forum has been selected pursuant to Section 8.3 above,
the Company shall, at its own expense, submit to the selected forum its claim
that the Indemnitee is not entitled to indemnification, and the Company shall
act in the utmost good faith to assure the Indemnitee a complete opportunity
to defend against such claim.
8.5 If the forum selected in accordance with Section 8.3 hereof
is not a court, then after the final decision of such forum is rendered, the
Company or the Indemnitee shall have the right to apply to the Court of
Chancery of Delaware, the court in which the proceeding giving rise to the
Indemnitee's claim for indemnification is or was pending or any other court
of competent jurisdiction, for the purpose of appealing the decision of such
forum, PROVIDED that such right is executed within sixty (60) days after the
final decision of such forum is rendered. If the forum selected in accordance
with Section 8.3 hereof is a court, then the rights of the Company or the
Indemnitee to appeal any decision of such court shall be governed by the
applicable laws and rules governing appeals of the decision of such court.
8.6 Notwithstanding any other provision in this Agreement to
the contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by
the Indemnitee in connection with any other proceeding between the Company
and the Indemnitee involving the interpretation or enforcement of the rights
of the Indemnitee under this Agreement unless a court of competent
jurisdiction finds that each of the material claims and/or defenses of the
Indemnitee in any such proceeding was frivolous or not made in good faith.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
9.1 CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance
expenses to the Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense, EXCEPT with
respect to proceedings specifically authorized by the Board or brought to
establish or enforce a right to indemnification and/or advancement of
expenses arising under this Agreement, the charter documents of the Company
or any subsidiary or any statute or law or otherwise, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board finds it to be appropriate; or
9.2 UNAUTHORIZED SETTLEMENTS. To indemnify the Indemnitee
hereunder for any amounts paid in settlement of a proceeding unless the
Company consents in advance in writing to such settlement, which consent
shall not be unreasonably withheld; or
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9.3 SECURITIES LAW ACTIONS. To indemnify the Indemnitee on
account of any suit in which judgment is rendered against the Indemnitee for
an accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company pursuant to the provisions of Section l6(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions
of any federal, state or local statutory law; or
9.4 UNLAWFUL INDEMNIFICATION. To indemnify the Indemnitee if a
final decision by a court having jurisdiction in the matter shall determine
that such indemnification is not lawful. In this respect, the Company and the
Indemnitee have been advised that the Securities and Exchange Commission
takes the position that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication.
10. NON-EXCLUSIVITY. The provisions for indemnification and
advancement of expenses set forth in this Agreement shall not be deemed
exclusive of any other rights which the Indemnitee may have under any
provision of law, the Company's Certificate of Incorporation or Bylaws, the
vote of the Company's stockholders or disinterested directors, other
agreements or otherwise, both as to action in the Indemnitee's official
capacity and to action in another capacity while occupying his position as an
agent of the Company, and the Indemnitee's rights hereunder shall continue
after the Indemnitee has ceased acting as an agent of the Company and shall
inure to the benefit of the heirs, executors and administrators of the
Indemnitee.
11. GENERAL PROVISIONS.
11.1 INTERPRETATION OF AGREEMENT. It is understood that the
parties hereto intend this Agreement to be interpreted and enforced so as to
provide indemnification and advancement of expenses to the Indemnitee to the
fullest extent now or hereafter permitted by law, except as expressly limited
herein.
11.2 SEVERABILITY. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any
reason whatsoever, then: (a) the validity, legality and enforceability of the
remaining provisions of this Agreement (including, without limitation, all
portions of any paragraphs of this Agreement containing any such provision
held to be invalid, illegal or unenforceable that are not themselves invalid,
illegal or unenforceable) shall not in any way be affected or impaired
thereby; and (b) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, all portions of any paragraphs of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable and to give effect to
Section 11.1 hereof.
11.3 MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
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11.4 SUBROGATION. In the event of full payment under this
Agreement, the Company shall be subrogated to the extent of such payment to
all of the rights of recovery of the Indemnitee, who shall execute all
documents required and shall do all acts that may be necessary or desirable
to secure such rights and to enable the Company effectively to bring suit to
enforce such rights.
11.5 COUNTERPARTS. This Agreement may be executed in one or more
counter-parts, which shall together constitute one agreement.
11.6 SUCCESSORS AND ASSIGNS. The terms of this Agreement shall
bind, and shall inure to the benefit of, the successors and assigns of the
parties hereto.
11.7 NOTICE. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed
duly given: (a) if delivered by hand and signed for by the party addressee;
or (b) if mailed by certified or registered mail, with postage prepaid, on
the third business day after the mailing date. Addresses for notice to either
party are as shown on the signature page of this Agreement or as subsequently
modified by written notice.
11.8 GOVERNING LAW. This Agreement shall be governed exclusively
by and construed according to the laws of the State of California, as applied
to contracts between California residents entered into and to be performed
entirely within California.
11.9 CONSENT TO JURISDICTION. The Company and the Indemnitee
each hereby irrevocably consent to the jurisdiction of the courts of the
State of California for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement.
11.10 ATTORNEYS' FEES. In the event Indemnitee is required to
bring any action to enforce rights under this Agreement (including, without
limitation, the expenses of any Proceeding described in Section 3), the
Indemnitee shall be entitled to all reasonable fees and expenses in bringing
and pursuing such action, unless a court of competent jurisdiction finds each
of the material claims of the Indemnitee in any such action was frivolous and
not made in good faith.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have entered into this
Indemnity Agreement effective as of the date first written above.
SILICON IMAGE, INC. INDEMNITEE:
By:__________________________________ By:__________________________________
Name:________________________________ Name:________________________________
Title:_______________________________
Address:_____________________________ Address:_____________________________
_____________________________________ _____________________________________
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Exhibit 10.02
SILICON IMAGE, INC.
1995 EQUITY INCENTIVE PLAN
AS ADOPTED AND AMENDED THROUGH
JULY 20, 1999
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options and Restricted Stock.
Capitalized terms not defined in the text are defined in Section 22 hereof.
This Plan is intended to be a written compensatory benefit plan within the
meaning of Rule 701 promulgated under the Securities Act.
2. SHARES SUBJECT TO THE PLAN.
2.1 NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2 and 17
hereof, the total number of Shares reserved and available for grant and
issuance pursuant to this Plan will be 5,866,000 Shares or such lesser number
of Shares as permitted under Section 260.140.45 of Title 10 of the California
Code of Regulations. Subject to Sections 2.2 and 17 hereof, Shares will again
be available for grant and issuance in connection with future Awards under
this Plan that: (a) are subject to issuance upon exercise of an Option but
cease to be subject to such Option for any reason other than exercise of such
Option or (b) are subject to a Restricted Stock Award that otherwise
terminates without Shares being issued. At all times the Company will reserve
and keep available a sufficient number of Shares as will be required to
satisfy the requirements of all Awards granted under this Plan.
2.2 ADJUSTMENT OF SHARES. In the event that the number of
outstanding shares of the Company's Common Stock is changed by a stock
dividend, recapitalization, stock split, reverse stock split, subdivision,
combination, reclassification or similar change in the capital structure of
the Company without consideration, then (a) the number of Shares reserved for
issuance under this Plan, (b) the Exercise Prices of and number of Shares
subject to outstanding Options and (c) the Purchase Prices of and number of
Shares subject to other outstanding Awards will be proportionately adjusted,
subject to any required action by the Board or the shareholders of the
Company and compliance with applicable securities laws; provided, however,
that fractions of a Share will not be issued but will either be paid in cash
at Fair Market Value of such fraction of a Share or will be rounded down to
the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 hereof) may be granted
only to employees (including officers and directors who are also employees)
of the Company or of a Parent or Subsidiary of the Company. NQSOs (as defined
in Section 5 hereto) and Restricted
<PAGE>
Stock Awards may be granted to employees, officers, directors and consultants
of the Company or any Parent or Subsidiary of the Company; provided such
consultants render bona fide services not in connection with the offer and
sale of securities in a capital-raising transaction. A person may be granted
more than one Award under this Plan.
4. ADMINISTRATION.
4.1 COMMITTEE AUTHORITY. This Plan will be administered by the
Committee or the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the
Board, the Committee will have full power to implement and carry out this
Plan. Without limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and
any other agreement or document executed pursuant to this
Plan;
(b) prescribe, amend and rescind rules and regulations relating
to this Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as
alternatives to, other Awards under this Plan or awards
under any other incentive or compensation plan of the
Company or any Parent or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission, or reconcile any
inconsistency in this Plan, any Award, any Award Agreement,
any Exercise Agreement or any Restricted Stock Purchase
Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 COMMITTEE DISCRETION. Any determination made by the Committee
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this
Plan or Award, and subject to Section 5.9 hereof, at any later time, and such
determination will be final and binding on the Company and on all persons
having an interest in any Award under this Plan. The Committee may delegate
to one or more officers of the Company the authority to grant an Award under
this Plan, provided such officer or officers are members of the Board.
<PAGE>
5. OPTIONS. The Committee may grant Options to eligible persons and
will determine whether such Options will be Incentive Stock Options within
the meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the
number of Shares subject to the Option, the Exercise Price of the Option, the
period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:
5.1 FORM OF OPTION GRANT. Each Option granted under this Plan
will be evidenced by an Award Agreement which will expressly identify the
Option as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such
form and contain such provisions (which need not be the same for each
Participant) as the Committee may from time to time approve, and which will
comply with and be subject to the terms and conditions of this Plan.
5.2 DATE OF GRANT. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option,
unless otherwise specified by the Committee. The Stock Option Agreement and a
copy of this Plan will be delivered to the Participant within a reasonable
time after the granting of the Option.
5.3 EXERCISE PERIOD. Options may be exercisable immediately
(subject to repurchase pursuant to Section 11 hereof) or may be exercisable
within the times or upon the events determined by the Committee as set forth
in the Stock Option Agreement governing such Option; provided, however, that
no Option will be exercisable after the expiration of ten (10) years from the
date the Option is granted; and provided further that no ISO granted to a
person who directly or by attribution owns more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any
Parent or Subsidiary of the Company ("TEN PERCENT SHAREHOLDER") will be
exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee also may provide for Options to become exercisable at
one time or from time to time, periodically or otherwise, in such number of
Shares or percentage of Shares as the Committee determines. Subject to
earlier termination of the Option as provided herein, each Participant who is
not an officer, director or consultant of the Company or of a Parent or
Subsidiary of the Company and does not have annual compensation of $60,000 or
more shall have the right to exercise an Option granted hereunder at the rate
of at least twenty percent (20%) per year over five (5) years from the date
such Option is granted.
5.4 EXERCISE PRICE. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less
than eighty-five percent (85%) of the Fair Market Value of the Shares on the
date of grant; provided that (a) the Exercise Price of an ISO will not be
less than one hundred percent (100%) of the Fair Market Value of the Shares
on the date of grant and (b) the Exercise Price of any Option granted to a
Ten Percent Shareholder will not be less than one hundred ten percent (110%)
of the Fair Market Value of the Shares on the date of grant. Payment for the
Shares purchased must be made in accordance with Section 7 hereof.
5.5 METHOD OF EXERCISE. Options may be exercised only by delivery
to the Company of a written stock option exercise agreement (the "EXERCISE
AGREEMENT") in a form approved by the Committee (which need not be the same
for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement,
if any, and such representations and agreements regarding Participant's
<PAGE>
investment intent and access to information and other matters, if any, as may
be required or desirable by the Company to comply with applicable securities
laws, together with payment in full of the Exercise Price, and any applicable
taxes, for the number of Shares being purchased.
5.6 TERMINATION. Subject to earlier termination pursuant to
Sections 17 and 18 hereof and notwithstanding the exercise periods set forth
in the Stock Option Agreement, exercise of an Option will always be subject
to the following:
(a) If the Participant is Terminated for any reason except
death, Disability or for Cause, then the Participant may
exercise such Participant's Options only to the extent that
such Options are exercisable upon the Termination Date and
such Options must be exercised by the Participant, if at
all, as to all or some of the Vested Shares calculated as of
the Termination Date, within three (3) months after the
Termination Date (or within such shorter time period, not
less than thirty (30) days, or within such longer time
period, not exceeding five (5) years, after the Termination
Date as may be determined by the Committee, with any
exercise beyond three (3) months after the Termination Date
deemed to be an NQSO) but in any event, non later than the
expiration date of the Options.
(b) If the Participant is Terminated because of Participant's
death or Disability (or the Participant dies within three
(3) months after a Termination other than for Cause), then
Participant's Options may be exercised only to the extent
that such Options are exercisable by Participant on the
Termination Date and must be exercised by Participant (or
Participant's legal representative or authorized assignee),
if at all, as to all or some of the Vested Shares calculated
as of the Termination Date, within twelve (12) months after
the Termination Date (or within such shorter time period,
not less than six (6) months, or within such longer time
period, not exceeding five (5) years, after the Termination
Date as may be determined by the Committee, with any
exercise beyond (i) three (3) months after the Termination
Date when the Termination is for any reason other than the
Participant's death or disability, within the meaning of
Section 22(e)(3) of the Code, or (ii) twelve (12) months
after the Termination Date when the Termination is for
Participant's disability, within the meaning of Section
22(e)(3) of the Code, deemed to be an NQSO) but in any event
no later than the expiration date of the Options.
(c) If the Participant is terminated for Cause, then
Participant's Options shall expire on such articipant's
Termination Date, or at such later time and on such
conditions as are determined by the Committee.
5.7 LIMITATIONS ON EXERCISE. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of
an Option, provided that such minimum number will not prevent Participant
from exercising the Option for the full number of Shares for which it is then
exercisable.
<PAGE>
5.8 LIMITATIONS ON ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year
(under this Plan or under any other incentive stock option plan of the
Company or any Parent or Subsidiary of the Company) will not exceed $100,000.
If the Fair Market Value of Shares on the date of grant with respect to which
ISOs are exercisable for the first time by a Participant during any calendar
year exceeds $100,000, then the Options for the first $100,000 worth of
Shares to become exercisable in such calendar year will be ISOs and the
Options for the amount in excess of $100,000 that become exercisable in that
calendar year will be NQSOs. In the event that the Code or the regulations
promulgated thereunder are amended after the Effective Date (as defined in
Section 18 hereof) to provide for a different limit on the Fair Market Value
of Shares permitted to be subject to ISOs, then such different limit will be
automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5.9 MODIFICATION, EXTENSION OR REMOVAL. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. Subject to Section 5.10 hereof, the Committee may
reduce the Exercise Price of outstanding Options without the consent of
Participants affected by a written notice to them; provided, however, that
the Exercise Price may not be reduced below the minimum Exercise Price that
would be permitted under Section 5.4 hereof for Options granted on the date
the action is taken to reduce the Exercise Price.
5.10 NO DISQUALIFICATION. Notwithstanding any other provision in
this Plan, no term of this Plan relating to ISOs will be interpreted, amended
or altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to
restrictions. The Committee will determine to whom an offer will be made, the
number of Shares the person may purchase, the Purchase Price, the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 FORM OF RESTRICTED STOCK AWARD. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an
Award Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such
form (which need not be the same for each Participant) as the Committee will
from time to time approve, and will comply with and be subject to the terms
and conditions of this Plan. The Restricted Stock Award will be accepted by
the Participant's execution and delivery of the Restricted Stock Purchase
Agreement and full payment for the Shares to the Company within thirty (30)
days from the date the Restricted Stock Purchase Agreement is delivered to
the person. If such person does not execute and deliver the Restricted Stock
Purchase Agreement along with full payment for the Shares to the Company
<PAGE>
within such thirty (30) days, then the offer will terminate, unless
otherwise determined by the Committee.
6.2 PURCHASE PRICE. The Purchase Price of Shares sold pursuant to
a Restricted Stock Award will be determined by the Committee and will be at
least eighty-five percent (85%) of the Fair Market Value of the Shares on the
date the Restricted Stock Award is granted or at the time the purchase is
consummated, except in the case of a sale to a Ten Percent Shareholder, in
which case the Purchase Price will be one hundred percent (100%) of the Fair
Market Value on the date the Restricted Stock Award is granted or at the time
the purchase is consummated. Payment of the Purchase Price must be made in
accordance with Section 7 hereof.
6.3 RESTRICTIONS. Restricted Stock Awards may be subject tot he
restrictions set forth in Section 11 hereof or such other restrictions not
inconsistent with the California Corporations Code.
7. PAYMENT FOR SHARE PURCHASES.
7.1 PAYMENT. Payment for Shares purchased pursuant to this Plan
may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that: (i) either (A) have been owned
by Participant for more than six (6) months and have been
paid for within the meaning of SEC Rule 144 (and, if such
shares were purchased from the Company by use of a
promissory note, such note has been fully paid with respect
to such shares) or (B) were obtained by Participant in the
public market and (ii) are clear of all liens, claims,
encumbrances or security interests.
(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing
interest at a rate sufficient to avoid imputation of income
under Sections 483 and 1274 of the Code; provided, however,
that Participants who are not employees or directors of the
Company will not be entitled to purchase Shares with a
promissory note unless the note is adequately secured by
collateral other than the Shares;
(d) by waiver of compensation due or accrued to the Participant
for services rendered;
(e) with respect only to purchases upon exercise of an Option,
and provided that a public market for the Company's stock
exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member of
the National Association of Securities Dealers (an
"NASD DEALER") whereby the Participant irrevocably
elects to exercise the Option and to sell a portion
of the
<PAGE>
Shares so purchased to pay for the Exercise Price, and
whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price
directly to the Company; or
(2) through a "margin" commitment from the Participant and
an NASD Dealer whereby the Participant irrevocably
elects to exercise the Option and to pledge the Shares
so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount
of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(f) by any combination of the foregoing.
7.2 LOAN GUARANTEES. The Committee may help the Participant
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
8. WITHHOLDING TAXES.
8.1 WITHHOLDING GENERALLY. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will
be net of an amount sufficient to satisfy federal, state, and local
withholding tax requirements.
8.2 STOCK WITHHOLDING. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting
of any Award that is subject to tax withholding and the Participant is
obligated to pay the Company the amount required to be withheld, the
Committee may in its sole discretion allow the Participant to satisfy the
minimum withholding tax obligation by electing to have the Company withhold
from the Shares to be issued that number of Shares having a Fair Market Value
equal to the minimum amount required to be withheld, determined on the date
that the amount of tax to be withheld is to be determined. All elections by a
Participant to have Shares withheld for this purpose will be made in
accordance with the requirements established by the Committee for such
elections and be in writing in a form acceptable to the Committee.
9. PRIVILEGES OF STOCK OWNERSHIP.
9.1 VOTING AND DIVIDENDS. No Participant will have any of the
rights of a shareholder with respect to any Shares until the Shares are
issued to the Participant. After Shares are issued to the Participant, the
Participant will be a shareholder and have all the rights of a shareholder
with respect to such Shares, including the right to vote and receive all
dividends or other distributions made or paid with respect to such Shares;
provided, that if such Shares are Restricted Stock, then any new, additional
or different securities the Participant may become entitled to receive with
respect to such Shares by virtue of a stock dividend, stock split or any
other change in the corporate or capital structure of the Company will be
subject to the same
<PAGE>
restrictions as the Restricted Stock; provided, further, that the Participant
will have no right to retain such stock dividends or stock distributions with
respect to Unvested Shares that are repurchased pursuant to Section 11
hereof. The Company will comply with Section 260.140.1 of Title 10 of the
California Code of Regulations with respect to the voting rights of Common
Stock.
9.2 FINANCIAL STATEMENTS. The company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding, or as otherwise required under Section
260.140.46 of Title 10 of the California Code of Regulations. Notwithstanding
the foregoing, the Company will not be required to provide such financial
statements to Participants when issuance is limited to key employees whose
services in connection with the Company assure them access to equivalent
information.
10. TRANSFERABILITY. Awards granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not
be made subject to execution, attachment or similar process, otherwise than
by will or by the laws of descent and distribution. During the lifetime of
the Participant an Award will be exercisable only by the Participant or
Participant's legal representative and any elections with respect to an
Award, may be made only by the Participant or Participant's legal
representative.
11. RESTRICTIONS OF SHARES.
11.1 RIGHT OF FIRST REFUSAL. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award
Agreement a right of first refusal to purchase all Shares that a Participant
(or a subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by the California Corporations Code, provided, that
such right of first refusal terminates upon the Company's initial public
offering of Common Stock pursuant to an effective registration statement
filed under the Securities Act.
11.2 RIGHT OF REPURCHASE. At the discretion of the Committee, the
Company reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase Unvested Shares held by a Participant for cash and/or
cancellation of purchase money indebtedness following such Participant's
Termination at any time within the later of ninety (90) days after the
Participant's Termination Date and the date the Participant purchases Shares
under the Plan at the Participant's Exercise Price or Purchase Price, as the
case may be, provided, that unless the Participant is an officer, director or
consultant of the Company or of a Parent or Subsidiary of the Company or has
annual compensation of $60,000 or more, such right of repurchase lapses at
the rate of at least twenty percent (20%) per year over five (5) years from:
(a) the date of grant of the Option or (b) in the case of Restricted Stock,
the date the Participant purchases the Shares.
12. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders,
legends and other restrictions as the Committee may deem necessary or
advisable, including restrictions under any applicable federal, state or
foreign securities law, or any rules, regulations and other requirements of
the SEC or any stock exchange or automated quotation system upon which the
Shares may be listed or quoted.
<PAGE>
13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit
all certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in
escrow until such restrictions have lapsed or terminated, and the Committee
may cause a legend or legends referencing such restrictions to be placed on
the certificates. Any Participant who is permitted to execute a promissory
note as partial or full consideration for the purchase of Shares under this
Plan will be required to pledge and deposit with the Company all or part of
the Shares so purchased as collateral to secure the payment of Participant's
obligation to the Company under the promissory note; provided, however, that
the Committee may require or accept other or additional forms of collateral
to secure the payment of such obligation and, in any event, the Company will
have full recourse against the Participant under the promissory note
notwithstanding any pledge of the Participant's Shares or other collateral.
In connection with any pledge of the Shares, Participant will be required to
execute and deliver a written pledge agreement in such form as the Committee
will from time to time approve. The Shares purchased with the promissory note
may be released from the pledge on a pro rata basis as the promissory note is
paid.
14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and
cancellation of any or all outstanding Awards. The Committee may at any time
buy from a Participant an Award previously granted with payment in cash,
shares of Common Stock of the Company (including Restricted Stock) or other
consideration, based on such terms and conditions as the Committee and the
Participant may agree.
15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and
the requirements of any stock exchange or automated quotation system upon
which the Shares may then be listed or quoted, as they are in effect on the
date of grant of the Award and also on the date of exercise or other
issuance. Notwithstanding any other provision in this Plan, the Company will
have no obligation to issue or deliver certificates for Shares under this
Plan prior to (a) obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable, and/or (b) compliance with any
exemption, completion of any registration or other qualification of such
Shares under any state or federal law or ruling of any governmental body that
the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the SEC or to effect
compliance with the exemption, registration, qualification or listing
requirements of any state securities laws, stock exchange or automated
quotation system, and the Company will have no liability for any inability or
failure to do so.
16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any
right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent or Subsidiary of the Company or limit in any
way the right of the Company or any Parent or Subsidiary of the
<PAGE>
Company to terminate Participant's employment or other relationship at any
time, with or without Cause.
17. CORPORATE TRANSACTIONS.
17.1 ASSUMPTION OR REPLACEMENT OF AWARDS BY SUCCESSOR OR ACQUIRING
CORPORATION. In the event of (a) a dissolution or liquidation of the Company,
(b) a merger or consolidation in which the Company is not the surviving
corporation (c) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company immediately prior to such
merger (other than any shareholder which merges with the Company in such
merger, or which owns or controls another corporation which merges, with the
Company in such merger) cease to own their shares or other equity interests
in the Company, or (d) the sale of all or substantially all of the assets of
the Company, any or all outstanding Awards may be assumed, converted or
replaced by the successor or acquiring corporation (if any), which
assumption, conversion or replacement will be binding on all Participants. In
the alternative, the successor or acquiring corporation may substitute
equivalent Awards or provide substantially similar consideration to
Participants as was provided to shareholders (after taking into account the
existing provisions of the Awards). The successor or acquiring corporation
may also issue, in place of outstanding Shares of the Company held by the
Participant, substantially similar shares or other property subject to
repurchase restrictions and other provisions no less favorable to the
Participant than those which applied to such outstanding Shares immediately
prior to such transaction described in this Section 17.1. In the event such
successor or acquiring corporation (if any) refuses to assume or substitute
Awards, as provided above, pursuant to a transaction described in this
Section 17.1, then notwithstanding any other provision in this Plan to the
contrary, the vesting of such Awards will expire on such transaction at such
time and on such conditions as the Board will determine.
17.2 OTHER TREATMENT OF AWARDS. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 17, in
the event of the occurrence of any transaction described in Section 17.1
hereof, any outstanding Awards will be treated as provided in the applicable
agreement or plan of merger, consolidation, dissolution, liquidation or sale
of assets.
17.3 ASSUMPTION OF AWARDS BY THE COMPANY. The Company, from time
to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under this Plan in substitution of
such other company's award or (b) assuming such award as if it had been
granted under this Plan if the terms of such assumed award could be applied
to an Award granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed award would have been
eligible to be granted an Award under this Plan if the other company had
applied the rules of this Plan to such grant. In the event the Company
assumes an award granted by another company, the terms and conditions of such
award will remain unchanged (except that the exercise price and the number
and nature of shares issuable upon exercise of any such option will be
adjusted appropriately pursuant to Section 424(a) of the Code). In the event
the Company elects to grant a new Option rather than assuming an existing
option, such new Option may be granted with a similarly adjusted Exercise
Price.
<PAGE>
18. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective
on the date that it is adopted by the Board (the "EFFECTIVE DATE"). This Plan
will be approved by the shareholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve (12)
months before or after the Effective Date. Upon the effective Date, the Board
may grant Awards pursuant to this Plan; provided, however, that: (a) no
Option may be exercised prior to initial shareholder approval of this Plan;
(b) no Option granted pursuant to an increase in the number of Shares
approved by the Board shall be exercised prior to the time such increase has
been approved by the shareholders of the Company; (c) in the event that
initial shareholder approval is not obtained within the time period provided
herein, all Awards granted hereunder shall be canceled, any Shares issued
pursuant to any Award shall be canceled and any purchase of Shares issued
hereunder shall be rescinded; and (d) Awards granted pursuant to an increase
in the number of Shares approved by the Board which increase is not timely
approved by shareholders shall be canceled, any Shares issued pursuant to any
such Awards shall be canceled, and any purchase of Shares subject to any such
Award shall be rescinded. In the event that initial shareholder approval is
not obtained within twelve (12) months before or after the date this Plan is
adopted by the Board, all Awards granted hereunder will be canceled, any
Shares issued pursuant to any Award will be canceled and any purchase of
Shares hereunder will be rescinded.
19. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the Effective Date or,
if earlier, the date of shareholder approval. This Plan and all agreements
hereunder shall be governed by and construed in accordance with the laws of
the State of California.
20. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9 hereof, the
Board may at any time terminate or amend this Plan in any respect, including
without limitation amendment of any form of Award Agreement or instrument to
be executed pursuant to this Plan; provided, however, that the Board will
not, without the approval of the shareholders of the Company, amend this Plan
in any manner that requires such shareholder approval pursuant to the
California Corporations Code or the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans.
21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the
Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and other equity awards otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
22. DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:
"AWARD" means any award under this Plan, including any Option or
Restricted Stock Award.
<PAGE>
"AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means Termination because of (i) any willful material
violation by the Participant of any law or regulation applicable to the
business of the Company or a Parent or Subsidiary of the Company, the
Participant's conviction for, or guilty plea to, a felony or a crime
involving moral turpitude, any willful perpetration by the Participant of a
common law fraud, (ii) the Participant's commission of an act of personal
dishonesty which involves personal profit in connection with the Company or
any other entity having a business relationship with the Company, (iii) any
material breach by the Participant of any provision of any agreement or
understanding between the Company or any Parent or Subsidiary of the Company
and the Participant regarding the terms of the Participant's service as an
employee, director or consultant to the Company or a Parent or Subsidiary of
the Company, including without limitation, the willful and continued failure
or refusal of the Participant to perform the material duties required of such
Participant as an employee, director or consultant of the Company or a Parent
or Subsidiary of the Company, other than as a result of having a Disability,
or a breach of any applicable invention assignment and confidentiality
agreement or similar agreement between the Company and the Participant, (iv)
Participant's disregard of the policies of the Company or any Parent or
Subsidiary of the Company so as to cause loss, damage or injury to the
property, reputation or employees of the Company or a Parent or Subsidiary of
the Company, or (v) any other misconduct by the Participant which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or a Parent or Subsidiary
of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to administer
this Plan, or if no committee is appointed, the Board.
means Silicon Image, Inc., or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
"EXERCISE PRICE" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the NASDAQ National
Market System, its last reported sale price on the NASDAQ
National Market System or, if no such reported sale takes
place on such date, the average of the closing bid and asked
prices;
<PAGE>
(b) if such Common Stock is publicly traded and is then listed on
a national securities exchange, the last reported sale price
or, if no such reported sale takes place on such date, the
average of the closing bid and asked prices on the principal
national securities exchange on which the Common Stock is
listed or admitted to trading;
(c) if such Common Stock is publicly traded but is not quoted on
the Nasdaq National Market System nor listed or admitted to
trading on a national securities exchange, the average of the
closing bid and asked prices on such date, as reported by The
Wall Street Journal, for the over-the-counter market; or
(d) if none of the foregoing is applicable, by the Committee in
good faith.
"OPTION" means an award of an option to purchase Shares pursuant to
Section 5 hereof.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this Plan.
"PLAN" means this Silicon Image, Inc. 1995 Equity Incentive Plan, as
amended from time to time.
"PURCHASE PRICE" means the price at which a Participant may purchase
Restricted Stock
"RESTRICTED STOCK" means Shares purchased pursuant to a Restricted
Stock Award.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6 hereof.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 17 hereof,
and any successor security.
"SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the
Company or a Parent or Subsidiary of the Company. A
<PAGE>
Participant will not be deemed to have ceased to provide services in the
case of (i) sick leave, (ii) military leave, or (iii) any other leave of
absence approved by the Committee, provided that such leave is for a period
of not more than ninety (90) days unless reinstatement (or, in the case of an
employee with an ISO, reemployment) upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated in writing. In the case of any Participant on (i) sick leave,
(ii) military leave or (iii) an approved leave of absence, the Committee may
make such provisions respecting suspension of vesting of the Award while on
leave from the Company or a Parent or Subsidiary of the Company as it may
deem appropriate, except that in no event may an Option be exercised after
the expiration of the term set forth in the Stock Option Agreement. The
Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in the Award
Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.
<PAGE>
[First Form of Stock Option Agreement (option exercisable as it vests)]
NO. __
SILICON IMAGE, INC.
1995 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("AGREEMENT") is made and entered
into as of the date of grant set forth below (the "DATE OF GRANT") by and
between Silicon Image, Inc., a California corporation (the "COMPANY"), and
the participant named below ("PARTICIPANT"). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company's 1995 Equity
Incentive Plan (the "PLAN").
PARTICIPANT:
-------------------------------------------
SOCIAL SECURITY NUMBER:
-------------------------------------------
ADDRESS:
-------------------------------------------
-------------------------------------------
TOTAL OPTION SHARES:
-------------------------------------------
EXERCISE PRICE PER SHARE:
-------------------------------------------
DATE OF GRANT:
-------------------------------------------
FIRST VESTING DATE:
-------------------------------------------
EXPIRATION DATE:
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TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an
option (the "OPTION") to purchase the total number of shares of Common Stock of
the Company set forth above (the "SHARES") at the Exercise Price Per Share set
forth above (the "EXERCISE PRICE"), subject to all of the terms and conditions
of this Agreement and the Plan. If designated as an Incentive Stock Option
above, the Option is intended to qualify as an "incentive stock option" ("ISO")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "CODE").
2. EXERCISE PERIOD.
2.1 EXERCISE PERIOD OF OPTION. Provided Participant
continues to provide services to the Company throughout the specified period,
the Option will become exercisable with respect to ____________ of the Shares
on the First Vesting Date and thereafter
<PAGE>
at the end of each ____________ full succeeding month period the Option shall
become exercisable as to an additional ____________ of the Shares.
2.2 EXPIRATION. The Option shall expire on the Expiration
Date set forth above and must be exercised, if at all, on or before the
Expiration Date; pROVIDED, that for Participants other than key employees,
executive managers and sales personnel, the Option will become fully
exercisable within 5 years from the Date of Grant with at least 20% of the
total shares first becoming exercisable at the end of each of the five years.
3. TERMINATION.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH OR
DISABILITY. If Participant is Terminated for any reason, except death or
Disability, the Option, to the extent (and only to the extent) that it would
have been exercisable by Participant on the date of Termination, may be
exercised by Participant no later than ninety (90) days after the date of
Termination, but in any event no later than the Expiration Date.
3.2 TERMINATION BECAUSE OF DEATH OR DISABILITY. If
Participant is Terminated because of death or Disability of Participant, the
Option, to the extent that it is exercisable by Participant on the date of
Termination, may be exercised by Participant (or Participant's legal
representative) no later than twelve (12) months after the date of
Termination, but in any event no later than the Expiration Date.
3.3 NO OBLIGATION TO EMPLOY. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of,
or other relationship with, the Company or any Parent, Subsidiary or
Affiliate of the Company, or limit in any way the right of the Company or any
Parent, Subsidiary or Affiliate of the Company to terminate Participant's
employment or other relationship at any time, with or without cause.
4. MANNER OF EXERCISE.
4.1 STOCK OPTION EXERCISE AGREEMENT. To exercise this
Option, Participant (or in the case of exercise after Participant's death,
Participant's executor, administrator, heir or legatee, as the case may be)
must deliver to the Company an executed stock option exercise agreement in
the form attached hereto as EXHIBIT A, or in such other form as may be
approved by the Company from time to time (the "EXERCISE AGREEMENT"), which
shall set forth, INTER ALIA, Participant's election to exercise the Option,
the number of Shares being purchased, any restrictions imposed on the Shares
and any representations, warranties and agreements regarding Participant's
investment intent and access to information as may be required by the Company
to comply with applicable securities laws. If someone other than Participant
exercises the Option, then such person must submit documentation reasonably
acceptable to the Company that such person has the right to exercise the
Option.
4.2 LIMITATIONS ON EXERCISE. The Option may not be
exercised unless such exercise is in compliance with all applicable federal
and state securities laws, as they are in
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effect on the date of exercise. The Option may not be exercised as to fewer
than 100 Shares unless it is exercised as to all Shares as to which the
Option is then exercisable.
4.3 PAYMENT. The Exercise Agreement shall be accompanied
by full payment of the Exercise Price for the Shares being purchased in cash
(by check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to
the Participant;
(b) by surrender of shares of the Company's Common Stock
that either: (1) have been owned by Participant for
more than six (6) months and have been paid for
within the meaning of SEC Rule 144 and, if such
shares were purchased from the Company by use of a
promissory note, such note has been fully paid with
respect to such shares); or (2) were obtained by
Participant in the open public market; and (3) are
clear of all liens, claims, encumbrances or security
interests;
(c) by tender of a full recourse promissory note having
such terms as may be approved by the Committee and
bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of
the Code, PROVIDED, HOWEVER, Participants who are not
employees of the Company shall not be entitled to
purchase Shares with a promissory note unless the
note is adequately secured by collateral other than
the Shares;
(d) by waiver of compensation due or accrued to
Participant for services rendered;
(e) provided that a public market for the Company's
stock exists, (1) through a "same day sale"
commitment from Participant and a broker-dealer
that is a member of the National Association of
Securities Dealers (an "NASD DEALER") whereby
Participant irrevocably elects to exercise the
Option and to sell a portion of the Shares so
purchased to pay for the exercise price and
whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the exercise
price directly to the Company, OR (2) through a --
"margin" commitment from Participant and an NASD
Dealer whereby Participant irrevocably elects to
exercise the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin account
as security for a loan from the NASD Dealer in the
amount of the exercise price, and whereby the NASD
Dealer irrevocably commits upon receipt of such
Shares to forward the exercise price directly to
the Company; or
(f) by any combination of the foregoing.
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4.4 TAX WITHHOLDING. Prior to the issuance of the Shares
upon exercise of the Option, Participant must pay or provide for any
applicable federal or state withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes
upon exercise of the Option by requesting that the Company retain Shares with
a Fair Market Value equal to the minimum amount of taxes required to be
withheld. In such case, the Company shall issue the net number of Shares to
the Participant by deducting the Shares retained from the Shares issuable
upon exercise.
4.5 ISSUANCE OF SHARES. Provided that the Exercise
Agreement and payment are in form and substance satisfactory to counsel for
the Company, the Company shall issue the Shares registered in the name of
Participant, Participant's authorized assignee, or Participant's legal
representative, and shall deliver certificates representing the Shares with
the appropriate legends affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option is an ISO, and if Participant sells or otherwise disposes of any of
the Shares acquired pursuant to the ISO on or before the later of (1) the
date two years after the Date of Grant, and (2) the date one year after
transfer of such Shares to Participant upon exercise of the Option,
Participant shall immediately notify the Company in writing of such
disposition. Participant agrees that Participant may be subject to income tax
withholding by the Company on the compensation income recognized by
Participant from the early disposition by payment in cash or out of the
current wages or other compensation payable to Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of the
Option and the issuance and transfer of Shares shall be subject to compliance
by the Company and Participant with all applicable requirements of federal
and state securities laws and with all applicable requirements of any stock
exchange on which the Company's Common Stock may be listed at the time of
such issuance or transfer. Participant understands that the Company is under
no obligation to register or qualify the Shares with the Securities and
Exchange Commission, any state securities commission or any stock exchange to
effect such compliance.
7. NONTRANSFERABILITY OF OPTION. The Option may not be
transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of Participant only by
Participant. The terms of the Option shall be binding upon the executors,
administrators, successors and assigns of Participant.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of
the Date of Grant of some of the federal and California tax consequences of
exercise of the Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION
OR DISPOSING OF THE SHARES.
8.1 EXERCISE OF ISO. If the Option qualifies as an ISO,
there will be no regular federal or California income tax liability upon the
exercise of the Option, although the
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excess, if any, of the fair market value of the Shares on the date of
exercise over the Exercise Price will be treated as a tax preference item for
federal income tax purposes and may subject the Participant to the
alternative minimum tax in the year of exercise.
8.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If the Option
does not qualify as an ISO, there may be a regular federal and California
income tax liability upon the exercise of the Option. Participant will be
treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the fair market value of the
Shares on the date of exercise over the Exercise Price. The Company will be
required to withhold from Participant's compensation or collect from
Participant and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
8.3 DISPOSITION OF SHARES. If the Shares are held for
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of the Option (and, in the case of an ISO, are
disposed of more than two years after the Date of Grant), any gain realized
on disposition of the Shares will be treated as long term capital gain for
federal and California income tax purposes. If Shares purchased under an ISO
are disposed of within one year of exercise or within two years after the
Date of Grant, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price. The Company will be required to withhold
from Participant's compensation or collect from Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
9. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have
any of the rights of a shareholder with respect to any Shares until
Participant exercises the Option and pays the Exercise Price.
10. INTERPRETATION. Any dispute regarding the interpretation
of this Agreement shall be submitted by Participant or the Company to the
Committee for review. The resolution of such a dispute by the Committee shall
be final and binding on the Company and Participant.
11. ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. This Agreement and the Plan constitute the entire agreement of the
parties and supersede all prior undertakings and agreements with respect to
the subject matter hereof.
12. NOTICES. Any notice required to be given or delivered to
the Company under the terms of this Agreement shall be in writing and
addressed to the Corporate Secretary of the Company at its principal
corporate offices. Any notice required to be given or delivered to
Participant shall be in writing and addressed to Participant at the address
indicated above or to such other address as such party may designate in
writing from time to time to the Company. All notices shall be deemed to have
been given or delivered upon: personal delivery; three (3) days after deposit
in the United States mail by certified or registered mail (return receipt
requested);
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one (1) business day after deposit with any return receipt express courier
(prepaid); or one (1) business day after transmission by rapifax or
telecopier.
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<PAGE>
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding
upon Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California as such laws
are applied to agreements between California residents entered into and to be
performed entirely within California.
15. ACCEPTANCE. Participant hereby acknowledges receipt of a
copy of the Plan and this Agreement. Participant has read and understands the
terms and provisions thereof, and accepts the Option subject to all the terms
and conditions of the Plan and this Agreement. Participant acknowledges that
there may be adverse tax consequences upon exercise of the Option or
disposition of the Shares and that Participant should consult a tax adviser
prior to such exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Participant
has executed this Agreement in duplicate as of the Effective Date.
SILICON IMAGE, INC. PARTICIPANT
By: ____________________________________ ____________________________
[President] [Participant]
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[First Form of Stock Option Exercise Agreement
(for option exercisable as it vests)]
SILICON IMAGE, INC.
1995 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Exercise Agreement is made and entered into as of ______________,
19___ (the "EFFECTIVE DATE") by and between Silicon Image, Inc., a California
corporation (the "COMPANY"), and the purchaser named below (the "PURCHASER").
Capitalized terms not defined herein shall have the meaning ascribed to them
in the Company's 1995 Equity Incentive Plan (the "PLAN").
PURCHASER: ______________________________________
SOCIAL SECURITY NUMBER: ______________________________________
ADDRESS: ______________________________________
______________________________________
TOTAL NUMBER OF SHARES: ______________________________________
PURCHASE PRICE PER SHARE: ______________________________________
TOTAL PURCHASE PRICE: ______________________________________
OPTION NO. ___ DATE OF GRANT: ______________________________________
TYPE OF OPTION: / / INCENTIVE STOCK OPTION
/ / NONQUALIFIED STOCK OPTION
1. EXERCISE OF OPTION.
1.1 EXERCISE. Pursuant to exercise of that certain option
("OPTION") granted to Purchaser under the Plan and subject to the terms and
conditions of this Agreement, Purchaser hereby purchases from the Company, and
the Company hereby sells to Purchaser, the total number of shares set forth
above ("SHARES") of the Company's Common Stock at a purchase price per share
set forth above for a total purchase price set forth above (the "PURCHASE
PRICE"). As used in this Agreement, the term "SHARES" refers to the Shares
purchased under this Exercise Agreement and includes all securities received
(a) in replacement of the Shares, (b) as a result of stock dividends or stock
splits with respect to the Shares, and (c) all securities received in
<PAGE>
replacement of the Shares in a merger, recapitalization, reorganization or
similar corporate transaction.
1.2 TITLE TO SHARES. The exact spelling of the name(s) under
which Purchaser will take title to the Shares is:
____________________________________________________________________
____________________________________________________________________
Purchaser desires to take title to the Shares as follows:
/ / Individual, as separate property
/ / Husband and wife, as community property
/ / Joint Tenants
/ / Alone or with spouse as trustee(s) of the
following trust (including date):
____________________________________________________________________
____________________________________________________________________
/ / Other; please specify:_______________________________________________
____________________________________________________________________
1.3 PAYMENT. Purchaser hereby delivers payment of the Purchase
Price in the manner permitted in the Stock Option Agreement as follows (check
and complete as appropriate):
/ / in cash in the amount of $____________, receipt of which is
acknowledged by the Company;
/ / by cancellation of indebtedness of the Company to Purchaser in the
amount of $__________;
/ / by delivery of _________ fully-paid, nonassessable and
vested shares of the Common Stock of the Company owned by Purchaser
for at least six (6) months prior to the date hereof which have
been paid for within the meaning of SEC Rule 144, if purchased by
use of a promissory note, such note has been fully paid with
respect to such vested shares), or obtained by Purchaser in the
open public market, and owned free and clear of all liens, claims,
encumbrances or security interests, valued at the current Fair
Market Value of $___________ per share;
/ / by tender of a Full Recourse Promissory Note in the
principal amount of $__________, secured by a Pledge Agreement of
even date herewith;
/ / by the waiver hereby of compensation due or accrued for services
rendered in the amount of $_________.
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<PAGE>
2. DELIVERY.
2.1 DELIVERIES BY PURCHASER. Purchaser hereby delivers to the
Company (i) this Exercise Agreement, (ii) if Purchaser is married, a Consent
of Spouse in the form of EXHIBIT 1 attached hereto (the "SPOUSE CONSENT")
executed by Purchaser's spouse, and (iii) the Purchase Price.
2.2 DELIVERIES BY THE COMPANY. Upon its receipt of the Purchase
Price and all the documents to be executed and delivered by Purchaser to the
Company under Section 2.1, the Company will issue a duly executed stock
certificate evidencing the Shares in the name of Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to the Company that:
3.1 AGREES TO TERMS OF THE PLAN. Purchaser has received a copy of
the Plan and the Stock Option Agreement, has read and understands the terms
of the Plan, the Stock Option Agreement and this Exercise Agreement, and
agrees to be bound by their terms and conditions. Purchaser acknowledges that
there may be adverse tax consequences upon exercise of the Option or
disposition of the Shares, and that Purchaser should consult a tax adviser
prior to such exercise or disposition.
3.2 PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes
only and not with a view to, or for sale in connection with, a distribution
of the Shares within the meaning of the Securities Act of 1933, as amended
(the "SECURITIES ACT"). Purchaser has no present intention of selling or
otherwise disposing of all or any portion of the Shares and no one other than
Purchaser has any beneficial ownership of any of the Shares.
3.3 ACCESS TO INFORMATION. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably
considers important in making the decision to purchase the Shares, and
Purchaser has had ample opportunity to ask questions of the Company's
representatives concerning such matters and this investment.
3.4 UNDERSTANDING OF RISKS. Purchaser is fully aware of: (i) the
highly speculative nature of the investment in the Shares; (ii) the financial
hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on transferability of the Shares (E.G., that Purchaser may not
be able to sell or dispose of the Shares or use them as collateral for
loans); (iv) the qualifications and backgrounds of the management of the
Company; and (v) the tax consequences of investment in the Shares. Purchaser
is capable of evaluating the merits and risks of this investment, has the
ability to protect Purchaser's own interests in this transaction and is
financially capable of bearing a total loss of this investment.
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3.5 NO GENERAL SOLICITATION. At no time was Purchaser presented
with or solicited by any publicly issued or circulated newspaper, mail,
radio, television or other form of general advertising or solicitation in
connection with the offer, sale and purchase of the Shares.
