<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 6, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
NVIDIA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
<TABLE>
<S> <C> <C>
CALIFORNIA (PRIOR TO REINCORPORATION) 3674 94-3177549
DELAWARE (AFTER REINCORPORATION) (PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION) CODE NUMBER)
</TABLE>
1226 TIROS WAY
SUNNYVALE, CA 94086
(408) 617-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JEN-HSUN HUANG
CHIEF EXECUTIVE OFFICER
NVIDIA CORPORATION
1226 TIROS WAY
SUNNYVALE, CA 94086
(408) 617-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JAMES C. GAITHER LARRY W. SONSINI
ERIC C. JENSEN JAMES N. STRAWBRIDGE
KARYN R. SMITH JON C. GONZALES
COOLEY GODWARD LLP WILSON SONSINI GOODRICH & ROSATI
ONE MARITIME PLAZA, 20TH FLOOR PROFESSIONAL CORPORATION
SAN FRANCISCO, CA 94111 650 PAGE MILL ROAD
(415) 693-2000 PALO ALTO, CA 94304
(650) 493-9300
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
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,
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, 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, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
number for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration 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,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================
PROPOSED
MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES OFFERING REGISTRATION
TO BE REGISTERED PRICE(1) FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.001 par value.................... $40,000,000 $11,800
===============================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(o) under the Securities Act
of 1933.
---------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued March 6, 1998
Shares
[LOGO OF NVIDIA]
COMMON STOCK
-----------
ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE
COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE
COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED THAT THE INITIAL
PUBLIC OFFERING PRICE WILL BE BETWEEN $ AND $ PER SHARE.
SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS TO BE CONSIDERED
IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE. THE COMPANY HAS
APPLIED TO HAVE THE COMMON STOCK APPROVED FOR QUOTATION ON THE
NASDAQ NATIONAL MARKET UNDER THE SYMBOL "NVID."
-----------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON
PAGE 6 HEREOF.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
PRICE $ A SHARE
-----------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
-------- --------------- -----------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $1,150,000.
(3) The Company has granted the Underwriters an option, exercisable within
30 days of the date hereof, to purchase up to an aggregate of
additional Shares at the price to public less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$ , $ and $ , respectively. See "Underwriters."
-----------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for the
Underwriters. It is expected that delivery of the Shares will be made on or
about , 1998 at the office of Morgan Stanley & Co. Incorporated,
New York, N.Y., against payment therefor in immediately available funds.
-----------
MORGAN STANLEY DEAN WITTER
HAMBRECHT & QUIST
CIBC OPPENHEIMER
, 1998
<PAGE>
[Description of illustration: four computer monitors depicting 3D rendering of
a building exterior, a game image, an anatomy illustration and the eye of a
frog. The caption is "Awesome 3D graphics-mainstream". The NVIDIA name and
logo is also depicted.]
Text to accompany artwork:
NVIDIA designs, develops and markets 3D graphics processors and related
software that provide high performance interactive 3D graphics to the
mainstream PC market.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS".
<PAGE>
[Description of illustration: Two-page computer display 3D rendering of a frog
on a lilypad]
<PAGE>
MAKING FANTASY REALITY AND REALITY FANTASTIC.
ARTWORK TEXT:
FOCUS ON MAINSTREAM
PC users today can easily differentiate the quality of graphics and prefer PCs
that provide a superior visual experience. NVIDIA's strategy is to achieve
market leadership in the high volume mainstream PC market by providing
compelling 3D graphics performance at competitive prices.
AWARD-WINNING TECHNOLOGY
NVIDIA's RIVA128 graphics processor is a highly integrated single-chip
solution that supports high performance interactive 3D graphics applications
while simultaneously optimizing 2D graphics and providing VGA compatibility
and DVD playback. The benefits and performance of the RIVA128 graphics
processor have received significant industry validation and have enabled the
Company's customers to win over 40 industry awards.
LEADING OEMS
NVIDIA's strategy is to enable leading OEM customers to differentiate their
products in a highly competitive marketplace by using NVIDIA's high
performance 3D graphics processors. The Company's products are used by five of
the top ten PC OEMs in the United States--Compaq, Dell, Gateway 2000, Micron
and Packard Bell NEC--and by leading add-in board manufacturers such as
Diamond and STB.
[OEM LOGOs]
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. This Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.