4. COMPLIANCE WITH SECURITIES LAWS.
4.1 COMPLIANCE WITH FEDERAL SECURITIES LAWS. Purchaser
understands and acknowledges that the Shares have not been registered with
the Securities and Exchange Commission ("SEC") under the Securities Act and
that, notwithstanding any other provision of the Stock Option Agreement to
the contrary, the exercise of any rights to purchase any Shares is expressly
conditioned upon compliance with the Securities Act and all applicable state
securities laws. Purchaser agrees to cooperate with the Company to ensure
compliance with such laws. The Shares are being issued under the Securities
Act pursuant to (the Company will check the applicable box):
/ / the exemption provided by SEC Rule 701;
/ / the exemption provided by SEC Rule 504;
/ / Section 4(2) of the Securities Act;
/ / other: ____________________________.
4.2 COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE SALE OF THE
SECURITIES THAT ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET
QUALIFIED WITH THE CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT
FROM SUCH QUALIFICATION, IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE
OF SUCH SECURITIES, AND THE RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS
OF THE PARTIES TO THIS EXERCISE AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED OR AN EXEMPTION BEING AVAILABLE.
5. RESTRICTED SECURITIES.
5.1 NO TRANSFER UNLESS REGISTERED OR EXEMPT. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are
available. Purchaser understands that only the Company may file a
registration statement with the SEC and that the Company is under no
obligation to do so with respect to the Shares. Purchaser has also been
advised that exemptions from registration and qualification may not be
available or may not permit Purchaser to transfer all or any of the Shares in
the amounts or at the times proposed by Purchaser.
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<PAGE>
5.2 SEC RULE 144. In addition, Purchaser has been advised that
SEC Rule 144 promulgated under the Securities Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Shares and, in any event, requires that the Shares be held for
a minimum of two years, and in certain cases three years, after they have
been purchased AND PAID FOR (within the meaning of Rule 144), before they may
be resold under Rule 144. Purchaser understands that Shares paid for with a
Note may not be deemed to be fully "paid for" within the meaning of Rule 144
unless certain conditions are met and that, accordingly, the Rule 144 holding
period of such Shares may not begin to run until such Shares are fully paid
for within the meaning of Rule 144. Purchaser understands that Rule 144 may
indefinitely restrict transfer of the Shares so long as Purchaser remains an
"affiliate" of the Company or if "current public information" about the
Company (as defined in Rule 144) is not publicly available.
5.3 SEC RULE 701. The Shares may become freely tradeable by
non-affiliates if issued pursuant to SEC Rule 701 promulgated under the
Securities Act (under limited conditions regarding the method of sale) 90
days after the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective
by the SEC, subject to the lengthier market standoff agreement contained in
Section 7 of this Exercise Agreement or any other agreement entered into by
Purchaser. Affiliates must comply with the provisions (other than the holding
period requirements) of Rule 144.
5.4 STATE LAW RESTRICTIONS ON TRANSFER. Purchaser understands
that transfer of the Shares may be restricted by Section 260.141.11 of the
Rules of the California Commissioner of Corporations, a copy of which is
attached hereto as EXHIBIT 2, and that the certificate(s) representing the
Shares may bear a legend to that effect.
6. RESTRICTIONS ON TRANSFERS.
6.1 DISPOSITION OF SHARES. Purchaser hereby agrees that Purchaser
shall make no disposition of the Shares (other than as permitted by this
Agreement) unless and until:
(a) Purchaser shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
(b) Purchaser shall have complied with all requirements of this
Exercise Agreement applicable to the disposition of the Shares;
(c) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to counsel for the Company,
that (i) the proposed disposition does not require registration of the Shares
under the Securities Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the Securities Act or of any
exemption from registration available under the Securities Act (including
Rule 144) has been taken; and
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<PAGE>
(d) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that the
proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Shares pursuant to the provisions of the
Commissioner Rules identified in Section 4.2.
6.2 RESTRICTION ON TRANSFER. Purchaser shall not transfer,
assign, grant a lien or security interest in, pledge, hypothecate, encumber
or otherwise dispose of any of the Shares which are subject to the Company's
Right of First Refusal, except as permitted by this Agreement.
6.3 TRANSFEREE OBLIGATIONS. Each person (other than the Company)
to whom the Shares are transferred by means of one of the permitted transfers
specified in this Agreement must, as a condition precedent to the validity of
such transfer, acknowledge in writing to the Company that such person is
bound by the provisions of this Exercise Agreement and that the transferred
shares are subject to (i) the Company's Right of First Refusal granted
hereunder and (ii) the market stand-off provisions of Section 7, to the same
extent such shares would be so subject if retained by the Purchaser.
7. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
registration of the Company's securities that, upon the request of the
Company or the underwriters managing any public offering of the Company's
securities, Purchaser will not sell or otherwise dispose of any Shares
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 180 days) after the
effective date of such registration requested by such managing underwriters
and subject to all restrictions as the Company or the underwriters may
specify.
8. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by
Purchaser or any transferee of such Shares (either being sometimes referred
to herein as the "HOLDER") may be sold or otherwise transferred (including
without limitation a transfer by gift or operation of law), the Company
and/or its assignee(s) shall have an assignable right of first refusal to
purchase the Shares to be sold or transferred (the "OFFERED SHARES") on the
terms and conditions set forth in this Section (the "RIGHT OF FIRST REFUSAL").
8.1 NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "NOTICE") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer the Offered
Shares; (ii) the name of each proposed bona fide purchaser or other
transferee ("PROPOSED TRANSFEREE"); (iii) the number of Offered Shares to be
transferred to each Proposed Transferee; (iv) the bona fide cash price or
other consideration for which the Holder proposes to transfer the Offered
Shares (the "OFFERED PRICE"); and (v) that the Holder will offer to sell the
Offered Shares to the Company and/or its assignee(s) at the Offered Price as
provided in this Section.
8.2 EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after the date of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all of the
Offered Shares proposed to be transferred to any one or more of the Proposed
Transferees named in the Notice, at the purchase price determined as
specified below.
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8.3 PURCHASE PRICE. The purchase price for the Offered Shares
purchased under this Section will be the Offered Price. If the Offered Price
includes consideration other than cash, then the cash equivalent value of the
non-cash consideration shall conclusively be deemed to be the value of such
non-cash consideration as determined in good faith by the Company's Board of
Directors.
8.4 PAYMENT. Payment of the purchase price for Offered Shares
will be payable, at the option of the Company and/or its assignee(s) (as
applicable), by check or by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or to such assignee,
in the case of a purchase of Offered Shares by such assignee) or by any
combination thereof. The purchase price will be paid without interest within
sixty (60) days after the Company's receipt of the Notice, or, at the option
of the Company and/or its assignee(s), in the manner and at the time(s) set
forth in the Notice.
8.5 HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are
not purchased by the Company and/or its assignee(s) as provided in this
Section, then the Holder may sell or otherwise transfer such Offered Shares
to that Proposed Transferee at the Offered Price or at a higher price,
PROVIDED that such sale or other transfer is consummated within 120 days
after the date of the Notice, and PROVIDED FURTHER, that (i) any such sale or
other transfer is effected in compliance with all applicable securities laws
and (ii) the Proposed Transferee agrees in writing that the provisions of
this Section will continue to apply to the Offered Shares in the hands of
such Proposed Transferee. If the Offered Shares described in the Notice are
not transferred to the Proposed Transferee within such 120 day period, then a
new Notice must be given to the Company, and the Company will again be
offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
8.6 EXEMPT TRANSFERS. Notwithstanding anything to the contrary in
this Section, the following transfers of Shares will be exempt from the Right
of First Refusal: (i) the transfer of any or all of the Shares during
Purchaser's lifetime by gift or on Purchaser's death by will or intestacy to
Purchaser's "immediate family" (as defined below) or to a trust for the
benefit of Purchaser or Purchaser's immediate family, provided that each
transferee or other recipient agrees in a writing satisfactory to the Company
that the provisions of this Section will continue to apply to the transferred
Shares in the hands of such transferee or other recipient; (ii) any transfer
of Shares made pursuant to a statutory merger or statutory consolidation of
the Company with or into another corporation or corporations (except that the
Right of First Refusal will continue to apply thereafter to such Shares, in
which case the surviving corporation of such merger or consolidation shall
succeed to the rights of the Company under this Section unless the agreement
of merger or consolidation expressly otherwise provides); or (iii) any
transfer of Shares pursuant to the winding up and dissolution of the Company.
As used herein, the term "IMMEDIATE FAMILY" will mean Purchaser's spouse, the
lineal descendant or antecedent, father, mother, brother or sister, adopted
child or grandchild of the Purchaser or the Purchaser's spouse, or the spouse
of any child, adopted child, grandchild or adopted grandchild of Purchaser or
the Purchaser's spouse.
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8.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal will terminate as to all Shares on the effective date of the first
sale of Common Stock of the Company to the general public pursuant to a
registration statement filed with and declared effective by the SEC under the
Securities Act (other than a registration statement relating solely to the
issuance of Common Stock pursuant to a business combination or an employee
incentive or benefit plan).
9. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of this
Exercise Agreement, Purchaser will have all of the rights of a shareholder of
the Company with respect to the Shares from and after the date that Purchaser
delivers payment of the Purchase Price until such time as Purchaser disposes
of the Shares or the Company and/or its assignee(s) exercise(s) the Right of
First Refusal. Upon an exercise of the Right of First Refusal, Purchaser will
have no further rights as a holder of the Shares so purchased upon such
exercise, except the right to receive payment for the Shares so purchased in
accordance with the provisions of this Exercise Agreement, and Purchaser will
promptly surrender the stock certificate(s) evidencing the Shares so
purchased to the Company for transfer or cancellation.
10. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
10.1 LEGENDS. Purchaser understands and agrees that the Company
will place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that
may be required by state or federal securities laws, the Company's Articles
of Incorporation or Bylaws, any other agreement between Purchaser and the
Company or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON PUBLIC RESALE, TRANSFER, AND RIGHT OF FIRST REFUSAL
OPTIONS HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S) AS SET FORTH IN A
STOCK OPTION EXERCISE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL
HOLDER OF
-8-
<PAGE>
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE
OF THE ISSUER. SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS AND THE RIGHT
OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
The California Commissioner of Corporations may require that the
following legend also be placed upon the share certificate(s) evidencing
ownership of the Shares:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
10.2 STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, to ensure
compliance with the restrictions imposed by this Agreement, the Company may
issue appropriate "stop-transfer" instructions to its transfer agent, if any,
and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
10.3 REFUSAL TO TRANSFER. The Company will not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares, or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares have been so transferred.
11. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY
SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR
DISPOSITION OF THE SHARES. PURCHASER REPRESENTS THAT PURCHASER HAS
CONSULTED WITH ANY TAX ADVISER PURCHASER DEEMS ADVISABLE IN CONNECTION
WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT PURCHASER IS
NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE. IN PARTICULAR, IF THE
SHARES ARE SUBJECT TO REPURCHASE BY THE COMPANY OR IF PURCHASER IS AN
INSIDER SUBJECT TO SECTION 16(b) OF THE EXCHANGE ACT, PURCHASER
REPRESENTS THAT PURCHASER HAS CONSULTED WITH PURCHASER'S TAX ADVISER
CONCERNING THE ADVISABILITY OF FILING AN 83(b) ELECTION WITH THE
INTERNAL REVENUE SERVICE. Set forth below is a brief summary as of the
date of this Exercise Agreement of some of the federal and California
tax consequences of exercise of the Option and disposition of the
Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX
ADVISER BEFORE EXECUTING THIS OPTION OR DISPOSING OF THE SHARES.
11.1 EXERCISE OF INCENTIVE STOCK OPTION. If the Option
qualifies as an incentive stock option, there will be no regular
federal income tax liability or California income tax liability upon
the exercise of the Option, although the excess, if any, of the fair
market value of the Shares on the date of exercise over the Purchase
Price Per Share will be treated as a tax
-9-
<PAGE>
preference item for federal income tax purposes and may subject Purchaser to
the alternative minimum tax in the year of exercise.
11.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If the Option does
not qualify as an incentive stock option, there may be a regular federal
income tax liability and a California income tax liability upon the exercise
of the Option. Purchaser will be treated as having received compensation
income (taxable at ordinary income tax rates) equal to the excess, if any, of
the fair market value of the Shares on the date of exercise over the Purchase
Price Per Share. The Company will be required to withhold from Purchaser's
compensation or collect from Purchaser and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at
the time of exercise.
11.3 DISPOSITION OF SHARES. If the Shares are held for more than
twelve months after the date of the transfer of the Shares pursuant to the
exercise of the Option (and, in the case of an ISO, are disposed of more than
two years after the Option Date of Grant), any gain realized on disposition
of the Shares will be treated as long term capital gain for federal and
California income tax purposes. If Shares purchased under an ISO are disposed
of within one year of exercise or within two years after the Option Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the excess, if
any, of the fair market value of the Shares on the date of exercise over the
Purchase Price Per Share. The Company will be required to withhold from
Purchaser's compensation or collect from Purchaser and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation
income at the time of exercise.
12. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of
the Shares will be subject to and conditioned upon compliance by the Company
and Purchaser with all applicable state and federal laws and regulations and
with all applicable requirements of any stock exchange or automated quotation
system on which the Company's Common Stock may be listed or quoted at the
time of such issuance or transfer.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement, including its rights to repurchase Shares under the
Right of First Refusal. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement will be binding
upon Purchaser and Purchaser's heirs, executors, administrators, legal
representatives, successors and assigns.
14. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California as
such laws are applied to agreements between California residents entered into
and to be performed entirely within California, excluding that body of laws
pertaining to conflict of laws. If any provision of this Agreement is
determined by a court of law to be illegal or unenforceable, then such
provision will be enforced to the maximum extent possible and the other
provisions will remain fully effective and enforceable.
-10-
<PAGE>
15. NOTICES. Any notice required to be given or delivered to the Company
shall be in writing and addressed to the Corporate Secretary of the Company
at its principal corporate offices. Any notice required to be given or
delivered to Purchaser shall be in writing and addressed to Purchaser at the
address indicated above or to such other address as Purchaser may designate
in writing from time to time to the Company. All notices shall be deemed
effectively given upon personal delivery, three (3) days after deposit in the
United States mail by certified or registered mail (return receipt
requested), one (1) business day after its deposit with any return receipt
express courier (prepaid), or one (1) business day after transmission by
rapifax or telecopier.
16. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
17. HEADINGS. The captions and headings of this Agreement are included
for ease of reference only and will be disregarded in interpreting or
construing this Agreement. All references herein to Sections will refer to
Sections of this Agreement.
18. ENTIRE AGREEMENT. The Plan and this Agreement, together with all its
Exhibits, constitute the entire agreement and understanding of the parties
with respect to the subject matter of this Agreement, and supersede all prior
understandings and agreements, whether oral or written, between the parties
hereto with respect to the specific subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in duplicate by its duly authorized representative and Purchaser has executed
this Agreement in duplicate as of the Effective Date.
SILICON IMAGE, INC. PURCHASER
By:____________________________________ __________________________________
_______________________________________ __________________________________
(Please print Name) (Please print Name)
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<PAGE>
LIST OF EXHIBITS
Exhibit 1: Spouse Consent
Exhibit 2: California Commissioner Rule 260.141.11
<PAGE>
EXHIBIT 1
SPOUSE CONSENT
The undersigned spouse of Purchaser has read, understands, and
hereby approves the Stock Option Exercise Agreement between Purchaser and the
Company (the "Agreement"). In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, the
undersigned hereby agrees to be irrevocably bound by the Agreement and
further agrees that any community property interest shall similarly be bound
by the Agreement. The undersigned hereby appoints Purchaser as my
attorney-in-fact with respect to any amendment or exercise of any rights
under the Agreement.
Date:______________________ ______________________________
Purchaser's Spouse
Address: ______________________________
______________________________
<PAGE>
EXHIBIT 2
CALIFORNIA COMMISSIONER RULE 260.141.11
(a) The issuer of any security upon which a restriction on transfer has
been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534
shall cause a copy of this section to be delivered to each issuee or
transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the
prior written consent of the Commissioner (until this condition is
removed pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules:
(4) to the transferor's ancestors, descendants or spouse, or any custodian
or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's
ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation intervivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting as
such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign
state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal transaction,
or as an underwriter or member of an underwriting syndicate or selling
group;
(9) if the interest sold or transferred is a pledge or other lien given by
the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Section 25111, 25112, 25113, or 25121
of the Code, of the securities to be transferred, provided that no
order under Section 25140 or subdivision (a) of Section 25143 is in
effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation, or
by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113 of
the Code, provided that no order under Section 25140 or subdivision (a)
of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who are
neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or the
administrator of the unclaimed property law of another state; or
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<PAGE>
(15) by the State Controller pursuant to the Unclaimed Property Law or by
the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at
the sale that transfer of the securities is restricted under this rule,
(ii) delivers to each purchaser a copy of this rule, and (iii) advises
the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not involve
a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirements of
Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently
stamped or printed thereon in capital letters of not less than 10-point
size, reading as follows:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFORE, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
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<PAGE>
AMENDMENT TO SILICON IMAGE, INC.
1995 EQUITY INCENTIVE PLAN STOCK OPTION AGREEMENT
This Amendment to the Silicon Image, Inc. 1995 Equity Incentive Plan
Stock Option Agreement (the "AMENDMENT") is dated as of ____________, _____ and
is entered into by and between Silicon Image, Inc., a California corporation
(the "COMPANY"), and ___________ ("PARTICIPANT"). Capitalized terms used herein
but not otherwise defined herein shall have the meanings ascribed to them in the
Agreement (as defined below).
R E C I T A L S:
WHEREAS, the Company and Participant entered into a Silicon Image, Inc.
1995 Equity Incentive Plan Stock Option Agreement No. ______ (the "AGREEMENT")
on __________, 199__ whereby the Company granted to Participant an option (the
"OPTION") to purchase shares of Common Stock of the Company (the "SHARES").
WHEREAS, the Agreement provided that the Option shall become exercisable as
it vests.
WHEREAS, the Company and Participant wish to amend the Agreement to provide
that the Option shall be immediately exercisable subject to a right of
repurchase on behalf of the Company for any Unvested Shares.
NOW, THEREFORE, THE PARTIES HEREBY AGREES AS FOLLOWS:
1. AMENDMENT TO SECTION 2.1. Section 2.1 of the Agreement is hereby
amended and restated in its entirety as follows:
"2.1 EXERCISE PERIOD OF OPTION. This Option is
immediately exercisable although the Shares issued upon
exercise of this Option will be subject to restrictions
and Repurchase Options set forth in Sections 8 and 9
below. Provided Participant continues to provide
services to the Company or any Subsidiary or Parent of
the Company, the Option shall become vested as to
portions of the Shares as follows: [INSERT VESTING
FROM AGREEMENT HERE]. If application of the vesting
percentage causes a fractional share, such share shall
be rounded down to the nearest whole share for each
month except for the last month in such vesting period,
at the end of which last month this Option shall become
vested in full for the remainder of the Shares.
Unvested Shares may not be sold or otherwise
transferred by Participant without the Company's prior
written consent. Notwithstanding any provision in this
Plan or this Agreement to the contrary, Options for
Unvested Shares (as
<PAGE>
described in Section 2.2 of this Agreement) will not be
exercisable on or after Participant's Termination Date."
2. AMENDMENT TO SECTION 8. Section 8 of the Agreement is hereby
amended and restated in its entirety as follows:
8. "COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The
Company, or its assignee, shall have the option to
repurchase Participant's Unvested Shares (as defined in
Section 2.2 of this Agreement) on the terms and conditions
set forth in the Exercise Agreement (the
"REPURCHASE OPTION") if Participant is Terminated (as
defined in the Plan) for any reason, or no reason, including
without limitation Participant's death, Disability (as
defined in the Plan), voluntary resignation or termination
by the Company with or without Cause. Notwithstanding the
foregoing, the Company shall retain the Repurchase Option
for Unvested Shares only as to that number of Unvested
Shares (whether or not exercised) that exceeds the number of
shares which remain unexercised."
3. AMENDMENT TO SECTION 9. Section 9 of the Agreement is hereby
amended by adding a new first sentence as follows:
"Unvested shares may not be sold or otherwise transferred by
Participant without the Company's prior written consent."
4. AMENDMENT TO SECTION 10. Section 10 of the Agreement is amended
by adding a new Section 10.4 as follows:
"10.4. SECTION 83(B) ELECTION FOR UNVESTED SHARES. With
respect to Unvested Shares, which are subject to the Repurchase
Option, unless an election is filed by the Participant with the
Internal Revenue Service (and, if necessary, the proper state
taxing authorities), WITHIN 30 DAYS of the purchase of the
Unvested Shares, electing pursuant to Section 83(b) of the Code
(and similar state tax provisions, if applicable) to be taxed
currently on any difference between the Exercise Price of the
Unvested Shares and their Fair Market Value on the date of
purchase, there may be a recognition of taxable income
(including, where applicable, alternative minimum taxable income)
to the Participant, measured by the excess, if any, of the Fair
Market Value of the Unvested Shares at the time they cease to be
Unvested Shares, over the Exercise Price of the Unvested Shares."
5. AMENDMENT TO SECTION 15. Section 15 of the Agreement is hereby
amended and restated in its entirety as follows:
2
<PAGE>
"15. SUCCESSORS AND ASSIGNS. The Company may assign any of
its rights under this Agreement including its rights to
purchase Shares under the Repurchase Option and the Right of
First Refusal. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth
herein, this Agreement shall be binding upon Participant and
Participant's heirs, executors, administrators, legal
representatives, successors and assigns."
6. REVISED STOCK OPTION EXERCISE AGREEMENT. Attached hereto as
EXHIBIT A is a revised Stock Option Exercise Agreement to be executed in
connection with Participant's exercise of the Option pursuant to the provisions
of Section 4 of the Agreement.
7. GOVERNING LAW. This Amendment will be governed by and construed
in accordance with the internal laws of the State of California, excluding that
body of laws pertaining to conflict of laws.
8. NO OTHER CHANGES. Accept as amended as set forth in this
Amendment, all other provisions of the Agreement shall continue in full force
and effect.
9. AGREEMENT IN FORCE. The parties hereto hereby confirm and agree
that the Agreement, as amended hereby, is, and shall continue to be, in full
force and effect and is hereby reaffirmed and ratified in all respects.
10. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed on the day and year first above written.
SILICON IMAGE, INC. PARTICIPANT
By: ________________________ ___________________________
Name: ________________________
Title:________________________
3
<PAGE>
NO._____
SILICON IMAGE, INC.
1995 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Stock Option Exercise Agreement (the "EXERCISE AGREEMENT") is made and
entered into as of _________________________, 19___ (the "EFFECTIVE DATE") by
and between Silicon Image, Inc., a California corporation (the "COMPANY"), and
the purchaser named below (the "PURCHASER"). Capitalized terms not defined
herein shall have the meanings ascribed to them in the Company's 1995 Equity
Incentive Plan, as amended (the "PLAN").
PURCHASER: _______________________________________________
_______________________________________________
SOCIAL SECURITY NUMBER: _______________________________________________
ADDRESS: _______________________________________________
_______________________________________________
TOTAL OPTION SHARES: _______________________________________________
EXERCISE PRICE PER SHARE: _______________________________________________
DATE OF GRANT: _______________________________________________
FIRST VESTING DATE: _______________________________________________
EXPIRATION DATE: _______________________________________________
(Unless earlier terminated under Section 5.6
of the Plan)
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. EXERCISE OF OPTION.
1.1 EXERCISE. Pursuant to exercise of that certain option (the
"OPTION") granted to Purchaser under the Plan and subject to the terms and
conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby sells to Purchaser, the Total Number of Shares
set forth above (the "SHARES") of the Company's Common Stock at the Exercise
Price Per Share set forth above (the "EXERCISE PRICE"). As used in this
Exercise Agreement, the term "SHARES" refers to the Shares purchased under this
Exercise Agreement and includes all securities received (i) in replacement of
the Shares, (ii) as a result of stock dividends or stock splits with respect to
the Shares, and (iii) all securities received in
1
<PAGE>
replacement of the Shares in a merger, recapitalization, reorganization or
similar corporate transaction.
1.2 TITLE TO SHARES. The exact spelling of the name(s) under which
Purchaser will take title to the Shares is:
________________________________________________________________
________________________________________________________________
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Other; please specify:_____________________________________
1.3 PAYMENT. Purchaser hereby delivers payment of the Exercise Price
in the manner permitted in the Stock Option Agreement as follows (check and
complete as appropriate):
[ ] in cash (by check) in the amount of $____________, receipt
of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company owed to
Purchaser in the amount of $_______________;
[ ] by delivery of _________ fully-paid, nonassessable and
vested shares of the Common Stock of the Company owned by
Purchaser for at least six (6) months prior to the date
hereof which have been paid for within the meaning of SEC
Rule 144, (if purchased by use of a promissory note, such
note has been fully paid with respect to such vested
shares), or obtained by Purchaser in the open public market,
and owned free and clear of all liens, claims, encumbrances
or security interests, valued at the current Fair Market
Value of $___________ per share;
[ ] by tender of a Full Recourse Promissory Note in the
principal amount of $__________, having such terms as may be
approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483
and 1274 of the Code and secured by a Pledge Agreement
herewith; provided, however, that Purchasers who are not
employees or directors of the Company shall not be entitled
to purchase Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares;
[ ] by the waiver hereby of compensation due or accrued for
services rendered in the amount of $_________.
2
<PAGE>
2. DELIVERY.
2.1 DELIVERIES BY PURCHASER. Purchaser hereby delivers to the
Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock Power
and Assignment Separate from Stock Certificate in the form of EXHIBIT 1 attached
hereto (the "STOCK POWERS"), both executed by Purchaser (and Purchaser's spouse,
if any), (iii) if Purchaser is married, a Consent of Spouse in the form of
EXHIBIT 2 attached hereto (the "SPOUSE CONSENT") executed by Purchaser's spouse,
and (iv) the Exercise Price and payment or other provision for any applicable
tax obligations in the form of a "Check", a copy of which is attached hereto as
EXHIBIT 3.
2.2 DELIVERIES BY THE COMPANY. Upon its receipt of the Exercise
Price, payment or other provision for any applicable tax obligations and all the
documents to be executed and delivered by Purchaser to the Company under Section
2.1, the Company will issue a duly executed stock certificate evidencing the
Shares in the name of Purchaser to be placed in escrow as provided in Section 11
until expiration or termination of the Company's Repurchase Option and Right of
First Refusal described in Sections 8, 9 and 10.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to the Company that:
3.1 AGREES TO TERMS OF THE PLAN. Purchaser has received a copy of
the Plan and the Stock Option Agreement, has read and understands the terms of
the Plan, the Stock Option Agreement and this Exercise Agreement, and agrees to
be bound by their terms and conditions. Purchaser acknowledges that there may
be adverse tax consequences upon exercise of the Option or disposition of the
Shares, and that Purchaser should consult a tax adviser prior to such exercise
or disposition.
3.2 PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is purchasing
the Shares for Purchaser's own account for investment purposes only and not with
a view to, or for sale in connection with, a distribution of the Shares within
the meaning of the Securities Act. Purchaser has no present intention of
selling or otherwise disposing of all or any portion of the Shares and no one
other than Purchaser has any beneficial ownership of any of the Shares.
3.3 ACCESS TO INFORMATION. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
3.4 UNDERSTANDING OF RISKS. Purchaser is fully aware of: (i) the
highly speculative nature of the investment in the Shares; (ii) the financial
hazards involved; (iii) the lack of liquidity of the Shares and the restrictions
on transferability of the Shares (E.G., that Purchaser may not be able to sell
or dispose of the Shares or use them as collateral for loans); (iv) the
qualifications and backgrounds of the management of the Company; and (v) the tax
consequences of investment in the Shares. Purchaser is capable of evaluating
the merits and risks of this investment, has the ability to protect Purchaser's
own interests in this transaction and is financially capable of bearing a total
loss of this investment.
3
<PAGE>
3.5 NO GENERAL SOLICITATION. At no time was Purchaser presented with
or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Shares.
4. COMPLIANCE WITH SECURITIES LAWS.
4.1 COMPLIANCE WITH U.S. FEDERAL SECURITIES LAWS. Purchaser
understands and acknowledges that the Shares have not been registered with the
SEC under the Securities Act and that, notwithstanding any other provision of
the Stock Option Agreement to the contrary, the exercise of any rights to
purchase any Shares is expressly conditioned upon compliance with the Securities
Act and all applicable state securities laws. Purchaser agrees to cooperate
with the Company to ensure compliance with such laws. The Shares are being
issued under the Securities Act pursuant to the exemption provided by SEC Rule
701.
4.2 COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE PLAN, THE STOCK
OPTION AGREEMENT, AND THIS EXERCISE AGREEMENT ARE INTENDED TO COMPLY WITH
SECTION 25102(o) OF THE CALIFORNIA CORPORATIONS CODE AND ANY RULES (INCLUDING
COMMISSIONER RULES, IF APPLICABLE) OR REGULATIONS PROMULGATED THEREUNDER BY THE
CALIFORNIA DEPARTMENT OF CORPORATIONS (THE "REGULATIONS"). ANY PROVISION OF
THIS EXERCISE AGREEMENT WHICH IS INCONSISTENT WITH SECTION 25102(o) SHALL,
WITHOUT FURTHER ACT OR AMENDMENT BY THE COMPANY OR THE BOARD, BE REFORMED TO
COMPLY WITH THE REQUIREMENTS OF SECTION 25102(o). THE SALE OF THE SECURITIES
THAT ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE
CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION,
IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS EXERCISE
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN
EXEMPTION BEING AVAILABLE.
5. RESTRICTED SECURITIES.
5.1 NO TRANSFER UNLESS REGISTERED OR EXEMPT. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are
available. Purchaser understands that only the Company may file a
registration statement with the SEC and that the Company is under no
obligation to do so with respect to the Shares. Purchaser has also been
advised that exemptions from registration and qualification may not be
available or may not permit Purchaser to transfer all or any of the Shares in
the amounts or at the times proposed by Purchaser.
5.2 SEC RULE 144. In addition, Purchaser has been advised that SEC
Rule 144 promulgated under the Securities Act, which permits certain limited
sales of unregistered securities, is not presently available with respect to the
Shares and, in any event, requires that the Shares be held for a minimum of one
(1) year, and in certain cases two (2) years, after they have
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been purchased AND PAID FOR (within the meaning of Rule 144). Purchaser
understands that Rule 144 may indefinitely restrict transfer of the Shares so
long as Purchaser remains an "affiliate" of the Company or if "current public
information" about the Company (as defined in Rule 144) is not publicly
available.
5.3 SEC RULE 701. The Shares are issued pursuant to SEC Rule 701
promulgated under the Securities Act and may become freely tradeable by
non-affiliates (under limited conditions regarding the method of sale) ninety
(90) days after the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective
by the SEC, subject to the lengthier market standoff agreement contained in
Section 7 of this Exercise Agreement or any other agreement entered into by
Purchaser. Affiliates must comply with the provisions (other than the holding
period requirements) of Rule 144.
6. RESTRICTIONS ON TRANSFERS.
6.1 DISPOSITION OF SHARES. Purchaser hereby agrees that Purchaser
shall make no disposition of the Shares (other than as permitted by this
Exercise Agreement) unless and until:
(a) Purchaser shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;
(b) Purchaser shall have complied with all requirements of this
Exercise Agreement applicable to the disposition of the Shares;
(c) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to counsel for the Company, that
(i) the proposed disposition does not require registration of the Shares under
the Securities Act or (ii) all appropriate actions necessary for compliance with
the registration requirements of the Securities Act or of any exemption from
registration available under the Securities Act (including Rule 144) have been
taken; and
(d) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that the proposed
disposition will not result in the contravention of any transfer restrictions
applicable to the Shares pursuant to the provisions of the Regulations referred
to in Section 4.2 hereof.
6.2 RESTRICTION ON TRANSFER. Purchaser shall not transfer, assign,
grant a lien or security interest in, pledge, hypothecate, encumber or otherwise
dispose of any of the Shares which are subject to the Company's Repurchase
Option or the Company's Right of First Refusal described below, except as
permitted by this Exercise Agreement.
6.3 TRANSFEREE OBLIGATIONS. Each person (other than the Company) to
whom the Shares are transferred by means of one of the permitted transfers
specified in this Exercise Agreement must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Exercise Agreement and that the
transferred Shares are subject to: (i) both the Company's Repurchase Option and
the
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Company's Right of First Refusal granted hereunder and (ii) the market
stand-off provisions of Section 7 hereof, to the same extent such Shares
would be so subject if retained by the Purchaser.
7. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
registration of the Company's securities that, upon the request of the Company
or the underwriters managing any public offering of the Company's securities,
Purchaser will not sell or otherwise dispose of any Shares without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180) days) after the
effective date of such registration requested by such managing underwriters and
subject to all restrictions as the Company or the underwriters may specify.
Purchaser further agrees to enter into any agreement reasonably required by the
underwriters to implement the foregoing.
8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The Company, or its
assignee, shall have the option to repurchase Purchaser's Unvested Shares (as
defined in Section 2.2 of the Stock Option Agreement) on the terms and
conditions set forth in this Section (the "REPURCHASE OPTION") if Purchaser is
Terminated (as defined in the Plan) for any reason, or no reason, including
without limitation Purchaser's death, Disability (as defined in the Plan),
voluntary resignation or termination by the Company with or without Cause.
Notwithstanding the foregoing, the Company shall retain the Repurchase Option
for Unvested Shares only as to that number of Unvested Shares (whether or not
exercised) that exceeds the number of shares which remain unexercised.
8.1 TERMINATION AND TERMINATION DATE. In case of any dispute as to
whether Purchaser is Terminated, the Committee shall have discretion to
determine whether Purchaser has been Terminated and the effective date of such
Termination (the "TERMINATION DATE").
8.2 EXERCISE OF REPURCHASE OPTION. At any time within ninety (90)
days after the Purchaser's Termination Date (or, in the case of securities
issued upon exercise of an Option after the Purchaser's Termination Date, within
ninety (90) days after the date of such exercise), the Company, or its assignee,
may elect to repurchase the Purchaser's Unvested Shares by giving Purchaser
written notice of exercise of the Repurchase Option.
8.3 CALCULATION OF REPURCHASE PRICE FOR UNVESTED SHARES. The Company
or its assignee shall have the option to repurchase from Purchaser (or from
Purchaser's personal representative as the case may be) the Unvested Shares at
the Purchaser's Exercise Price, proportionately adjusted for any stock split or
similar change in the capital structure of the Company as set forth in Section
2.2 of the Plan (the "REPURCHASE PRICE").
8.4 PAYMENT OF REPURCHASE PRICE. The Repurchase Price shall be
payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness owed by
Purchaser to the Company or such assignee, or by any combination thereof. The
Repurchase Price shall be paid without interest within sixty (60) days after
exercise of the Repurchase Option.
8.5 RIGHT OF TERMINATION UNAFFECTED. Nothing in this Exercise
Agreement shall be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Company (or any Parent or Subsidiary of the
Company) to terminate Purchaser's employment or
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other relationship with Company (or the Parent or Subsidiary of the Company)
at any time, for any reason or no reason, with or without Cause.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold or
otherwise transferred by Purchaser without the Company's prior written consent.
Before any Vested Shares held by Purchaser or any transferee of such Vested
Shares (either being sometimes referred to herein as the "HOLDER") may be sold
or otherwise transferred by gift (including without limitation any transfer by
(i) an assignment of any Shares for the benefit of creditors of the Holder,
(ii) a transfer by operation of law, (iii) an execution of judgment against the
Shares or the acquisition of record or beneficial ownership of Shares by a
lender or creditor, (iv) a transfer by will or under the laws of descent and
distribution, (v) a transfer pursuant to any decree of divorce, dissolution or
separate maintenance, any property settlement, any separation agreement or any
other agreement with a spouse (except for bona fide estate planning purposes)
under which any Shares are transferred or awarded to the spouse of the Holder or
are required to be sold, or (vi) a transfer resulting from the filing by the
Holder of a petition for relief or the filing of an involuntary petition against
Holder, under the bankruptcy laws of the United States or of any other nation
(each instance referred to hereafter as the "INVOLUNTARY TRANSFER")), the
Company and/or its assignee(s) shall have an assignable right of first refusal
to purchase the Vested Shares to be sold or transferred (the "OFFERED SHARES")
on the terms and conditions set forth in this Section (the
"RIGHT OF FIRST REFUSAL").
9.1 NOTICE OF PROPOSED TRANSFER. In the event the Holder proposes to
transfer any Vested Shares, other than by an Involuntary Transfer, the Holder of
the Offered Shares shall deliver to the Company a written notice (the "VOLUNTARY
TRANSFER NOTICE") stating: (i) the Holder's bona fide intention to sell or
otherwise transfer the Offered Shares; (ii) the name of each proposed bona fide
purchaser or other transferee (the "PROPOSED TRANSFEREE"); (iii) the number of
Offered Shares to be transferred to each Proposed Transferee; (iv) the bona fide
cash price or other consideration for which the Holder proposes to transfer the
Offered Shares (the "OFFERED PRICE"); and (v) that the Holder acknowledges this
Notice is an offer to sell the Offered Shares to the Company and/or its
assignee(s) pursuant to the Company's Right of First Refusal at the Offered
Price as provided for in this Exercise Agreement. In the event of any
Involuntary Transfer of any Vested Shares, the Holder shall deliver to the
Company a written notice (the "INVOLUNTARY TRANSFER NOTICE") stating: (i) the
number of Shares subject to the Involuntary Transfer, (ii) the manner,
circumstances and date of the Involuntary Transfer, and (iii) the name and
address of the Holder and transferee. If the Company subsequently requests
additional information concerning the Involuntary Transfer or transferee, Holder
agrees to promptly provide the requested information to the Company.
9.2 EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after the date of the Voluntary Transfer Notice or the Involuntary
Transfer Notice (either being sometimes referred to herein as the "NOTICE"), the
Company and/or its assignee(s) may, by giving written notice to the Holder,
elect to purchase all (or, with the consent of the Holder, less than all) the
Offered Shares proposed to be transferred to any one or more of the Proposed
Transferees named in the Notice, at the purchase price, determined as specified
below.
9.3 PURCHASE PRICE. The purchase price for the Offered Shares
purchased under this Section will be the Offered Price. If no price or other
legal consideration is to be paid for the Shares, the transfer will be referred
to as a "DONATIVE TRANSFER". If the Offered Price
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includes consideration other than cash, then the cash equivalent value of the
non-cash consideration shall conclusively be deemed to be the present Fair
Market Value of such non-cash consideration as conclusively determined in
good faith by the Board of Directors of the Company. In the case of a
Donative Transfer or an Involuntary Transfer, the Offered Price to be paid to
the Holder by the Company or its assignee will be the Fair Market Value on
the proposed transfer date, as conclusively determined in good faith by the
Board of Directors of the Company.
9.4 PAYMENT. Payment of the Offered Price will be payable, at the
option of the Company and/or its assignee(s) (as applicable), by check or by
cancellation of all or a portion of any outstanding indebtedness owed by the
Holder to the Company (or to such assignee, in the case of a purchase of Offered
Shares by such assignee) or by any combination thereof. The Offered Price will
be paid without interest within sixty (60) days after the Company's receipt of
the Notice, or, at the option of the Company and/or its assignee(s), in the
manner and at the time(s) set forth in the Notice.
9.5 HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to that
Proposed Transferee at the Offered Price or at a higher price, PROVIDED (i) that
such sale or other transfer is consummated within one hundred twenty (120) days
after the date of the Notice, (ii) any such sale or other transfer is effected
in compliance with all applicable securities laws, and (iii) the Proposed
Transferee agrees in writing that the provisions of this Section will continue
to apply to the Offered Shares in the hands of such Proposed Transferee. If the
Offered Shares described in the Notice are not transferred to the Proposed
Transferee within such one hundred twenty (120) day period, then a new Notice
must be given to the Company pursuant to which the Company will again be offered
the Right of First Refusal before any Shares held by the Holder may be sold or
otherwise transferred.
9.6 EXEMPT TRANSFERS. Notwithstanding anything to the contrary in
this Section, the following transfers of Vested Shares will be exempt from the
Right of First Refusal: (i) the transfer of any or all of the Vested Shares
during Purchaser's lifetime by gift or on Purchaser's death by will or intestacy
to Purchaser's "Immediate Family" (as defined below) or to a trust for the
benefit of Purchaser or Purchaser's Immediate Family, provided that each
transferee or other recipient agrees in a writing satisfactory to the Company
that the provisions of this Section will continue to apply to the transferred
Vested Shares in the hands of such transferee or other recipient; (ii) any
transfer of Vested Shares made pursuant to a statutory merger or statutory
consolidation of the Company with or into another corporation or corporations
(except that the Right of First Refusal will continue to apply thereafter to
such Vested Shares, in which case the surviving corporation of such merger or
consolidation shall succeed to the rights of the Company under this Section
unless the agreement of merger or consolidation expressly otherwise provides);
or (iii) any transfer of Vested Shares pursuant to the winding up and
dissolution of the Company. As used herein, the term "IMMEDIATE FAMILY" will
mean Purchaser's spouse, the lineal descendant or antecedent, father, mother,
brother or sister, child, adopted child, grandchild or adopted grandchild of the
Purchaser or the Purchaser's spouse, or the spouse of any child, adopted child,
grandchild or adopted grandchild of Purchaser or the Purchaser's spouse.
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9.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The Company's Right of
First Refusal will terminate when the Company's securities become publicly
traded.
10. RIGHTS AS A SHAREHOLDER. Subject to the terms and conditions of this
Exercise Agreement, Purchaser will have all of the rights of a shareholder of
the Company with respect to the Shares from and after the date that Shares are
issued to Purchaser until such time as Purchaser disposes of the Shares or the
Company and/or its assignee(s) exercise(s) the Repurchase Option or Right of
First Refusal. Upon an exercise of the Repurchase Option or the Right of First
Refusal, Purchaser will have no further rights as a holder of the Shares so
purchased upon such exercise, other than the right to receive payment for the
Shares so purchased in accordance with the provisions of this Exercise
Agreement, and Purchaser will promptly surrender the stock certificate(s)
evidencing the Shares so purchased to the Company for transfer or cancellation.
11. ESCROW. As security for Purchaser's faithful performance of this
Exercise Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company (the "ESCROW HOLDER"), who is hereby appointed
to hold such certificate(s) and Stock Powers in escrow and to take all such
actions and to effectuate all such transfers and/or releases of such Shares as
are in accordance with the terms of this Exercise Agreement. Purchaser and the
Company agree that Escrow Holder will not be liable to any party to this
Exercise Agreement (or to any other party) for any actions or omissions unless
Escrow Holder is grossly negligent or intentionally fraudulent in carrying out
the duties of Escrow Holder under this Exercise Agreement. Escrow Holder may
rely upon any letter, notice or other document executed with any signature
purported to be genuine and may rely on the advice of counsel and obey any order
of any court with respect to the transactions contemplated by this Exercise
Agreement. The Shares will be released from escrow upon termination of both the
Repurchase Option and the Right of First Refusal.
12. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
12.1 LEGENDS. Purchaser understands and agrees that the Company will
place the legends set forth below or similar legends on any stock certificate(s)
evidencing the Shares, together with any other legends that may be required by
state or U.S. Federal securities laws, the Company's Articles of Incorporation
or Bylaws, any other agreement between Purchaser and the Company or any
agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY
MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE
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SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON PUBLIC RESALE AND TRANSFER,
[INCLUDING THE RIGHT OF REPURCHASE AND RIGHT OF FIRST
REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S)]
AS SET FORTH IN A STOCK OPTION EXERCISE AGREEMENT BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY
OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER. SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS
INCLUDING THE RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL
ARE BINDING ON TRANSFEREES OF THESE SHARES.
12.2 STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, to ensure
compliance with the restrictions imposed by this Exercise Agreement, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent, if
any, and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
12.3 REFUSAL TO TRANSFER. The Company will not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Exercise Agreement or (ii) to treat
as owner of such Shares, or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares have been so transferred.
13. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR DISPOSITION OF
THE SHARES. PURCHASER REPRESENTS: (i) THAT PURCHASER HAS CONSULTED WITH ANY
TAX ADVISER THAT PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND (ii) THAT PURCHASER IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF UNVESTED SHARES ARE SUBJECT TO REPURCHASE
BY THE COMPANY, PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH
PURCHASER'S OWN TAX ADVISER CONCERNING THE ADVISABILITY OF FILING AN 83(b)
ELECTION WITH THE INTERNAL REVENUE SERVICE WHICH MUST BE FILED WITHIN THIRTY
(30) DAYS OF THE PURCHASE OF SHARES TO BE EFFECTIVE. Set forth below is a brief
summary as of the date the Plan was adopted by the Board of some of the U.S.
Federal and California tax consequences of exercise of the Option and
disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT HIS OR HER
OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
13.1 EXERCISE OF INCENTIVE STOCK OPTION. If the Option qualifies as
an ISO, there will be no regular U.S. Federal income tax liability or California
income tax liability upon
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the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as a tax preference item for U.S. Federal alternative minimum tax
purposes and may subject Purchaser to the alternative minimum tax in the year
of exercise.
13.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If the Option does not
qualify as an ISO, there may be a regular U.S. Federal income tax liability and
a California income tax liability upon the exercise of the Option. Purchaser
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise Price. If Purchaser is or was
an employee of the Company, the Company may be required to withhold from
Purchaser's compensation or collect from Purchaser and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
13.3 DISPOSITION OF SHARES. The following tax consequences may apply
upon disposition of the Shares.
(a) INCENTIVE STOCK OPTIONS. If the Shares are held for more
than twelve (12) months after the date of the transfer of the Shares pursuant
to the exercise of an ISO and are disposed of more than two (2) years after
the Date of Grant, any gain realized on disposition of the Shares will be
treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the
applicable one (1) year or two (2) year period, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price.
(b) NONQUALIFIED STOCK OPTIONS. If the Shares are held for more
than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of an NQSO, any gain realized on disposition of the Shares will be
treated as long term capital gain.
(c) WITHHOLDING. The Company may be required to withhold from
the Purchaser's compensation or collect from the Purchaser and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income.
13.4 SECTION 83(B) ELECTION FOR UNVESTED SHARES. With respect to
Unvested Shares, which are subject to the Repurchase Option, unless an election
is filed by the Purchaser with the Internal Revenue Service (and, if necessary,
the proper state taxing authorities), WITHIN 30 DAYS OF THE PURCHASE of the
Unvested Shares, electing pursuant to Section 83(b) of the Code (and similar
state tax provisions, if applicable) to be taxed currently on any difference
between the Exercise Price of the Unvested Shares and their Fair Market Value
on the date of purchase, there may be a recognition of taxable income
(including, where applicable, alternative minimum taxable income) to the
Purchaser, measured by the excess, if any, of the Fair Market Value of the
Unvested Shares at the time they cease to be Unvested Shares, over the Exercise
Price of the Unvested Shares. A form of Election under Section 83(b) is
attached hereto as EXHIBIT 4 for reference.
14. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of
the Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with
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all applicable state and U.S. Federal laws and regulations and with all
applicable requirements of any stock exchange or automated quotation system
on which the Company's Common Stock may be listed or quoted at the time of
such issuance or transfer.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Exercise Agreement, including its rights to purchase Shares under the
Repurchase Option and the Right of First Refusal. This Exercise Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth, this
Exercise Agreement will be binding upon Purchaser and Purchaser's heirs,
executors, administrators, legal representatives, successors and assigns.
16. GOVERNING LAW; SEVERABILITY. This Exercise Agreement shall be
governed by and construed in accordance with the internal laws of the State of
California as such laws are applied to agreements between California residents
entered into and to be performed entirely within California. If any provision
of this Exercise Agreement is determined by a court of law to be illegal or
unenforceable, then such provision will be enforced to the maximum extent
possible and the other provisions will remain fully effective and enforceable.
17. NOTICES. Any notice required to be given or delivered to the Company
shall be in writing and addressed to the Corporate Secretary of the Company at
its principal corporate offices. Any notice required to be given or delivered
to Purchaser shall be in writing and addressed to Purchaser at the address
indicated above or to such other address as Purchaser may designate in writing
from time to time to the Company. All notices shall be deemed effectively given
upon personal delivery, (i) three (3) days after deposit in the United States
mail by certified or registered mail (return receipt requested), (ii) one (1)
business day after its deposit with any return receipt express courier
(prepaid), or (iii) one (1) business day after transmission by rapifax or
telecopier.
18. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Agreement.
19. HEADINGS. The captions and headings of this Exercise Agreement are
included for ease of reference only and will be disregarded in interpreting or
construing this Exercise Agreement. All references herein to Sections will
refer to Sections of this Exercise Agreement.
20. ENTIRE AGREEMENT. The Plan, the Stock Option Agreement and this
Exercise Agreement, together with all Exhibits thereto, constitute the entire
agreement and understanding of the parties with respect to the subject matter of
this Exercise Agreement, and supersede all prior understandings and agreements,
whether oral or written, between the parties hereto with respect to the specific
subject matter hereof.
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IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be
executed in triplicate by its duly authorized representative and Purchaser has
executed this Exercise Agreement in triplicate as of the Effective Date,
indicated above.
SILICON IMAGE, INC. PURCHASER
By: ________________________________ ____________________________________
(Signature)
____________________________________ ____________________________________
(Please print name) (Please print name)
____________________________________
(Please print title)
[SIGNATURE PAGE TO SILICON IMAGE, INC. STOCK OPTION EXERCISE AGREEMENT]
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LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: Copy of Purchaser's Check
Exhibit 4: Section 83(b) Election
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EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
15
<PAGE>
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise
Agreement No. ________ dated as of _______________, _____, (the "AGREEMENT"),
the undersigned hereby sells, assigns and transfers unto
_______________________________, __________ shares of the Common Stock of
Silicon Image, Inc., a California corporation (the "COMPANY"), standing in
the undersigned's name on the books of the Company represented by Certificate
No(s). ______ delivered herewith, and does hereby irrevocably constitute and
appoint the Secretary of the Company as the undersigned's attorney-in-fact,
with full power of substitution, to transfer said stock on the books of the
Company. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND
ANY EXHIBITS THERETO.
Dated: _______________, _____
PURCHASER
_______________________________
(Signature)
_______________________________
(Please Print Name)
_______________________________
(Spouse's Signature, if any)
_______________________________
(Please Print Spouse's Name)
INSTRUCTIONS TO PURCHASER: Please do not fill in any blanks other than the
signature line. The purpose of this Stock Power and Assignment is to enable the
Company to acquire the shares pursuant to its "REPURCHASE OPTION" and/or "RIGHT
OF FIRST REFUSAL" set forth in the Exercise Agreement without requiring
additional signatures on the part of the Purchaser or Purchaser's Spouse.
16
<PAGE>
EXHIBIT 2
SPOUSE CONSENT
17
<PAGE>
SPOUSE CONSENT
The undersigned spouse of ______________________________ (the "PURCHASER")
has read, understands, and hereby approves the Stock Option Exercise Agreement
between Purchaser and the Company (the "AGREEMENT"). In consideration of the
Company's granting my spouse the right to purchase the Shares as set forth in
the Agreement, the undersigned hereby agrees to be irrevocably bound by the
Agreement and further agrees that any community property interest I may have in
the Shares shall similarly be bound by the Agreement. The undersigned hereby
appoints Purchaser as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.
Date: ________________________
_______________________________
Print Name of Purchaser's Spouse
_______________________________
Signature of Purchaser's Spouse
Address: _______________________________
_______________________________
_______________________________
18
<PAGE>
EXHIBIT 3
COPY OF PURCHASER'S CHECK
1
<PAGE>
EXHIBIT 4
SECTION 83(B) ELECTION
1
<PAGE>
ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include the excess, if any, of the
fair market value of the property described below at the time of transfer over
the amount paid for such property, as compensation for services in the
calculation of: (1) regular gross income; (2) alternative minimum taxable income
or (3) disqualifying disposition gross income, as the case may be.
1. TAXPAYER'S NAME: _______________________________
TAXPAYER'S ADDRESS: _______________________________
_______________________________
SOCIAL SECURITY NUMBER: _______________________________
2. The property with respect to which the election is made is described as
follows: _______ shares of Common Stock of Silicon Image, Inc., a
California corporation (the "COMPANY") which were transferred upon exercise
of an option by Company, which is Taxpayer's employer or the corporation
for whom the Taxpayer performs services.
3. The date on which the shares were transferred pursuant to the exercise of
the option was ____________________, _____ and this election is made for
calendar year _____.
4. The shares received upon exercise of the option are subject to the
following restrictions: The Company may repurchase all or a portion of the
shares at the Taxpayer's original purchase price under certain conditions
at the time of Taxpayer's termination of employment or services.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $_____ per
share at the time of exercise of the option.
6. The amount paid for such shares upon exercise of the option was $_____ per
share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED
WITHOUT THE CONSENT OF THE IRS.
Dated:__________________________ _______________________________________
Taxpayer's Signature
2
<PAGE>
[Second Form of Stock Option Agreement (immediately exercisable option)]
NO. _______
SILICON IMAGE, INC.
1995 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "AGREEMENT") is made and
entered into as of the date of grant set forth below (the "DATE OF GRANT") by
and between Silicon Image, Inc., a California corporation (the "COMPANY"),
and the participant named below (the "PARTICIPANT"). Capitalized terms not
defined herein shall have the meaning ascribed to them in the Company's 1995
Equity Incentive Plan, as amended (the "PLAN").
PARTICIPANT: ______________________________________________
SOCIAL SECURITY NUMBER: ______________________________________________
ADDRESS: ______________________________________________
______________________________________________
TOTAL OPTION SHARES: ______________________________________________
EXERCISE PRICE PER SHARE: $_____________________________________________
DATE OF GRANT: ______________________________________________
FIRST VESTING DATE: ______________________________________________
EXPIRATION DATE: ______________________________________________
(unless earlier terminated under Section 5.6
of the Plan)
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to
Participant an option (this "OPTION") to purchase the total number of shares
of Common Stock of the Company set forth above as Total Option Shares (the
"SHARES") at the Exercise Price Per Share set forth above (the "EXERCISE
PRICE"), subject to all of the terms and conditions of this Agreement and the
Plan. If designated as an Incentive Stock Option above, the Option is
intended to qualify as an "incentive stock option" (the "ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"CODE").
2. EXERCISE PERIOD.
2.1 EXERCISE PERIOD OF OPTION. This Option is
immediately exercisable although the Shares issued upon exercise of the
Option will be subject to the restrictions on transfer and Repurchase Options
set forth in Sections 7, 8 and 9 below. Provided Participant continues to
provide services to the Company or to any Parent or Subsidiary of the
Company, the
<PAGE>
Shares issuable upon exercise of this Option will become vested with respect
to one fourth (1/4) of the Shares on ________________ (the "FIRST VESTING
DATE") and thereafter at the end of each full succeeding month after the
First Vesting Date an additional one forty-eighth (1/48) of the Shares will
become vested until the Shares are vested with respect to one hundred percent
(100%) of the Shares. If application of the vesting percentage causes a
fractional share, such share shall be rounded down to the nearest whole share
for each month except for the last month in such vesting period, at the end
of which last month this Option shall become exercisable for the full
remainder of the Shares. Unvested Shares may not be sold or otherwise
transferred by Participant without the Company's prior written consent.
Notwithstanding any provision in the Plan or this Agreement to the contrary,
Options for Unvested Shares (as defined in Section 2.2 of this Agreement)
will not be exercisable on or after Participant's Termination Date.
2.2 VESTING OF OPTIONS. Shares that are vested
pursuant to the schedule set forth in Section 2.1 are "VESTED SHARES." Shares
that are not vested pursuant to the schedule set forth in Section 2.1 are
"UNVESTED SHARES."
2.3 EXPIRATION. The Option shall expire on the
Expiration Date set forth above or earlier as provided in Section 3 below or
pursuant to Section 5.6 of the Plan.
3. TERMINATION.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH,
DISABILITY OR CAUSE. If Participant is Terminated for any reason, except
death, Disability or for Cause, the Option, to the extent (and only to the
extent) that it would have been exercisable by Participant on the Termination
Date, may be exercised by Participant no later than three (3) months after
the Termination Date, but in any event no later than the Expiration Date.
3.2 TERMINATION BECAUSE OF DEATH OR DISABILITY.
If Participant is Terminated because of death or Disability of Participant
(or Participant dies within three (3) months of Termination when Termination
is for any reason other than Participant's Disability or for Cause), the
Option, to the extent that it is exercisable by Participant on the
Termination Date, may be exercised by Participant (or Participant's legal
representative) no later than twelve (12) months after the Termination Date,
but in any event no later than the Expiration Date. Any exercise beyond (i)
three (3) months after the Termination Date when the Termination is for any
reason other than the Participant's death or disability, within the meaning
of Section 22(e)(3) of the Code; or (ii) twelve (12) months after the
Termination Date when the termination is for Participant's disability, within
the meaning of Section 22(e)(3) of the Code, is deemed to be an NQSO.
3.3 TERMINATION FOR CAUSE. If Participant is
Terminated for Cause, then the Option will expire on Participant's
Termination Date, or at such later time and on such conditions as are
determined by the Committee.
3.4 NO OBLIGATION TO EMPLOY. Nothing in the Plan
or this Agreement shall confer on Participant any right to continue in the
employ of, or other relationship with, the Company or any Parent or
Subsidiary of the Company, or limit in any way the right of the Company or
any Parent or Subsidiary of the Company to terminate Participant's employment
or other relationship at any time, with or without Cause.
<PAGE>
4. MANNER OF EXERCISE.
4.1 STOCK OPTION EXERCISE AGREEMENT. To exercise
this Option, Participant (or in the case of exercise after Participant's
death or incapacity, Participant's executor, administrator, heir or legatee,
as the case may be) must deliver to the Company an executed stock option
exercise agreement in the form attached hereto as EXHIBIT A, or in such other
form as may be approved by the Committee from time to time (the "EXERCISE
AGREEMENT"), which shall set forth, INTER ALIA, (i) Participant's election to
exercise the Option, (ii) the number of Shares being purchased, (iii) any
restrictions imposed on the Shares and (iv) any representations, warranties
and agreements regarding Participant's investment intent and access to
information as may be required by the Company to comply with applicable
securities laws. If someone other than Participant exercises the Option, then
such person must submit documentation reasonably acceptable to the Company
verifying that such person has the legal right to exercise the Option.
4.2 LIMITATIONS ON EXERCISE. The Option may not
be exercised unless such exercise is in compliance with all applicable
federal and state securities laws, as they are in effect on the date of
exercise. The Option may not be exercised as to fewer than one hundred (100)
Shares unless it is exercised as to all Shares as to which the Option is then
exercisable.
4.3 PAYMENT. The Exercise Agreement shall be
accompanied by full payment of the Exercise Price for the shares being
purchased in cash (by check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock
that (i) either (A) have been owned by Participant
for more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such
shares were purchased from the Company by use of a
promissory note, such note has been fully paid with
respect to such shares); or (B) were obtained by
Participant in the open public market; and (ii) are
clear of all liens, claims, encumbrances or security
interests;
(c) by tender of a full recourse promissory note having
such terms as may be approved by the Committee and
bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of
the Code; provided, however, that Participants who
are not employees or directors of the Company shall
not be entitled to purchase Shares with a promissory
note unless the note is adequately secured by
collateral other than the Shares;
(d) by waiver of compensation due or accrued to
Participant for services rendered;
(e) provided that a public market for the Company's stock
exists: (i) through a "same day sale" commitment from
Participant and a broker-dealer that is a member of
the National Association of Securities Dealers (an
"NASD DEALER") whereby Participant irrevocably elects
to exercise the Option and to sell a portion of the
Shares so purchased sufficient to pay for
<PAGE>
the total Exercise Price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the total Exercise Price directly to the
Company, or (ii) through a "margin" commitment from
Participant and an NASD Dealer whereby Participant
irrevocably elects to exercise the Option and to
pledge the Shares so purchased to the NASD Dealer in
a margin account as security for a loan from the NASD
Dealer in the amount of the total Exercise Price, and
whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the total Exercise
Price directly to the Company; or
(f) by any combination of the foregoing.
4.4 TAX WITHHOLDING. Prior to the issuance of the
Shares upon exercise of the Option, Participant must pay or provide for any
applicable federal, state and local withholding obligations of the Company.
If the Committee permits, Participant may provide for payment of withholding
taxes upon exercise of the Option by requesting that the Company retain
Shares with a Fair Market Value equal to the minimum amount of taxes required
to be withheld. In such case, the Company shall issue the net number of
Shares to the Participant by deducting the Shares retained from the Shares
issuable upon exercise.
4.5 ISSUANCE OF SHARES. Provided that the
Exercise Agreement and payment are in form and substance satisfactory to
counsel for the Company, the Company shall issue the Shares registered in the
name of Participant, Participant's authorized assignee, or Participant's
legal representative, and shall deliver certificates representing the Shares
with the appropriate legends affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If
the Option is an ISO, and if Participant sells or otherwise disposes of any
of the Shares acquired pursuant to the ISO on or before the later of (i) the
date two (2) years after the Date of Grant, and (ii) the date one (1) year
after transfer of such Shares to Participant upon exercise of the Option,
Participant shall immediately notify the Company in writing of such
disposition. Participant agrees that Participant may be subject to income tax
withholding by the Company on the compensation income recognized by
Participant from the early disposition by payment in cash or out of the
current wages or other compensation payable to Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan and
this Agreement are intended to comply with Section 25102(o) of the California
Corporations Code and any regulations relating thereto. Any provision of this
Agreement which is inconsistent with Section 25102(o) or any regulations
relating thereto shall, without further act or amendment by the Company or
the Board, be reformed to comply with the requirements of Section 25102(o)
and any regulations relating thereto. The exercise of the Option and the
issuance and transfer of Shares shall be subject to compliance by the Company
and Participant with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance
or transfer. Participant understands that the Company is under no obligation
to register or qualify the Shares with the SEC, any state securities
commission or any stock exchange to effect such compliance.
<PAGE>
7. NONTRANSFERABILITY OF OPTION. The Option may not be
transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of Participant only by
Participant or in the event of Participant's incapacity, by Participant's
legal representative. The terms of the Option shall be binding upon the
executors, administrators, successors and assigns of Participant.
8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The
Company, or its assignee, shall have the option to repurchase Participant's
Unvested Shares (as defined in Section 2.2 of this Agreement) on the terms
and conditions set forth in the Exercise Agreement (the "REPURCHASE OPTION")
if Participant is Terminated (as defined in the Plan) for any reason, or no
reason, including without limitation Participant's death, Disability (as
defined in the Plan), voluntary resignation or termination by the Company
with or without Cause. Notwithstanding the foregoing, the Company shall
retain the Repurchase Option for Unvested Shares only as to that number of
Unvested Shares (whether or not exercised) that exceeds the number of shares
which remain unexercised.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may
not be sold or otherwise transferred by Participant without the Company's
prior written consent. Before any Vested Shares held by Participant or any
transferee of such Vested Shares may be sold or otherwise transferred
(including without limitation a transfer by gift or operation of law), the
Company and/or its assignee(s) shall have an assignable right of first
refusal to purchase the Vested Shares to be sold or transferred on the terms
and conditions set forth in the Exercise Agreement (the "RIGHT OF FIRST
REFUSAL"). The Company's Right of First Refusal will terminate when the
Company's securities become publicly traded.
10. TAX CONSEQUENCES. Set forth below is a brief summary
as of the Effective Date of the Plan of some of the federal and California
tax consequences of exercise of the Option and disposition of the Shares.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THE OPTION OR DISPOSING OF THE SHARES.
10.1 EXERCISE OF ISO. If the Option qualifies as
an ISO, there will be no regular federal or California income tax liability
upon the exercise of the Option, although the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price
will be treated as a tax preference item for federal alternative minimum tax
purposes and may subject the Participant to the alternative minimum tax in
the year of exercise.
10.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If the
Option does not qualify as an ISO, there may be a regular federal and
California income tax liability upon the exercise of the Option. Participant
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price. If Participant is
a current or former employee of the Company, the Company may be required to
withhold from Participant's compensation or collect from Participant and pay
to the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
10.3 DISPOSITION OF SHARES. The following tax
consequences may apply upon disposition of the Shares.
<PAGE>
(a) INCENTIVE STOCK OPTIONS. If the
Shares are held for more than twelve (12) months after the date of the
transfer of the Shares pursuant to the exercise of an ISO and are disposed of
more than two (2) years after the Date of Grant, any gain realized on
disposition of the Shares will be treated as long term capital gain for
federal and California income tax purposes. If Shares purchased under an ISO
are disposed of within the applicable one (1) year or two (2) year period,
any gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the excess, if any, of
the Fair Market Value of the Shares on the date of exercise over the Exercise
Price.
(b) NONQUALIFIED STOCK OPTIONS. If the
Shares are held for more than twelve (12) months after the date of the
transfer of the Shares pursuant to the exercise of an NQSO, any gain realized
on disposition of the Shares will be treated as long term capital gain.
(c) WITHHOLDING. The Company may be
required to withhold from the Participant's compensation or collect from the
Participant and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income.
10.4. SECTION 83(b) ELECTION FOR UNVESTED SHARES.
With respect to Unvested Shares, which are subject to the Repurchase Option,
unless an election is filed by the Participant with the Internal Revenue
Service (and, if necessary, the proper state taxing authorities), WITHIN 30
DAYS of the purchase of the Unvested Shares, electing pursuant to Section
83(b) of the Code (and similar state tax provisions, if applicable) to be
taxed currently on any difference between the Exercise Price of the Unvested
Shares and their Fair Market Value on the date of purchase, there may be a
recognition of taxable income (including, where applicable, alternative
minimum taxable income) to the Participant, measured by the excess, if any,
of the Fair Market Value of the Unvested Shares at the time they cease to be
Unvested Shares, over the Exercise Price of the Unvested Shares.
11. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not
have any of the rights of a shareholder with respect to any Shares until the
Shares are issued to Participant.
12. INTERPRETATION. Any dispute regarding the
interpretation of this Agreement shall be submitted by Participant or the
Company to the Committee for review. The resolution of such a dispute by the
Committee shall be final and binding on the Company and Participant.
13. ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. This Agreement and the Plan constitute the entire agreement of the
parties and supersede all prior undertakings and agreements with respect to
the subject matter hereof.
14. NOTICES. Any notice required to be given or delivered
to the Company under the terms of this Agreement shall be in writing and
addressed to the Corporate Secretary of the Company at its principal
corporate offices. Any notice required to be given or delivered to
Participant shall be in writing and addressed to Participant at the address
indicated above or to such other address as such party may designate in
writing from time to time to the Company. All notices shall be deemed to have
been given or delivered upon: (i) personal delivery; (ii) three (3) days
after deposit in the United States mail by certified or registered mail
(return receipt
<PAGE>
requested); (iii) one (1) business day after deposit with any return receipt
express courier (prepaid); or (iv) one (1) business day after transmission by
facsimile, rapifax or telecopier.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of
its rights under this Agreement including its rights to purchase Shares under
the Repurchase Option and the Right of First Refusal. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon Participant and Participant's heirs,
executors, administrators, legal representatives, successors and assigns.
16. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of California as such
laws are applied to agreements between California residents entered into and
to be performed entirely within California. If any provision of this
Agreement is determined by a court of law to be illegal or unenforceable,
then such provision will be enforced to the maximum extent possible and the
other provisions will remain fully effective and enforceable.
17. ACCEPTANCE. Participant hereby acknowledges receipt
of a copy of the Plan and this Agreement. Participant has read and
understands the terms and provisions thereof, and accepts the Option subject
to all the terms and conditions of the Plan and this Agreement. Participant
acknowledges that there may be adverse tax consequences upon exercise of the
Option or disposition of the Shares and that Participant should consult a tax
adviser prior to such exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed in triplicate by its duly authorized representative and
Participant has executed this Agreement in triplicate, effective as of the
Date of Grant.
SILICON IMAGE, INC. PARTICIPANT
By:_______________________________ _______________________________
(Signature)
__________________________________ _______________________________
(Please print name) (Please print name)
__________________________________
(Please print title)
<PAGE>
EXHIBIT A
FORM OF STOCK OPTION EXERCISE AGREEMENT
<PAGE>
[Second Form of Stock Option Exercise Agreement
(for exercise with cash of immediately exercisable option)]
NO.___
SILICON IMAGE, INC.
1995 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Stock Option Exercise Agreement (the "EXERCISE AGREEMENT") is made
and entered into as of _________________________, 19___ (the "EFFECTIVE DATE")
by and between Silicon Image, Inc., a California corporation (the "COMPANY"),
and the purchaser named below (the "PURCHASER"). Capitalized terms not defined
herein shall have the meanings ascribed to them in the Company's 1995 Equity
Incentive Plan, as amended (the "PLAN").
PURCHASER:
----------------------------------------------
----------------------------------------------
SOCIAL SECURITY NUMBER:
----------------------------------------------
ADDRESS:
----------------------------------------------
----------------------------------------------
TOTAL OPTION SHARES:
----------------------------------------------
EXERCISE PRICE PER SHARE:
----------------------------------------------
DATE OF GRANT:
----------------------------------------------
FIRST VESTING DATE:
----------------------------------------------
EXPIRATION DATE:
----------------------------------------------
(Unless earlier terminated under Section 5.6
of the Plan)
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. EXERCISE OF OPTION.
1.1 EXERCISE. Pursuant to exercise of that certain option
(the "OPTION") granted to Purchaser under the Plan and subject to the terms
and conditions of this Exercise Agreement, Purchaser hereby purchases from
the Company, and the Company hereby sells to Purchaser, the Total Number of
Shares set forth above (the "SHARES") of the Company's Common Stock at the
Exercise Price Per Share set forth above (the "EXERCISE Price"). As used in
this Exercise Agreement, the term "SHARES" refers to the Shares purchased
under this Exercise
1
<PAGE>
Agreement and includes all securities received (i) in replacement of the
Shares, (ii) as a result of stock dividends or stock splits with respect to
the Shares, and (iii) all securities received in replacement of the Shares in
a merger, recapitalization, reorganization or similar corporate transaction.
1.2 TITLE TO SHARES. The exact spelling of the name(s)
under which Purchaser will take title to the Shares is:
--------------------------------------------------------
--------------------------------------------------------
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Other; please specify:____________________________
1.3 PAYMENT. Purchaser hereby delivers payment of the
Exercise Price in the manner permitted in the Stock Option Agreement as
follows (check and complete as appropriate):
[ ] in cash (by check) in the amount of $____________,
receipt of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company
owed to Purchaser in the amount of $_____________;
[ ] by delivery of _________ fully-paid, nonassessable
and vested shares of the Common Stock of the
Company owned by Purchaser for at least six (6)
months prior to the date hereof which have been
paid for within the meaning of SEC Rule 144, (if
purchased by use of a promissory note, such note
has been fully paid with respect to such vested
shares), or obtained by Purchaser in the open
public market, and owned free and clear of all
liens, claims, encumbrances or security interests,
valued at the current Fair Market Value of
$___________ per share;
[ ] by tender of a Full Recourse Promissory Note in
the principal amount of $__________, having such
terms as may be approved by the Committee and
bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274
of the Code and secured by a Pledge Agreement
herewith; provided, however, that Purchasers who
are not employees or directors of the Company
shall not be entitled to purchase Shares with a
promissory note unless the note is adequately
secured by collateral other than the Shares;
[ ] by the waiver hereby of compensation due or
accrued for services rendered in the amount of
$_________.
2
<PAGE>
2. DELIVERY.
2.1 DELIVERIES BY PURCHASER. Purchaser hereby delivers to
the Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock
Power and Assignment Separate from Stock Certificate in the form of EXHIBIT 1
attached hereto (the "STOCK POWERS"), both executed by Purchaser (and
Purchaser's spouse, if any), (iii) if Purchaser is married, a Consent of
Spouse in the form of EXHIBIT 2 attached hereto (the "SPOUSE CONSENT")
executed by Purchaser's spouse, and (iv) the Exercise Price and payment or
other provision for any applicable tax obligations in the form of a "Check",
a copy of which is attached hereto as EXHIBIT 3.
2.2 DELIVERIES BY THE COMPANY. Upon its receipt of the
Exercise Price, payment or other provision for any applicable tax obligations
and all the documents to be executed and delivered by Purchaser to the
Company under Section 2.1, the Company will issue a duly executed stock
certificate evidencing the Shares in the name of Purchaser to be placed in
escrow as provided in Section 11 until expiration or termination of the
Company's Repurchase Option and Right of First Refusal described in Sections
8, 9 and 10.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to the Company that:
3.1 AGREES TO TERMS OF THE PLAN. Purchaser has received a
copy of the Plan and the Stock Option Agreement, has read and understands the
terms of the Plan, the Stock Option Agreement and this Exercise Agreement,
and agrees to be bound by their terms and conditions. Purchaser acknowledges
that there may be adverse tax consequences upon exercise of the Option or
disposition of the Shares, and that Purchaser should consult a tax adviser
prior to such exercise or disposition.
3.2 PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes
only and not with a view to, or for sale in connection with, a distribution
of the Shares within the meaning of the Securities Act. Purchaser has no
present intention of selling or otherwise disposing of all or any portion of
the Shares and no one other than Purchaser has any beneficial ownership of
any of the Shares.
3.3 ACCESS TO INFORMATION. Purchaser has had access to
all information regarding the Company and its present and prospective
business, assets, liabilities and financial condition that Purchaser
reasonably considers important in making the decision to purchase the Shares,
and Purchaser has had ample opportunity to ask questions of the Company's
representatives concerning such matters and this investment.
3.4 UNDERSTANDING OF RISKS. Purchaser is fully aware of:
(i) the highly speculative nature of the investment in the Shares; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on transferability of the Shares (E.G., that Purchaser may not
be able to sell or dispose of the Shares or use them as collateral for
loans); (iv) the qualifications and backgrounds of the management of the
Company; and (v) the tax consequences of investment in the Shares. Purchaser
is capable of evaluating the merits and risks of this investment, has the
ability to protect Purchaser's own interests in this transaction and is
financially capable of bearing a total loss of this investment.
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3.5 NO GENERAL SOLICITATION. At no time was Purchaser
presented with or solicited by any publicly issued or circulated newspaper,
mail, radio, television or other form of general advertising or solicitation
in connection with the offer, sale and purchase of the Shares.
4. COMPLIANCE WITH SECURITIES LAWS.
4.1 COMPLIANCE WITH U.S. FEDERAL SECURITIES LAWS.
Purchaser understands and acknowledges that the Shares have not been
registered with the SEC under the Securities Act and that, notwithstanding
any other provision of the Stock Option Agreement to the contrary, the
exercise of any rights to purchase any Shares is expressly conditioned upon
compliance with the Securities Act and all applicable state securities laws.
Purchaser agrees to cooperate with the Company to ensure compliance with such
laws. The Shares are being issued under the Securities Act pursuant to the
exemption provided by SEC Rule 701.
4.2 COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE PLAN,
THE STOCK OPTION AGREEMENT, AND THIS EXERCISE AGREEMENT ARE INTENDED TO
COMPLY WITH SECTION 25102(o) OF THE CALIFORNIA CORPORATIONS CODE AND ANY
RULES (INCLUDING COMMISSIONER RULES, IF APPLICABLE) OR REGULATIONS
PROMULGATED THEREUNDER BY THE CALIFORNIA DEPARTMENT OF CORPORATIONS (THE
"REGULATIONS"). ANY PROVISION OF THIS EXERCISE AGREEMENT WHICH IS
INCONSISTENT WITH SECTION 25102(o) SHALL, WITHOUT FURTHER ACT OR AMENDMENT BY
THE COMPANY OR THE BOARD, BE REFORMED TO COMPLY WITH THE REQUIREMENTS OF
SECTION 25102(o). THE SALE OF THE SECURITIES THAT ARE THE SUBJECT OF THIS
EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE CALIFORNIA COMMISSIONER OF
CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION, IS SUBJECT TO SUCH
QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE RECEIPT OF ANY
PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL
UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS EXERCISE
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR
AN EXEMPTION BEING AVAILABLE.
5. RESTRICTED SECURITIES.
5.1 NO TRANSFER UNLESS REGISTERED OR EXEMPT. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are
available. Purchaser understands that only the Company may file a
registration statement with the SEC and that the Company is under no
obligation to do so with respect to the Shares. Purchaser has also been
advised that exemptions from registration and qualification may not be
available or may not permit Purchaser to transfer all or any of the Shares in
the amounts or at the times proposed by Purchaser.
5.2 SEC RULE 144. In addition, Purchaser has been advised
that SEC Rule 144 promulgated under the Securities Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Shares and, in any event, requires that the Shares be held for
a minimum of one (1) year, and in certain cases two (2) years, after they
have
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been purchased AND PAID FOR (within the meaning of Rule 144). Purchaser
understands that Rule 144 may indefinitely restrict transfer of the Shares so
long as Purchaser remains an "affiliate" of the Company or if "current public
information" about the Company (as defined in Rule 144) is not publicly
available.
5.3 SEC RULE 701. The Shares are issued pursuant to SEC
Rule 701 promulgated under the Securities Act and may become freely tradeable
by non-affiliates (under limited conditions regarding the method of sale)
ninety (90) days after the first sale of Common Stock of the Company to the
general public pursuant to a registration statement filed with and declared
effective by the SEC, subject to the lengthier market standoff agreement
contained in Section 7 of this Exercise Agreement or any other agreement
entered into by Purchaser. Affiliates must comply with the provisions (other
than the holding period requirements) of Rule 144.
6. RESTRICTIONS ON TRANSFERS.
6.1 DISPOSITION OF SHARES. Purchaser hereby agrees that
Purchaser shall make no disposition of the Shares (other than as permitted by
this Exercise Agreement) unless and until:
(a) Purchaser shall have notified the Company of the
proposed disposition and provided a written summary of the terms and
conditions of the proposed disposition;
(b) Purchaser shall have complied with all
requirements of this Exercise Agreement applicable to the disposition of the
Shares;
(c) Purchaser shall have provided the Company with
written assurances, in form and substance satisfactory to counsel for the
Company, that (i) the proposed disposition does not require registration of
the Shares under the Securities Act or (ii) all appropriate actions necessary
for compliance with the registration requirements of the Securities Act or of
any exemption from registration available under the Securities Act (including
Rule 144) have been taken; and
(d) Purchaser shall have provided the Company with
written assurances, in form and substance satisfactory to the Company, that
the proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Shares pursuant to the provisions of the
Regulations referred to in Section 4.2 hereof.
6.2 RESTRICTION ON TRANSFER. Purchaser shall not
transfer, assign, grant a lien or security interest in, pledge, hypothecate,
encumber or otherwise dispose of any of the Shares which are subject to the
Company's Repurchase Option or the Company's Right of First Refusal described
below, except as permitted by this Exercise Agreement.
6.3 TRANSFEREE OBLIGATIONS. Each person (other than the
Company) to whom the Shares are transferred by means of one of the permitted
transfers specified in this Exercise Agreement must, as a condition precedent
to the validity of such transfer, acknowledge in writing to the Company that
such person is bound by the provisions of this Exercise Agreement and that
the transferred Shares are subject to: (i) both the Company's Repurchase
Option and the
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Company's Right of First Refusal granted hereunder and (ii) the market
stand-off provisions of Section 7 hereof, to the same extent such Shares
would be so subject if retained by the Purchaser.
7. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection
with any registration of the Company's securities that, upon the request of
the Company or the underwriters managing any public offering of the Company's
securities, Purchaser will not sell or otherwise dispose of any Shares
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed one hundred eighty (180)
days) after the effective date of such registration requested by such
managing underwriters and subject to all restrictions as the Company or the
underwriters may specify. Purchaser further agrees to enter into any
agreement reasonably required by the underwriters to implement the foregoing.
8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The
Company, or its assignee, shall have the option to repurchase Purchaser's
Unvested Shares (as defined in Section 2.2 of the Stock Option Agreement) on
the terms and conditions set forth in this Section (the "REPURCHASE OPTION")
if Purchaser is Terminated (as defined in the Plan) for any reason, or no
reason, including without limitation Purchaser's death, Disability (as
defined in the Plan), voluntary resignation or termination by the Company
with or without Cause. Notwithstanding the foregoing, the Company shall
retain the Repurchase Option for Unvested Shares only as to that number of
Unvested Shares (whether or not exercised) that exceeds the number of shares
which remain unexercised.
8.1 TERMINATION AND TERMINATION DATE. In case of any dispute
as to whether Purchaser is Terminated, the Committee shall have discretion to
determine whether Purchaser has been Terminated and the effective date of such
Termination (the "TERMINATION DATE").
8.2 EXERCISE OF REPURCHASE OPTION. At any time within
ninety (90) days after the Purchaser's Termination Date (or, in the case of
securities issued upon exercise of an Option after the Purchaser's
Termination Date, within ninety (90) days after the date of such exercise),
the Company, or its assignee, may elect to repurchase the Purchaser's
Unvested Shares by giving Purchaser written notice of exercise of the
Repurchase Option.
8.3 CALCULATION OF REPURCHASE PRICE FOR UNVESTED SHARES.
The Company or its assignee shall have the option to repurchase from
Purchaser (or from Purchaser's personal representative as the case may be)
the Unvested Shares at the Purchaser's Exercise Price, proportionately
adjusted for any stock split or similar change in the capital structure of
the Company as set forth in Section 2.2 of the Plan (the "REPURCHASE PRICE").
8.4 PAYMENT OF REPURCHASE PRICE. The Repurchase Price
shall be payable, at the option of the Company or its assignee, by check or
by cancellation of all or a portion of any outstanding indebtedness owed by
Purchaser to the Company or such assignee, or by any combination thereof. The
Repurchase Price shall be paid without interest within sixty (60) days after
exercise of the Repurchase Option.
8.5 RIGHT OF TERMINATION UNAFFECTED. Nothing in this
Exercise Agreement shall be construed to limit or otherwise affect in any
manner whatsoever the right or power of the Company (or any Parent or
Subsidiary of the Company) to terminate Purchaser's employment or
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other relationship with Company (or the Parent or Subsidiary of the Company)
at any time, for any reason or no reason, with or without Cause.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not
be sold or otherwise transferred by Purchaser without the Company's prior
written consent. Before any Vested Shares held by Purchaser or any transferee
of such Vested Shares (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred by gift (including without
limitation any transfer by (i) an assignment of any Shares for the benefit of
creditors of the Holder, (ii) a transfer by operation of law, (iii) an
execution of judgment against the Shares or the acquisition of record or
beneficial ownership of Shares by a lender or creditor, (iv) a transfer by
will or under the laws of descent and distribution, (v) a transfer pursuant
to any decree of divorce, dissolution or separate maintenance, any property
settlement, any separation agreement or any other agreement with a spouse
(except for bona fide estate planning purposes) under which any Shares are
transferred or awarded to the spouse of the Holder or are required to be
sold, or (vi) a transfer resulting from the filing by the Holder of a
petition for relief or the filing of an involuntary petition against Holder,
under the bankruptcy laws of the United States or of any other nation (each
instance referred to hereafter as the "INVOLUNTARY TRANSFER")), the Company
and/or its assignee(s) shall have an assignable right of first refusal to
purchase the Vested Shares to be sold or transferred (the "OFFERED SHARES")
on the terms and conditions set forth in this Section (the "RIGHT OF FIRST
REFUSAL").
9.1 NOTICE OF PROPOSED TRANSFER. In the event the Holder
proposes to transfer any Vested Shares, other than by an Involuntary
Transfer, the Holder of the Offered Shares shall deliver to the Company a
written notice (the "VOLUNTARY TRANSFER NOTICE") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer the Offered Shares; (ii)
the name of each proposed bona fide purchaser or other transferee (the
"PROPOSED TRANSFEREE"); (iii) the number of Offered Shares to be transferred
to each Proposed Transferee; (iv) the bona fide cash price or other
consideration for which the Holder proposes to transfer the Offered Shares
(the "OFFERED PRICE"); and (v) that the Holder acknowledges this Notice is an
offer to sell the Offered Shares to the Company and/or its assignee(s)
pursuant to the Company's Right of First Refusal at the Offered Price as
provided for in this Exercise Agreement. In the event of any Involuntary
Transfer of any Vested Shares, the Holder shall deliver to the Company a
written notice (the "INVOLUNTARY TRANSFER NOTICE") stating: (i) the number of
Shares subject to the Involuntary Transfer, (ii) the manner, circumstances
and date of the Involuntary Transfer, and (iii) the name and address of the
Holder and transferee. If the Company subsequently requests additional
information concerning the Involuntary Transfer or transferee, Holder agrees
to promptly provide the requested information to the Company.
9.2 EXERCISE OF RIGHT OF FIRST REFUSAL. At any time
within thirty (30) days after the date of the Voluntary Transfer Notice or
the Involuntary Transfer Notice (either being sometimes referred to herein as
the "NOTICE"), the Company and/or its assignee(s) may, by giving written
notice to the Holder, elect to purchase all (or, with the consent of the
Holder, less than all) the Offered Shares proposed to be transferred to any
one or more of the Proposed Transferees named in the Notice, at the purchase
price, determined as specified below.
9.3 PURCHASE PRICE. The purchase price for the Offered
Shares purchased under this Section will be the Offered Price. If no price or
other legal consideration is to be paid for the Shares, the transfer will be
referred to as a "DONATIVE TRANSFER". If the Offered Price includes
consideration other than cash, then the cash equivalent value of the non-cash
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consideration shall conclusively be deemed to be the present Fair Market
Value of such non-cash consideration as conclusively determined in good faith
by the Board of Directors of the Company. In the case of a Donative Transfer
or an Involuntary Transfer, the Offered Price to be paid to the Holder by the
Company or its assignee will be the Fair Market Value on the proposed
transfer date, as conclusively determined in good faith by the Board of
Directors of the Company.
9.4 PAYMENT. Payment of the Offered Price will be
payable, at the option of the Company and/or its assignee(s) (as applicable),
by check or by cancellation of all or a portion of any outstanding
indebtedness owed by the Holder to the Company (or to such assignee, in the
case of a purchase of Offered Shares by such assignee) or by any combination
thereof. The Offered Price will be paid without interest within sixty (60)
days after the Company's receipt of the Notice, or, at the option of the
Company and/or its assignee(s), in the manner and at the time(s) set forth in
the Notice.
9.5 HOLDER'S RIGHT TO TRANSFER. If all of the Offered
Shares proposed in the Notice to be transferred to a given Proposed
Transferee are not purchased by the Company and/or its assignee(s) as
provided in this Section, then the Holder may sell or otherwise transfer such
Offered Shares to that Proposed Transferee at the Offered Price or at a
higher price, PROVIDED (i) that such sale or other transfer is consummated
within one hundred twenty (120) days after the date of the Notice, (ii) any
such sale or other transfer is effected in compliance with all applicable
securities laws, and (iii) the Proposed Transferee agrees in writing that the
provisions of this Section will continue to apply to the Offered Shares in
the hands of such Proposed Transferee. If the Offered Shares described in the
Notice are not transferred to the Proposed Transferee within such one hundred
twenty (120) day period, then a new Notice must be given to the Company
pursuant to which the Company will again be offered the Right of First
Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
9.6 EXEMPT TRANSFERS. Notwithstanding anything to the
contrary in this Section, the following transfers of Vested Shares will be
exempt from the Right of First Refusal: (i) the transfer of any or all of the
Vested Shares during Purchaser's lifetime by gift or on Purchaser's death by
will or intestacy to Purchaser's "Immediate Family" (as defined below) or to
a trust for the benefit of Purchaser or Purchaser's Immediate Family,
provided that each transferee or other recipient agrees in a writing
satisfactory to the Company that the provisions of this Section will continue
to apply to the transferred Vested Shares in the hands of such transferee or
other recipient; (ii) any transfer of Vested Shares made pursuant to a
statutory merger or statutory consolidation of the Company with or into
another corporation or corporations (except that the Right of First Refusal
will continue to apply thereafter to such Vested Shares, in which case the
surviving corporation of such merger or consolidation shall succeed to the
rights of the Company under this Section unless the agreement of merger or
consolidation expressly otherwise provides); or (iii) any transfer of Vested
Shares pursuant to the winding up and dissolution of the Company. As used
herein, the term "IMMEDIATE FAMILY" will mean Purchaser's spouse, the lineal
descendant or antecedent, father, mother, brother or sister, child, adopted
child, grandchild or adopted grandchild of the Purchaser or the Purchaser's
spouse, or the spouse of any child, adopted child, grandchild or adopted
grandchild of Purchaser or the Purchaser's spouse.
9.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The Company's
Right of First Refusal will terminate when the Company's securities become
publicly traded.
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10. RIGHTS AS A SHAREHOLDER. Subject to the terms and
conditions of this Exercise Agreement, Purchaser will have all of the rights
of a shareholder of the Company with respect to the Shares from and after the
date that Shares are issued to Purchaser until such time as Purchaser
disposes of the Shares or the Company and/or its assignee(s) exercise(s) the
Repurchase Option or Right of First Refusal. Upon an exercise of the
Repurchase Option or the Right of First Refusal, Purchaser will have no
further rights as a holder of the Shares so purchased upon such exercise,
other than the right to receive payment for the Shares so purchased in
accordance with the provisions of this Exercise Agreement, and Purchaser will
promptly surrender the stock certificate(s) evidencing the Shares so
purchased to the Company for transfer or cancellation.
11. ESCROW. As security for Purchaser's faithful performance of
this Exercise Agreement, Purchaser agrees, immediately upon receipt of the
stock certificate(s) evidencing the Shares, to deliver such certificate(s),
together with the Stock Powers executed by Purchaser and by Purchaser's
spouse, if any (with the date and number of Shares left blank), to the
Secretary of the Company or other designee of the Company (the "ESCROW
HOLDER"), who is hereby appointed to hold such certificate(s) and Stock
Powers in escrow and to take all such actions and to effectuate all such
transfers and/or releases of such Shares as are in accordance with the terms
of this Exercise Agreement. Purchaser and the Company agree that Escrow
Holder will not be liable to any party to this Exercise Agreement (or to any
other party) for any actions or omissions unless Escrow Holder is grossly
negligent or intentionally fraudulent in carrying out the duties of Escrow
Holder under this Exercise Agreement. Escrow Holder may rely upon any letter,
notice or other document executed with any signature purported to be genuine
and may rely on the advice of counsel and obey any order of any court with
respect to the transactions contemplated by this Exercise Agreement. The
Shares will be released from escrow upon termination of both the Repurchase
Option and the Right of First Refusal.
12. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
12.1 LEGENDS. Purchaser understands and agrees that the
Company will place the legends set forth below or similar legends on any
stock certificate(s) evidencing the Shares, together with any other legends
that may be required by state or U.S. Federal securities laws, the Company's
Articles of Incorporation or Bylaws, any other agreement between Purchaser
and the Company or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR
UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS
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IN COMPLIANCE WITH THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO CERTAIN RESTRICTIONS ON PUBLIC
RESALE AND TRANSFER, [INCLUDING THE RIGHT OF
REPURCHASE AND RIGHT OF FIRST REFUSAL OPTIONS
HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S)] AS
SET FORTH IN A STOCK OPTION EXERCISE AGREEMENT
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT
THE PRINCIPAL OFFICE OF THE ISSUER. SUCH PUBLIC
SALE AND TRANSFER RESTRICTIONS INCLUDING THE
RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL
ARE BINDING ON TRANSFEREES OF THESE SHARES.
12.2 STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, to
ensure compliance with the restrictions imposed by this Exercise Agreement, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
12.3 REFUSAL TO TRANSFER. The Company will not be required
(i) to transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Exercise Agreement
or (ii) to treat as owner of such Shares, or to accord the right to vote or
pay dividends to any purchaser or other transferee to whom such Shares have
been so transferred.
13. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY
SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR
DISPOSITION OF THE SHARES. PURCHASER REPRESENTS: (i) THAT PURCHASER HAS
CONSULTED WITH ANY TAX ADVISER THAT PURCHASER DEEMS ADVISABLE IN CONNECTION
WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND (ii) THAT PURCHASER IS NOT
RELYING ON THE COMPANY FOR ANY TAX ADVICE. IN PARTICULAR, IF UNVESTED SHARES
ARE SUBJECT TO REPURCHASE BY THE COMPANY, PURCHASER REPRESENTS THAT PURCHASER
HAS CONSULTED WITH PURCHASER'S OWN TAX ADVISER CONCERNING THE ADVISABILITY OF
FILING AN 83(b) ELECTION WITH THE INTERNAL REVENUE SERVICE WHICH MUST BE
FILED WITHIN THIRTY (30) DAYS OF THE PURCHASE OF SHARES TO BE EFFECTIVE. Set
forth below is a brief summary as of the date the Plan was adopted by the
Board of some of the U.S. Federal and California tax consequences of exercise
of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PURCHASER
SHOULD CONSULT HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
13.1 EXERCISE OF INCENTIVE STOCK OPTION. If the Option
qualifies as an ISO, there will be no regular U.S. Federal income tax liability
or California income tax liability upon the exercise of the Option, although the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price will be treated as a tax preference item for U.S.
Federal alternative minimum tax purposes and may subject Purchaser to the
alternative minimum tax in the year of exercise.
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13.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If the Option
does not qualify as an ISO, there may be a regular U.S. Federal income tax
liability and a California income tax liability upon the exercise of the
Option. Purchaser will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise
Price. If Purchaser is or was an employee of the Company, the Company may be
required to withhold from Purchaser's compensation or collect from Purchaser
and pay to the applicable taxing authorities an amount equal to a percentage
of this compensation income at the time of exercise.
13.3 DISPOSITION OF SHARES. The following tax consequences
may apply upon disposition of the Shares.
(a) INCENTIVE STOCK OPTIONS. If the Shares are held
for more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an ISO and are disposed of more than two (2)
years after the Date of Grant, any gain realized on disposition of the Shares
will be treated as long term capital gain for federal and California income
tax purposes. If Shares purchased under an ISO are disposed of within the
applicable one (1) year or two (2) year period, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price.
(b) NONQUALIFIED STOCK OPTIONS. If the Shares are
held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an NQSO, any gain realized on disposition
of the Shares will be treated as long term capital gain.
(c) WITHHOLDING. The Company may be required to
withhold from the Purchaser's compensation or collect from the Purchaser and
pay to the applicable taxing authorities an amount equal to a percentage of
this compensation income.
13.4 SECTION 83(b) ELECTION FOR UNVESTED SHARES. With
respect to Unvested Shares, which are subject to the Repurchase Option,
unless an election is filed by the Purchaser with the Internal Revenue
Service (and, if necessary, the proper state taxing authorities), WITHIN 30
DAYS OF THE PURCHASE of the Unvested Shares, electing pursuant to Section
83(b) of the Code (and similar state tax provisions, if applicable) to be
taxed currently on any difference between the Exercise Price of the Unvested
Shares and their Fair Market Value on the date of purchase, there may be a
recognition of taxable income (including, where applicable, alternative
minimum taxable income) to the Purchaser, measured by the excess, if any, of
the Fair Market Value of the Unvested Shares at the time they cease to be
Unvested Shares, over the Exercise Price of the Unvested Shares. A form of
Election under Section 83(b) is attached hereto as EXHIBIT 4 for reference.
14. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and
transfer of the Shares will be subject to and conditioned upon compliance by
the Company and Purchaser with all applicable state and U.S. Federal laws and
regulations and with all applicable requirements of any stock exchange or
automated quotation system on which the Company's Common Stock may be listed
or quoted at the time of such issuance or transfer.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Exercise Agreement, including its rights to purchase Shares
under the Repurchase Option and the
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Right of First Refusal. This Exercise Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Exercise Agreement will
be binding upon Purchaser and Purchaser's heirs, executors, administrators,
legal representatives, successors and assigns.
16. GOVERNING LAW; SEVERABILITY. This Exercise Agreement shall
be governed by and construed in accordance with the internal laws of the
State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within California. If any
provision of this Exercise Agreement is determined by a court of law to be
illegal or unenforceable, then such provision will be enforced to the maximum
extent possible and the other provisions will remain fully effective and
enforceable.
17. NOTICES. Any notice required to be given or delivered to
the Company shall be in writing and addressed to the Corporate Secretary of
the Company at its principal corporate offices. Any notice required to be
given or delivered to Purchaser shall be in writing and addressed to
Purchaser at the address indicated above or to such other address as
Purchaser may designate in writing from time to time to the Company. All
notices shall be deemed effectively given upon personal delivery, (i) three
(3) days after deposit in the United States mail by certified or registered
mail (return receipt requested), (ii) one (1) business day after its deposit
with any return receipt express courier (prepaid), or (iii) one (1) business
day after transmission by rapifax or telecopier.
18. FURTHER INSTRUMENTS. The parties agree to execute such
further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Exercise Agreement.
19. HEADINGS. The captions and headings of this Exercise
Agreement are included for ease of reference only and will be disregarded in
interpreting or construing this Exercise Agreement. All references herein to
Sections will refer to Sections of this Exercise Agreement.
20. ENTIRE AGREEMENT. The Plan, the Stock Option Agreement and
this Exercise Agreement, together with all Exhibits thereto, constitute the
entire agreement and understanding of the parties with respect to the subject
matter of this Exercise Agreement, and supersede all prior understandings and
agreements, whether oral or written, between the parties hereto with respect
to the specific subject matter hereof.
12
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be
executed in triplicate by its duly authorized representative and Purchaser has
executed this Exercise Agreement in triplicate as of the Effective Date,
indicated above.
SILICON IMAGE, INC. PURCHASER
By:_________________________________ _____________________________
(Signature)
____________________________________ _____________________________
(Please print name) (Please print name)
____________________________________
(Please print title)
[SIGNATURE PAGE TO SILICON IMAGE, INC. STOCK OPTION EXERCISE AGREEMENT]
13
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: Copy of Purchaser's Check
Exhibit 4: Section 83(b) Election
14
<PAGE>
EXHIBIT 1
---------
STOCK POWER AND ASSIGNMENT
--------------------------
SEPARATE FROM STOCK CERTIFICATE
-------------------------------
15
<PAGE>
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise
Agreement No. ________ dated as of _______________, _____, (the "AGREEMENT"),
the undersigned hereby sells, assigns and transfers unto
_______________________________, __________ shares of the Common Stock of
Silicon Image, Inc., a California corporation (the "COMPANY"), standing in the
undersigned's name on the books of the Company represented by Certificate No(s).
______ delivered herewith, and does hereby irrevocably constitute and appoint
the Secretary of the Company as the undersigned's attorney-in-fact, with full
power of substitution, to transfer said stock on the books of the Company. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS
THERETO.
Dated: _______________, _____
PURCHASER
___________________________________
(Signature)
___________________________________
(Please Print Name)
___________________________________
(Spouse's Signature, if any)
___________________________________
(Please Print Spouse's Name)
INSTRUCTIONS TO PURCHASER: Please do not fill in any blanks other than the
signature line. The purpose of this Stock Power and Assignment is to enable the
Company to acquire the shares pursuant to its "REPURCHASE OPTION" and/or "RIGHT
OF FIRST REFUSAL" set forth in the Exercise Agreement without requiring
additional signatures on the part of the Purchaser or Purchaser's Spouse.
16
<PAGE>
EXHIBIT 2
---------
SPOUSE CONSENT
--------------
17
<PAGE>
SPOUSE CONSENT
The undersigned spouse of ______________________________ (the
"PURCHASER") has read, understands, and hereby approves the Stock Option
Exercise Agreement between Purchaser and the Company (the "AGREEMENT"). In
consideration of the Company's granting my spouse the right to purchase the
Shares as set forth in the Agreement, the undersigned hereby agrees to be
irrevocably bound by the Agreement and further agrees that any community
property interest I may have in the Shares shall similarly be bound by the
Agreement. The undersigned hereby appoints Purchaser as my attorney-in-fact with
respect to any amendment or exercise of any rights under the Agreement.
Date: ____________________
______________________________________
Print Name of Purchaser's Spouse
______________________________________
Signature of Purchaser's Spouse
Address: ______________________________________
______________________________________
______________________________________
18
<PAGE>
EXHIBIT 3
---------
COPY OF PURCHASER'S CHECK
-------------------------
1
<PAGE>
EXHIBIT 4
---------
SECTION 83(b) ELECTION
----------------------
1
<PAGE>
ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include the excess, if any, of the
fair market value of the property described below at the time of transfer over
the amount paid for such property, as compensation for services in the
calculation of: (1) regular gross income; (2) alternative minimum taxable income
or (3) disqualifying disposition gross income, as the case may be.
1. TAXPAYER'S NAME: _________________________________________
TAXPAYER'S ADDRESS: _________________________________________
_________________________________________
SOCIAL SECURITY NUMBER: _________________________________________
2. The property with respect to which the election is made is described as
follows: _______ shares of Common Stock of Silicon Image, Inc., a
California corporation (the "COMPANY") which were transferred upon
exercise of an option by Company, which is Taxpayer's employer or the
corporation for whom the Taxpayer performs services.
3. The date on which the shares were transferred pursuant to the exercise
of the option was ____________________, _____ and this election is made
for calendar year _____.
4. The shares received upon exercise of the option are subject to the
following restrictions: The Company may repurchase all or a portion of
the shares at the Taxpayer's original purchase price under certain
conditions at the time of Taxpayer's termination of employment or
services.
5. The fair market value of the shares (without regard to restrictions
other than restrictions which by their terms will never lapse) was
$_____ per share at the time of exercise of the option.
6. The amount paid for such shares upon exercise of the option was $_____
per share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED WITHOUT
THE CONSENT OF THE IRS.
Dated:____________________________ ____________________________________
Taxpayer's Signature
2
<PAGE>
[Second Form of Stock Option Exercise Agreement (for exercise with promissory
note of immediately exercisable option - only for use by officers at vice
president level or higher)]
NO. _____
SILICON IMAGE, INC.
1995 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Exercise Agreement is made and entered into as of ____________,
199__ (the "EFFECTIVE DATE") by and between Silicon Image, Inc., a California
corporation (the "COMPANY"), and the purchaser named below (the "PURCHASER").
Capitalized terms not defined herein shall have the meaning ascribed to them
in the Company's 1995 Equity Incentive Plan, as amended through September 24,
1998 (the "PLAN").
PARTICIPANT: ______________________________________________
SOCIAL SECURITY NUMBER: ______________________________________________
ADDRESS: ______________________________________________
______________________________________________
TOTAL OPTION SHARES: ______________________________________________
EXERCISE PRICE PER SHARE: $_____________________________________________
DATE OF GRANT: ______________________________________________
FIRST VESTING DATE: ______________________________________________
EXPIRATION DATE: ______________________________________________
(unless earlier terminated under Section 3
below)
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. EXERCISE OF OPTION.
1.1 EXERCISE. Pursuant to exercise of that certain option
("OPTION") granted to Purchaser under the Plan and subject to the terms and
conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby sells to Purchaser, the
<PAGE>
Total Number of Shares set forth above ("SHARES") of the Company's Common
Stock at the Exercise Price Per Share set forth above ("EXERCISE PRICE"). As
used in this Exercise Agreement, the term "SHARES" refers to the Shares
purchased under this Exercise Agreement and includes all securities received
(a) in replacement of the Shares, (b) as a result of stock dividends or stock
splits with respect to the Shares, and (c) all securities received in
replacement of the Shares in a merger, recapitalization, reorganization or
similar corporate transaction.
1.2 TITLE TO SHARES. The exact spelling of the name(s)
under which Purchaser will take title to the Shares is:
______________________________________________________
______________________________________________________
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Alone or with spouse as trustee(s) of the following
trust (including date):
___________________________________________________
___________________________________________________
[ ]Other; please specify:_____________________________
1.3 PAYMENT. Purchaser hereby delivers payment of the
Exercise Price in the manner permitted in the Stock Option Agreement as
follows (check and complete as appropriate):
[ ] in cash (by check) in the amount of $____________,
receipt of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to
Purchaser in the amount of $______________;
[ ] by delivery of _________ fully-paid,
nonassessable and vested shares of the Common
Stock of the Company owned by Purchaser for at
least six (6) months prior to the date hereof
which have been paid for within the meaning of
SEC Rule 144, (if purchased by use of a
promissory note, such note has been fully paid
with respect to such vested shares), or obtained
by Purchaser in the open public market, and owned
free and clear of all liens, claims, encumbrances
or security interests, valued at the current Fair
Market Value of $___________ per share;
<PAGE>
[ ] by tender of a Full Recourse Promissory Note in
the principal amount of $__________, having such
terms as may be approved by the Committee and
bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274
of the Code and secured by a Pledge Agreement
herewith; provided, however, that Participants
who are not employees or directors of the Company
shall not be entitled to purchase Shares with a
promissory note unless the note is adequately
secured by collateral other than the Shares;
[ ] by the waiver hereby of compensation due or
accrued for services rendered in the amount of
$_________.
2. DELIVERY.
2.1 DELIVERIES BY PURCHASER. Purchaser hereby delivers to
the Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock
Power and Assignment Separate from Stock Certificate in the form of EXHIBIT 1
attached hereto (the "STOCK POWERS"), both executed by Purchaser (and
Purchaser's spouse, if any), (iii) if Purchaser is married, a Consent of
Spouse in the form of EXHIBIT 2 attached hereto (the "SPOUSE CONSENT")
executed by Purchaser's spouse, and (iv) the Exercise Price any payment or
other provision for any applicable tax obligations by delivery of a Secured
Full Recourse Promissory Note in the form of EXHIBIT 3 and (v) a Stock Pledge
Agreement in the form of EXHIBIT 5 executed by Purchaser (the "PLEDGE
AGREEMENT").
2.2 DELIVERIES BY THE COMPANY. Upon its receipt of the
Exercise Price, payment or other provision for any applicable tax obligations
and all the documents to be executed and delivered by Purchaser to the
Company under Section 2.1, the Company will issue a duly executed stock
certificate evidencing the Shares in the name of Purchaser, to be placed in
escrow as provided in Section 11 to secure payment of Participant's
obligation to the Company under the promissory note and until expiration or
termination of the Company's Repurchase Option and Right of First Refusal
described in Sections 8, 9 and 10.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to the Company that:
3.1 AGREES TO TERMS OF THE PLAN. Purchaser has received a
copy of the Plan and the Stock Option Agreement, has read and understands the
terms of the Plan, the Stock Option Agreement and this Exercise Agreement,
and agrees to be bound by their terms and conditions. Purchaser acknowledges
that there may be adverse tax consequences upon exercise of the Option or
disposition of the Shares, and that Purchaser should consult a tax adviser
prior to such exercise or disposition.
3.2 PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes
only and not with a view to, or for sale in connection with, a distribution
of the Shares within the meaning of the Securities Act.
<PAGE>
Purchaser has no present intention of selling or otherwise disposing of all
or any portion of the Shares and no one other than Purchaser has any
beneficial ownership of any of the Shares.
3.3 ACCESS TO INFORMATION. Purchaser has had access to
all information regarding the Company and its present and prospective
business, assets, liabilities and financial condition that Purchaser
reasonably considers important in making the decision to purchase the Shares,
and Purchaser has had ample opportunity to ask questions of the Company's
representatives concerning such matters and this investment.
3.4 UNDERSTANDING OF RISKS. Purchaser is fully aware of:
(i) the highly speculative nature of the investment in the Shares; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on transferability of the Shares (E.G., that Purchaser may not
be able to sell or dispose of the Shares or use them as collateral for
loans); (iv) the qualifications and backgrounds of the management of the
Company; and (v) the tax consequences of investment in the Shares. Purchaser
is capable of evaluating the merits and risks of this investment, has the
ability to protect Purchaser's own interests in this transaction and is
financially capable of bearing a total loss of this investment.
3.5 NO GENERAL SOLICITATION. At no time was Purchaser
presented with or solicited by any publicly issued or circulated newspaper,
mail, radio, television or other form of general advertising or solicitation
in connection with the offer, sale and purchase of the Shares.
4. COMPLIANCE WITH SECURITIES LAWS.
4.1 COMPLIANCE WITH U.S. FEDERAL SECURITIES LAWS.
Purchaser understands and acknowledges that the Shares have not been
registered with the SEC under the Securities Act and that, notwithstanding
any other provision of the Stock Option Agreement to the contrary, the
exercise of any rights to purchase any Shares is expressly conditioned upon
compliance with the Securities Act and all applicable state securities laws.
Purchaser agrees to cooperate with the Company to ensure compliance with such
laws. The Shares are being issued under the Securities Act pursuant to the
exemption provided by SEC Rule 701.
4.2 COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE PLAN,
THE STOCK OPTION AGREEMENT, AND THIS EXERCISE AGREEMENT ARE INTENDED TO
COMPLY WITH SECTION 25102(o) OF THE CALIFORNIA CORPORATIONS CODE. ANY
PROVISION OF THIS EXERCISE AGREEMENT WHICH IS INCONSISTENT WITH SECTION
25102(o) SHALL, WITHOUT FURTHER ACT OR AMENDMENT BY THE COMPANY OR THE BOARD,
BE REFORMED TO COMPLY WITH THE REQUIREMENTS OF SECTION 25102(o). THE SALE OF
THE SECURITIES THAT ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET
QUALIFIED WITH THE CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT
FROM SUCH QUALIFICATION, IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE
OF SUCH SECURITIES, AND THE RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS
OF THE PARTIES TO THIS EXERCISE AGREEMENT ARE
<PAGE>
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
BEING AVAILABLE.
5. RESTRICTED SECURITIES.
5.1 NO TRANSFER UNLESS REGISTERED OR EXEMPT. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are
available. Purchaser understands that only the Company may file a
registration statement with the SEC and that the Company is under no
obligation to do so with respect to the Shares. Purchaser has also been
advised that exemptions from registration and qualification may not be
available or may not permit Purchaser to transfer all or any of the Shares in
the amounts or at the times proposed by Purchaser.
5.2 SEC RULE 144. In addition, Purchaser has been advised
that SEC Rule 144 promulgated under the Securities Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Shares and, in any event, requires that the Shares be held for
a minimum of one (1) year, and in certain cases two (2) years, after they
have been purchased AND PAID FOR (within the meaning of Rule 144). Purchaser
understands that Shares paid for with a Note may not be deemed to be fully
"paid for" within the meaning of Rule 144 unless certain conditions are met
and that, accordingly, the Rule 144 holding period of such Shares may not
begin to run until such Shares are fully paid for within the meaning of Rule
144. Purchaser understands that Rule 144 may indefinitely restrict transfer
of the Shares so long as Purchaser remains an "affiliate" of the Company or
if "current public information" about the Company (as defined in Rule 144) is
not publicly available.
5.3 SEC RULE 701. The Shares are issued pursuant to SEC
Rule 701 promulgated under the Securities Act and may become freely tradeable
by non-affiliates (under limited conditions regarding the method of sale)
ninety (90) days after the first sale of Common Stock of the Company to the
general public pursuant to a registration statement filed with and declared
effective by the SEC, subject to the lengthier market standoff agreement
contained in Section 7 of this Exercise Agreement or any other agreement
entered into by Purchaser. Affiliates must comply with the provisions (other
than the holding period requirements) of Rule 144.
6. RESTRICTIONS ON TRANSFERS.
6.1 DISPOSITION OF SHARES. Purchaser hereby agrees that
Purchaser shall make no disposition of the Shares (other than as permitted by
this Exercise Agreement) unless and until:
<PAGE>
(a) Purchaser shall have notified the Company of
the proposed disposition and provided a written summary of the terms and
conditions of the proposed disposition;
(b) Purchaser shall have complied with all
requirements of this Exercise Agreement applicable to the disposition of the
Shares;
(c) Purchaser shall have provided the Company
with written assurances, in form and substance satisfactory to counsel for
the Company, that (i) the proposed disposition does not require registration
of the Shares under the Securities Act or (ii) all appropriate action
necessary for compliance with the registration requirements of the Securities
Act or of any exemption from registration available under the Securities Act
(including Rule 144) has been taken; and
(d) Purchaser shall have provided the Company
with written assurances, in form and substance satisfactory to the Company,
that the proposed disposition will not result in the contravention of any
transfer restrictions applicable to the Shares pursuant to the provisions of
the Commissioner Rules identified in Section 4.2.
6.2 RESTRICTION ON TRANSFER. Purchaser shall not
transfer, assign, grant a lien or security interest in, pledge, hypothecate,
encumber or otherwise dispose of any of the Shares which are subject to the
Company's Repurchase Option or the Company's Right of First Refusal, except
as permitted by this Exercise Agreement.
6.3 TRANSFEREE OBLIGATIONS. Each person (other than the
Company) to whom the Shares are transferred by means of one of the permitted
transfers specified in this Exercise Agreement must, as a condition precedent
to the validity of such transfer, acknowledge in writing to the Company that
such person is bound by the provisions of this Exercise Agreement and that
the transferred Shares are subject to (i) both the Company's Repurchase
Option and the Company's Right of First Refusal granted hereunder and (ii)
the market stand-off provisions of Section 7, to the same extent such Shares
would be so subject if retained by the Purchaser.
7. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection
with any registration of the Company's securities that, upon the request of
the Company or the underwriters managing any public offering of the Company's
securities, Purchaser will not sell or otherwise dispose of any Shares
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 180 days) after the
effective date of such registration requested by such managing underwriters
and subject to all restrictions as the Company or the underwriters may
specify.
8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The Company,
or its assignee, shall have the option to repurchase Purchaser's Unvested
Shares (as defined in Section 2.3 of the Stock Option Agreement) on the terms
and conditions set forth in this Section (the "REPURCHASE OPTION") if
Purchaser is Terminated (as defined in the Plan) for any reason, or no
reason, including without limitation Purchaser's death, Disability (as
defined in the Plan), voluntary resignation or termination by the Company
with or without cause. Notwithstanding
<PAGE>
the foregoing, the Company shall retain the Repurchase Option for Unvested
Shares only as to that number of Unvested Shares (whether or not exercised)
that exceeds the number of shares which remain exercisable.
8.1 TERMINATION AND TERMINATION DATE. In case of any
dispute as to whether Purchaser is Terminated, the Committee shall have
discretion to determine whether Purchaser has been Terminated and the
effective date of such Termination (the "TERMINATION DATE").
8.2 EXERCISE OF REPURCHASE OPTION. At any time within
ninety (90) days after the Purchaser's Termination Date (or, in the case of
securities issued upon exercise of an Option after the Participant's
Termination Date, within ninety (90) days after the date of such exercise),
the Company, or its assignee, may elect to repurchase the Purchaser's
Unvested Shares by giving Purchaser written notice of exercise of the
Repurchase Option.
8.3 CALCULATION OF REPURCHASE PRICE FOR UNVESTED SHARES.
The Company or its assignee shall have the option to repurchase from
Purchaser (or from Purchaser's personal representative as the case may be)
the Unvested Shares at the Purchaser's Exercise Price, proportionately
adjusted for any stock split or similar change in the capital structure of
the Company as set forth in Section 2.2 of the Plan.
8.4 PAYMENT OF REPURCHASE PRICE. The repurchase price
shall be payable, at the option of the Company or its assignee, by check or
by cancellation of all or a portion of any outstanding indebtedness of
Purchaser to the Company or such assignee, or by any combination thereof. The
repurchase price shall be paid without interest within sixty (60) days after
exercise of the Repurchase Option.
8.5 RIGHT OF TERMINATION UNAFFECTED. Nothing in this
Exercise Agreement shall be construed to limit or otherwise affect in any
manner whatsoever the right or power of the Company (or any Parent or
Subsidiary of the Company) to terminate Purchaser's employment or other
relationship with Company (or the Parent or Subsidiary of the Company) at any
time, for any reason or no reason, with or without cause.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be
sold or otherwise transferred by Purchaser without the Company's prior
written consent. Before any Vested Shares held by Purchaser or any transferee
of such Vested Shares (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including without limitation
a transfer by gift or operation of law), the Company and/or its assignee(s)
shall have an assignable right of first refusal to purchase the Vested Shares
to be sold or transferred (the "OFFERED SHARES") on the terms and conditions
set forth in this Section (the "RIGHT OF FIRST REFUSAL").
9.1 NOTICE OF PROPOSED TRANSFER. The Holder of the
Offered Shares shall deliver to the Company a written notice (the "NOTICE")
stating: (i) the Holder's bona fide intention to sell or otherwise transfer
the Offered Shares; (ii) the name of each proposed bona fide purchaser or
other transferee ("PROPOSED TRANSFEREE"); (iii) the number of Offered Shares
to be transferred to each Proposed Transferee; (iv) the bona fide cash price
or other consideration
<PAGE>
for which the Holder proposes to transfer the Offered Shares (the "OFFERED
PRICE"); and (v) that the Holder will offer to sell the Offered Shares to the
Company and/or its assignee(s) at the Offered Price as provided in this
Section.
9.2 EXERCISE OF RIGHT OF FIRST REFUSAL. At any time
within thirty (30) days after the date of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase
all (or, with the consent of the Holder, less than all) the Offered Shares
proposed to be transferred to any one or more of the Proposed Transferees
named in the Notice, at the purchase price determined as specified below.
9.3 PURCHASE PRICE. The purchase price for the Offered
Shares purchased under this Section will be the Offered Price. If the Offered
Price includes consideration other than cash, then the cash equivalent value
of the non-cash consideration shall conclusively be deemed to be the value of
such non-cash consideration as determined in good faith by the Board.
9.4 PAYMENT. Payment of the Offered Price will be
payable, at the option of the Company and/or its assignee(s) (as applicable),
by check or by cancellation of all or a portion of any outstanding
indebtedness of the Holder to the Company (or to such assignee, in the case
of a purchase of Offered Shares by such assignee) or by any combination
thereof. The Offered Price will be paid without interest within sixty (60)
days after the Company's receipt of the Notice, or, at the option of the
Company and/or its assignee(s), in the manner and at the time(s) set forth in
the Notice.
9.5 HOLDER'S RIGHT TO TRANSFER. If all of the Offered
Shares proposed in the Notice to be transferred to a given Proposed
Transferee are not purchased by the Company and/or its assignee(s) as
provided in this Section, then the Holder may sell or otherwise transfer such
Offered Shares to that Proposed Transferee at the Offered Price or at a
higher price, PROVIDED that such sale or other transfer is consummated within
120 days after the date of the Notice, and PROVIDED FURTHER, that (i) any
such sale or other transfer is effected in compliance with all applicable
securities laws and (ii) the Proposed Transferee agrees in writing that the
provisions of this Section will continue to apply to the Offered Shares in
the hands of such Proposed Transferee. If the Offered Shares described in the
Notice are not transferred to the Proposed Transferee within such 120 day
period, then a new Notice must be given to the Company, and the Company will
again be offered the Right of First Refusal before any Shares held by the
Holder may be sold or otherwise transferred.
9.6 EXEMPT TRANSFERS. Notwithstanding anything to the
contrary in this Section, the following transfers of Vested Shares will be
exempt from the Right of First Refusal: (i) the transfer of any or all of the
Vested Shares during Purchaser's lifetime by gift or on Purchaser's death by
will or intestacy to Purchaser's "immediate family" (as defined below) or to
a trust for the benefit of Purchaser or Purchaser's immediate family,
provided that each transferee or other recipient agrees in a writing
satisfactory to the Company that the provisions of this Section will continue
to apply to the transferred Vested Shares in the hands of such transferee or
other recipient; (ii) any transfer of Vested Shares made pursuant to a
statutory merger or statutory consolidation of the Company with or into
another corporation or corporations (except that the Right of First Refusal
and Repurchase Option will continue to apply thereafter to such Vested
<PAGE>
Shares, in which case the surviving corporation of such merger or
consolidation shall succeed to the rights of the Company under this Section
unless the Agreement of merger or consolidation expressly otherwise
provides); or (iii) any transfer of Vested Shares pursuant to the winding up
and dissolution of the Company. As used herein, the term "IMMEDIATE FAMILY"
will mean Purchaser's spouse, the lineal descendant or antecedent, father,
mother, brother or sister, child, adopted child, grandchild or adopted
grandchild of the Purchaser or the Purchaser's spouse, or the spouse of any
child, adopted child, grandchild or adopted grandchild of Purchaser or the
Purchaser's spouse.
9.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The Company's
Right of First Refusal will terminate when the Company's securities become
publicly traded.
10. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of
this Exercise Agreement, Purchaser will have all of the rights of a
shareholder of the Company with respect to the Shares from and after the date
that Shares are issued to Purchaser until such time as Purchaser disposes of
the Shares or the Company and/or its assignee(s) exercise(s) the Repurchase
Option or Right of First Refusal. Upon an exercise of the Repurchase Option
or the Right of First Refusal, Purchaser will have no further rights as a
holder of the Shares so purchased upon such exercise, except the right to
receive payment for the Shares so purchased in accordance with the provisions
of this Exercise Agreement, and Purchaser will promptly surrender the stock
certificate(s) evidencing the Shares so purchased to the Company for transfer
or cancellation.
11. ESCROW. As security for Purchaser's faithful performance of
this Exercise Agreement, Purchaser agrees, immediately upon receipt of the
stock certificate(s) evidencing the Shares, to deliver such certificate(s),
together with the Stock Powers executed by Purchaser and by Purchaser's
spouse, if any (with the date and number of Shares left blank), to the
Secretary of the Company or other designee of the Company ("ESCROW HOLDER"),
who is hereby appointed to hold such certificate(s) and Stock Powers in
escrow and to take all such actions and to effectuate all such transfers
and/or releases of such Shares as are in accordance with the terms of this
Exercise Agreement. Purchaser and the Company agree that Escrow Holder will
not be liable to any party to this Exercise Agreement (or to any other party)
for any actions or omissions unless Escrow Holder is grossly negligent or
intentionally fraudulent in carrying out the duties of Escrow Holder under
this Exercise Agreement. Escrow Holder may rely upon any letter, notice or
other document executed by any signature purported to be genuine and may rely
on the advice of counsel and obey any order of any court with respect to the
transactions contemplated by this Exercise Agreement. The Shares will be
released from escrow upon termination of both the Repurchase Option and the
Right of First Refusal, PROVIDED, HOWEVER, that the Shares will be retained
in escrow so long as they are subject to the Pledge Agreement.
12. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
12.1 LEGENDS. Purchaser understands and agrees that the
Company will place the legends set forth below or similar legends on any
stock certificate(s) evidencing the Shares, together with any other legends
that may be required by state or U.S. Federal securities laws, the Company's
Articles of Incorporation or Bylaws, any other agreement between Purchaser
and the Company or any agreement between Purchaser and any third party:
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF
THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON PUBLIC RESALE AND
TRANSFER, RIGHT OF REPURCHASE AND RIGHT OF FIRST
REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AS SET FORTH IN A STOCK OPTION EXERCISE
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER
OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT
THE PRINCIPAL OFFICE OF THE ISSUER. SUCH PUBLIC SALE
AND TRANSFER RESTRICTIONS AND THE RIGHT OF REPURCHASE
AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES
OF THESE SHARES.
The California Commissioner of Corporations may require that the
following legend also be placed upon the share certificate(s) evidencing
ownership of the Shares:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF
THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE
ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
12.2 STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, to
ensure compliance with the restrictions imposed by this Exercise Agreement,
the Company may issue appropriate
<PAGE>
"stop-transfer" instructions to its transfer agent, if any, and if the
Company transfers its own securities, it may make appropriate notations to
the same effect in its own records.
12.3 REFUSAL TO TRANSFER. The Company will not be required
(i) to transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Exercise Agreement
or (ii) to treat as owner of such Shares, or to accord the right to vote or
pay dividends to any purchaser or other transferee to whom such Shares have
been so transferred.
13. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY
SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR
DISPOSITION OF THE SHARES. PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED
WITH ANY TAX ADVISER PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE
PURCHASE OR DISPOSITION OF THE SHARES AND THAT PURCHASER IS NOT RELYING ON
THE COMPANY FOR ANY TAX ADVICE. IN PARTICULAR, IF UNVESTED SHARES ARE SUBJECT
TO REPURCHASE BY THE COMPANY, PURCHASER REPRESENTS THAT PURCHASER HAS
CONSULTED WITH PURCHASER'S TAX ADVISER CONCERNING THE ADVISABILITY OF FILING
AN 83(b) ELECTION WITH THE INTERNAL REVENUE SERVICE. Set forth below is a
brief summary as of the date the Plan was adopted by the Board of some of the
U.S. Federal and California tax consequences of exercise of the Option and
disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
13.1 EXERCISE OF INCENTIVE STOCK OPTION. If the Option
qualifies as an ISO, there will be no regular U.S. Federal income tax
liability or California income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the
date of exercise over the Exercise Price will be treated as a tax preference
item for U.S. Federal alternative minimum tax purposes and may subject
Purchaser to the alternative minimum tax in the year of exercise.
13.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If the Option
does not qualify as an ISO, there may be a regular U.S. Federal income tax
liability and a California income tax liability upon the exercise of the
Option. Purchaser will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise
Price. If Purchaser is or was an employee of the Company, the Company may be
required to withhold from Purchaser's compensation or collect from Purchaser
and pay to the applicable taxing authorities an amount equal to a percentage
of this compensation income at the time of exercise.
13.3 DISPOSITION OF SHARES. If the Shares are held for
more than one (1) year after the date of the transfer of the Shares pursuant
to the exercise of the Option for Vested Shares (or for more than one (1)
year after the date of transfer of the Shares pursuant to the exercise of an
Option for Unvested Shares for which a Section 83(b) election has been made),
<PAGE>
and, in the case of an ISO, are disposed of more than two (2) years after the
Date of Grant, any gain realized on disposition of the Shares will be treated
as long term capital gain for U.S. Federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the
applicable one (1) year or two (2) year period, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. The Company
may be required to withhold from Purchaser's compensation or collect from
Purchaser and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
13.4 SECTION 83(b) ELECTION FOR UNVESTED SHARES. With
respect to Unvested Shares, which are subject to the Repurchase Option,
unless an election is filed by the Purchaser with the Internal Revenue
Service (and, if necessary, the proper state taxing authorities), WITHIN 30
DAYS of the purchase of the Unvested Shares, electing pursuant to Section
83(b) of the Internal Revenue Code (and similar state tax provisions, if
applicable) to be taxed currently on any difference between the Exercise
Price of the Unvested Shares and their Fair Market Value on the date of
purchase, there may be a recognition of taxable income (including, where
applicable, alternative minimum taxable income) to the Purchaser, measured by
the excess, if any, of the Fair Market Value of the Unvested Shares at the
time they cease to be Unvested Shares, over the Exercise Price of the
Unvested Shares.
14. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and
transfer of the Shares will be subject to and conditioned upon compliance by
the Company and Purchaser with all applicable state and U.S. Federal laws and
regulations and with all applicable requirements of any stock exchange or
automated quotation system on which the Company's Common Stock may be listed
or quoted at the time of such issuance or transfer.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Exercise Agreement, including its rights to repurchase
Shares under the Repurchase Option and the Right of First Refusal. This
Exercise Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Company. Subject to the restrictions on
transfer herein set forth, this Exercise Agreement will be binding upon
Purchaser and Purchaser's heirs, executors, administrators, legal
representatives, successors and assigns.
16. GOVERNING LAW; SEVERABILITY. This Exercise Agreement shall be
governed by and construed in accordance with the internal laws of the State
of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within California. If any
provision of this Exercise Agreement is determined by a court of law to be
illegal or unenforceable, then such provision will be enforced to the maximum
extent possible and the other provisions will remain fully effective and
enforceable.
17. NOTICES. Any notice required to be given or delivered to the
Company shall be in writing and addressed to the Corporate Secretary of the
Company at its principal corporate offices. Any notice required to be given
or delivered to Purchaser shall be in writing and addressed to Purchaser at
the address indicated above or to such other address as Purchaser may
designate in writing from time to time to the Company. All notices shall be
deemed effectively
<PAGE>
given upon personal delivery, three (3) days after deposit in the United
States mail by certified or registered mail (return receipt requested), one
(1) business day after its deposit with any return receipt express courier
(prepaid), or one (1) business day after transmission by rapifax or
telecopier.
18. FURTHER INSTRUMENTS. The parties agree to execute such
further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Exercise Agreement.
19. HEADINGS. The captions and headings of this Exercise
Agreement are included for ease of reference only and will be disregarded in
interpreting or construing this Exercise Agreement. All references herein to
Sections will refer to Sections of this Exercise Agreement.
20. ENTIRE AGREEMENT. The Plan, the Stock Option Agreement and
this Exercise Agreement, together with all its Exhibits, constitute the
entire agreement and understanding of the parties with respect to the subject
matter of this Exercise Agreement, and supersede all prior understandings and
agreements, whether oral or written, between the parties hereto with respect
to the specific subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Exercise Agreement
to be executed in duplicate by its duly authorized representative and
Purchaser has executed this Exercise Agreement in triplicate as of the
Effective Date.
SILICON IMAGE, INC. PURCHASER
By:__________________________________ __________________________________
(Signature)
_____________________________________ __________________________________
(Please print name) (Please print name)
_____________________________________
(Please print title)
[SIGNATURE PAGE TO SILICON IMAGE, INC. STOCK OPTION EXERCISE AGREEMENT]
<PAGE>
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: Copy of Purchaser's Check and/or Secured Full Recourse
Promissory Note
Exhibit 4: Section 83(b) Election
Exhibit 5: Stock Pledge Agreement
<PAGE>
EXHIBIT 1
---------
STOCK POWER AND ASSIGNMENT
--------------------------
SEPARATE FROM STOCK CERTIFICATE
-------------------------------
<PAGE>
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Option
Exercise Agreement No. ________ dated as of _______________, 19___, (the
"AGREEMENT"), the undersigned hereby sells, assigns and transfers unto
_______________________________, shares of the Common Stock of Silicon Image,
Inc., a California corporation (the "COMPANY"), standing in the undersigned's
name on the books of the Company represented by Certificate No(s). ______
delivered herewith, and does hereby irrevocably constitute and appoint the
Secretary of the Company as the undersigned's attorney-in-fact, with full
power of substitution, to transfer said stock on the books of the Company.
THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THIS EXERCISE AGREEMENT AND
ANY EXHIBITS THERETO.
Dated: _______________, 19____
PURCHASER
__________________________________
(Signature)
__________________________________
(Please Print Name)
__________________________________
(Spouse's Signature, if any)
__________________________________
(Please Print Spouse's Name)
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this Stock Power and Assignment is to enable the Company to
acquire the shares upon a default under Purchaser's Note and to exercise of
its "Repurchase Option" and/or "Right of First Refusal" set forth in this
Exercise Agreement without requiring additional signatures on the part of the
Purchaser or Purchaser's Spouse.
<PAGE>
EXHIBIT 2
---------
SPOUSE CONSENT
--------------
<PAGE>
SPOUSE CONSENT
The undersigned spouse of Purchaser has read, understands, and
hereby approves the Stock Option Exercise Agreement between Purchaser and the
Company (the "AGREEMENT"). In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in this Exercise
Agreement, the undersigned hereby agrees to be irrevocably bound by this
Exercise Agreement and further agrees that any community property interest
shall similarly be bound by this Exercise Agreement. The undersigned hereby
appoints Purchaser as my attorney-in-fact with respect to any amendment or
exercise of any rights under this Exercise Agreement.
Date:_________________________
__________________________________
Name of Purchaser - Please Print
__________________________________
Signature of Purchaser's Spouse
Address: __________________________________
<PAGE>
EXHIBIT 3
---------
COPY OF PURCHASER'S CHECK AND/OR
--------------------------------
SECURED FULL RECOURSE PROMISSORY NOTE
-------------------------------------
<PAGE>
SECURED FULL RECOURSE PROMISSORY NOTE
______________, California
$__________________ __________________, 19___
1. OBLIGATION. In exchange for the issuance to the undersigned
("PURCHASER") of ___________ shares (the "SHARES") of the Common Stock of
Silicon Image, Inc., a California corporation (the "COMPANY"), receipt of
which is hereby acknowledged, Purchaser hereby promises to pay to the order
of the Company on or before _________, 19___, at the Company's principal
place of business at _________________________________ California __________,
or at such other place as the Company may direct, the principal sum of
_______________________________________ Dollars ($__________) together with
interest compounded semi-annually on the unpaid principal at the rate of
_________ percent (___%), which rate is not less than the minimum rate
established pursuant to Section 1274(d) of the Internal Revenue Code of 1986,
as amended, on the earliest date on which there was a binding contract in
writing for the purchase of the Shares; PROVIDED, HOWEVER, that the rate at
which interest will accrue on unpaid principal under this Note will not
exceed the highest rate permitted by applicable law.
2. SECURITY. Payment of this Note is secured by a security
interest in the Shares granted to the Company by Purchaser under a Stock
Pledge Agreement dated of even date herewith between the Company and
Purchaser (the "PLEDGE AGREEMENT"). This Note is being tendered by Purchaser
to the Company as the Exercise Price of the Shares pursuant to that certain
Stock Option Exercise Agreement between Purchaser and the Company dated of
even date with this Note (the "PURCHASE AGREEMENT").
3. DEFAULT; ACCELERATION OF OBLIGATION. Purchaser will be deemed
to be in default under this Note and the principal sum of this Note, together
with all interest accrued thereon, will immediately become due and payable in
full: (a) upon Purchaser's failure to make any payment when due under this
Note; (b) in the event Purchaser is Terminated (as defined in the Company's
1998 Equity Incentive Plan) for any reason; (c) upon any transfer of any of
the Shares (except a transfer to the Company); (d) upon the filing by or
against Purchaser of any voluntary or involuntary petition in bankruptcy or
any petition for relief under the U.S. Federal bankruptcy code or any other
state or U.S. Federal law for the relief of debtors; or (e) upon the
execution by Purchaser of an assignment for the benefit of creditors or the
appointment of a receiver, custodian, trustee or similar party to take
possession of Purchaser's assets or property.
4. REMEDIES ON DEFAULT. Upon any default of Purchaser under this
Note, the Company will have, in addition to its rights and remedies under
this Note and the Pledge Agreement, full recourse against any real, personal,
tangible or intangible assets of Purchaser, and may pursue any legal or
equitable remedies that are available to it.
<PAGE>
5. PREPAYMENT. Prepayment of principal and/or interest due under
this Note may be made at any time without penalty. Unless otherwise agreed in
writing by the Company, all payments will be made in lawful tender of the
United States and will be applied first to the payment of accrued interest,
and the remaining balance of such payment, if any, will then be applied to
the payment of principal. If Purchaser prepays all or a portion of the
principal amount of this Note, the Shares paid for by the portion of
principal so paid will continue to be held in pledge under the Pledge
Agreement to serve as independent collateral for the outstanding portion of
this Note for the purpose of commencing the holding period under Rule 144(d)
of the Securities and Exchange Commission with respect to other Shares
purchased with this Note unless Purchaser notifies the Company in writing
otherwise and the Company consents to release of the Shares from the Pledge
Agreement.
6. GOVERNING LAW; WAIVER. The validity, construction and
performance of this Note will be governed by the internal laws of the State
of California, excluding that body of law pertaining to conflicts of law.
Purchaser hereby waives presentment, notice of non-payment, notice of
dishonor, protest, demand and diligence.
7. ATTORNEYS' FEES. If suit is brought for collection of this
Note, Purchaser agrees to pay all reasonable expenses, including attorneys'
fees, incurred by the holder in connection therewith whether or not such suit
is prosecuted to judgment.
8. RULE 144 HOLDING PERIOD. PURCHASER UNDERSTANDS THAT THE
HOLDING PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE
COMMISSION WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS
NOTE UNTIL EITHER (A) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN
CASH OR BY OTHER PROPERTY ACCEPTED BY THE COMPANY, OR (B) THIS NOTE IS
SECURED BY COLLATERAL, OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID
FOR, HAVING A FAIR MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S
THEN OUTSTANDING OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date
and year first above written.
__________________________________ __________________________________
Purchaser's Name [type or print] Purchaser's Signature
[SIGNATURE PAGE TO SILICON IMAGE, INC. SECURED FULL RECOURSE PROMISSORY NOTE]
-2-
<PAGE>
EXHIBIT 4
---------
SECTION 83(b) ELECTION
----------------------
<PAGE>
ELECTION UNDER SECTION 83(B) OF THE INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include the excess, if any, of
the fair market value of the property described below at the time of transfer
over the amount paid for such property, as compensation for services in the
calculation of: (1) regular gross income; (2) alternative minimum taxable
income or (3) disqualifying disposition gross income, as the case may be.
1. TAXPAYER'S NAME: ______________________________________
TAXPAYER'S ADDRESS: ______________________________________
______________________________________
SOCIAL SECURITY NUMBER: ______________________________________
2. The property with respect to which the election is made is described
as follows: _______ shares of Common Stock of Silicon Image, Inc., a
California corporation which were transferred upon exercise of an
option (the "COMPANY"), which is Taxpayer's employer or the
corporation for whom the Taxpayer performs services.
3. The date on which the shares were transferred pursuant to the
exercise of the option was ________, 199__ and this election is made
for calendar year 199__.
4. The shares received upon exercise of the option are subject to the
following restrictions: The Company may repurchase all or a portion
of the shares at the Taxpayer's original purchase price under
certain conditions at the time of Taxpayer's termination of
employment or services.
5. The fair market value of the shares (without regard to restrictions
other than restrictions which by their terms will never lapse) was
$___ per share at the time of exercise of the option.
6. The amount paid for such shares upon exercise of the option was $___
per share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS
AFTER THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE
TAXPAYER'S INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE
REVOKED WITHOUT THE CONSENT OF THE IRS.
Dated: ________________ _______________________________________
Taxpayer's Signature
<PAGE>
EXHIBIT 5
---------
STOCK PLEDGE AGREEMENT
----------------------
<PAGE>
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement ("AGREEMENT") is made and entered into
as of _______________, 19___ between Silicon Image, Inc., a California
corporation (the "COMPANY"), and __________________ ("PLEDGOR").
R E C I T A L S
A. In exchange for Pledgor's Secured Full Recourse Promissory
Note to the Company of even date herewith (the "NOTE"), the Company has
issued and sold to Pledgor _______________ shares of its Common Stock (the
"SHARES") pursuant to the terms and conditions of that Stock Option Exercise
Agreement between the Company and Pledgor of even date herewith (the
"PURCHASE AGREEMENT").
B. Pledgor has agreed that repayment of the Note will be secured
by the pledge of the Shares pursuant to this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. CREATION OF SECURITY INTEREST. Pursuant to the
provisions of the California Commercial Code, Pledgor hereby grants to the
Company, and the Company hereby accepts, a first and present security
interest in the Shares as collateral to secure the payment of Pledgor's
obligation to the Company under the Note. Pledgor herewith delivers to the
Company Common Stock certificate(s) No(s). _________, representing all the
Shares, together with one stock power for each certificate in the form
attached as an Exhibit to the Purchase Agreement, duly executed (with the
date and number of shares left blank) by Pledgor and Pledgor's spouse, if
any. For purposes of this Agreement, the Shares pledged to the Company
hereby, together with any additional collateral pledged pursuant to Sections
5 and 6 hereof, will hereinafter be collectively referred to as the
"COLLATERAL." Pledgor agrees that the Collateral pledged to the Company will
be deposited with and held by the Escrow Holder (as defined in the Purchase
Agreement) and that, notwithstanding anything to the contrary in the Purchase
Agreement, for purposes of carrying out the provisions of this Agreement,
Escrow Holder will act solely for the Company as its agent.
2. REPRESENTATIONS AND WARRANTIES. Pledgor hereby
represents and warrants to the Company that Pledgor has good title (both
record and beneficial) to the Collateral, free and clear of all claims,
pledges, security interests, liens or encumbrances of every nature
whatsoever, and that Pledgor has the right to pledge and grant the Company
the security interest in the Collateral granted under this Agreement. Pledgor
further agrees that, until the entire principal sum and all accrued interest
due under the Note has been paid in full, Purchaser will not, without the
Company's prior written consent, (i) sell, assign or transfer, or attempt to
sell, assign or transfer, any of the Collateral, or (ii) grant or create, or
attempt to grant or create, any security interest, lien, pledge, claim or
other encumbrance with respect to any of the Collateral.
<PAGE>
3. RIGHTS ON DEFAULT. In the event of default (as
defined in the Note) by Pledgor under the Note, the Company will have full
power to sell, assign and deliver the whole or any part of the Collateral at
any broker's exchange or elsewhere, at public or private sale, at the option
of the Company, in order to satisfy any part of the obligations of Pledgor
now existing or hereinafter arising under the Note. On any such sale, the
Company or its assigns may purchase all or any part of the Collateral. In
addition, at its sole option, the Company may elect to retain all the
Collateral in full satisfaction of Pledgor's obligation under the Note, in
accordance with the provisions and procedures set forth in the California
Commercial Code.
4. ADDITIONAL REMEDIES. The rights and remedies granted
to the Company herein upon default under the Note will be in addition to all
the rights, powers and remedies of the Company under the California
Commercial Code and applicable law and such rights, powers and remedies will
be exercisable by the Company with respect to all of the Collateral. Pledgor
agrees that the Company's reasonable expenses of holding the Collateral,
preparing it for resale or other disposition, and selling or otherwise
disposing of the Collateral, including attorneys' fees and other legal
expenses, will be deducted from the proceeds of any sale or other disposition
and will be included in the amounts Pledgor must tender to redeem the
Collateral. All rights, powers and remedies of the Company will be cumulative
and not alternative. Any forbearance or failure or delay by the Company in
exercising any right, power or remedy hereunder will not be deemed to be a
waiver of any such right, power or remedy and any single or partial exercise
of any such right, power or remedy hereunder will not preclude the further
exercise thereof.
5. DIVIDENDS; VOTING. All dividends hereinafter declared
on or payable with respect to the Collateral during the term of this pledge
(excluding only ordinary cash dividends, which will be payable to Pledgor so
long as Pledgor is not in default under the Note) will be immediately
delivered to the Company to be held in pledge under this Agreement.
Notwithstanding this Agreement, so long as Pledgor owns the Shares and is not
in default under the Note, Pledgor will be entitled to vote any shares
comprising the Collateral, subject to any proxies granted by Pledgor.
6. ADJUSTMENTS. In the event that during the term of
this pledge, any stock dividend, reclassification, readjustment, stock split
or other change is declared or made with respect to the Collateral, or if
warrants or any other rights, options or securities are issued in respect of
the Collateral, then all new, substituted and/or additional shares or other
securities issued by reason of such change or by reason of the exercise of
such warrants, rights, options or securities, will be immediately pledged to
the Company to be held under the terms of this Agreement in the same manner
as the Collateral is held hereunder.
7. RIGHTS UNDER PURCHASE AGREEMENT. Pledgor understands
and agrees that the Company's rights to repurchase the Collateral under the
Purchase Agreement, if any, will continue for the periods and on the terms
and conditions specified in the Purchase Agreement, whether or not the Note
has been paid during such period of time, and that to the extent that the
Note is not paid during such period of time, the repurchase by the Company of
the Collateral may be made by way of cancellation of all or any part of
Pledgor's indebtedness under the Note.
-2-
<PAGE>
8. REDELIVERY OF COLLATERAL. Upon payment in full of the
entire principal sum and all accrued interest due under the Note, and subject
to the terms and conditions of the Purchase Agreement, the Company will
immediately redeliver the Collateral to Pledgor and this Agreement will
terminate; PROVIDED, HOWEVER, that all rights of the Company to retain
possession of the Shares pursuant to the Purchase Agreement will survive
termination of this Agreement.
9. SUCCESSORS AND ASSIGNS. This Agreement will inure to
the benefit of the respective heirs, personal representatives, successors and
assigns of the parties hereto.
10. GOVERNING LAW; SEVERABILITY. This Agreement will be
governed by and construed in accordance with the internal laws of the State
of California, excluding that body of law relating to conflicts of law.
Should one or more of the provisions of this Agreement be determined by a
court of law to be illegal or unenforceable, the other provisions
nevertheless will remain effective and will be enforceable.
11. MODIFICATION; ENTIRE AGREEMENT. This Agreement will
not be amended without the written consent of both parties hereto. This
Agreement constitutes the entire agreement of the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings related to such subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
SILICON IMAGE, INC. PLEDGOR
By:_______________________________ __________________________________
(Signature)
__________________________________ __________________________________
(Please print name) (Please print name)
__________________________________
(Please print title)
[SIGNATURE PAGE TO SILICON IMAGE INC. STOCK PLEDGE AGREEMENT]
-3-
<PAGE>
[Third Form of Stock Option Agreement (option exercisable as it vests)]
NO.____
SILICON IMAGE, INC.
1995 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("AGREEMENT") is made and entered into as of
the date of grant set forth below (the "DATE OF GRANT") by and between
Silicon Image, Inc., a California corporation (the "COMPANY"), and the
participant named below ("PARTICIPANT"). Capitalized terms not defined herein
shall have the meaning ascribed to them in the Company's 1995 Equity
Incentive Plan, as amended (the "PLAN").
PARTICIPANT: _________________________________________________
_________________________________________________
SOCIAL SECURITY NUMBER: _________________________________________________
ADDRESS: _________________________________________________
_________________________________________________
TOTAL OPTION SHARES: _________________________________________________
EXERCISE PRICE PER SHARE: _________________________________________________
DATE OF GRANT: _________________________________________________
FIRST VESTING DATE: _________________________________________________
EXPIRATION DATE: _________________________________________________
(unless earlier terminated under Section 3 below)
TYPE OF STOCK OPTION
(CHECK ONE): / / INCENTIVE STOCK OPTION
/ / NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an option
(this "OPTION") to purchase the total number of shares of Common of the
Company set forth above as Total Option Shares (the "SHARES") at the Exercise
Price Per Share set forth above (the "EXERCISE PRICE"), subject to all of the
terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, the Option is intended to qualify as an
"incentive stock option" ("ISO") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "CODE").
2. EXERCISE PERIOD.
2.1 EXERCISE PERIOD OF OPTION. Provided Participant continues to
provide services to the Company or any Subsidiary or Parent of the Company,
the Option shall become vested and exercisable as to portions of the Shares
as follows: (a) This Option shall not vest with respect to any of the Shares
until _______, 199_ (the "FIRST VESTING DATE"); (b) on the First Vesting Date
the Option shall vest as to ___________ percent (__%) of the Shares; and (c)
thereafter each year on the anniversary of the First Vesting Date the Option
shall vest as to an additional ____________ percent (___%) of the Shares
until this Option is vested with respect to 100% of the Shares. If
application of the vesting percentage causes a fractional share, such share
shall be rounded down to the nearest whole share.
<PAGE>
2.2 VESTING OF OPTIONS. Shares that are vested pursuant to the
schedule set forth in Section 2.1 are "VESTED SHARES." Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "UNVESTED
SHARES."
2.3 EXPIRATION. The Option shall expire on the Expiration Date
set forth above or earlier as provided in Section 3 below.
3. TERMINATION.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH, DISABILITY OR CAUSE.
If Participant is Terminated for any reason, except death, Disability or for
Cause, the Option, to the extent (and only to the extent) that it would have
been exercisable by Participant on the Termination Date, may be exercised by
Participant no later than three (3) months after the Termination Date, but in
any event no later than the Expiration Date.
3.2 TERMINATION BECAUSE OF DEATH OR DISABILITY. If Participant is
Terminated because of death or Disability of Participant (or Participant dies
within three (3) months of Termination other than because of Participant's
Disability or for Cause), the Option, to the extent that it is exercisable by
Participant on the Termination Date, may be exercised by Participant (or
Participant's legal representative) no later than twelve (12) months after
the Termination Date, but in any event no later than the Expiration Date. Any
exercise beyond (a) three (3) months after the Termination Date when the
Termination is for any reason other than the Participant's death or
disability, within the meaning of Section 22(e)(3) of the Code; or (b) twelve
(12) months after the Termination Date when the termination is for
Participant's disability, within the meaning of Section 22(e)(3) of the Code,
is deemed to be an NQSO.
3.3 TERMINATION FOR CAUSE. If Participant is Terminated for
Cause, then the Option will expire on Participant's Termination Date, or at
such later time and on such conditions as are determined by the Committee.
3.4 NO OBLIGATION TO EMPLOY. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of,
or other relationship with, the Company or any Parent or Subsidiary of the
Company, or limit in any way the right of the Company or any Parent or
Subsidiary of the Company to terminate Participant's employment or other
relationship at any time, with or without Cause.
4. MANNER OF EXERCISE.
4.1 STOCK OPTION EXERCISE AGREEMENT. To exercise this Option,
Participant (or in the case of exercise after Participant's death or
incapacity, Participant's executor, administrator, heir or legatee, as the
case may be) must deliver to the Company an executed stock option exercise
agreement in the form attached hereto as EXHIBIT A, or in such other form as
may be approved by the Company from time to time (the "EXERCISE AGREEMENT"),
which shall set forth, INTER ALIA, Participant's election to exercise the
Option, the number of Shares being purchased, any restrictions imposed on the
Shares and any representations, warranties and agreements regarding
Participant's investment intent and access to information as may be required
by the Company to comply with applicable securities laws. If someone other
than Participant exercises the Option, then such person must submit
documentation reasonably acceptable to the Company that such person has the
right to exercise the Option.
4.2 LIMITATIONS ON EXERCISE. The Option may not be exercised
unless such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. The Option
may not be exercised as to fewer than one hundred (100) Shares unless it is
exercised as to all Shares as to which the Option is then exercisable.
4.3 PAYMENT. The Exercise Agreement shall be accompanied by full
payment of the Exercise Price for the shares being purchased in cash (by
check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to
the Participant;
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(b) by surrender of shares of the Company's Common Stock that
(1) either (A) have been owned by Participant for more
than six (6) months and have been paid for within the
meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note,
such note has been fully paid with respect to such
shares); or (B) were obtained by Participant in the
open public market; and (2) are clear of all liens,
claims, encumbrances or security interests;
(c) by waiver of compensation due or accrued to Participant
for services rendered;
(d) provided that a public market for the Company's stock
exists, (1) through a "same day sale" commitment from
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD
DEALER") whereby Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares
so purchased to pay for the Exercise Price and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the
Company, OR (2) through a "margin" commitment from
Participant and an NASD Dealer whereby Participant
irrevocably elects to exercise the Option and to pledge
the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in
the amount of the Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares
to forward the Exercise Price directly to the Company; or
(e) by any combination of the foregoing.
4.4 TAX WITHHOLDING. Prior to the issuance of the Shares upon
exercise of the Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes
upon exercise of the Option by requesting that the Company retain Shares with
a Fair Market Value equal to the minimum amount of taxes required to be
withheld. In such case, the Company shall issue the net number of Shares to
the Participant by deducting the Shares retained from the Shares issuable
upon exercise.
4.5 ISSUANCE OF SHARES. Provided that the Exercise Agreement and
payment are in form and substance satisfactory to counsel for the Company,
the Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate
legends affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option is
an ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (a) the date two (2)
years after the Date of Grant, and (b) the date one (1) year after transfer
of such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the
Company on the compensation income recognized by Participant from the early
disposition by payment in cash or out of the current wages or other
compensation payable to Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of the Option and
the issuance and transfer of Shares shall be subject to compliance by the
Company and Participant with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance
or transfer. Participant understands that the Company is under no obligation
to register or qualify the Shares with the Securities and Exchange
Commission, any state securities commission or any stock exchange to effect
such compliance.
7. NONTRANSFERABILITY OF OPTION. The Option may not be transferred in
any manner other than by will or by the laws of descent and distribution and
may be exercised during the lifetime of Participant only by
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Participant or in the event of Participant's incapacity, by Participant's
legal representative. The terms of the Option shall be binding upon the
executors, administrators, successors and assigns of Participant.
8. RESERVED.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Vested Shares held by
Participant or any transferee of such Vested Shares may be sold or otherwise
transferred (including without limitation a transfer by gift or operation of
law), the Company and/or its assignee(s) shall have an assignable right of
first refusal to purchase the Vested Shares to be sold or transferred on the
terms and conditions set forth in the Exercise Agreement (the "RIGHT OF FIRST
REFUSAL"). The Company's Right of First Refusal will terminate when the
Company's securities become publicly traded.
10. TAX CONSEQUENCES. Set forth below is a brief summary as of the
Effective Date of the Plan of some of the federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THE OPTION OR DISPOSING OF THE SHARES.
10.1 EXERCISE OF ISO. If the Option qualifies as an ISO, there
will be no regular federal or California income tax liability upon the
exercise of the Option, although the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price will be treated
as a tax preference item for federal alternative minimum tax purposes and may
subject the Participant to the alternative minimum tax in the year of
exercise.
10.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If the Option does
not qualify as an ISO, there may be a regular federal and California income
tax liability upon the exercise of the Option. Participant will be treated as
having received compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the Fair Market Value of the Shares on the
date of exercise over the Exercise Price. If Participant is a current or
former employee of the Company, the Company may be required to withhold from
Participant's compensation or collect from Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
10.3 DISPOSITION OF SHARES. If the Shares are held for more than
one (1) year after the date of the transfer of the Shares pursuant to the
exercise of the Option for Vested Shares and, in the case of an ISO, are
disposed of more than two (2) years after the Date of Grant, any gain
realized on disposition of the Shares will be treated as long term capital
gain for federal and California income tax purposes. If Shares purchased
under an ISO are disposed of within the applicable one (1) year or two (2)
year period, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price. The Company may be required to withhold
from Participant's compensation or collect from Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
11. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any of the
rights of a shareholder with respect to any Shares until the Shares are
issued to Participant.
12. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the Committee
for review. The resolution of such a dispute by the Committee shall be final
and binding on the Company and Participant.
13. ENTIRE AGREEMENT. The Plan is incorporated herein by reference. This
Agreement and the Plan constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
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<PAGE>
14. NOTICES. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing
and addressed to Participant at the address indicated above or to such other
address as such party may designate in writing from time to time to the
Company. All notices shall be deemed to have been given or delivered upon:
personal delivery; three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); one (1) business day
after deposit with any return receipt express courier (prepaid); or one (1)
business day after transmission by facsimile, rapifax or telecopier.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement including its right to repurchase Shares under the Right
of First Refusal. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding
upon Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California. If any provision of this Agreement is determined
by a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.
17. ACCEPTANCE. Participant hereby acknowledges receipt of a copy of the
Plan and this Agreement, Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that
there may be adverse tax consequences upon exercise of the Option or
disposition of the Shares and that Participant should consult a tax adviser
prior to such exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in triplicate by its duly authorized representative and Participant has
executed this Agreement in triplicate as of the Date of Grant.
SILICON IMAGE, INC. PARTICIPANT
By:____________________________________ ____________________________________
(Signature)
_______________________________________ ____________________________________
(Please print name) (Please print name)
_______________________________________
(Please print title)
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<PAGE>
EXHIBIT A
---------
STOCK OPTION EXERCISE AGREEMENT
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<PAGE>
[Third Form of Stock Option Exercise Agreement
(for option exercisable as it vests)]
NO.____
SILICON IMAGE, INC.
1995 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Exercise Agreement is made and entered into as of __________, ___
(the "EFFECTIVE DATE") by and between Silicon Image, Inc., a California
corporation (the "COMPANY"), and the purchaser named below (the "PURCHASER").
Capitalized terms not defined herein shall have the meaning ascribed to them
in the Company's 1995 Equity Incentive Plan, as amended (the "PLAN").
PARTICIPANT: _________________________________________________
_________________________________________________
SOCIAL SECURITY NUMBER: _________________________________________________
ADDRESS: _________________________________________________
_________________________________________________
TOTAL OPTION SHARES: _________________________________________________
EXERCISE PRICE PER SHARE: _________________________________________________
DATE OF GRANT: _________________________________________________
FIRST VESTING DATE: _________________________________________________
EXPIRATION DATE: _________________________________________________
(unless earlier terminated under Section 3 below)
TYPE OF STOCK OPTION
(CHECK ONE): / / INCENTIVE STOCK OPTION
/ / NONQUALIFIED STOCK OPTION
1. EXERCISE OF OPTION.
1.1 EXERCISE. Pursuant to exercise of that certain option
("OPTION") granted to Purchaser under the Plan and subject to the terms and
conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby sells to Purchaser, the Total Number of
Shares set forth above of the Company's Common Stock at the Exercise Price
Per Share set forth above ("EXERCISE PRICE"). As used in this Exercise
Agreement, the term "SHARES" refers to the Shares purchased under this
Exercise Agreement and includes all securities received (a) in replacement of
the Shares, (b) as a result of stock dividends or stock splits with respect
to the Shares, and (c) all securities received in replacement of the Shares
in a merger, recapitalization, reorganization or similar corporate
transaction.
1.2 TITLE TO SHARES. The exact spelling of the name(s) under
which Purchaser will take title to the Shares is:
<PAGE>
_____________________________________________________________
Purchaser desires to take title to the Shares as follows:
/ / Individual, as separate property
/ / Husband and wife, as community property
/ / Joint Tenants
/ / Alone or with spouse as trustee(s) of the
following trust (including date):
_____________________________________________________________
_____________________________________________________________
/ / Other; please specify:
1.3 PAYMENT. Purchaser hereby delivers payment of the Exercise
Price in the manner permitted in the Stock Option Agreement as follows (check
and complete as appropriate):
/ / in cash (by check) in the amount of $____________,
receipt of which is acknowledged by the Company;
/ / by cancellation of indebtedness of the Company to
Purchaser in the amount of $____________;
/ / by delivery of _________ fully-paid, nonassessable and
vested shares of the Common Stock of the Company owned
by Purchaser for at least six (6) months prior to the
date hereof which have been paid for within the meaning
of SEC Rule 144, (if purchased by use of a promissory
note, such note has been fully paid with respect to
such vested shares), or obtained by Purchaser in the
open public market, and owned free and clear of all
liens, claims, encumbrances or security interests,
valued at the current Fair Market Value of $___________
per share;
/ / by the waiver hereby of compensation due or accrued for
services rendered in the amount of $_________.
2. DELIVERY.
2.1 DELIVERIES BY PURCHASER. Purchaser hereby delivers to the
Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock
Power and Assignment Separate from Stock Certificate in the form of EXHIBIT 1
attached hereto (the "STOCK POWERS"), both executed by Purchaser (and
Purchaser's spouse, if any), (iii) if Purchaser is married, a Consent of
Spouse in the form of EXHIBIT 2 attached hereto (the "SPOUSE CONSENT")
executed by Purchaser's spouse, and (iv) the Exercise Price any payment or
other provision for any applicable tax obligations;
2.2 DELIVERIES BY THE COMPANY. Upon its receipt of the Exercise
Price, payment or other provision for any applicable tax obligations and all
the documents to be executed and delivered by Purchaser to the Company under
Section 2.1, the Company will issue a duly executed stock certificate
evidencing the Shares in the name of Purchaser, to be placed in escrow as
provided in Section 11 to secure payment of Participant's obligation to the
Company until expiration or termination of the Company's Right of First
Refusal described in Sections 9 and 10.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to the Company that:
3.1 AGREES TO TERMS OF THE PLAN. Purchaser has received a copy of
the Plan and the Stock Option Agreement, has read and understands the terms
of the Plan, the Stock Option Agreement and this Exercise
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Agreement, and agrees to be bound by their terms and conditions. Purchaser
acknowledges that there may be adverse tax consequences upon exercise of the
Option or disposition of the Shares, and that Purchaser should consult a tax
adviser prior to such exercise or disposition.
3.2 PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes
only and not with a view to, or for sale in connection with, a distribution
of the Shares within the meaning of the Securities Act. Purchaser has no
present intention of selling or otherwise disposing of all or any portion of
the Shares and no one other than Purchaser has any beneficial ownership of
any of the Shares.
3.3 ACCESS TO INFORMATION. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably
considers important in making the decision to purchase the Shares, and
Purchaser has had ample opportunity to ask questions of the Company's
representatives concerning such matters and this investment.
3.4 UNDERSTANDING OF RISKS. Purchaser is fully aware of: (i) the
highly speculative nature of the investment in the Shares; (ii) the financial
hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on transferability of the Shares (E.G., that Purchaser may not
be able to sell or dispose of the Shares or use them as collateral for
loans); (iv) the qualifications and backgrounds of the management of the
Company; and (v) the tax consequences of investment in the Shares. Purchaser
is capable of evaluating the merits and risks of this investment, has the
ability to protect Purchaser's own interests in this transaction and is
financially capable of bearing a total loss of this investment.
3.5 NO GENERAL SOLICITATION. At no time was Purchaser presented
with or solicited by any publicly issued or circulated newspaper, mail,
radio, television or other form of general advertising or solicitation in
connection with the offer, sale and purchase of the Shares.
4. COMPLIANCE WITH SECURITIES LAWS.
4.1 COMPLIANCE WITH U.S. FEDERAL SECURITIES LAWS. Purchaser
understands and acknowledges that the Shares have not been registered with
the SEC under the Securities Act and that, notwithstanding any other
provision of the Stock Option Agreement to the contrary, the exercise of any
rights to purchase any Shares is expressly conditioned upon compliance with
the Securities Act and all applicable state securities laws. Purchaser agrees
to cooperate with the Company to ensure compliance with such laws.
4.2 COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE SALE OF THE
SECURITIES THAT ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET
QUALIFIED WITH THE CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT
FROM SUCH QUALIFICATION, IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE
OF SUCH SECURITIES, AND THE RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS
OF THE PARTIES TO THIS EXERCISE AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED OR AN EXEMPTION BEING AVAILABLE.
5. RESTRICTED SECURITIES.
5.1 NO TRANSFER UNLESS REGISTERED OR EXEMPT. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are
available. Purchaser understands that only the Company may file a
registration statement with the SEC and that the Company is under no
obligation to do so with respect to the Shares. Purchaser has also been
advised that exemptions from registration and qualification may not be
available or may not permit Purchaser to transfer all or any of the Shares in
the amounts or at the times proposed by Purchaser.
5.2 SEC RULE 144. In addition, Purchaser has been advised that
SEC Rule 144 promulgated under the Securities Act, which permits certain
limited sales of unregistered securities, is not presently available with
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<PAGE>
respect to the Shares and, in any event, requires that the Shares be held for
a minimum of one (1) year, and in certain cases two (2) years, after they
have been purchased AND PAID FOR (within the meaning of Rule 144). Purchaser
understands that Rule 144 may indefinitely restrict transfer of the Shares so
long as Purchaser remains an "affiliate" of the Company or if "current public
information" about the Company (as defined in Rule 144) is not publicly
available.
5.3 STATE LAW RESTRICTIONS ON TRANSFER. Purchaser understands
that transfer of the Shares may be restricted by Section 260.141.11 of the
Rules of the California Commissioner of Corporations, a copy of which is
attached hereto as EXHIBIT 3, and that the certificate(s) representing the
Shares may bear a legend to that effect.
6. RESTRICTIONS ON TRANSFERS.
6.1 DISPOSITION OF SHARES. Purchaser hereby agrees that Purchaser
shall make no disposition of the Shares (other than as permitted by this
Exercise Agreement) unless and until:
(a) Purchaser shall have notified the Company of the
proposed disposition and provided a written summary of the terms and
conditions of the proposed disposition;
(b) Purchaser shall have complied with all requirements of
this Exercise Agreement applicable to the disposition of the Shares;
(c) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to counsel for the Company,
that (i) the proposed disposition does not require registration of the Shares
under the Securities Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the Securities Act or of any
exemption from registration available under the Securities Act (including
Rule 144) has been taken; and
(d) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that the
proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Shares pursuant to the provisions of the
Commissioner Rules identified in Section 4.2.
6.2 RESTRICTION ON TRANSFER. Purchaser shall not transfer,
assign, grant a lien or security interest in, pledge, hypothecate, encumber
or otherwise dispose of any of the Shares which are subject to the Company's
Right of First Refusal, except as permitted by this Exercise Agreement.
6.3 TRANSFEREE OBLIGATIONS. Each person (other than the Company)
to whom the Shares are transferred by means of one of the permitted transfers
specified in this Exercise Agreement must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Exercise Agreement and that the
transferred Shares are subject to the Company's Right of First Refusal
granted hereunder and (ii) the market stand-off provisions of Section 7, to
the same extent such Shares would be so subject if retained by the Purchaser.
7. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
registration of the Company's securities that, upon the request of the
Company or the underwriters managing any public offering of the Company's
securities, Purchaser will not sell or otherwise dispose of any Shares
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 180 days) after the
effective date of such registration requested by such managing underwriters
and subject to all restrictions as the Company or the underwriters may
specify.
8. RESERVED.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold or
otherwise transferred by Purchaser without the Company's prior written
consent. Before any Vested Shares held by Purchaser or any transferee of such
Vested Shares (either being sometimes referred to herein as the "HOLDER") may
be sold or otherwise transferred (including without limitation a transfer by
gift or operation of law), the Company and/or its
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<PAGE>
assignee(s) shall have an assignable right of first refusal to purchase the
Vested Shares to be sold or transferred (the "OFFERED SHARES") on the terms
and conditions set forth in this Section (the "RIGHT OF FIRST REFUSAL").
9.1 NOTICE OF PROPOSED TRANSFER. The Holder of the Offered Shares
shall deliver to the Company a written notice (the "NOTICE") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer the Offered
Shares; (ii) the name of each proposed bona fide purchaser or other
transferee ("PROPOSED TRANSFEREE"); (iii) the number of Offered Shares to be
transferred to each Proposed Transferee; (iv) the bona fide cash price or
other consideration for which the Holder proposes to transfer the Offered
Shares (the "OFFERED PRICE"); and (v) that the Holder will offer to sell the
Offered Shares to the Company and/or its assignee(s) at the Offered Price as
provided in this Section.
9.2 EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
(30) days after the date of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all (or, with
the consent of the Holder, less than all) the Offered Shares proposed to be
transferred to any one or more of the Proposed Transferees named in the
Notice, at the purchase price determined as specified below.
9.3 PURCHASE PRICE. The purchase price for the Offered Shares
purchased under this Section will be the Offered Price. If the Offered Price
includes consideration other than cash, then the cash equivalent value of the
non-cash consideration shall conclusively be deemed to be the value of such
non-cash consideration as determined in good faith by the Board.
9.4 PAYMENT. Payment of the Offered Price will be payable, at the
option of the Company and/or its assignee(s) (as applicable), by check or by
cancellation of all or a portion of any outstanding indebtedness of the
Holder to the Company (or to such assignee, in the case of a purchase of
Offered Shares by such assignee) or by any combination thereof. The Offered
Price will be paid without interest within sixty (60) days after the
Company's receipt of the Notice, or, at the option of the Company and/or its
assignee(s), in the manner and at the time(s) set forth in the Notice.
9.5 HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are
not purchased by the Company and/or its assignee(s) as provided in this
Section, then the Holder may sell or otherwise transfer such Offered Shares
to that Proposed Transferee at the Offered Price or at a higher price,
PROVIDED that such sale or other transfer is consummated within 120 days
after the date of the Notice, and PROVIDED FURTHER, that (i) any such sale or
other transfer is effected in compliance with all applicable securities laws
and (ii) the Proposed Transferee agrees in writing that the provisions of
this Section will continue to apply to the Offered Shares in the hands of
such Proposed Transferee. If the Offered Shares described in the Notice are
not transferred to the Proposed Transferee within such 120 day period, then a
new Notice must be given to the Company, and the Company will again be
offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
9.6 EXEMPT TRANSFERS. Notwithstanding anything to the contrary in
this Section, the following transfers of Vested Shares will be exempt from
the Right of First Refusal: (i) the transfer of any or all of the Vested
Shares during Purchaser's lifetime by gift or on Purchaser's death by will or
intestacy to Purchaser's "immediate family" (as defined below) or to a trust
for the benefit of Purchaser or Purchaser's immediate family, provided that
each transferee or other recipient agrees in a writing satisfactory to the
Company that the provisions of this Section will continue to apply to the
transferred Vested Shares in the hands of such transferee or other recipient;
(ii) any transfer of Vested Shares made pursuant to a statutory merger or
statutory consolidation of the Company with or into another corporation or
corporations (except that the Right of First Refusal will continue to apply
thereafter to such Vested Shares, in which case the surviving corporation of
such merger or consolidation shall succeed to the rights of the Company under
this Section unless the Agreement of merger or consolidation expressly
otherwise provides); or (iii) any transfer of Vested Shares pursuant to the
winding up and dissolution of the Company. As used herein, the term
"IMMEDIATE FAMILY" will mean Purchaser's spouse, the lineal descendant or
antecedent, father, mother, brother or sister, child, adopted child,
grandchild or adopted grandchild of the Purchaser or the Purchaser's spouse,
or the spouse of any child, adopted child, grandchild or adopted grandchild
of Purchaser or the Purchaser's spouse.
9.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The Company's Right of
First Refusal will terminate when the Company's securities become publicly
traded.
-5-
<PAGE>
10. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of this
Exercise Agreement, Purchaser will have all of the rights of a shareholder of
the Company with respect to the Shares from and after the date that Shares
are issued to Purchaser until such time as Purchaser disposes of the Shares
or the Company and/or its assignee(s) exercise(s) the Right of First Refusal.
Upon an exercise of the Right of First Refusal, Purchaser will have no
further rights as a holder of the Shares so purchased upon such exercise,
except the right to receive payment for the Shares so purchased in accordance
with the provisions of this Exercise Agreement, and Purchaser will promptly
surrender the stock certificate(s) evidencing the Shares so purchased to the
Company for transfer or cancellation.
11. ESCROW. As security for Purchaser's faithful performance of this
Exercise Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s),
together with the Stock Powers executed by Purchaser and by Purchaser's
spouse, if any (with the date and number of Shares left blank), to the
Secretary of the Company or other designee of the Company ("ESCROW HOLDER"),
who is hereby appointed to hold such certificate(s) and Stock Powers in
escrow and to take all such actions and to effectuate all such transfers
and/or releases of such Shares as are in accordance with the terms of this
Exercise Agreement. Purchaser and the Company agree that Escrow Holder will
not be liable to any party to this Exercise Agreement (or to any other party)
for any actions or omissions unless Escrow Holder is grossly negligent or
intentionally fraudulent in carrying out the duties of Escrow Holder under
this Exercise Agreement. Escrow Holder may rely upon any letter, notice or
other document executed by any signature purported to be genuine and may rely
on the advice of counsel and obey any order of any court with respect to the
transactions contemplated by this Exercise Agreement. The Shares will be
released from escrow upon termination of the Right of First Refusal.
12. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
12.1 LEGENDS. Purchaser understands and agrees that the Company
will place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that
may be required by state or U.S. Federal securities laws, the Company's
Articles of Incorporation or Bylaws, any other agreement between Purchaser
and the Company or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY
MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF
THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON PUBLIC RESALE AND TRANSFER, RIGHT
FIRST REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AS SET FORTH IN A STOCK OPTION EXERCISE
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH PUBLIC SALE AND
TRANSFER RESTRICTIONS AND THE RIGHT OF FIRST REFUSAL ARE
BINDING ON TRANSFEREES OF THESE SHARES.
-6-
<PAGE>
The California Commissioner of Corporations may require that the
following legend also be placed upon the share certificate(s) evidencing
ownership of the Shares:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
12.2 STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, to ensure
compliance with the restrictions imposed by this Exercise Agreement, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
12.3 REFUSAL TO TRANSFER. The Company will not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Exercise Agreement or (ii) to
treat as owner of such Shares, or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares have been
so transferred.
13. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR DISPOSITION
OF THE SHARES. PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH ANY TAX
ADVISER PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT PURCHASER IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. Set forth below is a brief summary as of the date the
Plan was adopted by the Board of some of the U.S. Federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
13.1 EXERCISE OF INCENTIVE STOCK OPTION. If the Option qualifies
as an ISO, there will be no regular U.S. Federal income tax liability or
California income tax liability upon the exercise of the Option, although the
excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price will be treated as a tax preference item for
U.S. Federal alternative minimum tax purposes and may subject Purchaser to
the alternative minimum tax in the year of exercise.
13.2 EXERCISE OF NONQUALIFIED STOCK OPTION. If the Option does
not qualify as an ISO, there may be a regular U.S. Federal income tax
liability and a California income tax liability upon the exercise of the
Option. Purchaser will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise
Price. If Purchaser is or was an employee of the Company, the Company may be
required to withhold from Purchaser's compensation or collect from Purchaser
and pay to the applicable taxing authorities an amount equal to a percentage
of this compensation income at the time of exercise.
13.3 DISPOSITION OF SHARES. If the Shares are held for more than
one (1) year after the date of the transfer of the Shares pursuant to the
exercise of the Option for Vested Shares and, in the case of an ISO, are
disposed of more than two (2) years after the Date of Grant, any gain
realized on disposition of the Shares will be treated as long term capital
gain for U.S. Federal and California income tax purposes. If Shares purchased
under an ISO are disposed of within the applicable one (1) year or two (2)
year period, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price. The Company may be required to withhold
from Purchaser's compensation or collect from Purchaser and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
-7-
<PAGE>
14. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of
the Shares will be subject to and conditioned upon compliance by the Company
and Purchaser with all applicable state and U.S. Federal laws and regulations
and with all applicable requirements of any stock exchange or automated
quotation system on which the Company's Common Stock may be listed or quoted
at the time of such issuance or transfer.
15. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Exercise AGREEMENT, including its Right of First Refusal. This
Exercise Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Company. Subject to the restrictions on
transfer herein set forth, this Exercise Agreement will be binding upon
Purchaser and Purchaser's heirs, executors, administrators, legal
representatives, successors and assigns.
16. GOVERNING LAW; SEVERABILITY. This Exercise Agreement shall be
governed by and construed in accordance with the internal laws of the State
of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within California. If any
provision of this Exercise Agreement is determined by a court of law to be
illegal or unenforceable, then such provision will be enforced to the maximum
extent possible and the other provisions will remain fully effective and
enforceable.
17. NOTICES. Any notice required to be given or delivered to the Company
shall be in writing and addressed to the Corporate Secretary of the Company
at its principal corporate offices. Any notice required to be given or
delivered to Purchaser shall be in writing and addressed to Purchaser at the
address indicated above or to such other address as Purchaser may designate
in writing from time to time to the Company. All notices shall be deemed
effectively given upon personal delivery, three (3) days after deposit in the
United States mail by certified or registered mail (return receipt
requested), one (1) business day after its deposit with any return receipt
express courier (prepaid), or one (1) business day after transmission by
rapifax or telecopier.
18. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Agreement.
19. HEADINGS. The captions and headings of this Exercise Agreement are
included for ease of reference only and will be disregarded in interpreting
or construing this Exercise Agreement. All references herein to Sections will
refer to Sections of this Exercise Agreement.
20. ENTIRE AGREEMENT. The Plan, the Stock Option Agreement and this
Exercise Agreement, together with all its Exhibits, constitute the entire
agreement and understanding of the parties with respect to the subject matter
of this Exercise Agreement, and supersede all prior understandings and
agreements, whether oral or written, between the parties hereto with respect
to the specific subject matter hereof.
-8-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be
executed in duplicate by its duly authorized representative and Purchaser has
executed this Exercise Agreement in triplicate as of the Effective Date.
SILICON IMAGE, INC. PURCHASER
By:____________________________________ ___________________________________
(Signature)
_______________________________________ ___________________________________
(Please print name) (Please print name)
_______________________________________
(Please print title)
[SIGNATURE PAGE TO SILICON IMAGE, INC. STOCK OPTION EXERCISE AGREEMENT]
-9-
<PAGE>
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: California Commissioner Rule 260.141.11
<PAGE>
EXHIBIT 1
---------
STOCK POWER AND ASSIGNMENT
--------------------------
SEPARATE FROM STOCK CERTIFICATE
-------------------------------
<PAGE>
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Option
Exercise Agreement No. ________ dated as of _______________, 19___, (the
"AGREEMENT"), the undersigned hereby sells, assigns and transfers unto
_______________________________, shares of the Common Stock of Silicon Image,
Inc., a California corporation (the "COMPANY"), standing in the undersigned's
name on the books of the Company represented by Certificate No(s). ______
delivered herewith, and does hereby irrevocably constitute and appoint the
Secretary of the Company as the undersigned's attorney-in-fact, with full
power of substitution, to transfer said stock on the books of the Company.
THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THIS EXERCISE AGREEMENT AND
ANY EXHIBITS THERETO.
Dated: _______________, 19____
PURCHASER
______________________________________
(Signature)
______________________________________
(Please Print Name)
______________________________________
(Spouse's Signature, if any)
______________________________________
(Please Print Spouse's Name)
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this Stock Power and Assignment is to enable the Company to
acquire the shares upon exercise of its "Right of First Refusal" set forth in
this Exercise Agreement without requiring additional signatures on the part
of the Purchaser or Purchaser's Spouse.
<PAGE>
EXHIBIT 2
---------
SPOUSE CONSENT
--------------
<PAGE>
SPOUSE CONSENT
The undersigned spouse of Purchaser has read, understands, and
hereby approves the Stock Option Exercise Agreement between Purchaser and the
Company (the "AGREEMENT"). In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in this Exercise
Agreement, the undersigned hereby agrees to be irrevocably bound by this
Exercise Agreement and further agrees that any community property interest
shall similarly be bound by this Exercise Agreement. The undersigned hereby
appoints Purchaser as my attorney-in-fact with respect to any amendment or
exercise of any rights under this Exercise Agreement.
Date:_________________________
______________________________________
Name of Purchaser - Please Print
______________________________________
Signature of Purchaser's Spouse
Address: ______________________________________
<PAGE>
EXHIBIT 3
CALIFORNIA COMMISSIONER RULE 260.141.11
(a) The issuer of any security upon which a restriction on transfer has
been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534
shall cause a copy of this section to be delivered to each issuee or
transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the
prior written consent of the Commissioner (until this condition is
removed pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules:
(4) to the transferor's ancestors, descendants or spouse, or any custodian
or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's
ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation intervivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting as
such or as a finder) to a resident of a foreign state, territory or
country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign
state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal transaction,
or as an underwriter or member of an underwriting syndicate or selling
group;
(9) if the interest sold or transferred is a pledge or other lien given by
the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Section 25111, 25112, 25113, or 25121
of the Code, of the securities to be transferred, provided that no
order under Section 25140 or subdivision (a) of Section 25143 is in
effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation, or
by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113 of
the Code, provided that no order under Section 25140 or subdivision (a)
of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who are
neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or the
administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or by
the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at
the sale that transfer of the securities is restricted under this rule,
(ii) delivers to each purchaser a copy of this rule, and (iii) advises
the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not involve
a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirements of
Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
<PAGE>
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend, prominently
stamped or printed thereon in capital letters of not less than 10-point
size, reading as follows:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFORE, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
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<PAGE>
EXHIBIT 10.03
SILICON IMAGE, INC.
1999 EQUITY INCENTIVE PLAN
As Adopted July 20, 1999
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
2.1 NUMBER OF SHARES AVAILABLE. Subject to
Sections 2.2 and 18, the total number of Shares reserved and available for grant
and issuance pursuant to this Plan will be 1,000,000 Shares plus Shares that are
subject to: (a) issuance upon exercise of an Option but cease to be subject to
such Option for any reason other than exercise of such Option; (b) an Award
granted hereunder but are forfeited or are repurchased by the Company at the
original issue price; and (c) an Award that otherwise terminates without Shares
being issued. In addition, any authorized shares not issued or subject to
outstanding grants under the Silicon Image, Inc. 1995 Equity Incentive Plan (the
"PRIOR PLAN") on the Effective Date (as defined below) and any shares issued
under the Prior Plan that are forfeited or repurchased by the Company or that
are issuable upon exercise of options granted pursuant to the Prior Plan that
expire or become unexercisable for any reason without having been exercised in
full, will no longer be available for grant and issuance under the Prior Plan,
but will be available for grant and issuance under this Plan. In addition, on
the first business day of each calendar year of the Company during the term of
the Plan, the aggregate number of Shares reserved and available for grant and
issuance pursuant to this Plan will be increased automatically by a number of
Shares equal to 5% of the total outstanding shares of the Company, PROVIDED,
that the Board or the Committee may in its sole discretion reduce the amount of
the increase in any particular year; and, PROVIDED FURTHER, that no more than
10,000,000 shares shall qualify as ISOs (as defined in Section 5 below). At all
times the Company shall reserve and keep available a sufficient number of Shares
as shall be required to satisfy the requirements of all outstanding Options
granted under this Plan and all other outstanding but unvested Awards granted
under this Plan.
2.2 ADJUSTMENT OF SHARES. In the event that the
number of outstanding shares is changed by a stock dividend, recapitalization,
stock split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
number of Shares subject to each Annual Grant described in Section 9 below, (c)
the Exercise Prices of and number of Shares subject to outstanding Options, and
(d) the number of Shares subject to other outstanding Awards will be
proportionately adjusted, subject to any required action by the Board or the
stockholders of the Company and compliance with applicable securities laws;
PROVIDED, HOWEVER, that fractions of a Share will not be issued but will either
be replaced by a cash payment equal to the Fair Market Value of such fraction of
a Share or will be rounded up to the nearest whole Share, as determined by the
Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be
granted only to employees (including officers and directors who are also
employees) of the Company or of a Parent or Subsidiary of the Company. All other
Awards may be granted to employees, officers, directors, consultants,
independent contractors and advisors of the Company or any Parent or Subsidiary
of the Company; PROVIDED such consultants, contractors and advisors render bona
fide services not in connection with the offer and sale of securities in a
capital-raising transaction. No person will be eligible to receive more than
500,000 Shares in any calendar year under this Plan pursuant to the grant of
Awards hereunder, other than new employees of the Company or of a Parent or
Subsidiary of the Company (including new employees who are also officers and
directors of the Company or any Parent or Subsidiary of the Company), who are
eligible to receive up to a maximum of 750,000 Shares in the calendar year in
which they commence their employment. A person may be granted more than one
Award under this Plan.
<PAGE>
4. ADMINISTRATION.
4.1 COMMITTEE AUTHORITY. This Plan will be
administered by the Committee or by the Board acting as the Committee. Except
for automatic grants to Eligible Directors pursuant to Section 9 hereof, and
subject to the general purposes, terms and conditions of this Plan, and to the
direction of the Board, the Committee will have full power to implement and
carry out this Plan. Except for automatic grants to Eligible Directors pursuant
to Section 9 hereof, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement
and any other agreement or document executed pursuant
to this Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or
as alternatives to, other Awards under this Plan or any
other incentive or compensation plan of the Company or
any Parent or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of
Awards;
(i) correct any defect, supply any omission or reconcile
any inconsistency in this Plan, any Award or any Award
Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 COMMITTEE DISCRETION. Except for automatic
grants to Eligible Directors pursuant to Section 9 hereof, any determination
made by the Committee with respect to any Award will be made in its sole
discretion at the time of grant of the Award or, unless in contravention of any
express term of this Plan or Award, at any later time, and such determination
will be final and binding on the Company and on all persons having an interest
in any Award under this Plan. The Committee may delegate to one or more officers
of the Company the authority to grant an Award under this Plan to Participants
who are not Insiders of the Company.
5. OPTIONS. The Committee may grant Options to eligible persons
and will determine whether such Options will be Incentive Stock Options within
the meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOS"), the
number of Shares subject to the Option, the Exercise Price of the Option, the
period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:
5.1 FORM OF OPTION GRANT. Each Option granted under
this Plan will be evidenced by an Award Agreement which will expressly identify
the Option as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and, except as
otherwise required by the terms of Section 9 hereof, will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
2
<PAGE>
5.2 DATE OF GRANT. The date of grant of an Option
will be the date on which the Committee makes the determination to grant such
Option, unless otherwise specified by the Committee. The Stock Option Agreement
and a copy of this Plan will be delivered to the Participant within a reasonable
time after the granting of the Option.
5.3 EXERCISE PERIOD. Except for automatic grants to
Eligible Directors pursuant to Section 9 hereof, Options may be exercisable
within the times or upon the events determined by the Committee as set forth in
the Stock Option Agreement governing such Option; PROVIDED, HOWEVER, that no
Option will be exercisable after the expiration of ten (10) years from the date
the Option is granted; and PROVIDED FURTHER that no ISO granted to a person who
directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("TEN PERCENT STOCKHOLDER") will be exercisable after
the expiration of five (5) years from the date the ISO is granted. The Committee
also may provide for Options to become exercisable at one time or from time to
time, periodically or otherwise, in such number of Shares or percentage of
Shares as the Committee determines.
5.4 EXERCISE PRICE. The Exercise Price of an
Option will be determined by the Committee when the Option is granted and may be
not less than 85% of the Fair Market Value of the Shares on the date of grant;
provided that: (i) the Exercise Price of an ISO will be not less than 100% of
the Fair Market Value of the Shares on the date of grant; and (ii) the Exercise
Price of any ISO granted to a Ten Percent Stockholder will not be less than 110%
of the Fair Market Value of the Shares on the date of grant. Payment for the
Shares purchased may be made in accordance with Section 8 of this Plan.
5.5 METHOD OF EXERCISE. Options may be exercised
only by delivery to the Company of a written stock option exercise agreement
(the "EXERCISE AGREEMENT") in a form approved by the Committee (which need not
be the same for each Participant), stating the number of Shares being purchased,
the restrictions imposed on the Shares purchased under such Exercise Agreement,
if any, and such representations and agreements regarding Participant's
investment intent and access to information and other matters, if any, as may be
required or desirable by the Company to comply with applicable securities laws,
together with payment in full of the Exercise Price for the number of Shares
being purchased.
5.6 TERMINATION. Notwithstanding the exercise
periods set forth in the Stock Option Agreement, exercise of an Option will
always be subject to the following:
(a) If the Participant is Terminated for any reason except
death or Disability, then the Participant may exercise
such Participant's Options only to the extent that such
Options would have been exercisable upon the
Termination Date no later than three (3) months after
the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be
determined by the Committee, with any exercise beyond
three (3) months after the Termination Date deemed to
be an NQSO), but in any event, no later than the
expiration date of the Options.
(b) If the Participant is Terminated because of
Participant's death or Disability (or the Participant
dies within three (3) months after a Termination other
than for Cause or because of Participant's
Disability), then Participant's Options may be
exercised only to the extent that such Options would
have been exercisable by Participant on the
Termination Date and must be exercised by Participant
(or Participant's legal representative or authorized
assignee) no later than twelve (12) months after the
Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be
determined by the Committee, with any such exercise
beyond (a) three (3) months after the Termination Date
when the Termination is for any reason other than the
Participant's death or Disability, or (b) twelve (12)
months after the Termination Date when the Termination
is for Participant's death or Disability, deemed to be
an NQSO), but in any event no later than the
expiration date of the Options.
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5.7 LIMITATIONS ON EXERCISE. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 LIMITATIONS ON ISO. The aggregate Fair Market
Value (determined as of the date of grant) of Shares with respect to which ISO
are exercisable for the first time by a Participant during any calendar year
(under this Plan or under any other incentive stock option plan of the Company,
Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair
Market Value of Shares on the date of grant with respect to which ISO are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, then the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year will be ISO and the Options for the amount in
excess of $100,000 that become exercisable in that calendar year will be NQSOs.
In the event that the Code or the regulations promulgated thereunder are amended
after the Effective Date of this Plan to provide for a different limit on the
Fair Market Value of Shares permitted to be subject to ISO, such different limit
will be automatically incorporated herein and will apply to any Options granted
after the effective date of such amendment.
5.9 MODIFICATION, EXTENSION OR RENEWAL. The Committee
may modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; PROVIDED, HOWEVER, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 NO DISQUALIFICATION. Notwithstanding any other
provision in this Plan, no term of this Plan relating to ISO will be
interpreted, amended or altered, nor will any discretion or authority granted
under this Plan be exercised, so as to disqualify this Plan under Section 422 of
the Code or, without the consent of the Participant affected, to disqualify any
ISO under Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "PURCHASE PRICE"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 FORM OF RESTRICTED STOCK AWARD. All purchases
under a Restricted Stock Award made pursuant to this Plan will be evidenced by
an Award Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such
form (which need not be the same for each Participant) as the Committee will
from time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer will terminate, unless otherwise determined by the Committee.
6.2 PURCHASE PRICE. The Purchase Price of Shares
sold pursuant to a Restricted Stock Award will be determined by the Committee on
the date the Restricted Stock Award is granted, except in the case of a sale to
a Ten Percent Stockholder, in which case the Purchase Price will be 100% of the
Fair Market Value. Payment of the Purchase Price may be made in accordance with
Section 8 of this Plan.
6.3 TERMS OF RESTRICTED STOCK AWARDS. Restricted
Stock Awards shall be subject to such restrictions as the Committee may impose.
These restrictions may be based upon completion of a specified number of years
of service with the Company or upon completion of the performance goals as set
out in advance in
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the Participant's individual Restricted Stock Purchase Agreement. Restricted
Stock Awards may vary from Participant to Participant and between groups of
Participants. Prior to the grant of a Restricted Stock Award, the Committee
shall: (a) determine the nature, length and starting date of any Performance
Period for the Restricted Stock Award; (b) select from among the Performance
Factors to be used to measure performance goals, if any; and (c) determine
the number of Shares that may be awarded to the Participant. Prior to the
payment of any Restricted Stock Award, the Committee shall determine the
extent to which such Restricted Stock Award has been earned. Performance
Periods may overlap and Participants may participate simultaneously with
respect to Restricted Stock Awards that are subject to different Performance
Periods and having different performance goals and other criteria.
6.4 TERMINATION DURING PERFORMANCE PERIOD. If a
Participant is Terminated during a Performance Period for any reason, then such
Participant will be entitled to payment (whether in Shares, cash or otherwise)
with respect to the Restricted Stock Award only to the extent earned as of the
date of Termination in accordance with the Restricted Stock Purchase Agreement,
unless the Committee will determine otherwise.
7. STOCK BONUSES.
7.1 AWARDS OF STOCK BONUSES. A Stock Bonus is an
award of Shares (which may consist of Restricted Stock) for services rendered to
the Company or any Parent or Subsidiary of the Company. A Stock Bonus may be
awarded for past services already rendered to the Company, or any Parent or
Subsidiary of the Company pursuant to an Award Agreement (the "STOCK BONUS
AGREEMENT") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. A Stock Bonus may
be awarded upon satisfaction of such performance goals as are set out in advance
in the Participant's individual Award Agreement (the "PERFORMANCE STOCK BONUS
AGREEMENT") that will be in such form (which need not be the same for each
Participant) as the Committee will from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent or Subsidiary and/or
individual performance factors or upon such other criteria as the Committee may
determine.
7.2 TERMS OF STOCK BONUSES. The Committee will
determine the number of Shares to be awarded to the Participant. If the Stock
Bonus is being earned upon the satisfaction of performance goals pursuant to a
Performance Stock Bonus Agreement, then the Committee will: (a) determine the
nature, length and starting date of any Performance Period for each Stock Bonus;
(b) select from among the Performance Factors to be used to measure the
performance, if any; and (c) determine the number of Shares that may be awarded
to the Participant. Prior to the payment of any Stock Bonus, the Committee shall
determine the extent to which such Stock Bonuses have been earned. Performance
Periods may overlap and Participants may participate simultaneously with respect
to Stock Bonuses that are subject to different Performance Periods and different
performance goals and other criteria. The number of Shares may be fixed or may
vary in accordance with such performance goals and criteria as may be determined
by the Committee. The Committee may adjust the performance goals applicable to
the Stock Bonuses to take into account changes in law and accounting or tax
rules and to make such adjustments as the Committee deems necessary or
appropriate to reflect the impact of extraordinary or unusual items, events or
circumstances to avoid windfalls or hardships.
7.3 FORM OF PAYMENT. The earned portion of a Stock
Bonus may be paid currently or on a deferred basis with such interest or
dividend equivalent, if any, as the Committee may determine. Payment may be made
in the form of cash or whole Shares or a combination thereof, either in a lump
sum payment or in installments, all as the Committee will determine.
8. PAYMENT FOR SHARE PURCHASES.
8.1 PAYMENT. Payment for Shares purchased pursuant to
this Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
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(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been owned
by Participant for more than six (6) months and have
been paid for within the meaning of SEC Rule 144 (and,
if such shares were purchased from the Company by use
of a promissory note, such note has been fully paid
with respect to such shares); or (2) were obtained by
Participant in the public market;
(c) by tender of a full recourse promissory note having
such terms as may be approved by the Committee and
bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of the
Code; PROVIDED, HOWEVER, that Participants who are not
employees or directors of the Company will not be
entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral
other than the Shares;
(d) by waiver of compensation due or accrued to the
Participant for services rendered;
(e) with respect only to purchases upon exercise of an
Option, and provided that a public market for the
Company's stock exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a
member of the National Association of
Securities Dealers (an "NASD DEALER") whereby
the Participant irrevocably elects to exercise
the Option and to sell a portion of the Shares
so purchased to pay for the Exercise Price,
and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward
the Exercise Price directly to the Company; or
(2) through a "margin" commitment from the
Participant and a NASD Dealer whereby the
Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased
to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in
the amount of the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise
Price directly to the Company; or
(f) by any combination of the foregoing.
8.2 LOAN GUARANTEES. The Committee may help the
Participant pay for Shares purchased under this Plan by authorizing a guarantee
by the Company of a third-party loan to the Participant.
9. AUTOMATIC GRANTS TO ELIGIBLE DIRECTORS.
9.1 TYPES OF OPTIONS AND SHARES. Options granted under
this Plan and subject to this Section 9 shall be NQSOs.
9.2 ELIGIBILITY. Options subject to this Section 9
shall be granted only to Eligible Directors.
9.3 ANNUAL GRANTS. Immediately following each annual
meeting of stockholders, (a) each Eligible Director will automatically be
granted an Option for 10,000 Shares, provided the Eligible Director is a member
of the Board on such date and has served continuously as a member of the Board
of Directors of the Company (or the Company's California predecessor) for a
period of at least one year since the date when such Eligible Director first
became a member of the Board; and (b) each Eligible Director who is a member of
the Committee or the Company's Audit Committee will automatically be granted an
option for an additional 5,000 Shares for each such committee on which such
Eligible Director serves, provided such Eligible Director is a
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member of such committee on such date and has served continuously as a member
of such committee of the Company (or the Company's California predecessor)
for a period of at least one year since the date when such Eligible Director
first joined such committee. The Options described in this Section 9.3 are
referred to as the "ANNUAL GRANTS."
9.4 EXERCISE PRICE; EXERCISE PERIOD. The exercise
price of an Annual Grant shall be the Fair Market Value of the Shares at the
time of grant. The Exercise Period of an Annual Grant shall end two (2) years
after the date of grant.
10. WITHHOLDING TAXES.
10.1 WITHHOLDING GENERALLY. Whenever Shares are to be
issued in satisfaction of Awards granted under this Plan, the Company may
require the Participant to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such Shares. Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
10.2 STOCK WITHHOLDING. When, under applicable tax
laws, a Participant incurs tax liability in connection with the exercise or
vesting of any Award that is subject to tax withholding and the Participant is
obligated to pay the Company the amount required to be withheld, the Committee
may in its sole discretion allow the Participant to satisfy the minimum
withholding tax obligation by electing to have the Company withhold from the
Shares to be issued that number of Shares having a Fair Market Value equal to
the minimum amount required to be withheld, determined on the date that the
amount of tax to be withheld is to be determined. All elections by a Participant
to have Shares withheld for this purpose will be made in accordance with the
requirements established by the Committee and be in writing in a form acceptable
to the Committee
11. TRANSFERABILITY.
11.1 Except as otherwise provided in this
Section 11, Awards granted under this Plan, and any interest therein, will
not be transferable or assignable by Participant, and may not be made subject
to execution, attachment or similar process, otherwise than by will or by the
laws of descent and distribution or as determined by the Committee and set
forth in the Award Agreement with respect to Awards that are not ISOs.
11.2 ALL AWARDS OTHER THAN NQSO'S. All Awards
other than NQSO's shall be exercisable: (i) during the Participant's lifetime,
only by (A) the Participant, or (B) the Participant's guardian or legal
representative; and (ii) after Participant's death, by the legal representative
of the Participant's heirs or legatees.
11.3 NQSOS. Unless otherwise restricted by the
Committee, an NQSO shall be exercisable: (i) during the Participant's lifetime
only by (A) the Participant, (B) the Participant's guardian or legal
representative, (C) a Family Member of the Participant who has acquired the NQSO
by "permitted transfer;" and (ii) after Participant's death, by the legal
representative of the Participant's heirs or legatees. "Permitted transfer"
means, as authorized by this Plan and the Committee in an NQSO, any transfer
effected by the Participant during the Participant's lifetime of an interest in
such NQSO but only such transfers which are by gift or domestic relations order.
A permitted transfer does not include any transfer for value and neither of the
following are transfers for value: (a) a transfer of under a domestic relations
order in settlement of marital property rights or (b) a transfer to an entity in
which more than fifty percent of the voting interests are owned by Family
Members or the Participant in exchange for an interest in that entity.
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12. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES..
12.1 VOTING AND DIVIDENDS. No Participant will
have any of the rights of a stockholder with respect to any Shares until the
Shares are issued to the Participant. After Shares are issued to the
Participant, the Participant will be a stockholder and have all the rights of a
stockholder with respect to such Shares, including the right to vote and receive
all dividends or other distributions made or paid with respect to such Shares;
PROVIDED, that if such Shares are Restricted Stock, then any new, additional or
different securities the Participant may become entitled to receive with respect
to such Shares by virtue of a stock dividend, stock split or any other change in
the corporate or capital structure of the Company will be subject to the same
restrictions as the Restricted Stock; PROVIDED, FURTHER, that the Participant
will have no right to retain such stock dividends or stock distributions with
respect to Shares that are repurchased at the Participant's Purchase Price or
Exercise Price pursuant to Section 12.
12.2 FINANCIAL STATEMENTS. The Company will
provide financial statements to each Participant prior to such Participant's
purchase of Shares under this Plan, and to each Participant annually during the
period such Participant has Awards outstanding; PROVIDED, HOWEVER, the Company
will not be required to provide such financial statements to Participants whose
services in connection with the Company assure them access to equivalent
information.
12.3 RESTRICTIONS ON SHARES. At the discretion
of the Committee, the Company may reserve to itself and/or its assignee(s) in
the Award Agreement a right to repurchase a portion of or all Unvested Shares
held by a Participant following such Participant's Termination at any time
within ninety (90) days after the later of Participant's Termination Date and
the date Participant purchases Shares under this Plan, for cash and/or
cancellation of purchase money indebtedness, at the Participant's Exercise Price
or Purchase Price, as the case may be.
13. CERTIFICATES. All certificates for Shares or other
securities delivered under this Plan will be subject to such stock transfer
orders, legends and other restrictions as the Committee may deem necessary or
advisable, including restrictions under any applicable federal, state or foreign
securities law, or any rules, regulations and other requirements of the SEC or
any stock exchange or automated quotation system upon which the Shares may be
listed or quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; PROVIDED, HOWEVER, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any
time or from time to time, authorize the Company, with the consent of the
respective Participants, to issue new Awards in exchange for the surrender and
cancellation of any or all outstanding Awards. The Committee may at any time buy
from a Participant an Award previously granted with payment in cash, Shares
(including Restricted Stock) or other consideration, based on such terms and
conditions as the Committee and the Participant may agree.
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16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award
will not be effective unless such Award is in compliance with all applicable
federal and state securities laws, rules and regulations of any governmental
body, and the requirements of any stock exchange or automated quotation system
upon which the Shares may then be listed or quoted, as they are in effect on the
date of grant of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
18.1 ASSUMPTION OR REPLACEMENT OF AWARDS BY
SUCCESSOR. In the event of (a) a dissolution or liquidation of the Company, (b)
a merger or consolidation in which the Company is not the surviving corporation
(other than a merger or consolidation with a wholly-owned subsidiary, a
reincorporation of the Company in a different jurisdiction, or other transaction
in which there is no substantial change in the stockholders of the Company or
their relative stock holdings and the Awards granted under this Plan are
assumed, converted or replaced by the successor corporation, which assumption
will be binding on all Participants), (c) a merger in which the Company is the
surviving corporation but after which the stockholders of the Company
immediately prior to such merger (other than any stockholder that merges, or
which owns or controls another corporation that merges, with the Company in such
merger) cease to own their shares or other equity interest in the Company, (d)
the sale of substantially all of the assets of the Company, or (e) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction, any or all outstanding Awards
(including without limitation Annual Grants under Section 9) may be assumed,
converted or replaced by the successor corporation (if any), which assumption,
conversion or replacement will be binding on all Participants. In the
alternative, the successor corporation may substitute equivalent Awards or
provide substantially similar consideration to Participants as was provided to
stockholders (after taking into account the existing provisions of the Awards).
The successor corporation may also issue, in place of outstanding Shares of the
Company held by the Participant, substantially similar shares or other property
subject to repurchase restrictions no less favorable to the Participant. In the
event such successor corporation (if any) refuses to assume or substitute
Awards, as provided above, pursuant to a transaction described in this
Subsection 18.1, such Awards (including without limitation Annual Grants under
Section 9) will expire on such transaction at such time and on such conditions
as the Committee will determine. Notwithstanding anything in this Plan to the
contrary, the Committee may, in its sole discretion, provide that the vesting of
any or all Awards granted pursuant to this Plan will accelerate upon a
transaction described in this Section 18. If the Committee exercises such
discretion with respect to Options, such Options will become exercisable in full
prior to the consummation of such event at such time and on such conditions as
the Committee determines, and if such Options are not exercised prior to the
consummation of the corporate transaction, they shall terminate at such time as
determined by the Committee.
18.2 OTHER TREATMENT OF AWARDS. Subject to any
greater rights granted to Participants under the foregoing provisions of this
Section 18, in the event of the occurrence of any transaction described in
Section 18.1, any outstanding Awards (including without limitation Annual Grants
under Section 9) will be treated as provided in the applicable agreement or plan
of merger, consolidation, dissolution, liquidation, or sale of assets.
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18.3 ASSUMPTION OF AWARDS BY THE COMPANY. The
Company, from time to time, also may substitute or assume outstanding awards
granted by another company, whether in connection with an acquisition of such
other company or otherwise, by either; (a) granting an Award under this Plan in
substitution of such other company's award; or (b) assuming such award as if it
had been granted under this Plan if the terms of such assumed award could be
applied to an Award granted under this Plan. Such substitution or assumption
will be permissible if the holder of the substituted or assumed award would have
been eligible to be granted an Award under this Plan if the other company had
applied the rules of this Plan to such grant. In the event the Company assumes
an award granted by another company, the terms and conditions of such award will
remain unchanged (EXCEPT that the exercise price and the number and nature of
Shares issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code). In the event the Company elects to
grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become
effective on the date on which the registration statement filed by the Company
with the SEC under the Securities Act registering the initial public offering of
the Company's Common Stock is declared effective by the SEC (the "EFFECTIVE
DATE"). This Plan shall be approved by the stockholders of the Company
(excluding Shares issued pursuant to this Plan), consistent with applicable
laws, within twelve (12) months before or after the date this Plan is adopted by
the Board. Upon the Effective Date, the Committee may grant Awards pursuant to
this Plan; PROVIDED, HOWEVER, that: (a) no Option may be exercised prior to
initial stockholder approval of this Plan; (b) no Option granted pursuant to an
increase in the number of Shares subject to this Plan approved by the Board will
be exercised prior to the time such increase has been approved by the
stockholders of the Company; (c) in the event that initial stockholder approval
is not obtained within the time period provided herein, all Awards granted
hereunder shall be cancelled, any Shares issued pursuant to any Awards shall be
cancelled and any purchase of Shares issued hereunder shall be rescinded; and
(d) in the event that stockholder approval of such increase is not obtained
within the time period provided herein, all Awards granted pursuant to such
increase will be cancelled, any Shares issued pursuant to any Award granted
pursuant to such increase will be cancelled, and any purchase of Shares pursuant
to such increase will be rescinded.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as
provided herein, this Plan will terminate ten (10) years from the date this Plan
is adopted by the Board or, if earlier, the date of stockholder approval. This
Plan and all agreements thereunder shall be governed by and construed in
accordance with the laws of the State of California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; PROVIDED, HOWEVER, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this
Plan by the Board, the submission of this Plan to the stockholders of the
Company for approval, nor any provision of this Plan will be construed as
creating any limitations on the power of the Board to adopt such additional
compensation arrangements as it may deem desirable, including, without
limitation, the granting of stock options and bonuses otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
23. DEFINITIONS. As used in this Plan, the following terms will
have the following meanings:
"AWARD" means any award under this Plan, including any
Option, Restricted Stock or Stock Bonus.
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"AWARD AGREEMENT" means, with respect to each Award,
the signed written agreement between the Company and the Participant setting
forth the terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means the commission of an act of theft,
embezzlement, fraud, dishonesty or a breach of fiduciary duty to the Company or
a Parent or Subsidiary of the Company.
"CODE" means the Internal Revenue Code of 1986, as
amended.
"COMMITTEE" means the Compensation Committee of the
Board.
"COMPANY" means Silicon Image, Inc. or any successor
corporation.
"DISABILITY" means a disability, whether temporary or
permanent, partial or total, as determined by the Committee. For ISO purposes,
"Disability" means a disability within the meaning of Code Section 22(e)(3).
"ELIGIBLE DIRECTOR" means a member of the Board (1)
who is not an employee of the Company or any Parent, Subsidiary or Affiliate of
the Company, and (2) whose direct pecuniary interest (as defined by the SEC in
Rule 16a-1 promulgated under the Exchange Act) in the Company's Common Stock is
less than five percent (5%) of total shares of Common Stock outstanding.
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
"EXERCISE PRICE" means the price at which a holder of
an Option may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value
of a share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq
National Market on the date of determination as
reported in THE WALL STREET JOURNAL;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national securities exchange on which the Common Stock
is listed or admitted to trading as reported in THE
WALL STREET JOURNAL;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities exchange,
the average of the closing bid and asked prices on the
date of determination as reported in THE WALL STREET
JOURNAL;
(d) in the case of an Award made on the Effective Date, the
price per share at which shares of the Company's Common
Stock are initially offered for sale to the public by
the Company's underwriters in the initial public
offering of the Company's Common Stock pursuant to a
registration statement filed with the SEC under the
Securities Act; or
(e) if none of the foregoing is applicable, by the
Committee in good faith.
"FAMILY MEMBER" includes any of the following:
11
<PAGE>
(a) child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece,
nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law of
the Participant, including any such person with such
relationship to the Participant by adoption;
(b) any person (other than a tenant or employee) sharing
the Participant's household;
(c) a trust in which the persons in (a) and (b) have more
than fifty percent of the beneficial interest;
(d) a foundation in which the persons in (a) and (b) or
the Participant control the
management of assets; or
(e) any other entity in which the persons in (a) and (b) or
the Participant own more than fifty percent of the
voting interest.
"INSIDER" means an officer or director of the Company
or any other person whose transactions in the Company's Common Stock are subject
to Section 16 of the Exchange Act.
"OPTION" means an award of an option to purchase
Shares pursuant to Section 5.
"PARENT" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if each of
such corporations other than the Company owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
"PARTICIPANT" means a person who receives an Award
under this Plan.
"PERFORMANCE FACTORS" means the factors selected by
the Committee from among the following measures to determine whether the
performance goals established by the Committee and applicable to Awards have
been satisfied:
(a) Net revenue and/or net revenue growth;
(b) Earnings before income taxes and
amortization and/or earnings before income
taxes and amortization growth;
(c) Operating income and/or operating income
growth;
(d) Net income and/or net income growth;
(e) Earnings per share and/or earnings per share
growth;
(f) Total stockholder return and/or total
stockholder return growth;
(g) Return on equity;
(h) Operating cash flow return on income;
(i) Adjusted operating cash flow return on
income;
(j) Economic value added; and
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<PAGE>
(k) Individual confidential business objectives.
"PERFORMANCE PERIOD" means the period of service
determined by the Committee, not to exceed five years, during which years of
service or performance is to be measured for Restricted Stock Awards or Stock
Bonuses.
"PLAN" means this Silicon Image, Inc. 1999 Equity
Incentive Plan, as amended from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares
pursuant to Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SHARES" means shares of the Company's Common Stock
reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and
18, and any successor security.
"STOCK BONUS" means an award of Shares, or cash in
lieu of Shares, pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if each
of the corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of
this Plan with respect to a Participant, that the Participant has for any reason
ceased to provide services as an employee, officer, director, consultant,
independent contractor, or advisor to the Company or a Parent or Subsidiary of
the Company. An employee will not be deemed to have ceased to provide services
in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of
absence approved by the Committee, provided, that such leave is for a period of
not more than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined
in the Award Agreement.
"VESTED SHARES" means "Vested Shares" as defined in
the Award Agreement.
13
<PAGE>
NO.__
SILICON IMAGE, INC.
1999 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "AGREEMENT") is made and entered into
as of the Date of Grant set forth below (the "DATE OF GRANT") by and between
Silicon Image, Inc., a Delaware corporation (the "COMPANY"), and the Optionee
named below ("OPTIONEE"). Capitalized terms not defined herein shall have
the meanings ascribed to them in the Company's 1999 Equity Incentive Plan
(the "PLAN").
OPTIONEE: _________________________________________
SOCIAL SECURITY NUMBER: _________________________________________
OPTIONEE'S ADDRESS: _________________________________________
_________________________________________
TOTAL OPTION SHARES: _________________________________________
EXERCISE PRICE PER SHARE: _________________________________________
DATE OF GRANT: _________________________________________
VESTING START DATE: _________________________________________
EXPIRATION DATE: _________________________________________
(unless earlier terminated under Section 3
hereof)
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Optionee an
option (this "OPTION") to purchase up to the total number of shares of Common
Stock of the Company set forth above as Total Option Shares (collectively,
the "SHARES") at the Exercise Price Per Share set forth above (the "EXERCISE
PRICE"), subject to all of the terms and conditions of this Agreement and the
Plan. If designated as an Incentive Stock Option above, this Option is
intended to qualify as an "incentive stock option" ("ISO") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "CODE"),
to the extent permitted under Code Section 422.
2. VESTING; EXERCISE PERIOD.
2.1 VESTING OF SHARES. This Option shall be exercisable
as it vests. Subject to the terms and conditions of the Plan and this
Agreement, this Option shall vest and become exercisable as to portions of
the Shares as follows: (a) this Option shall not be exercisable with respect
to any of the Shares until _________________, 19___ (the "First
<PAGE>
Vesting Date"); (b) if Optionee has continuously provided services to the
Company, or any Parent or Subsidiary of the Company, then on the First
Vesting Date, this Option shall become exercisable as to twenty-five percent
(25%) of the Shares; and (c) thereafter this Option shall become exercisable
as to an additional 2.08333% of the Shares on each monthly anniversary of the
First Vesting Date, provided that Optionee has continuously provided services
to the Company, or any Parent or Subsidiary of the Company, at all times
during the relevant month. This Option shall cease to vest upon Optionee's
Termination and Optionee shall in no event be entitled under this Option to
purchase a number of shares of the Company's Common Stock greater than the
"Total Option Shares."
2.2 VESTING OF OPTIONS. Shares that are vested pursuant
to the schedule set forth in Section 2.1 hereof are "Vested Shares." Shares
that are not vested pursuant to the schedule set forth in Section 2.1 hereof
are "Unvested Shares."
2.3 EXPIRATION. This Option shall expire on the
Expiration Date set forth above and must be exercised, if at all, on or
before the earlier of the Expiration Date or the date on which this Option is
earlier terminated in accordance with the provisions of Section 3 hereof.
3. TERMINATION.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH, DISABILITY
OR CAUSE. If Optionee is Terminated for any reason except Optionee's death,
Disability or Cause, then this Option, to the extent (and only to the extent)
that it is vested in accordance with the schedule set forth in Section 2.1
hereof on the Termination Date, may be exercised by Optionee no later than
three (3) months after the Termination Date, but in any event no later than
the Expiration Date.
3.2 TERMINATION BECAUSE OF DEATH OR DISABILITY. If
Optionee is Terminated because of death or Disability of Optionee (or the
Optionee dies within three (3) months after Termination other than for Cause
or because of Disability), then this Option, to the extent that it is vested
in accordance with the schedule set forth in Section 2.1 hereof on the
Termination Date, may be exercised by Optionee (or Optionee's legal
representative or authorized assignee) no later than twelve (12) months after
the Termination Date, but in any event no later than the Expiration Date.
Any exercise after three months after the Termination Date when the
Termination is for any reason other than Optionee's death or disability,
within the meaning of Code Section 22(e)(3), shall be deemed to be the
exercise of a nonqualified stock option.
3.3 TERMINATION FOR CAUSE. If Optionee is Terminated for
Cause, this Option will expire on the Optionee's date of Termination.
3.4 NO OBLIGATION TO EMPLOY. Nothing in the Plan or this
Agreement shall confer on Optionee any right to continue in the employ of, or
other relationship with, the Company or any Parent or Subsidiary of the
Company, or limit in any way the right of the Company or any Parent or
Subsidiary of the Company to terminate Optionee's employment or other
relationship at any time, with or without Cause.
2
<PAGE>
4. MANNER OF EXERCISE.
4.1 STOCK OPTION EXERCISE AGREEMENT. To exercise this
Option, Optionee (or in the case of exercise after Optionee's death,
Optionee's executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the
form attached hereto as EXHIBIT A, or in such other form as may be approved
by the Company from time to time (the "EXERCISE AGREEMENT"), which shall set
forth, INTER ALIA, Optionee's election to exercise this Option, the number of
shares being purchased, any restrictions imposed on the Shares and any
representations, warranties and agreements regarding Optionee's investment
intent and access to information as may be required by the Company to comply
with applicable securities laws. If someone other than Optionee exercises
this Option, then such person must submit documentation reasonably acceptable
to the Company that such person has the right to exercise this Option.
4.2 LIMITATIONS ON EXERCISE. This Option may not be
exercised unless such exercise is in compliance with all applicable federal
and state securities laws, as they are in effect on the date of exercise.
This Option may not be exercised as to fewer than 100 Shares unless it is
exercised as to all Shares as to which this Option is then exercisable.
4.3 PAYMENT. The Exercise Agreement shall be accompanied
by full payment of the Exercise Price for the Shares being purchased in cash
(by check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Optionee;
(b) by surrender of shares of the Company's Common Stock that
either: (1) have been owned by Optionee for more than six (6)
months and have been paid for within the meaning of SEC Rule
144 (and, if such shares were purchased from the Company by
use of a promissory note, such note has been fully paid with
respect to such shares); or (2) were obtained by Optionee in
the open public market; AND (3) are clear of all liens,
claims, encumbrances or security interests;
(c) by waiver of compensation due or accrued to Optionee for
services rendered;
(d) provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from Optionee and a
broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD DEALER") whereby Optionee
irrevocably elects to exercise this Option and to sell a
portion of the Shares so purchased to pay for the Exercise
Price and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the exercise price directly
to the Company; OR (2) through a "margin" commitment from
Optionee and an NASD Dealer whereby Optionee irrevocably
elects to exercise this Option and to pledge the Shares so
purchased to the NASD Dealer in a margin account as security
for a loan from the NASD Dealer in the amount of the Exercise
Price, and whereby the
3
<PAGE>
NASD Dealer irrevocably commits upon receipt of such Shares
to forward the Exercise Price directly to the Company;
(f) by any combination of the foregoing.
4.4 TAX WITHHOLDING. Prior to the issuance of the Shares
upon exercise of this Option, Optionee must pay or provide for any applicable
federal or state withholding obligations of the Company. If the Committee
permits, Optionee may provide for payment of withholding taxes upon exercise
of this Option by requesting that the Company retain Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld.
In such case, the Company shall issue the net number of Shares to the
Optionee by deducting the Shares retained from the Shares issuable upon
exercise.
4.5 ISSUANCE OF SHARES. Provided that the Exercise
Agreement and payment are in form and substance satisfactory to counsel for
the Company, the Company shall issue the Shares registered in the name of
Optionee, Optionee's authorized assignee, or Optionee's legal representative,
and shall deliver certificates representing the Shares with the appropriate
legends affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. To the
extent this Option is an ISO, if Optionee sells or otherwise disposes of any
of the Shares acquired pursuant to the ISO on or before the later of (a) the
date two (2) years after the Date of Grant, and (b) the date one (1) year
after transfer of such Shares to Optionee upon exercise of this Option, then
Optionee shall immediately notify the Company in writing of such disposition.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this
Option and the issuance and transfer of Shares shall be subject to compliance
by the Company and Optionee with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock
exchange on which the Company's Common Stock may be listed at the time of
such issuance or transfer. Optionee understands that the Company is under no
obligation to register or qualify the Shares with the SEC, any state
securities commission or any stock exchange to effect such compliance.
7. NONTRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner other than under the terms and conditions of the
Plan or by will or by the laws of descent and distribution and may be
exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, successors
and assigns of Optionee.
8. TAX CONSEQUENCES. Set forth below is a brief summary as of
the date the Board adopted the Plan of some of the federal tax consequences
of exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
4
<PAGE>
8.1 EXERCISE OF INCENTIVE STOCK OPTION. To the extent
this Option qualifies as an ISO, there will be no regular federal income tax
liability upon the exercise of this Option, although the excess, if any, of
the fair market value of the Shares on the date of exercise over the Exercise
Price will be treated as a tax preference item for federal income tax
purposes and may subject the Optionee to the alternative minimum tax in the
year of exercise.
8.2 EXERCISE OF NONQUALIFIED STOCK OPTION. To the extent
this Option does not qualify as an ISO, there may be a regular federal income
tax liability upon the exercise of this Option. Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the fair market value of the Shares on the
date of exercise over the Exercise Price. The Company may be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
8.3 DISPOSITION OF SHARES. The following tax
consequences may apply upon disposition of the Shares.
a. INCENTIVE STOCK OPTIONS. If the Shares are
held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an ISO and are disposed of more than two
(2) years after the Date of Grant, any gain realized on disposition of the
Shares will be treated as capital gain for federal income tax purposes. If
Shares purchased under an ISO are disposed of within the applicable one (1)
year or two (2) year period, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the fair market value of the Shares on the
date of exercise over the Exercise Price.
b. NONQUALIFIED STOCK OPTIONS. If the Shares
are held for more than twelve (12) months after the date of the transfer of
the Shares pursuant to the exercise of an NQSO, any gain realized on
disposition of the Shares will be treated as long-term capital gain.
c. WITHHOLDING. The Company may be required to
withhold from Optionee's compensation or collect from the Optionee and pay to
the applicable taxing authorities an amount equal to a percentage of this
compensation income.
9. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not have any
of the rights of a stockholder with respect to any Shares until the Shares
are issued to Optionee.
10. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Optionee or the Company to the Committee
for review. The resolution of such a dispute by the Committee shall be final
and binding on the Company and Optionee.
11. ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. This Agreement and the Plan and the Exercise Agreement constitute
the entire agreement and
5
<PAGE>
understanding of the parties hereto with respect to the subject matter hereof
and supersede all prior understandings and agreements with respect to such
subject matter.
12. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed
to the Corporate Secretary of the Company at its principal corporate offices.
Any notice required to be given or delivered to Optionee shall be in writing
and addressed to Optionee at the address indicated above or to such other
address as such party may designate in writing from time to time to the
Company. All notices shall be deemed to have been given or delivered upon:
personal delivery; three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); one (1) business day
after deposit with any return receipt express courier (prepaid); or one (1)
business day after transmission by facsimile.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding
upon Optionee and Optionee's heirs, executors, administrators, legal
representatives, successors and assigns.
14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California,
without regard to that body of law pertaining to choice of law or conflict of
law.
15. ACCEPTANCE. Optionee hereby acknowledges receipt of a copy
of the Plan and this Agreement. Optionee has read and understands the terms
and provisions thereof, and accepts this Option subject to all the terms and
conditions of the Plan and this Agreement. Optionee acknowledges that there
may be adverse tax consequences upon exercise of this Option or disposition
of the Shares and that the Company has advised Optionee to consult a tax
advisor prior to such exercise or disposition.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in duplicate by its duly authorized representative and Optionee has executed
this Agreement in duplicate as of the Date of Grant.
SILICON IMAGE, INC. OPTIONEE
By:_______________________________ _______________________________
(Signature)
__________________________________ _______________________________
(Please print name) (Please print name)
__________________________________
(Please print title)
7
<PAGE>
EXHIBIT A
---------
STOCK OPTION EXERCISE AGREEMENT
<PAGE>
EXHIBIT A
SILICON IMAGE, INC.
1999 EQUITY INCENTIVE PLAN (THE "PLAN")
STOCK OPTION EXERCISE AGREEMENT
I hereby elect to purchase the number of shares of Common Stock of
SILION IMAGE, INC. (the "COMPANY") as set forth below:
Optionee______________________ Number of Shares Purchased:__________________
Social Security Number:_______ Purchase Price per Share:____________________
Address:______________________ Aggregate Purchase Price:____________________
___________________ Date of Option Agreement:____________________
___________________
Type of Option: [ ] Incentive Stock Option Exact Name of Title to Shares:
[ ] Nonqualified Stock Option _______________________________
1. DELIVERY OF PURCHASE PRICE. Optionee hereby delivers to the Company the
Aggregate Purchase Price, to the extent permitted in the Option Agreement
(the "OPTION AGREEMENT") as follows (check as applicable and complete):
[ ] in cash (by check) in the amount of $_____________________, receipt
of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to Optionee in the
amount of $___________________________________;
[ ] by delivery of ______________________________ fully-paid,
nonassessable and vested shares of the Common Stock of the Company
owned by Optionee for at least six (6) months prior to the date
hereof (and which have been paid for within the meaning of SEC Rule
144), or obtained by Optionee in the open public market, and owned
free and clear of all liens, claims, encumbrances or security
interests, valued at the current Fair Market Value of
$____________________ per share;
[ ] by the waiver hereby of compensation due or accrued to Optionee for
services rendered in the amount of
$____________________________________ ;
[ ] through a "same-day-sale" commitment, delivered herewith, from
Optionee and the NASD Dealer named therein, in the amount of
$_______________________________; or
[ ] through a "margin" commitment, delivered herewith from Optionee and
the NASD Dealer named therein, in the amount of
$_________________________________________.
2. MARKET STANDOFF AGREEMENT. Optionee, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, agrees not
to sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by Optionee during the period requested by
the managing underwriter following the effective date of a registration
statement of the Company filed under the Securities Act, provided that all
officers and directors of the Company are required to enter into similar
agreements. Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer
instructions with respect to the shares (or other securities) subject to the
foregoing restriction until the end of such period.
3. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE
TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE
SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE.
4. ENTIRE AGREEMENT. The Plan and Option Agreement are incorporated herein
by reference. This Exercise Agreement, the Plan and the Option Agreement
constitute the entire agreement and understanding of the parties and
supersede in their entirety all prior understandings and agreements of the
Company and Optionee with respect to the subject matter hereof, and are
governed by California law except for that body of law pertaining to choice
of law or conflict of law.
Date:_______________________________ ____________________________________
SIGNATURE OF OPTIONEE
<PAGE>
SPOUSAL CONSENT
I acknowledge that I have read the foregoing Stock Option Exercise
Agreement (the "AGREEMENT") and that I know its contents. I hereby consent
to and approve all of the provisions of the Agreement, and agree that the
shares of the Common Stock of Silicon Image, Inc. purchased thereunder (the
"SHARES") and any interest I may have in such Shares are subject to all the
provisions of the Agreement. I will take no action at any time to hinder
operation of the Agreement on these Shares or any interest I may have in or
to them.
_____________________________________ Date:__________________
SIGNATURE OF OPTIONEE'S SPOUSE
_____________________________________
SPOUSE'S NAME - TYPED OR PRINTED
_____________________________________
OPTIONEE'S NAME - TYPED OR PRINTED
<PAGE>
NO.
SILICON IMAGE, INC.
1999 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(For Non-Employee Directors)
This Stock Option Agreement (this "AGREEMENT") is made and entered into
as of the Date of Grant set forth below (the "DATE OF GRANT") by and between
Silicon Image, Inc., a Delaware corporation (the "COMPANY"), and the Optionee
named below ("OPTIONEE"). Capitalized terms not defined herein shall have
the meanings ascribed to them in the Company's 1999 Equity Incentive Plan
(the "PLAN").
OPTIONEE: _______________________________________
SOCIAL SECURITY NUMBER: _______________________________________
OPTIONEE'S ADDRESS: _______________________________________
TOTAL OPTION SHARES: _______________________________________
EXERCISE PRICE PER SHARE: _______________________________________
DATE OF GRANT: _______________________________________
EXPIRATION DATE: _______________________________________
(unless earlier terminated under
Section 3 hereof)
TYPE OF STOCK OPTION: NONQUALIFIED STOCK OPTION
---------------------------------------
1. GRANT OF OPTION. The Company hereby grants to Optionee an option
(this "OPTION") to purchase up to the total number of shares of Common Stock
of the Company set forth above as Total Option Shares (collectively, the
"SHARES") at the Exercise Price Per Share set forth above (the "EXERCISE
PRICE"), subject to all of the terms and conditions of this Agreement and the
Plan.
2. VESTING; EXERCISE PERIOD.
2.1 VESTING OF SHARES. Subject to the terms and conditions of the
Plan and this Agreement, this Option shall be 100% vested and exercisable as
to the Shares as of the Date of Grant.
2.2 EXPIRATION. This Option shall expire on the Expiration Date
set forth above and must be exercised, if at all, on or before the earlier of
the Expiration Date or the date on which this Option is earlier terminated in
accordance with the provisions of Section 3 hereof.
3. TERMINATION. Except as provided below in this Section, this Option
shall terminate and may not be exercised if Optionee ceases to be a member of
the Board of Directors
<PAGE>
Stock Option Agreement
For Non-Employee Directors
1999 Equity Incentive Plan
of the Company ("BOARD MEMBER"). The date on which Optionee ceases to be a
Board Member shall be referred to as the "TERMINATION DATE."
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH OR DISABILITY. If
Optionee ceases to be a Board Member for any reason except Death or
Disability, then this Option may be exercised by Optionee no later than three
(3) months after the Termination Date, but in any event no later than the
Expiration Date.
3.2 TERMINATION BECAUSE OF DEATH OR DISABILITY. If Optionee
ceases to be a Board Member for any reason except Death or Disability, then
this Option may be exercised by Optionee (or Optionee's legal representative
or authorized assignee) no later than twelve (12) months after the
Termination Date, but in any event no later than the Expiration Date.
4. MANNER OF EXERCISE.
4.1 STOCK OPTION EXERCISE AGREEMENT. To exercise this Option,
Optionee (or in the case of exercise after Optionee's death, Optionee's
executor, administrator, heir or legatee, as the case may be) must deliver to
the Company an executed stock option exercise agreement in the form attached
hereto as EXHIBIT A, or in such other form as may be approved by the Company
from time to time (the "EXERCISE AGREEMENT"), which shall set forth, INTER
ALIA, Optionee's election to exercise this Option, the number of shares being
purchased, any restrictions imposed on the Shares and any representations,
warranties and agreements regarding Optionee's investment intent and access
to information as may be required by the Company to comply with applicable
securities laws. If someone other than Optionee exercises this Option, then
such person must submit documentation reasonably acceptable to the Company
that such person has the right to exercise this Option.
4.2 LIMITATIONS ON EXERCISE. This Option may not be exercised
unless such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. This Option
may not be exercised as to fewer than 100 Shares unless it is exercised as to
all Shares as to which this Option is then exercisable.
4.3 PAYMENT. The Exercise Agreement shall be accompanied by full
payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to the Optionee;
(b) by surrender of shares of the Company's Common Stock that either:
(1) have been owned by Optionee for more than six (6) months and
have been paid for within the meaning of SEC Rule 144 (and, if such
shares were purchased from the Company by use of a promissory note,
such note has been fully paid with respect to such shares); or (2)
were obtained by Optionee in the open public market; AND (3) are
clear of all liens, claims, encumbrances or security interests;
2
<PAGE>
Stock Option Agreement
For Non-Employee Directors
1999 Equity Incentive Plan
(c) by waiver of compensation due or accrued to Optionee for services
rendered;
(d) provided that a public market for the Company's stock exists: (1)
through a "same day sale" commitment from Optionee and a
broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD DEALER") whereby Optionee irrevocably
elects to exercise this Option and to sell a portion of the Shares
so purchased to pay for the Exercise Price and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to forward
the exercise price directly to the Company; OR (2) through a
"margin" commitment from Optionee and an NASD Dealer whereby
Optionee irrevocably elects to exercise this Option and to pledge
the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the Exercise Price directly
to the Company;
(f) by any combination of the foregoing.
4.4 TAX WITHHOLDING. Prior to the issuance of the Shares
upon exercise of this Option, Optionee must pay or provide for any applicable
federal or state withholding obligations of the Company. If the Committee
permits, Optionee may provide for payment of withholding taxes upon exercise
of this Option by requesting that the Company retain Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld.
In such case, the Company shall issue the net number of Shares to the
Optionee by deducting the Shares retained from the Shares issuable upon
exercise.
4.5 ISSUANCE OF SHARES. Provided that the Exercise Agreement
and payment are in form and substance satisfactory to counsel for the
Company, the Company shall issue the Shares registered in the name of
Optionee, Optionee's authorized assignee, or Optionee's legal representative,
and shall deliver certificates representing the Shares with the appropriate
legends affixed thereto.
5. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this
Option and the issuance and transfer of Shares shall be subject to compliance
by the Company and Optionee with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock
exchange on which the Company's Common Stock may be listed at the time of
such issuance or transfer. Optionee understands that the Company is under no
obligation to register or qualify the Shares with the SEC, any state
securities commission or any stock exchange to effect such compliance.
6. NONTRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner other than under the terms and conditions of the
Plan or by will or by the laws of descent and distribution and may be
exercised during the lifetime of Optionee only by Optionee.
3
<PAGE>
Stock Option Agreement
For Non-Employee Directors
1999 Equity Incentive Plan
The terms of this Option shall be binding upon the executors, administrators,
successors and assigns of Optionee.
7. TAX CONSEQUENCES. Set forth below is a brief summary as of
the date the Board adopted the Plan of some of the federal tax consequences
of exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO
CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THIS OPTION
OR DISPOSING OF THE SHARES.
7.1 EXERCISE OF NONQUALIFIED STOCK OPTION. To the extent
this Option does not qualify as an ISO, there may be a regular federal income
tax liability upon the exercise of this Option. Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the fair market value of the Shares on the
date of exercise over the Exercise Price. The Company may be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
7.2 DISPOSITION OF SHARES. The following tax consequences
may apply upon disposition of the Shares.
a. NONQUALIFIED STOCK OPTIONS. If the Shares are held
for more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an NQSO, any gain realized on disposition of the
Shares will be treated as long-term capital gain.
b. WITHHOLDING. The Company may be required to
withhold from Optionee's compensation or collect from the Optionee and pay to
the applicable taxing authorities an amount equal to a percentage of this
compensation income.
8. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not have any of
the rights of a stockholder with respect to any Shares until the Shares are
issued to Optionee.
9. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Optionee or the Company to the Committee
for review. The resolution of such a dispute by the Committee shall be final
and binding on the Company and Optionee.
10. ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. This Agreement and the Plan and the Exercise Agreement constitute
the entire agreement and understanding of the parties hereto with respect to
the subject matter hereof and supersede all prior understandings and
agreements with respect to such subject matter.
11. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed
to the Corporate Secretary of the Company at its principal corporate offices.
Any notice required to be given or delivered to
4
<PAGE>
Stock Option Agreement
For Non-Employee Directors
1999 Equity Incentive Plan
Optionee shall be in writing and addressed to Optionee at the address
indicated above or to such other address as such party may designate in
writing from time to time to the Company. All notices shall be deemed to
have been given or delivered upon: personal delivery; three (3) days after
deposit in the United States mail by certified or registered mail (return
receipt requested); one (1) business day after deposit with any return
receipt express courier (prepaid); or one (1) business day after transmission
by facsimile.
12. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding
upon Optionee and Optionee's heirs, executors, administrators, legal
representatives, successors and assigns.
13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California,
without regard to that body of law pertaining to choice of law or conflict of
law.
14. ACCEPTANCE. Optionee hereby acknowledges receipt of a copy of
the Plan and this Agreement. Optionee has read and understands the terms and
provisions thereof, and accepts this Option subject to all the terms and
conditions of the Plan and this Agreement. Optionee acknowledges that there
may be adverse tax consequences upon exercise of this Option or disposition
of the Shares and that the Company has advised Optionee to consult a tax
advisor prior to such exercise or disposition.
5
<PAGE>
Stock Option Agreement
For Non-Employee Directors
1999 Equity Incentive Plan
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in duplicate by its duly authorized representative and Optionee has executed
this Agreement in duplicate as of the Date of Grant.
SILICON IMAGE, INC. OPTIONEE
By:________________________________ __________________________________
(Signature)
___________________________________ __________________________________
(Please print name) (Please print name)
___________________________________
(Please print title)
6
<PAGE>
EXHIBIT A
STOCK OPTION EXERCISE AGREEMENT
<PAGE>
EXHIBIT A
SILICON IMAGE, INC.
1999 EQUITY INCENTIVE PLAN (THE "PLAN")
STOCK OPTION EXERCISE AGREEMENT
(For Non-Employee Directors)
I hereby elect to purchase the number of shares of Common Stock of
SILICON IMAGE, INC. (the "COMPANY") as set forth below:
<TABLE>
<S> <C>
Optionee ______________________________ Number of Shares Purchased:____________________
Social Security Number:________________ Purchase Price per Share:______________________
Address:_______________________________ Aggregate Purchase Price:______________________
_______________________________ Date of Option Agreement:______________________
_______________________________
Type of Option: Nonqualified Stock Option Exact Name of Title to Shares:_________________
_______________________________________________
</TABLE>
1. DELIVERY OF PURCHASE PRICE. Optionee hereby delivers to the Company the
Aggregate Purchase Price, to the extent permitted in the Option Agreement
(the "OPTION AGREEMENT") as follows (check as applicable and complete):
[ ] in cash (by check) in the amount of $_____________________,
receipt of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to Optionee in
the amount of $___________________________________;
[ ] by delivery of ______________________________ fully-paid,
nonassessable and vested shares of the Common Stock of the
Company owned by Optionee for at least six (6) months prior to
the date hereof (and which have been paid for within the
meaning of SEC Rule 144), or obtained by Optionee in the open
public market, and owned free and clear of all liens, claims,
encumbrances or security interests, valued at the current Fair
Market Value of $____________________ per share;
[ ] by the waiver hereby of compensation due or accrued to
Optionee for services rendered in the amount of
$____________________________________ ;
[ ] through a "same-day-sale" commitment, delivered herewith, from
Optionee and the NASD Dealer named therein, in the amount of
$_______________________________; or
[ ] through a "margin" commitment, delivered herewith from
Optionee and the NASD Dealer named therein, in the amount of
$_________________________________________.
2. MARKET STANDOFF AGREEMENT. Optionee, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, agrees not
to sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by Optionee during the period requested by
the managing underwriter following the effective date of a registration
statement of the Company filed under the Securities Act, provided that all
officers and directors of the Company are required to enter into similar
agreements. Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer
instructions with respect to the shares (or other securities) subject to the
foregoing restriction until the end of such period.
3. TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE
TAX CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE
SHARES. OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX
CONSULTANT(S) OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR
ANY TAX ADVICE.
4. ENTIRE AGREEMENT. The Plan and Option Agreement are incorporated herein
by reference. This Exercise Agreement, the Plan and the Option Agreement
constitute the entire agreement and understanding of the parties and
supersede in their entirety all prior understandings and agreements of the
Company and Optionee with respect to the subject matter hereof, and are
governed by California law except for that body of law pertaining to choice
of law or conflict of law.
Date:___________________________________ _________________________________
SIGNATURE OF OPTIONEE
<PAGE>
SPOUSAL CONSENT
I acknowledge that I have read the foregoing Stock Option Exercise
Agreement (the "AGREEMENT") and that I know its contents. I hereby consent
to and approve all of the provisions of the Agreement, and agree that the
shares of the Common Stock of Silicon Image, Inc. purchased thereunder (the
"SHARES") and any interest I may have in such Shares are subject to all the
provisions of the Agreement. I will take no action at any time to hinder
operation of the Agreement on these Shares or any interest I may have in or
to them.
____________________________________ Date:__________________
SIGNATURE OF OPTIONEE'S SPOUSE
_____________________________________
SPOUSE'S NAME - TYPED OR PRINTED
_____________________________________
OPTIONEE'S NAME - TYPED OR PRINTED
<PAGE>
EXHIBIT 10.04
SILICON IMAGE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
As Adopted July 20, 1999
1. ESTABLISHMENT OF PLAN. Silicon Image, Inc. (the "COMPANY")
proposes to grant options for purchase of the Company's Common Stock to
eligible employees of the Company and its Participating Subsidiaries (as
hereinafter defined) pursuant to this Employee Stock Purchase Plan (this
"PLAN"). For purposes of this Plan, "PARENT CORPORATION" and "SUBSIDIARY"
shall have the same meanings as "parent corporation" and "subsidiary
corporation" in Sections 424(e) and 424(f), respectively, of the Internal
Revenue Code of 1986, as amended (the "CODE"). "PARTICIPATING SUBSIDIARIES"
are Parent Corporations or Subsidiaries that the Board of Directors of the
Company (the "BOARD") designates from time to time as corporations that shall
participate in this Plan. The Company intends this Plan to qualify as an
"employee stock purchase plan" under Section 423 of the Code (including any
amendments to or replacements of such Section), and this Plan shall be so
construed. Any term not expressly defined in this Plan but defined for
purposes of Section 423 of the Code shall have the same definition herein. A
total of 250,000 shares of the Company's Common Stock is reserved for
issuance under this Plan. In addition, on each January 1, the aggregate
number of shares of the Company's Common Stock reserved for issuance under
the Plan shall be increased automatically by a number of shares equal to 1%
of the total number of outstanding shares of the Company Common Stock on the
immediately preceding December 31; PROVIDED, that the Board or the Committee
may in its sole discretion reduce the amount of the increase in any
particular year; and, PROVIDED FURTHER, that the aggregate number of shares
issued over the term of this Plan shall not exceed 4,000,000 shares. Such
number shall be subject to adjustments effected in accordance with Section 14
of this Plan.
2. PURPOSE. The purpose of this Plan is to provide eligible
employees of the Company and Participating Subsidiaries with a convenient
means of acquiring an equity interest in the Company through payroll
deductions, to enhance such employees' sense of participation in the affairs
of the Company and Participating Subsidiaries, and to provide an incentive
for continued employment.
3. ADMINISTRATION. This Plan shall be administered by the
Compensation Committee of the Board (the "COMMITTEE"). Subject to the
provisions of this Plan and the limitations of Section 423 of the Code or any
successor provision in the Code, all questions of interpretation or
application of this Plan shall be determined by the Committee and its
decisions shall be final and binding upon all participants. Members of the
Committee shall receive no compensation for their services in connection with
the administration of this Plan, other than standard fees as established from
time to time by the Board for services rendered by Board members serving on
Board committees. All expenses incurred in connection with the administration
of this Plan shall be paid by the Company.
4. ELIGIBILITY. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:
(a) employees who are not employed by the Company or a
Participating Subsidiary (10) days before the beginning of such Offering
Period, except that employees who are employed on the Effective Date of the
Registration Statement filed by the Company with the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended (the
"SECURITIES ACT") registering the initial public offering of the Company's
Common Stock shall be eligible to participate in the first Offering Period
under the Plan;
(b) employees who are customarily employed for twenty (20) hours
or less per week;
(c) employees who are customarily employed for five (5) months
or less in a calendar year;
(d) employees who, together with any other person whose stock
would be attributed to such employee pursuant to Section 424(d) of the Code,
own stock or hold options to purchase stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of stock of
the Company or any of its Participating Subsidiaries or who, as a result of
being granted an option under this Plan with respect to such Offering Period,
<PAGE>
would own stock or hold options to purchase stock possessing five percent
(5%) or more of the total combined voting power or value of all classes of
stock of the Company or any of its Participating Subsidiaries; and
(e) individuals who provide services to the Company or any of
its Participating Subsidiaries as independent contractors who are
reclassified as common law employees for any reason EXCEPT FOR federal income
and employment tax purposes.
5. OFFERING DATES. The offering periods of this Plan (each, an
"OFFERING PERIOD") shall be of twenty-four (24) months duration commencing on
February 1 and August 1 of each year and ending on January 31 and July 31 of
each year; PROVIDED, HOWEVER, that notwithstanding the foregoing, the first
such Offering Period shall commence on the first business day on which price
quotations for the Company's Common Stock are available on the Nasdaq
National Market (the "FIRST OFFERING DATE") and shall end on July 31, 2001.
Except for the first Offering Period, each Offering Period shall consist of
four (4) six month purchase periods (individually, a "PURCHASE PERIOD")
during which payroll deductions of the participants are accumulated under
this Plan. The first Offering Period shall consist of no more than five and
no fewer than three Purchase Periods, any of which may be greater or less
than six months as determined by the Committee. The first business day of
each Offering Period is referred to as the "OFFERING DATE". The last business
day of each Purchase Period is referred to as the "PURCHASE DATE". The
Committee shall have the power to change the duration of Offering Periods
with respect to offerings without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected.
6. PARTICIPATION IN THIS PLAN. Eligible employees may become
participants in an Offering Period under this Plan on the first Offering Date
after satisfying the eligibility requirements by delivering a subscription
agreement to the Company not later than five (5) days before such Offering
Date. Notwithstanding the foregoing, the Committee may set a later time for
filing the subscription agreement authorizing payroll deductions for all
eligible employees with respect to a given Offering Period. An eligible
employee who does not deliver a subscription agreement to the Company by such
date after becoming eligible to participate in such Offering Period shall not
participate in that Offering Period or any subsequent Offering Period unless
such employee enrolls in this Plan by filing a subscription agreement with
the Company not later than five (5) days preceding a subsequent Offering
Date. Once an employee becomes a participant in an Offering Period, such
employee will automatically participate in the Offering Period commencing
immediately following the last day of the prior Offering Period unless the
employee withdraws or is deemed to withdraw from this Plan or terminates
further participation in the Offering Period as set forth in Section 11
below. Such participant is not required to file any additional subscription
agreement in order to continue participation in this Plan.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee
in this Plan with respect to an Offering Period will constitute the grant (as
of the Offering Date) by the Company to such employee of an option to
purchase on the Purchase Date up to that number of shares of Common Stock of
the Company determined by dividing (a) the amount accumulated in such
employee's payroll deduction account during such Purchase Period by (b) the
lower of (i) eighty-five percent (85%) of the fair market value of a share of
the Company's Common Stock on the Offering Date (but in no event less than
the par value of a share of the Company's Common Stock), or (ii) eighty-five
percent (85%) of the fair market value of a share of the Company's Common
Stock on the Purchase Date (but in no event less than the par value of a
share of the Company's Common Stock), PROVIDED, HOWEVER, that the number of
shares of the Company's Common Stock subject to any option granted pursuant
to this Plan shall not exceed the lesser of (x) the maximum number of shares
set by the Committee pursuant to Section 10(c) below with respect to the
applicable Purchase Date, or (y) the maximum number of shares which may be
purchased pursuant to Section 10(b) below with respect to the applicable
Purchase Date. The fair market value of a share of the Company's Common Stock
shall be determined as provided in Section 8 below.
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
2
<PAGE>
(b) The fair market value on the Purchase Date.
For purposes of this Plan, the term "FAIR MARKET VALUE" means,
as of any date, the value of a share of the Company's Common Stock determined
as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq
National Market on the date of determination as
reported in THE WALL STREET JOURNAL;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its
closing price on the date of determination on the
principal national securities exchange on which the
Common Stock is listed or admitted to trading as
reported in THE WALL STREET JOURNAL;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities
exchange, the average of the closing bid and asked
prices on the date of determination as reported in
THE WALL STREET JOURNAL; or
(d) if none of the foregoing is applicable, by the Board
in good faith, which in the case of the First
Offering Date will be the price per share at which
shares of the Company's Common Stock are initially
offered for sale to the public by the Company's
underwriters in the initial public offering of the
Company's Common Stock pursuant to a registration
statement filed with the SEC under the Securities
Act.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE
OF SHARES.
(a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period. The deductions are made
as a percentage of the participant's compensation in one percent (1%)
increments not less than one percent (1%), nor greater than fifteen percent
(15%) or such lower limit set by the Committee. Compensation shall mean all
W-2 cash compensation, including, but not limited to, base salary, wages,
commissions, overtime, shift premiums and bonuses, plus draws against
commissions, PROVIDED, HOWEVER, that for purposes of determining a
participant's compensation, any election by such participant to reduce his or
her regular cash remuneration under Sections 125 or 401(k) of the Code shall
be treated as if the participant did not make such election. Payroll
deductions shall commence on the first payday of the Offering Period and
shall continue to the end of the Offering Period unless sooner altered or
terminated as provided in this Plan.
(b) A participant may increase or decrease the rate of payroll
deductions during an Offering Period by filing with the Company a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing more than fifteen (15) days
after the Company's receipt of the authorization and shall continue for the
remainder of the Offering Period unless changed as described below. Such
change in the rate of payroll deductions may be made at any time during an
Offering Period, but not more than one (1) change may be made effective
during any Purchase Period. A participant may increase or decrease the rate
of payroll deductions for any subsequent Offering Period by filing with the
Company a new authorization for payroll deductions not later than fifteen
(15) days before the beginning of such Offering Period.
(c) A participant may reduce his or her payroll deduction
percentage to zero during an Offering Period by filing with the Company a
request for cessation of payroll deductions. Such reduction shall be
effective beginning with the next payroll period commencing more than fifteen
(15) days after the Company's receipt of the request and no further payroll
deductions will be made for the duration of the Offering Period. Payroll
deductions credited to the participant's account prior to the effective date
of the request shall be used to purchase shares of Common Stock of the
Company in accordance with Section (e) below. A participant may not resume
making payroll deductions during the Offering Period in which he or she
reduced his or her payroll deductions to zero.
3
<PAGE>
(d) All payroll deductions made for a participant are credited
to his or her account under this Plan and are deposited with the general
funds of the Company. No interest accrues on the payroll deductions. All
payroll deductions received or held by the Company may be used by the Company
for any corporate purpose, and the Company shall not be obligated to
segregate such payroll deductions.
(e) On each Purchase Date, so long as this Plan remains in
effect and provided that the participant has not submitted a signed and
completed withdrawal form before that date which notifies the Company that
the participant wishes to withdraw from that Offering Period under this Plan
and have all payroll deductions accumulated in the account maintained on
behalf of the participant as of that date returned to the participant, the
Company shall apply the funds then in the participant's account to the
purchase of whole shares of Common Stock reserved under the option granted to
such participant with respect to the Offering Period to the extent that such
option is exercisable on the Purchase Date. The purchase price per share
shall be as specified in Section 8 of this Plan. Any cash remaining in a
participant's account after such purchase of shares shall be refunded to such
participant in cash, without interest; provided, however that any amount
remaining in such participant's account on a Purchase Date which is less than
the amount necessary to purchase a full share of Common Stock of the Company
shall be carried forward, without interest, into the next Purchase Period or
Offering Period, as the case may be. In the event that this Plan has been
oversubscribed, all funds not used to purchase shares on the Purchase Date
shall be returned to the participant, without interest. No Common Stock shall
be purchased on a Purchase Date on behalf of any employee whose participation
in this Plan has terminated prior to such Purchase Date.
(f) As promptly as practicable after the Purchase Date, the
Company shall issue shares for the participant's benefit representing the
shares purchased upon exercise of his or her option.
(g) During a participant's lifetime, his or her option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No participant shall be entitled to purchase stock under
this Plan at a rate which, when aggregated with his or her rights to purchase
stock under all other employee stock purchase plans of the Company or any
Subsidiary, exceeds $25,000 in fair market value, determined as of the
Offering Date (or such other limit as may be imposed by the Code) for each
calendar year in which the employee participates in this Plan. The Company
shall automatically suspend the payroll deductions of any participant as
necessary to enforce such limit provided that when the Company automatically
resumes such payroll deductions, the Company must apply the rate in effect
immediately prior to such suspension.
(b) No more than two hundred percent (200%) of the number of
shares determined by using eighty-five percent (85%) of the fair market value
of a share of the Company's Common Stock on the Offering Date as the
denominator may be purchased by a participant on any single Purchase Date.
(c) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Not less
than thirty (30) days prior to the commencement of any Offering Period, the
Committee may, in its sole discretion, set a maximum number of shares which
may be purchased by any employee at any single Purchase Date (hereinafter the
"MAXIMUM SHARE AMOUNT"). Until otherwise determined by the Committee, there
shall be no Maximum Share Amount. In no event shall the Maximum Share Amount
exceed the amounts permitted under Section 10(b) above. If a new Maximum
Share Amount is set, then all participants must be notified of such Maximum
Share Amount prior to the commencement of the next Offering Period. The
Maximum Share Amount shall continue to apply with respect to all succeeding
Purchase Dates and Offering Periods unless revised by the Committee as set
forth above.
(d) If the number of shares to be purchased on a Purchase Date
by all employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, then the Company will make a pro rata
allocation of the remaining shares in as uniform a manner as shall be
reasonably practicable and as the
4
<PAGE>
Committee shall determine to be equitable. In such event, the Company shall
give written notice of such reduction of the number of shares to be purchased
under a participant's option to each participant affected.
(e) Any payroll deductions accumulated in a participant's
account which are not used to purchase stock due to the limitations in this
Section 10 shall be returned to the participant as soon as practicable after
the end of the applicable Purchase Period, without interest.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period under
this Plan by signing and delivering to the Company a written notice to that
effect on a form provided for such purpose. Such withdrawal may be elected at
any time at least fifteen (15) days prior to the end of an Offering Period.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest,
and his or her interest in this Plan shall terminate. In the event a
participant voluntarily elects to withdraw from this Plan, he or she may not
resume his or her participation in this Plan during the same Offering Period,
but he or she may participate in any Offering Period under this Plan which
commences on a date subsequent to such withdrawal by filing a new
authorization for payroll deductions in the same manner as set forth in
Section 6 above for initial participation in this Plan.
(c) If the Fair Market Value on the first day of the current
Offering Period in which a participant is enrolled is higher than the Fair
Market Value on the first day of any subsequent Offering Period, the Company
will automatically enroll such participant in the subsequent Offering Period.
Any funds accumulated in a participant's account prior to the first day of
such subsequent Offering Period will be applied to the purchase of shares on
the Purchase Date immediately prior to the first day of such subsequent
Offering Period, if any.
12. TERMINATION OF EMPLOYMENT. Termination of a participant's
employment for any reason, including retirement, death or the failure of a
participant to remain an eligible employee of the Company or of a
Participating Subsidiary, immediately terminates his or her participation in
this Plan. In such event, the payroll deductions credited to the
participant's account will be returned to him or her or, in the case of his
or her death, to his or her legal representative, without interest. For
purposes of this Section 12, an employee will not be deemed to have
terminated employment or failed to remain in the continuous employ of the
Company or of a Participating Subsidiary in the case of sick leave, military
leave, or any other leave of absence approved by the Board; PROVIDED that
such leave is for a period of not more than ninety (90) days or reemployment
upon the expiration of such leave is guaranteed by contract or statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's
interest in this Plan is terminated by withdrawal, termination of employment
or otherwise, or in the event this Plan is terminated by the Board, the
Company shall deliver to the participant all payroll deductions credited to
such participant's account. No interest shall accrue on the payroll
deductions of a participant in this Plan.
14. CAPITAL CHANGES. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each option under this Plan which has not yet been exercised and the number
of shares of Common Stock which have been authorized for issuance under this
Plan but have not yet been placed under option (collectively, the
"RESERVES"), as well as the price per share of Common Stock covered by each
option under this Plan which has not yet been exercised, shall be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock of the Company resulting from a stock
split or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of issued and outstanding shares
of Common Stock effected without receipt of any consideration by the Company;
PROVIDED, HOWEVER, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Committee, whose
determination shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an option.
5
<PAGE>
In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, declare that this Plan shall terminate as of a date fixed by the
Committee and give each participant the right to purchase shares under this
Plan prior to such termination. In the event of (i) a merger or consolidation
in which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the
Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative
stock holdings and the options under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on
all participants), (ii) a merger in which the Company is the surviving
corporation but after which the stockholders of the Company immediately prior
to such merger (other than any stockholder that merges, or which owns or
controls another corporation that merges, with the Company in such merger)
cease to own their shares or other equity interest in the Company, (iii) the
sale of all or substantially all of the assets of the Company or (iv) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of
the Company by tender offer or similar transaction, the Plan will continue
with regard to Offering Periods that commenced prior to the closing of the
proposed transaction and shares will be purchased based on the Fair Market
Value of the surviving corporation's stock on each Purchase Date, unless
otherwise provided by the Committee consistent with pooling of interests
accounting treatment.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the
event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of
shares of its outstanding Common Stock, or in the event of the Company being
consolidated with or merged into any other corporation.
15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 below) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void
and without effect.
16. REPORTS. Individual accounts will be maintained for each
participant in this Plan. Each participant shall receive promptly after the
end of each Purchase Period a report of his or her account setting forth the
total payroll deductions accumulated, the number of shares purchased, the per
share price thereof and the remaining cash balance, if any, carried forward
to the next Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each participant shall notify the Company
in writing if the participant disposes of any of the shares purchased in any
Offering Period pursuant to this Plan if such disposition occurs within two
(2) years from the Offering Date or within one (1) year from the Purchase
Date on which such shares were purchased (the "NOTICE PERIOD"). The Company
may, at any time during the Notice Period, place a legend or legends on any
certificate representing shares acquired pursuant to this Plan requesting the
Company's transfer agent to notify the Company of any transfer of the shares.
The obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the
grant of any option hereunder shall confer any right on any employee to
remain in the employ of the Company or any Participating Subsidiary, or
restrict the right of the Company or any Participating Subsidiary to
terminate such employee's employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have
equal rights and privileges with respect to this Plan so that this Plan
qualifies as an "employee stock purchase plan" within the meaning of Section 423
or any successor provision of the Code and the related regulations. Any
provision of this Plan which is inconsistent with Section 423 or any successor
provision of the Code shall, without further act or amendment by the Company,
the Committee or the Board, be reformed to comply with the requirements of
Section 423. This Section 19 shall take precedence over all other provisions in
this Plan.
6
<PAGE>
20. NOTICES. All notices or other communications by a participant to
the Company under or in connection with this Plan shall be deemed to have
been duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board, this Plan will become effective on the First Offering Date (as defined
above). This Plan shall be approved by the stockholders of the Company, in
any manner permitted by applicable corporate law, within twelve (12) months
before or after the date this Plan is adopted by the Board. No purchase of
shares pursuant to this Plan shall occur prior to such stockholder approval.
This Plan shall continue until the earlier to occur of (a) termination of
this Plan by the Board (which termination may be effected by the Board at any
time), (b) issuance of all of the shares of Common Stock reserved for
issuance under this Plan, or (c) ten (10) years from the adoption of this
Plan by the Board.
22. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under this Plan in the event of such participant's
death subsequent to the end of an Purchase Period but prior to delivery to
him of such shares and cash. In addition, a participant may file a written
designation of a beneficiary who is to receive any cash from the
participant's account under this Plan in the event of such participant's
death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may
deliver such shares or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF
SHARES. Shares shall not be issued with respect to an option unless the
exercise of such option and the issuance and delivery of such shares pursuant
thereto shall comply with all applicable provisions of law, domestic or
foreign, including, without limitation, the Securities Act, the Securities
Exchange Act of 1934, as amended, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange or automated quotation
system upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
24. APPLICABLE LAW. The Plan shall be governed by the substantive
laws (excluding the conflict of laws rules) of the State of California.
25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance
with Section 21 above within twelve (12) months of the adoption of such
amendment (or earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under this
Plan; or
(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.
Notwithstanding the foregoing, the Board may make such amendments to
the Plan as the Board determines to be advisable, if the continuation of the
Plan or any Offering Period would result in financial accounting treatment
7
<PAGE>
for the Plan that is different from the financial accounting treatment in
effect on the date this Plan is adopted by the Board.
8
<PAGE>
SILICON IMAGE, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN
ENROLLMENT FORM
Check One: Complete:
[ ] New Enrollment or Re-enrollment Social Security No.__________________
[ ] Change Employee No._________________________
[ ] Change in How Shares Are to Be Held in Account
[ ] Increase in Payroll Deduction Level
[ ] this Purchase Period [ ] next Offering Period
[ ] Decrease in Payroll Deduction Level
[ ] this Purchase Period [ ] next Offering Period
[ ] Suspension of Payroll Deductions for Open Offering Period
(Attach Completed Suspension Form)
[ ] Withdrawal (Attach Completed Withdrawal Form)
[ ] Beneficiary Change
1. Name of Participant_____________________________________________
2. Shares purchased under the Plan should be held in account with the Plan
Broker in my name or in my name together with the name(s) indicated below:
Name_______________________________Social Security No.___________________
Name_______________________________Social Security No.___________________
There may be tax consequences for naming individuals other than your
spouse on the account in which Shares purchased under the Plan are held.
If spouse (circle one): Joint Tenants/Community Property.
PLEASE NOTIFY THE PLAN BROKER DIRECTLY TO TRANSFER OR SELL YOUR STOCK.
3. Payroll Deduction Level (from 1% to 15% in whole
percentages):____________ (the percentage deduction will be made from
your W-2 compensation including base salary, commissions, overtime,
shift premiums, bonuses and draws against commissions)
4. I confirm my spouse's interest (if married) in the community property
herein, and I hereby designate the following person(s) as my
beneficiary(ies) to receive all payments and/or stock attributable to my
interest under the Plan:
<TABLE>
<CAPTION>
NAME *To be divided ADDRESS
as follows:
<S> <C> <C>
______________________________________ ______________ _______________________________
Last First M.I. Number Street
______________________________________ _______________________________
Social Security No. Relationship City State Zip
______________________________________ ______________ _______________________________
Last First M.I. Number Street
______________________________________ _______________________________
Social Security No. Relationship City State Zip
</TABLE>
* If more than one beneficiary: (1) insert "in equal shares", or
(2)insert percentage to be paid to each beneficiary.
5. The information provided on this Enrollment Form will remain in effect
unless and until I complete and submit to Silicon Image, Inc. a new
enrollment form.
SILICON IMAGE, INC. OFFICE USE:
Signature:_____________ Date received by the______________:_________
Name:__________________ Date entered into system:
Date:__________________ PLEASE RETURN THIS COMPLETED FORM TO
SILICON IMAGE, INC.
<PAGE>
SILICON IMAGE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
1. I elect to participate in the Silicon Image, Inc. (the "COMPANY") 1999
Employee Stock Purchase Plan (the "PLAN") and to subscribe to purchase
shares of the Company's Common Stock (the "SHARES") in accordance with
this Subscription Agreement and the Plan.
2. I authorize payroll deductions from each of my paychecks in that
percentage of my base salary, commissions, overtime, shift premiums,
bonuses and draws against commissions as shown on my Enrollment Form, in
accordance with the Plan.
3. I understand that such payroll deductions shall be accumulated for the
purchase of Shares under the Plan at the applicable purchase price
determined in accordance with the Plan. I further understand that
except as otherwise set forth in the Plan, Shares will be purchased for
me automatically at the end of each Purchase Period unless I withdraw
from the Plan or otherwise become ineligible to participate in the Plan.
4. I understand that this Subscription Agreement will automatically
re-enroll me in all subsequent Offering Periods unless I withdraw from
the Plan or I become ineligible to participate in the Plan.
5. I acknowledge that I have a copy of and am familiar with the Company's
most recent Prospectus which describes the Plan. A copy of the complete
Plan and the Prospectus is on file with the Company. (In the case of
the initial Plan Purchase Period, the Prospectus will be on file on the
first day of the Offering Period.)
6. I understand that Shares purchased for me under the Plan will be held in
a personal account with the Plan Broker unless I request otherwise.
7. I hereby agree to be bound by the terms of the Plan. The effectiveness
of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
8. I have read and understood this Subscription Agreement.
Signature:____________________
Name:_________________________
Date:_________________________
PLEASE RETURN THIS COMPLETED FORM TO THE COMPANY.
<PAGE>
SILICON IMAGE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, _________________________, the undersigned participant in the
Offering Period of the Silicon Image, Inc. 1999 Employee Stock Purchase Plan
(the "PLAN") which began on _______________, hereby notify Silicon Image,
Inc. (the "COMPANY") that I wish to withdraw from the Offering Period. I
direct the Company to pay to me as promptly as practicable all payroll
deductions credited to my account with respect to such Offering Period. I
understand and agree that my participation in the Plan will terminate and no
shares will be purchased for me at the end of the Purchase Period so long as
I submit this Notice of Withdrawal to the Company at least 15 days prior to
the end of the Purchase Period. I understand and agree that if I submit this
Notice of Withdrawal to the Company LESS than 15 days prior to the end of the
Purchase Period, shares will be purchased for me at the end of the Purchase
Period, and my participation in the Plan will end at the beginning of the
next Purchase Period or Offering Period, as the case may be. I further
understand that no additional payroll deductions will be made for the
purchase of shares in the current Offering Period, and I shall be eligible to
participate in succeeding Offering Periods only by timely delivering to the
Company a new Subscription Agreement and Enrollment Form.
Name and address of Participant (please print):
Name:______________________________________________________________________
Street Address or P.O. Box:________________________________________________
City, State ZIP:___________________________________________________________
_______________________________ __________________________
Signature Date
PLEASE RETURN THIS FORM TO THE COMPANY.
<PAGE>
SILICON IMAGE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF SUSPENSION
I, _________________________, the undersigned participant in the
Offering Period of the Silicon Image, Inc. 1999 Employee Stock Purchase Plan
(the "PLAN") which began on _______________, hereby notify Silicon Image,
Inc. (the "COMPANY") that I wish to suspend my payroll deductions to the Plan
for the remainder of the Offering Period. I understand and agree that my
request will be effective beginning with the next payroll period commencing
more than 15 days after the Company receives this Notice of Suspension. I
understand and agree that payroll deductions credited to my account prior to
the date this Notice of Suspension is effective will be used to purchase
shares on the next Purchase Date. I further understand that no additional
payroll deductions will be made for the purchase of shares in the current
Offering Period, and I will be eligible to participate in succeeding Offering
Periods only by timely delivering to the Company a new Subscription Agreement
and Enrollment Form.
Name and address of Participant (please print):
Name:______________________________________________________________________
Street Address or P.O. Box:________________________________________________
City, State ZIP:___________________________________________________________
_______________________________ __________________________
Signature Date
PLEASE RETURN THIS FORM TO THE COMPANY.
<PAGE>
EXHIBIT 10.05
EMPLOYMENT AGREEMENT
This Employment Agreement (the "AGREEMENT") is entered into as of June
15, 1998 (the "EFFECTIVE DATE") by and between Silicon Image, Inc., a
California corporation (the "COMPANY"), and Daniel Atler ("EXECUTIVE"). This
Agreement supersedes and replaces a certain offer letter dated May 21, 1998
by and between the Company and Executive.
In consideration of the promises and the terms and conditions set forth
in this Agreement, the parties agree as follows:
1. POSITION. The Company hereby appoints Executive to the position
of Chief Financial Officer, Vice President Finance and Administration,
reporting to the Company's President, who currently is Scott Macomber.
2. SALARY. Executive's salary will be $145,000 per year, subject to
annual review.
3. BENEFITS. Executive shall be eligible to participate in the
employee benefit plans and executive compensation programs maintained by the
Company applicable to other employees and key executives of the Company,
including, without limitation, retirement plans, savings or profit-sharing
plans, deferred compensation plans, supplemental retirement or excess-benefit
plans, stock option, stock purchase, incentive or other bonus plans, life,
disability, health, accident and other insurance programs, paid vacations,
and similar plans or programs.
4. EQUITY COMPENSATION. Simultaneously with the approval of this
Agreement, the Company's Board of Directors is granting Executive under the
Company's 1995 Equity Incentive Plan an incentive stock option to purchase
170,000 shares of the Company's Common Stock at $0.25 per share. The options
will be immediately exercisable in full, subject to the Company's right to
repurchase all of the shares at cost upon termination of Executive's
employment, which repurchase right shall expire with respect to 25% of the
shares on June 15, 1999 and with respect to an additional 6.25% of the shares
each quarter thereafter, subject to paragraphs 5(c) and 5(d) below.
5. SEVERANCE.
(a) DEFINITIONS. As used in this Agreement:
"CAUSE" shall mean willful gross misconduct, conviction of a felony or
an act of material personal dishonesty.
"CHANGE IN CONTROL" shall mean the occurrence of any of the following
events:
(i) any "person" (as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) becoming the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the
total voting power represented by the Company's then outstanding voting
<PAGE>
securities, other than in a private financing where securities are acquired
directly from the Company; or
(ii) the closing of any transaction or series of related transactions,
including the acquisition of the Company by another entity and any
reorganization, merger or consolidation, which results in the holders of the
Company's capital stock prior to the transaction or transactions holding less
than fifty percent (50%) of the outstanding voting power of the Company after
the transaction or transactions, or which results in the sale of all or
substantially all of the assets of the Company.
"DISABILITY" shall mean a physical or mental illness or injury which, as
determined by the Company, has continuously prevented Executive from
performing his duties with the Company for a period of six months prior to
termination.
(b) SEVERANCE. If Executive's employment terminates for any reason
other than a termination by the Company for Cause, then for six (6) months
following Executive's termination, (i) the Company shall continue to pay to
Executive his then-current salary, less applicable withholding taxes, on the
Company's normal payroll dates during that period, and (ii) the Company will
continue Executive's benefits as described in Section 3 above to the extent
permitted by the terms of the Company's plans then in effect.
(c) CONDITIONS OF ACCELERATION OF VESTING. The provisions of
paragraph 5(d) below shall apply if there is a Change in Control and either
(i) Executive is employed by the Company on the date of the Change in Control
and continues his employment after the Change in Control to aid in an orderly
transition, if the Company so requests (provided that Executive shall not be
required to continue his employment for more than three (3) months after the
Change in Control in order to satisfy such obligation), or (ii) Company
terminates Executive's employment other than for Cause, death or Disability
after the Company begins negotiations with a third party that culminate in a
Change of Control and not more than 150 days prior to the Change in Control
(in which case, for the purpose of interpreting the vesting and
exercisability provisions of Executive's stock option and/or restricted stock
grants, Executive's termination shall be deemed to occur on the date of the
Change in Control); PROVIDED, however, that notwithstanding the foregoing,
if, on or before December 15, 1998, the Company begins negotiations with a
third party regarding a Change in Control which culminate in a Change in
Control, the provisions of paragraph (d) below shall apply only if either
condition (ii) above is met or Executive's employment terminates for any
reason, other than termination for Cause by the Company, within the period
beginning on the date of the Change of Control and ending one (1) year
thereafter, provided that Executive continues his employment after the Change
in Control to aid in an orderly transition, if the Company so requests
(provided that Executive shall not be required to continue his employment for
more than three (3) months after the Change in Control in order to satisfy
such obligation).
(d) TERMS OF ACCELERATION OF VESTING. All Executive's stock option
and/or restricted stock grants made prior to the Change in Control shall have
a vesting rate of twice the vesting rate set forth in the grant, PROVIDED,
that in no event shall the minimum aggregate number of
2
<PAGE>
shares vested be less than at least one-half of the aggregate number of
shares granted. For example, if immediately prior to a Change of Control,
Executive's stock options and restricted stock grants would have otherwise
vested as to forty percent (40%) of the shares subject to the grants, then
upon such Change in Control such grants shall instead be vested as to eighty
percent (80%) of the shares subject to such grants. For example, if
immediately prior to a Change of Control, Executive's stock options and
restricted stock grants would have otherwise vested as to none of the shares
subject to the grants, then upon such Change in Control such grants shall
instead be vested as to fifty percent (50%) of the shares subject to such
grants. In addition, should Executive's employment continue following a
Change in Control, all Executive's stock option and/or restricted stock
grants made prior to the Change in Control shall continue to vest at twice
the vesting rate set forth in the original grant.
(e) LIMITATION ON PAYMENTS. In the event that the severance and
other benefits provided for in this Agreement or otherwise payable to
Executive (i) constitute "parachute payments" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code") and (ii)
but for this Section 5(e), would be subject to the excise tax imposed by
Section 4999 of the Code, then Executive's severance benefits under this
Agreement shall be payable either:
(1) in full, or
(2) as to such lesser amount which would result in no portion
of such severance benefits being subject to excise tax under Section 4999 of
the Code;
whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by Executive on an after-tax basis, of the
greater amount of severance benefits. Unless the Company and Executive
otherwise agree in writing, any determination required under this Section
5(e) shall be made in writing by the Company's independent public accountants
(the "ACCOUNTANTS"), whose determination shall be conclusive and binding upon
Executive and the Company for all purposes.
For purposes of making the calculations required by this Section 5(e),
the Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Section 280G and 4999 of the Code. The Company
and Executive shall furnish to the Accountants such information and documents
as the Accountants may reasonably request in order to make a determination
under this Section 5(e). The Company shall bear all costs the Accountants
may reasonably incur in connection with any calculations contemplated by this
Section 5(e).
(f) The provisions of paragraphs 5(c), (d) and (e) will be added to
each of Executive's stock option and/or restricted stock grants.
6. PROPRIETARY RIGHTS. Simultaneously with the execution of this
Agreement, Executive and Company are entering into the Company's form of
Employee Invention Assignment and Confidential Information Agreement,
attached hereto as EXHIBIT A. Executive
3
<PAGE>
agrees not to bring to the Company any confidential or proprietary material
of any former employer and not to violate any other obligations Executive
might have to any former employer.
7. AT-WILL EMPLOYMENT. Executive's employment by the Company is "at
will," which means that either Executive or the Company can terminate the
employment at any time, with or without reason.
8. ARBITRATION. Executive and the Company shall submit to mandatory
binding arbitration in any controversy or claim arising out of, or relating
to, this Agreement or any breach hereof. Such arbitration shall be conducted
in accordance with the commercial arbitration rules of the American
Arbitration Association in effect at that time, and judgment upon the
determination or award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.
9. ATTORNEYS' FEES. If any dispute under this Agreement is finally
determined in Executive's or Company's favor, the other party shall pay all
reasonable fees and expenses, including attorneys' and consultants' fees,
incurred by the prevailing party in good faith in connection therewith.
10. TERM OF AGREEMENT. This Agreement shall continue in effect until
the date of termination of Executive's employment with the Company, PROVIDED,
that if at the time of such termination Company is making payments to
Executive pursuant to Section 5(b), Company shall continue to make payments
for so long as required by that section and, PROVIDED FURTHER, that if under
Section 5(c), Executive's employment is deemed to terminate on the date of a
Change in Control, then this Agreement shall continue in effect until such
Change in Control.
11. SUCCESSORS. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business or assets of the Company, to expressly
assume and agree to perform the obligations under this Agreement in the same
manner and to the same extent that the Company would be required to perform
if no such succession had taken place. As used in this Agreement, "Company"
includes any successor to its business or assets which executes and delivers
this Agreement or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law. This Agreement shall inure
to the benefit of and be enforceable by the Executive's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
12. NOTICE. Notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed to have been duly
given when delivered by United States registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth
on the last page of this Agreement, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
13. AMENDMENT OR WAIVER. No provision of this Agreement may be
amended, modified, waived or discharged unless such amendment, waiver,
modification or discharge is
4
<PAGE>
agreed to in a writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
14. VALIDITY. This invalidity or unenforceabiltiy of any provision
of this Agreement shall not affect the validity or enforceability of any
other provisions of this Agreement, which shall remain in full force and
effect.
15. APPLICABLE LAW. This Agreement shall be interpreted and enforced
in accordance with the internal laws of the State of California.
16. CONFIDENTIALITY. Executive will not disclose the terms of this
Agreement to anyone except as follows: (1) to accountants, attorneys, or
other advisors for the purpose of consulting with them, (2) as required by
law.
17. ENTIRE AGREEMENT. This Agreement represents the entire agreement
between the Company and the Executive with respect to the matters set forth
herein.
IN WITNESS WHEREOF, this Agreement is executed as of the Effective Date.
Silicon Image, Inc. Executive
By: /s/ Scott Macomber /s/ Daniel Atler
---------------------------- ----------------------------------
Scott Macomber, President Daniel Atler
10131 Bubb Road 300 Sunkist Lane
Cupertino, CA 95014-4976 Los Altos, CA 94022
5
<PAGE>
EMPLOYEE INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT
In consideration of my employment with Silicon Image, Inc., a
California corporation (the "COMPANY"), I hereby represent to, and agree with
the Company as follows:
1. COMPANY BUSINESS. I understand that the Company is engaged in a
continuous program of research, development, production and marketing in
connection with its business and that, as an essential part of my employment
with the Company, I may be expected to make new contributions to and create
inventions of value for the Company.
2. DISCLOSURE OF INVENTIONS. From and after the date I first
became employed with the Company, I will promptly disclose in confidence to
the Company all inventions, improvements, designs, original works of
authorship, formulas, processes, compositions of matter, computer software
programs, databases, mask works, and trade secrets ("INVENTIONS"), whether or
not patentable, copyrightable or protectible as trade secrets, that are made
or conceived or first reduced to practice or created by me, either alone or
jointly with others, during the period of my employment, whether or not in
the course of my employment.
3. WORK FOR HIRE; ASSIGNMENT OF INVENTIONS. I acknowledge that
copyrightable works prepared by me within the scope of my employment are
"works for hire" under the Copyright Act and that the Company will be
considered the author thereof. I agree that all Inventions that (a) are
developed using equipment, supplies, facilities or trade secrets of the
Company, (b) result from work performed by me for the Company or (c) relate
to the Company's business or current or anticipated research and development,
will be the sole and exclusive property of the Company and are hereby
assigned by me to the Company ("Assigned Inventions").
4. LABOR CODE 2870 NOTICE. I have been notified and understand
that the provisions of Section 3 of this Agreement do not apply to any
Invention that qualifies fully under the provisions of Section 2870 of the
California Labor Code, which states as follows:
ANY PROVISION IN AN EMPLOYMENT AGREEMENT WHICH PROVIDES THAT AN EMPLOYEE
SHALL ASSIGN, OR OFFER TO ASSIGN, ANY OF HIS OR HER RIGHTS IN AN INVENTION TO
HIS OR HER EMPLOYER SHALL NOT APPLY TO AN INVENTION THAT THE EMPLOYEE
DEVELOPED ENTIRELY ON HIS OR HER OWN TIME WITHOUT USING THE EMPLOYER'S
EQUIPMENT, SUPPLIES, FACILITIES, OR TRADE SECRET INFORMATION EXCEPT FOR THOSE
INVENTIONS THAT EITHER: (1) RELATE AT THE TIME OF CONCEPTION OR REDUCTION TO
PRACTICE OF THE INVENTION TO THE EMPLOYER'S BUSINESS, OR ACTUALLY OR
DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT OF THE EMPLOYER, OR (2)
RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE EMPLOYER. TO THE
EXTENT A PROVISION IN AN EMPLOYMENT AGREEMENT PURPORTS TO REQUIRE AN EMPLOYEE
TO ASSIGN AN INVENTION OTHERWISE EXCLUDED FROM BEING REQUIRED TO BE ASSIGNED
UNDER CALIFORNIA LABOR CODE SECTION 2870(a), THE
<PAGE>
PROVISION IS AGAINST THE PUBLIC POLICY OF THIS STATE AND IS UNENFORCEABLE.
-2-
<PAGE>
5. ASSIGNMENT OF OTHER RIGHTS. I hereby irrevocably transfer and
assign to the Company: (a) all worldwide patents, patent applications,
copyrights, mask works, trade secrets and other intellectual property rights
in any Assigned Invention; and (b) any and all "Moral Rights" (as defined
below) that I may have in or with respect to any Assigned Invention. I also
hereby forever waive and agree never to assert any and all Moral Rights I may
have in or with respect to any Assigned Invention, even after termination of
my work on behalf of the Company. "MORAL RIGHTS" mean any rights to claim
authorship of an invention or to restrain or object to any modification of
any Assigned Invention, and any similar right, existing under judicial or
statutory law of any country in the world, or under any treaty, regardless of
whether or not such right is denominated or generally referred to as a "moral
right".
6. ASSISTANCE. I agree to assist the Company in every proper way
to obtain for the Company and enforce patents, copyrights, mask work rights,
and other legal protections for the Assigned Inventions in any and all
countries. I will execute any documents that the Company may reasonably
request for use in obtaining or enforcing such patents, copyrights, mask work
rights, trade secrets and other legal protections. My obligations under this
paragraph will continue beyond the termination of my employment with the
Company, provided that the Company will compensate me at a reasonable rate
after such termination for time or expenses actually spent by me at the
Company's request on such assistance. I appoint the Secretary of the Company
as my attorney-in-fact to execute documents on my behalf for this purpose.
7. PROPRIETARY INFORMATION. I understand that my employment by the
Company creates a relationship of confidence and trust with respect to any
information of a confidential or secret nature that may be disclosed to me by
the Company that relates to the business of the Company or to the business of
any parent, subsidiary, affiliate, customer or supplier of the Company or any
other party with whom the Company agrees to hold information of such party in
confidence ("PROPRIETARY INFORMATION"). Such Proprietary Information includes
but is not limited to Assigned Inventions, marketing plans, product plans,
business strategies, financial information, forecasts, personnel information
and customer lists.
8. CONFIDENTIALITY. At all times, both during my employment and
after its termination, I will keep and hold all such Proprietary Information
in strict confidence and trust, and I will not use or disclose any of such
Proprietary Information without the prior written consent of the Company,
except as may be necessary to perform my duties as an employee of the
Company. Upon termination of my employment with the Company, I will promptly
deliver to the Company all documents and materials of any nature pertaining
to my work with the Company and I will not take with me any documents or
materials or copies thereof containing any Proprietary Information.
9. NO BREACH OF PRIOR AGREEMENT. I represent that my performance
of all the terms of this Agreement and my duties as an employee of the
Company will not breach any invention assignment, proprietary information or
similar agreement with any former employer or other party. I represent that I
will not bring with me to the Company or use in the performance of my duties
for the Company any documents or materials of a former employer that are not
generally available to the public or have not been legally transferred to the
Company.
-3-
<PAGE>
10. NOTIFICATION. I hereby authorize the Company to notify my
actual or future employers of the terms of this Agreement and my
responsibilities hereunder.
11. NON-SOLICITATION. During, and for a period of one (1) year
after termination of, my employment with the Company, I will not solicit or
take away suppliers, customers, employees or consultants of the Company for
my own benefit or for the benefit of any other party.
12. INJUNCTIVE RELIEF. I understand that in the event of a breach
or threatened breach of this Agreement by me the Company may suffer
irreparable harm and will therefore be entitled to injunctive relief to
enforce this Agreement.
13. GOVERNING LAW. This Agreement will be governed and interpreted
in accordance with the internal laws of the State of California, excluding
that body of law governing conflicts of law.
14. NO DUTY TO EMPLOY. I understand that this Agreement does not
constitute a contract of employment or obligate the Company to employ me for
any stated period of time. This Agreement shall be effective as of the first
day of my employment by the Company, namely: ______________________, 1995
SILICON IMAGE, INC. EMPLOYEE:
By: /s/ Scott Macomber /s/ Daniel K. Atler
------------------------------------ ---------------------------------
Its: President Daniel K. Atler
----------------------------------- ---------------------------------
Name (Please Print)
-4-
<PAGE>
Exhibit 10.19
[Letterhead of Silicon Image, Inc.]
SILICON IMAGE, INC.
10131 Bubb Rd.
Cupertino, CA 95014
Ph: (408) 873-3111
Fax: (408) 873-0446
June 16, 1999
Steve Tirado
18052 Center Street
Castro Valley, CA 94546
Dear Steve:
Silicon Image, Inc. (the "Company") is pleased to confirm our offer of
employment to you. The terms of our offer and the benefits currently provided
by the Company are as follows:
1. You will initially report to the President and Chief Executive
Officer, David Lee, in the position of Executive Vice President,
Marketing and Business Development.
2. The Company understands that your career goal is to be promoted to
the position of Chief Operating Officer or Chief Executive Officer
of the Company within approximately two years of your date of hire.
Accordingly, the Company undertakes, as part of its regular
periodic performance review process, to evaluate your performance
and establish performance objectives for you in light of this
career goal. The first such review will take place within six to
nine months of your date of hire. The Company further agrees that
it will not consider any other candidate for the position of Chief
Executive Officer or Chief Operating Officer of the Company unless
it also considers you for that position. You in turn understand and
agree that the appointment of such an officer lies within the
discretion of the Company's Board of Directors at the time, and the
Company is not promising you such a promotion within two years or
at any other time.
3. Your starting salary will be $225,000 per year and will be subject
to annual review. During your first year of employment, you will be
eligible for a special cash bonus of up to $25,000 on the six-month
anniversary of your date of hire and an additional $25,000 on the
one-year anniversary of your date of hire, based on your achieving
certain goals agreed to by you and the Company, such as hiring and
building the marketing organization. The Company presently plans to
establish a "Management by Objective" ("MBO") bonus program for the
Company's executives at such time (if ever) that the Company
becomes profitable. Should such an MBO bonus program be established
by the Company, you will be eligible to participate on terms
comparable to those offered to other executive officers of the
Company.
1
<PAGE>
4. You will be eligible to participate in the employee benefit plans
and executive compensation programs maintained by the Company
applicable to other employees and key executives of the Company,
including, without limitation, retirement plans, savings or
profit-sharing plans, deferred compensation plans, supplemental
retirement or excess-benefit plans, stock option, stock purchase,
incentive or other bonus plans, life, disability, health, accident
and other insurance programs, and similar plans or programs. You
will initially be eligible for three weeks of paid vacation each
year.
5. We will recommend to the Board of Directors of the Company that you
be granted an option under the Company's 1995 Equity Incentive Plan
to purchase a number of shares of the Company's common stock
representing 2% of the fully diluted common equivalent shares
outstanding, or 470,175 shares. The exercise price per share of the
option will be the fair market value of the Company's common stock,
as determined by the Company's Board of Directors at its first
opportunity following the date you begin employment at the Company.
Your option will be immediately exercisable in full, subject to
your payment of the exercise price in cash or by delivery of a full
recourse promissory note having terms standard for the Company. The
shares you will be given the opportunity to purchase will vest of
the rate of one-fourth (1/4) at the end of your first anniversary
with the Company and an additional one-forty eighth (1/48) per
month thereafter so long as you remain employed by the Company.
6. If your employment with the Company terminates for any reason other
than a termination by the Company for "Cause" (as defined
following), then for six (6) months following your termination, (i)
the Company will continue to pay you your then-current salary, less
applicable withholding taxes, on the Company's normal payroll dates
during that period, and (ii) the Company will continue your
benefits as described in Section 4 above to the extent permitted by
the terms of the Company's plans then in effect. As used herein,
"Cause" means willful gross misconduct, conviction of a felony or
an act of material personal dishonesty.
7. As an employee of the Company you will have access to certain
Company confidential information and you may, during the course of
your employment, develop certain information or inventions which
will be the property of the Company. To protect the interests of
the Company, you will need to sign the Company's standard "Employee
Invention Assignment and Confidentiality Agreement" as a condition
of your employment. We will provide a copy of this form of
agreement to for review upon your request. We wish to impress upon
you that we do not wish you to bring with you any confidential or
proprietary material of any former employer or to violate any other
obligations you may have to your former employers.
8. This offer of employment is made to you in confidence, and its
terms must not be disclosed by you to anyone outside your immediate
family. If you do disclose any of its terms to such a family
member, you must caution him or her that such information is
confidential and must not be disclosed to anyone else.
9. While we look forward to a long and profitable relationship, should
you decide to accept our offer, you will be an at-will employee of
the Company, which means the employment relationship can be
terminated by either of us for any reason at any time.
2
<PAGE>
Any statements or representations to the contrary (and, indeed, any
statements contradicting any provision in this letter) should be
regarded by you as ineffective. Further, your participation in any
stock option or benefit program is not to be regarded as assuring
you of continuing employment for any particular period of time.
10. This offer will remain open until June 18, 1999. If you decide to
accept our offer, and I hope you will, please sign the enclosed
copy of this letter in the space indicated below and return it to
me. Your signature will acknowledge that you have read and
understood and agreed to the terms and conditions of this offer and
the attached documents. Should you have anything else that you wish
to discuss, please do not hesitate to call me.
We look forward to the opportunity to welcome you to the Company.
Very truly yours,
Silicon Image, Inc.
By: /s/ David D. Lee
-------------------------------------
David D. Lee, President and CEO
Acknowledged, Accepted and Agreed
/s/ Steve Tirado
-------------------------------------
Steve Tirado
3
<PAGE>
Summary Capitalization of Silicon Image, Inc.
June 15, 1999
<TABLE>
<CAPTION>
Number of Number of
Shares Common
Type of Security Outstanding Equivalents
- ---------------- ----------- -----------
<S> <C> <C>
Series A Preferred Stock 1,565,000 3,130,000
Series B Preferred Stock 400,000 932,203
Series C Preferred Stock 4,000,000 4,000,000
Series D Preferred Stock 3,594,859 3,594,859
Non-Plan Common Stock and Options 5,525,000 5,525,000
Outstanding
Plan Common Stock and Options Outstanding 4,560,375 4,560,375
Reserve under Plan 1,305,625 1,305,625
Warrants for Series D 32,142 32,142
Warrants for Common 428,571 428,571
TOTAL 23,508,775
</TABLE>
4
<PAGE>
OFFER LETTER ADDENDUM
This Addendum pertains to a certain letter agreement dated June 15, 1999,
by and between Silicon Image, Inc., a California corporation (the "Company"),
and Steve Tirado.
The Company and Mr. Tirado agree that Mr. Tirado will first be employed
by the Company on June 19, 1999. Mr. Tirado represents and warrants that he
will not breach any obligations to current or prior employers by being
employed by the Company on that date.
The Company and Mr. Tirado agree that Mr. Tirado's status on June 19,1999
will be [part-time employee/leave of absence]. The Company and Mr. Tirado
agree that Mr. Tirado will not assume the position of Executive Vice
President, Marketing and Business Development until such time as Mr. Tirado
is able to devote substantially full-time efforts to his employment with the
Company.
SILICON IMAGE, INC.
By: /s/ David D. Lee /s/ Steve Tirado
------------------------------- -----------------------------
David D. Lee Steve Tirado
President & CEO
<PAGE>
Exhibit 10.20
RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement is made and entered into as of _____________ (the
"EFFECTIVE DATE") between Silicon Image, Inc. (the "COMPANY"), a California
corporation, and ______________ ("PURCHASER").
1. PURCHASE OF SHARES. On the Effective Date and subject to the
terms and conditions of this Agreement, Purchaser hereby purchases from the
Company, and Company hereby sells to Purchaser, an aggregate of __________
shares of the Company's common stock (the "SHARES") at an aggregate purchase
price of $__________ (the "PURCHASE PRICE") or $______ per Share (the
"PURCHASE PRICE PER SHARE"). As used in this Agreement, the term "Shares"
refers to the Shares purchased under this Agreement and includes all
securities received (a) in replacement of the Shares, (b) as a result of
stock dividends or stock splits in respect of the Shares, and (c) in
replacement of the Shares in a recapitalization, merger, reorganization or
the like.
2. PAYMENT OF PURCHASE PRICE; CLOSING.
(a) DELIVERIES BY PURCHASER. Purchaser hereby delivers to the
Company the full Purchase Price by delivery to the Company of a Secured Full
Recourse Promissory Note of Purchaser in the principal amount of
$____________ in the form of EXHIBIT 1, duly executed by Purchaser (the
"NOTE"). Purchaser also hereby delivers to the Company: (i) two (2) copies of
a blank Stock Power and Assignment Separate from Stock Certificate in the
form of EXHIBIT 2 attached hereto (the "STOCK POWERS"), both executed by
Purchaser (and Purchaser's spouse, if any), (ii) if Purchaser is married, a
Consent of Spouse in the form of EXHIBIT 3 attached hereto (the "SPOUSE
CONSENT") duly executed by Purchaser's spouse; and (iii) a Stock Pledge
Agreement in the form of EXHIBIT 4, duly executed by Purchaser (the "PLEDGE
AGREEMENT").
(b) DELIVERIES BY THE COMPANY. Upon its receipt of the entire
Purchase Price and all the documents to be executed and delivered by
Purchaser to the Company under Section 2(a), the Company will issue a duly
executed stock certificate evidencing the Shares in the name of Purchaser
registered in Purchaser's name in accordance with Section 19, with such
certificate to be placed in escrow as provided in Section 8 until expiration
or termination of both the Company's Repurchase Option and Right of First
Refusal described in Sections 5 and 6 and payment in full to the Company of
all sums due under the Note.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to the Company that:
(a) PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes
only and not with a view to, or for sale in connection with, a distribution
of the Shares within the meaning of the Securities Act of 1933, as amended
(the "1933 ACT"). Purchaser has no present intention of selling or otherwise
<PAGE>
disposing of all or any portion of the Shares and no one other than Purchaser
has any beneficial ownership of any of the Shares.
(b) ACCESS TO INFORMATION. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably
considers important in making the decision to purchase the Shares, and
Purchaser has had ample opportunity to ask questions of the Company's
representatives concerning such matters and this investment.
(c) UNDERSTANDING OF RISKS. Purchaser is fully aware of: (i)
the highly speculative nature of the investment in the Shares; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on transferability of the Shares (E.G., that Purchaser may not
be able to sell or dispose of the Shares or use them as collateral for
loans); (iv) the qualifications and backgrounds of the management of the
Company; and (v) the tax consequences of investment in the Shares.
(d) PURCHASER'S QUALIFICATIONS. Purchaser has a preexisting
personal or business relationship with the Company and/or certain of its
officers and/or directors of a nature and duration sufficient to make
Purchaser aware of the character, business acumen and general business and
financial circumstances of the Company and/or such officers and directors. By
reason of Purchaser's business or financial experience, Purchaser is capable
of evaluating the merits and risks of this investment, has the ability to
protect Purchaser's own interests in this transaction and is financially
capable of bearing a total loss of this investment.
(e) NO GENERAL SOLICITATION. At no time was Purchaser
presented with or solicited by any publicly issued or circulated newspaper,
mail, radio, television or other form of general advertising or solicitation
in connection with the offer, sale and purchase of the Shares.
(f) COMPLIANCE WITH SECURITIES LAWS. Purchaser understands and
acknowledges that, in reliance upon the representations and warranties made
by Purchaser herein, the Shares are not being registered with the Securities
and Exchange Commission ("SEC") under the 1933 Act or being qualified under
the California Corporate Securities Law of 1968, as amended (the "LAW"), but
instead are being issued under an exemption or exemptions from the
registration and qualification requirements of the 1933 Act and the Law.
(g) RESTRICTIONS ON TRANSFER. Purchaser understands that
Purchaser may not transfer any Shares unless such Shares are registered under
the 1933 Act or qualified under the Law or unless, in the opinion of counsel
to the Company, exemptions from such registration and qualification
requirements are available. Purchaser understands that only the Company may
file a registration statement with the SEC or the California Commissioner of
Corporations and that the Company is under no obligation to do so with
respect to the Shares. Purchaser has also been advised that exemptions from
registration and qualification may not be available or may not permit
Purchaser to transfer all or any of the Shares in the amounts or at the times
proposed by Purchaser.
-2-
<PAGE>
(h) RULE 144. In addition, Purchaser has been advised that SEC
Rule 144 promulgated under the 1933 Act, which permits certain limited sales
of unregistered securities, is not presently available with respect to the
Shares and, in any event, requires that the Shares be held for a minimum of
one year, and in certain cases two years, after they have been purchased AND
PAID FOR (within the meaning of Rule 144), before they may be resold under
Rule 144.
Purchaser understands that Shares paid for with a Note may not be
deemed to be fully "paid for" within the meaning of Rule 144 unless certain
conditions are met and that, accordingly, the Rule 144 holding period of such
Shares may not begin to run until such Shares are fully paid for within the
meaning of Rule 144. Purchaser understands that Rule 144 may indefinitely
restrict transfer of the Shares so long as Purchaser remains an "affiliate"
of the Company and "current public information" about the Company (as defined
in Rule 144) is not publicly available.
4. COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE SALE OF THE
SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT, IF NOT YET QUALIFIED WITH
THE CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH
QUALIFICATION, IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH
SECURITIES, AND THE RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR
TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS OF
THE PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED OR AN EXEMPTION BEING AVAILABLE.
5. COMPANY'S REPURCHASE OPTION. The Company has the option to
repurchase all or a portion of the Unvested Shares (as defined below) on the
terms and conditions set forth in this Section (the "REPURCHASE OPTION") if
Purchaser ceases to be employed by the Company (as defined herein) for any
reason, or no reason, including without limitation Purchaser's death,
disability, voluntary resignation or termination by the Company with or
without cause.
(a) DEFINITION OF "EMPLOYED BY THE COMPANY"; "TERMINATION
DATE". For purposes of this Agreement, Purchaser will be considered to be
"EMPLOYED BY THE COMPANY" if the Board of Directors of the Company determines
that Purchaser is rendering substantial services as an officer, employee,
consultant or independent contractor to the Company or to any parent,
subsidiary or affiliate of the Company. In case of any dispute as to whether
Purchaser is employed by the Company, the Board of Directors of the Company
will have discretion to determine whether Purchaser has ceased to be employed
by the Company or any parent, subsidiary or affiliate of the Company and the
effective date on which Purchaser's employment terminated (the "TERMINATION
DATE").
(b) UNVESTED AND VESTED SHARES. Shares that are not Vested
Shares (as defined in this Section) are "UNVESTED SHARES". On the Effective
Date all of the Shares will be Unvested Shares. If Purchaser has been
continuously employed by the Company at all times
-3-
<PAGE>
from the Effective Date until _____________- (the "FIRST VESTING DATE"), then
on the First Vesting Date twenty-five percent (25%) of the Shares will become
Vested Shares; and thereafter, for so long (and only for so long) as
Purchaser remains continuously employed by the Company at all times after the
First Vesting Date, an additional two and eighty-three thousandths percent
(2.083%) of the Shares will become Vested Shares upon the expiration of each
full calendar month elapsed after the First Vesting Date. No Shares will
become Vested Shares after the Termination Date.
(c) ADJUSTMENTS. The number of Shares that are Vested Shares
or Unvested Shares will be proportionally adjusted to reflect any stock
dividend, stock split, reverse stock split or recapitalization of the common
stock of the Company occurring after the Effective Date.
(d) EXERCISE OF REPURCHASE OPTION AT ORIGINAL PRICE. At any
time within thirty (30) days after the Termination Date, the Company may
elect to repurchase any or all of the Unvested Shares by giving Purchaser
written notice of exercise of the Repurchase Option. The Company and/or its
assignee(s) will then have the option to repurchase from Purchaser (or from
Purchaser's personal representative as the case may be) any or all of the
Unvested Shares at the Purchaser's original Purchase Price Per Share (as
adjusted to reflect any stock dividend, stock split, reverse stock split or
recapitalization of the common stock of the Company occurring after the
Effective Date).
(e) PAYMENT OF REPURCHASE PRICE. The repurchase price payable
to purchase Unvested Shares upon exercise of the Repurchase Option will be
payable, at the option of the Company or its assignee(s), by check or by
cancellation of all or a portion of any outstanding indebtedness of Purchaser
to the Company (or to such assignee) or by any combination thereof. The
repurchase price will be paid without interest within sixty (60) days after
the Termination Date.
(f) RIGHT OF TERMINATION UNAFFECTED. Nothing in this Agreement
will be construed to limit or otherwise affect in any manner whatsoever the
right or power of the Company (or any parent, subsidiary or affiliate of the
Company) to terminate Purchaser's employment at any time for any reason or no
reason, with or without cause.
6. RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold or
otherwise transferred by Purchaser without the Company's prior written
consent. Before any Vested Shares held by Purchaser or any transferee of such
Shares (either being sometimes referred to herein as the "HOLDER") may be
sold or otherwise transferred (including without limitation a transfer by
gift or operation of law), the Company and/or its assignee(s) will have a
right of first refusal to purchase the Shares to be sold or transferred (the
"OFFERED SHARES") on the terms and conditions set forth in this Section (the
"RIGHT OF FIRST REFUSAL").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares will
deliver to the Company a written notice (the "NOTICE") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer the Offered
Shares; (ii) the name of each proposed purchaser or other transferee
("PROPOSED TRANSFEREE"); (iii) the number of Offered Shares to be transferred
to each Proposed Transferee; (iv) the bona fide cash price or other
consideration for which the Holder
-4-
<PAGE>
proposes to transfer the Offered Shares (the "OFFERED PRICE"); and (v) that
the Holder will offer to sell the Offered Shares to the Company and/or its
assignee(s) at the Offered Price as provided in this Section.
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after the date of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase
all (but not less than all) of the Offered Shares proposed to be transferred
to any one or more of the Proposed Transferees named in the Notice, at the
purchase price determined in accordance with subsection (c) below.
(c) PURCHASE PRICE. The purchase price for the Offered Shares
purchased under this Section will be the Offered Price. If the Offered Price
includes consideration other than cash, then the value of the non-cash
consideration as determined in good faith by the Company's Board of Directors
will conclusively be deemed to be the cash equivalent value of such non-cash
consideration.
(d) PAYMENT. Payment of the purchase price for Offered Shares
will be payable, at the option of the Company and/or its assignee(s) (as
applicable), by check or by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or to such assignee,
in the case of a purchase of Offered Shares by such assignee) or by any
combination thereof. The purchase price will be paid without interest within
sixty (60) days after the Company's receipt of the Notice, or, at the option
of the Company and/or its assignee(s), in the manner and at the time(s) set
forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are
not purchased by the Company and/or its assignee(s) as provided in this
Section, then the Holder may sell or otherwise transfer such Offered Shares
to that Proposed Transferee at the Offered Price or at a higher price,
PROVIDED that such sale or other transfer is consummated within 120 days
after the date of the Notice, and PROVIDED FURTHER, that: (i) any such sale
or other transfer is effected in compliance with all applicable securities
laws; and (ii) the Proposed Transferee agrees in writing that the provisions
of this Section will continue to apply to the Offered Shares in the hands of
such Proposed Transferee. If the Offered Shares described in the Notice are
not transferred to the Proposed Transferee within such 120 day period, then a
new Notice must be given to the Company, and the Company will again be
offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(f) EXEMPT TRANSFERS. Notwithstanding anything to the contrary
in this Section, the following transfers of Shares will be exempt from the
Right of First Refusal: (i) the transfer of any or all of the Shares during
Purchaser's lifetime by gift or on Purchaser's death by will or intestacy to
Purchaser's "immediate family" (as defined below) or to a trust for the
benefit of Purchaser or Purchaser's immediate family, provided that each
transferee or other recipient agrees in a writing satisfactory to the Company
that the provisions of this Section will continue to apply to the transferred
Shares in the hands of such transferee or other recipient; (ii) any transfer
of Shares made pursuant to a statutory merger or statutory consolidation of
the Company
-5-
<PAGE>
with or into another corporation or corporations (except that the Right of
First Refusal will continue to apply thereafter to such Shares, in which case
the surviving corporation of such merger or consolidation shall succeed to
the rights or the Company under this Section unless the agreement of merger
or consolidation expressly otherwise provides); or (iii) any transfer of
Shares pursuant to the winding up and dissolution of the Company. As used
herein, the term "IMMEDIATE FAMILY" will mean Purchaser's spouse, lineal
descendant or antecedent, father, mother, brother or sister, adopted child or
grandchild, or the spouse of any child, adopted child, grandchild or adopted
grandchild of Purchaser.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal will terminate as to all Shares on the effective date of the first
sale of common stock of the Company to the general public pursuant to a
registration statement filed with and declared effective by the SEC under the
1933 Act (other than a registration statement relating solely to the issuance
of common stock pursuant to a business combination or an employee incentive
or benefit plan).
(h) ENCUMBRANCES ON VESTED SHARES. Purchaser may grant a lien
or security interest in, or pledge, hypothecate or encumber Vested Shares
only if each party to whom such lien or security interest is granted, or to
whom such pledge, hypothecation or other encumbrance is made, agrees in a
writing satisfactory to the Company that: (i) such lien, security interest,
pledge, hypothecation or encumbrance will not apply to such Vested Shares
after they are acquired by the Company and/or its assignees) under this
Section; and (ii) the provisions of this Section will continue to apply to
such Vested Shares in the hands of such party and any transferee of such
party. Purchaser may not grant a lien or security interest in, or pledge,
hypothecate or encumber, any Unvested Shares.
7. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of
this Agreement, Purchaser will have all of the rights of a shareholder of the
Company with respect to the Shares from and after the date that Purchaser
delivers payment of the Purchase Price until such time as Purchaser disposes
of the Shares or the Company and/or its assignee(s) exercise(s) the
Repurchase Option or Right of First Refusal. Upon an exercise of the
Repurchase Option or the Right of First Refusal, Purchaser will have no
further rights as a holder of the Shares so purchased upon such exercise,
except the right to receive payment for the Shares so purchased in accordance
with the provisions of this Agreement, and Purchaser will promptly surrender
the stock certificate(s) evidencing the Shares so purchased to the Company
for transfer or cancellation.
8. ESCROW. As security for Purchaser's faithful performance of
this Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s),
together with the Stock Powers executed by Purchaser and by Purchaser's
spouse, if any (with the date and number of Shares left blank), to the
Secretary of the Company or other designee of the Company ("ESCROW HOLDER"),
who is hereby appointed to hold such certificate(s) and Stock Powers in
escrow and to take all such actions and to effectuate all such transfers
and/or releases of such Shares as are in accordance with the terms of this
Agreement. Escrow Holder will act solely for the Company as its agent and not
as a fiduciary. Purchaser and the Company agree that Escrow Holder will not
be liable to any party to this
-6-
<PAGE>
Agreement (or to any other party) for any actions or omissions unless Escrow
Holder is grossly negligent or intentionally fraudulent in carrying out the
duties of Escrow Holder under this Section. Escrow Holder may rely upon any
letter, notice or other document executed by any signature purported to be
genuine and may rely on the advice of counsel and obey any order of any court
with respect to the transactions contemplated by this Agreement. The Shares
will be released from escrow upon termination of both the Repurchase Option
and the Right of First Refusal PROVIDED, HOWEVER, that the Shares will be
retained in escrow so long as they are subject to the Pledge Agreement.
9. TAX CONSEQUENCES. Purchaser hereby acknowledges that Purchaser
has been informed that, unless an election is filed by the Purchaser with the
Internal Revenue Service (and, if necessary, the proper state taxing
authorities), WITHIN 30 DAYS of the purchase of the Shares, electing pursuant
to Section 83(b) of the Internal Revenue Code (and similar state tax
provisions, if applicable) to be taxed currently on any difference between
the Purchase Price of the Shares and their fair market value on the date of
purchase, there will be a recognition of taxable income to the Purchaser,
measured by the excess, if any, of the fair market value of the Vested
Shares, at the time they cease to be Unvested Shares, over the purchase price
for such Shares. Purchaser represents that Purchaser has consulted any tax
consultant(s) Purchaser deems advisable in connection with Purchaser's
purchase of the Shares and the filing of the election under Section 83(b) and
similar tax provisions. A form of Election under Section 83(b) is attached
hereto as EXHIBIT 5 for reference. PURCHASER HEREBY ASSUMES ALL
RESPONSIBILITY FOR FILING SUCH ELECTION AND PAYING ANY TAXES RESULTING FROM
SUCH ELECTION OR FOR FAILING TO FILE THE ELECTION AND PAYING TAXES RESULTING
FROM THE LAPSE OF THE REPURCHASE RESTRICTIONS ON THE UNVESTED SHARES.
10. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Purchaser understands and agrees that the Company
will place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that
may be required by state or federal securities laws, the Company's Articles
of Incorporation or Bylaws, any other agreement between Purchaser and the
Company or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
-7-
<PAGE>
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF
THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON PUBLIC RESALE, TRANSFER, RIGHT OF
REPURCHASE AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE
ISSUER AND/OR ITS ASSIGNEE(S) AS SET FORTH IN A
RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER
AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS AND THE RIGHT
OF REPURCHASE AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THESE SHARES.
(b) STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, in
order to ensure compliance with the restrictions imposed by this Agreement,
the Company may issue appropriate "stop-transfer" instructions to its
transfer agent, if any, and if the Company transfers its own securities, it
may make appropriate notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company will not be required (i)
to transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii)
to treat as owner of such Shares, or to accord the right to vote or pay
dividends, to any purchaser or other transferee to whom such Shares have been
so transferred.
11. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with
any registration of the Company's securities under the 1933 Act that, upon
the request of the Company or the underwriters managing any registered public
offering of the Company's securities, Purchaser will not sell or otherwise
dispose of any Shares without the prior written consent of the Company or
such managing underwriters, as the case may be, for a period of time (not to
exceed 180 days) after the effective date of such registration requested by
such managing underwriters and subject to all restrictions as the Company or
the managing underwriters may specify for employee-shareholders generally.
-8-
<PAGE>
12. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer
of the Shares will be subject to and conditioned upon compliance by the
Company and Purchaser with all applicable state and federal laws and
regulations and with all applicable requirements of any stock exchange or
automated quotation system on which the Company's common stock may be listed
or quoted at the time of such issuance or transfer.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement, including its rights to repurchase Shares under
the Repurchase Option and the Right of First Refusal. This Agreement will be
binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth, this
Agreement will be binding upon Purchaser and Purchaser's heirs, executors,
administrators, successors and assigns.
14. GOVERNING LAW; SEVERABILITY. This Agreement will be governed by
and construed in accordance with the internal laws of the State of
California, excluding that body of laws pertaining to conflict of laws. If
any provision of this Agreement is determined by a court of law to be illegal
or unenforceable, then such provision will be enforced to the maximum extent
possible and the other provisions will remain fully effective and enforceable.
15. NOTICES. Any notice required or permitted hereunder will be
given in writing and will be deemed effectively given upon personal delivery,
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested), one (1) business day after its
deposit with any return receipt express courier (prepaid), or one (1)
business day after transmission by telecopier, addressed to the other party
at its address (or facsimile number, in the case of transmission by
telecopier) as shown below its signature to this Agreement, or to such other
address as such party may designate in writing from time to time to the other
party.
16. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
17. HEADINGS. The captions and headings of this Agreement are
included for ease of reference only and will be disregarded in interpreting
or construing this Agreement. All references herein to Sections will refer to
Sections of this Agreement.
18. ENTIRE AGREEMENT. This Agreement, together with all its
Exhibits, constitutes the entire agreement and understanding of the parties
with respect to the subject matter of this Agreement, and supersedes all
prior understandings and agreements, whether oral or written, between the
parties hereto with respect to the specific subject matter hereof.
19. TITLE TO SHARES. The exact spelling of the name(s) under which
Purchaser will take title to the Shares is:
_______________________________________________________
_______________________________________________________
-9-
<PAGE>
Purchaser desires to take title to the Shares as follows:
/ / Individual, as separate property
/ / Husband and wife, as community property
/ / Joint Tenants
/ / Alone or with spouse as trustee(s) of the
following trust (including date):___________________________________
____________________________________________________________________
____________________________________________________________________
/ / Other; please specify:______________________________________________
____________________________________________________________________
Purchaser's social security number is:_________________________________________
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Purchaser has
executed this Agreement in duplicate, as of the Effective Date.
COMPANY PURCHASER
By:__________________________________ ______________________________________
Name:________________________________
Title:_______________________________ Name:_________________________________
Address:_____________________________ Address:______________________________
_____________________________________ ______________________________________
Fax: (____)_________________________ Fax: (____)__________________________
-10-
<PAGE>
LIST OF EXHIBITS
-----------------
Exhibit 1: Secured Full Recourse Promissory Note
Exhibit 2: Stock Power and Assignment Separate from Stock Certificate
Exhibit 3: Spousal Consent
Exhibit 4: Stock Pledge Agreement
Exhibit 5: Election Under Section 83(b) of the Internal Revenue Code
-11-
<PAGE>
EXHIBIT 1
SECURED FULL RECOURSE PROMISSORY NOTE
Cupertino, California
$__________________ ___________________, ____
1. OBLIGATION. In exchange for the issuance to the undersigned
("PURCHASER") of __________ shares (the "SHARES") of the Common Stock of
Silicon Image, Inc., a California corporation (the "COMPANY"), receipt of
which is hereby acknowledged, Purchaser hereby promises to pay to the order
of the Company on or before ____________, at the Company's principal place of
business at 10131 Bubb Road, Cupertino, California 95014-4976, or at such
other place as the Company may direct, the principal sum of
____________________________________ Dollars ($__________) together with
interest compounded semi-annually on the unpaid principal at the rate of
___________________ percent (_____%), which rate is not less than the minimum
rate established pursuant to Section 1274(d) of the Internal Revenue Code of
1986, as amended, on the earliest date on which there was a binding contract
in writing for the purchase of the Shares; PROVIDED, HOWEVER, that the rate
at which interest will accrue on unpaid principal under this Note will not
exceed the highest rate permitted by applicable law.
2. SECURITY. Payment of this Note is secured by a security
interest in the Shares granted to the Company by Purchaser under a Stock
Pledge Agreement dated of even date herewith between the Company and
Purchaser (the "PLEDGE AGREEMENT"). This Note is being tendered by Purchaser
to the Company as the purchase price of the Shares pursuant to that certain
Restricted Stock Purchase Agreement between Purchaser and the Company dated
of even date with this Note (the "PURCHASE AGREEMENT").
3. DEFAULT; ACCELERATION OF OBLIGATION. Purchaser will be deemed
to be in default under this Note and the principal sum of this Note, together
with all interest accrued thereon, will immediately become due and payable in
full: (a) upon Purchaser's failure to make any payment of principal and/or
interest when due under this Note; (b) in the event Purchaser ceases to be
employed by the Company (as defined in the Purchase Agreement) for any reason
and the Company exercises its Repurchase Option to repurchase all or some of
the Shares under the Purchase Agreement; (c) upon the filing by or against
Purchaser of any voluntary or involuntary petition in bankruptcy or any
petition for relief under the federal bankruptcy code or any other state or
federal law for the relief of debtors; or (d) upon the execution by Purchaser
of an assignment for the benefit of creditors or the appointment of a
receiver, custodian, trustee or similar party to take possession of
Purchaser's assets or property.
4. REMEDIES ON DEFAULT. Upon any default of Purchaser under this
Note, the Company will have, in addition to its rights and remedies under
this Note and the Pledge
<PAGE>
Agreement, full recourse against any real, personal, tangible or intangible
assets of Purchaser, and may pursue any legal or equitable remedies that are
available to it.
5. RULE 144 HOLDING PERIOD. PURCHASER UNDERSTANDS THAT THE HOLDING
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (A) THE PURCHASE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY
OTHER PROPERTY ACCEPTED BY THE COMPANY, OR (B) THIS NOTE IS SECURED BY
COLLATERAL, OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH,
HAVING A FAIR MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN
OUTSTANDING OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
6. PREPAYMENT. Prepayment of principal and/or interest due under
this Note may be made at any time without penalty. Unless otherwise agreed in
writing by the Company, all payments will be made in lawful tender of the
United States and will be applied first to the payment of accrued interest,
and the remaining balance of such payment, if any, will then be applied to
the payment of principal. If Purchaser prepays all or a portion of the
principal amount of this Note, Purchaser intends that the Shares paid for by
the portion of principal so paid will continue to be held in pledge under the
Pledge Agreement to serve as independent collateral for the outstanding
portion of this Note for the purpose of commencing the holding period under
Rule 144(d) of the Securities and Exchange Commission with respect to other
Shares purchased with this Note.
7. GOVERNING LAW; WAIVER. The validity, construction and
performance of this Note will be governed by the internal laws of the State
of California, excluding that body of law pertaining to conflicts of law.
Purchaser hereby waives presentment, notice of non-payment, notice of
dishonor, protest, demand and diligence.
8. ATTORNEYS' FEES. If suit is brought for collection of this
Note, Purchaser agrees to pay all reasonable expenses, including attorneys'
fees, incurred by the holder in connection therewith whether or not such suit
is prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date
and year first above written.
PURCHASER
______________________________________
[SIGNATURE PAGE TO SECURED FULL RECOURSE PROMISSORY NOTE]
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<PAGE>
EXHIBIT 2
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock
Purchase Agreement dated as of June __, 1999, (the "AGREEMENT"), the
undersigned hereby sells, assigns and transfers unto _____________________,
__________ shares of the common stock of Silicon Image, Inc., a California
corporation (the "COMPANY"), standing in the undersigned's name on the books
of the Company represented by Certificate No(s). ____ delivered herewith, and
does hereby irrevocably constitute and appoint the Secretary of the Company
as the undersigned's attorney-in-fact, with full power of substitution, to
transfer said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE
USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS THERETO.
Dated: ______________, _____
PURCHASER
______________________________________
(Signature)
______________________________________
(Please Print Name)
______________________________________
(Spouse's Signature, if any)
______________________________________
(Please Print Spouse's Name)
INSTRUCTION: Please do NOT fill in any blanks other than the signature line.
The purpose of this Stock Power and Assignment is to enable the Company
and/or its assignee(s) to acquire the shares upon a default under Purchaser's
Note and to exercise of its "Repurchase Option" and/or "Right of First
Refusal" set forth in the Agreement without requiring additional signatures
on the part of the Purchaser or Purchaser's Spouse.
<PAGE>
EXHIBIT 3
CONSENT OF SPOUSE
I, the undersigned, am the spouse of
_______________________-("PURCHASER"). I have read and hereby consent to and
approve all the terms and conditions of the Restricted Stock Purchase
Agreement (the "AGREEMENT") dated __________________ between Purchaser and
Silicon Image, Inc., a California corporation (the "COMPANY"), pursuant to
which Purchaser has purchased _________ shares of the Company's common stock
(the "SHARES") and that certain Secured Full Recourse Promissory Note (the
"NOTE") and Stock Pledge Agreement ("PLEDGE AGREEMENT") executed by Purchaser
in connection with the Agreement.
In consideration of the Company granting my spouse the right to
purchase the Shares under the Agreement, I hereby agree to be irrevocably
bound by all the terms and conditions of the Agreement (including but not
limited to the Company's Repurchase Option, the Right of First Refusal and
the market standoff agreements contained therein) and of the Note and the
Pledge Agreement and further agree that any community property interest I may
have in the Shares will be similarly bound by the Agreement, the Note and the
Pledge Agreement.
I hereby appoint Purchaser as my attorney-in-fact, to act in my
name, place and stead with respect to any amendment of the Agreement, the
Note and the Pledge Agreement, and with respect to the making and filing of
an election under Internal Revenue Code Section 83(b) in connection with the
purchase of the Shares.
Dated: ________________
______________________________________
Signature of Spouse [Sign Here]
______________________________________
Name of Spouse [Please Print]
/ / Check this box if you do not have a spouse.
<PAGE>
EXHIBIT 4
STOCK PLEDGE AGREEMENT
This Agreement is made and entered into as of _____________- between
Silicon Image, Inc., a California corporation (the "COMPANY"), and
_____________________________ ("PLEDGOR").
R E C I T A L S
A. In exchange for Pledgor's Secured Full Recourse Promissory Note
to the Company of even date herewith (the "NOTE"), the Company has issued and
sold to Pledgor ____________________________________ (______) shares of its
common stock (the "SHARES") pursuant to the terms and conditions of that
certain Restricted Stock Purchase Agreement between the Company and Pledgor
of even date herewith (the "PURCHASE AGREEMENT").
B. Pledgor has agreed that repayment of the Note will be secured
by the pledge of the Shares pursuant to this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. CREATION OF SECURITY INTEREST. Pursuant to the provisions
of the California Commercial Code, Pledgor hereby grants to the Company, and
the Company hereby accepts, a first and present security interest in the
Shares and the shares of Common Stock of the Company set forth on EXHIBIT A
(the "ADDITIONAL SHARES") as collateral to secure the payment of Pledgor's
obligation to the Company under the Note. Pledgor herewith delivers to the
Company common stock certificate(s) No(s). ________, representing all the
Shares, and common stock certificate(s) No(s). ___, representing all the
Additional Shares, together with one stock power for each certificate in the
form attached as an Exhibit to the Purchase Agreement, duly executed (with
the date and number of shares left blank) by Pledgor and Pledgor's spouse, if
any. For purposes of this Agreement, the Shares and Additional Shares pledged
to the Company hereby, together with any additional collateral pledged
pursuant to Section 5 hereof, will hereinafter be collectively referred to as
the "COLLATERAL." Pledgor agrees that the Collateral pledged to the Company
will be deposited with and held by the Escrow Holder (as defined in the
Purchase Agreement) and that, notwithstanding anything to the contrary in the
Purchase Agreement, for purposes of carrying out the provisions of this
Agreement, Escrow Holder will act solely for the Company as its agent and not
as a fiduciary.
2. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents
and warrants to the Company that Pledgor has good title (both record and
beneficial) to the Collateral, free and clear of all claims, pledges,
security interests, liens or encumbrances of every nature whatsoever, and
that Pledgor has the right to pledge and grant the Company the security
interest in the Collateral granted under this Agreement. Pledgor further
agrees that, until the entire principal
<PAGE>
sum and all accrued interest due under the Note has been paid in full,
Purchaser will not, without the Company's prior written consent, (i) sell,
assign or transfer, or attempt to sell, assign or transfer, any of the
Collateral, or (ii) grant or create, or attempt to grant or create, any
security interest, lien, pledge, claim or other encumbrance with respect to
any of the Collateral.
3. RIGHTS ON DEFAULT. In the event of default (as defined in
the Note) by Pledgor under the Note, the Company will have full power to
sell, assign and deliver the whole or any part of the Collateral at any
broker's exchange or elsewhere, at public or private sale, at the option of
the Company, in order to satisfy any part of the obligations of Pledgor now
existing or hereinafter arising under the Note. On any such sale, the Company
or its assigns may purchase all or any part of the Collateral. In addition,
at its sole option, the Company may elect to retain all the Collateral in
full satisfaction of Pledgor's obligation under the Note, in accordance with
the provisions and procedures set forth in the California Commercial Code.
4. ADDITIONAL REMEDIES. The rights and remedies granted to
the Company herein upon default under the Note will be in addition to all the
rights, powers and remedies of the Company under the California Commercial
Code and applicable law and such rights, powers and remedies will be
exercisable by the Company with respect to all of the Collateral. Pledgor
agrees that the Company's reasonable expenses of holding the Collateral,
preparing it for resale or other disposition, and selling or otherwise
disposing of the Collateral, including attorneys' fees and other legal
expenses, will be deducted from the proceeds of any sale or other disposition
and will be included in the amounts Pledgor must tender to redeem the
Collateral. All rights, powers and remedies of the Company will be cumulative
and not alternative. Any forbearance or failure or delay by the Company in
exercising any right, power or remedy hereunder will not be deemed to be a
waiver of any such right, power or remedy and any single or partial exercise
of any such right, power or remedy hereunder will not preclude the further
exercise thereof.
5. DIVIDENDS; VOTING. All dividends hereinafter declared on
or payable with respect to the Collateral during the term of this pledge
(excluding only ordinary cash dividends, which will be payable to Pledgor so
long as Pledgor is not in default under the Note) will be immediately
delivered to the Company to be held in pledge under this Agreement.
Notwithstanding this Agreement, so long as Pledgor owns the Shares and
Additional Shares and is not in default under the Note, Pledgor will be
entitled to vote any shares comprising the Collateral, subject to any proxies
granted by Pledgor.
6. ADJUSTMENTS. In the event that during the term of this
pledge, any stock dividend, reclassification, readjustment, stock split or
other change is declared or made with respect to the Collateral, or if
warrants or any other rights, options or securities are issued in respect of
the Collateral, then all new, substituted and/or additional shares or other
securities issued by reason of such change or by reason of the exercise of
such warrants, rights, options or securities, will be immediately pledged to
the Company to be held under the terms of this Agreement in the same manner
as the Collateral is held hereunder.
-2-
<PAGE>
7. RIGHTS UNDER PURCHASE AGREEMENT. Pledgor understands and
agrees that the Company's rights to repurchase the Shares under the Purchase
Agreement will continue for the periods and on the terms and conditions
specified in the Purchase Agreement, whether or not the Note has been paid
during such period of time, and that to the extent that the Note is not paid
during such period of time, the repurchase by the Company of the Shares may
be made by way of cancellation of all or any part of Pledgor's indebtedness
under the Note.
8. REDELIVERY OF COLLATERAL. Upon payment in full of the
entire principal sum and all accrued interest due under the Note, and subject
to the terms and conditions of the Purchase Agreement, the Company will
immediately redeliver the Collateral to Pledgor and this Agreement will
terminate; PROVIDED, however, that all rights of the Company to retain
possession of the Shares pursuant to the Purchase Agreement will survive
termination of this Agreement.
9. SUCCESSORS AND ASSIGNS. This Agreement will inure to the
benefit of the respective heirs, personal representatives, successors and
assigns of the parties hereto.
10. GOVERNING LAW; SEVERABILITY. This Agreement will be
governed by and construed in accordance with the internal laws of the State
of California, excluding that body of law relating to conflicts of law.
Should one or more of the provisions of this Agreement be determined by a
court of law to be illegal or unenforceable, the other provisions
nevertheless will remain effective and will be enforceable.
11. MODIFICATION; ENTIRE AGREEMENT. This Agreement will not be
amended without the written consent of both parties hereto. This Agreement
and Section 8 of the Purchase Agreement constitute the entire agreement of
the parties hereto with respect to the subject matter hereof and supersede
all prior agreements and understandings related to such subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
COMPANY PLEDGOR
By:__________________________________ ____________________________________
Name:________________________________
Its:_________________________________
-3-
<PAGE>
EXHIBIT A
ADDITIONAL SHARES
Silicon Image, Inc. Common Stock Number of Shares
[Certificate No. ___]
-4-
<PAGE>
EXHIBIT 5
ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in gross income for the Taxpayer's current
taxable year the excess, if any, of the fair market value of the property
described below at the time of transfer over the amount paid for such
property, as compensation for services.
1. TAXPAYER'S NAME: _________________________________
TAXPAYER'S ADDRESS: _________________________________
SOCIAL SECURITY NUMBER: _________________________________
2. The property with respect to which the election is made is described as
follows: _________ shares of Common Stock of Silicon Image, Inc., a
California corporation (the "COMPANY"), which is Taxpayer's employer or
the corporation for whom the Taxpayer performs services.
3. The date on which the shares were transferred was _____________ and
this election is made for calendar year _____.
4. The shares are subject to the following restrictions: The Company may
repurchase all or a portion of the shares at the Taxpayer's original
purchase price under certain conditions at the time of Taxpayer's
termination of employment or services.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $_____ per
share at the time of transfer.
6. The amount paid for such shares was $______ per share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS
AFTER THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE
TAXPAYER'S INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE
REVOKED WITHOUT THE CONSENT OF THE IRS.
Dated: ___________ __, ______ ____________________________________
Taxpayer's Signature
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 (No.
333-83665) of our report dated July 14, 1999 relating to the financial
statements of Silicon Image, Inc., which appears in such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
PricewaterhouseCoopers LLP
San Jose, California
August 25, 1999