THE COMPANY
NVIDIA designs, develops and markets 3D graphics processors and related
software that provide high performance interactive 3D graphics to the
mainstream PC market. The Company's RIVA128 graphics processor is designed to
deliver a highly immersive, interactive 3D experience with realistic imagery
and stunning effects. The RIVA128 graphics processor provides superior
processing power at competitive prices and is architected to take advantage of
mainstream industry standards such as Microsoft's Direct3D API. The highly
integrated design of the RIVA128 graphics processor combines high performance
3D and 2D graphics on a single chip and provides a simpler and lower cost
graphics solution relative to competing solutions, including multi-chip or
multi-board 2D/3D graphics subsystems.
NVIDIA designed the RIVA128 graphics processor to enable PC OEMs and add-in
board manufacturers to build award-winning products by delivering state-of-the-
art interactive 3D graphics capability to end users while maintaining
affordable prices. The Company believes that by developing 3D graphics
solutions that provide superior performance and address the key requirements of
the mainstream PC market, it will accelerate the adoption of 3D graphics
throughout this market. The benefits and performance of the RIVA128 graphics
processor have received significant industry validation and have enabled the
Company's customers to win over 40 industry awards. NVIDIA's graphics
processors currently are designed into products offered by five of the top ten
PC OEMs in the United States--Compaq, Dell, Gateway 2000, Micron and Packard
Bell NEC--and by leading add-in board manufacturers such as Diamond and STB.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered................. shares
Common Stock to be outstanding after
the offering........................ shares(1)
Use of proceeds...................... For general corporate purposes, including
capital expenditures and working capital.
See "Use of Proceeds."
Proposed Nasdaq National Market
symbol.............................. NVID
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION YEAR ENDED DECEMBER 31,
(APRIL 5, 1993) TO ----------------------------------
DECEMBER 31, 1993 1994 1995 1996 1997
--------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenue........... $ -- $ -- $ 1,182 $ 3,912 $29,071
Gross profit (loss)..... -- -- (367) 874 7,845
Operating loss.......... (506) (1,351) (6,470) (2,993) (2,560)
Net loss................ (484) (1,361) (6,377) (3,077) (2,691)
Basic and diluted net
loss per share(2)...... $ (.07) $ (.19) $ (.56) $ (.27) $ (.21)
Shares used in basic and
diluted per share
computation(2)......... 6,784 7,048 11,365 11,383 12,677
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 6,551 $
Total assets............................................. 25,038
Capital lease obligations, less current portion.......... 1,891
Total stockholders' equity............................... 6,896
</TABLE>
- -------
(1) Based on the number of shares outstanding as of December 31, 1997. Excludes
as of February 28, 1998 (i) 5,531,833 shares of Common Stock issuable upon
the exercise of options outstanding at a weighted average exercise price of
$3.30 per share, (ii) 158,806 shares of Common Stock issuable upon the
exercise of warrants outstanding at a weighted average exercise price of
$2.10 per share, (iii) 4,426,457 shares of Common Stock reserved for future
grants under the Company's 1998 Equity Incentive Plan, (iv) 300,000 shares
reserved for future grants under the Company's 1998 Non-Employee Directors'
Stock Option Plan and (v) 500,000 shares of Common Stock reserved for
issuance pursuant to the Company's 1998 Employee Stock Purchase Plan. See
"Management--Employee Benefit Plans" and Notes 3 and 8 of Notes to
Financial Statements.
(2) See Note 1 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in per share computations.
(3) Adjusted to reflect the sale of the shares of Common Stock offered
hereby at an assumed initial public offering price of $ per share and
after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company. See "Use of Proceeds"
and "Capitalization."
3
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY
PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
----------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
The Company............................................................... 5
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 20
Dividend Policy........................................................... 20
Capitalization............................................................ 21
Dilution.................................................................. 22
Selected Financial Data................................................... 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 24
Business.................................................................. 31
Management................................................................ 43
Certain Transactions...................................................... 51
Principal Stockholders.................................................... 52
Description of Capital Stock.............................................. 54
Shares Eligible for Future Sale........................................... 56
Underwriters.............................................................. 58
Legal Matters............................................................. 59
Experts................................................................... 59
Additional Information.................................................... 60
Index to Financial Statements............................................. F-1
</TABLE>
----------------
The Company intends to furnish to its stockholders annual reports containing
financial statements audited by an independent public accounting firm and
quarterly reports for the first three quarters of each year containing
unaudited interim financial information.
----------------
NVIDIA is a registered trademark of the Company and the Company has filed
for trademark protection for the NVIDIA logo. The Company and ST
Microelectronics, Inc. have filed jointly for trademark protection for
RIVA128. All other trademarks or service marks appearing in this Prospectus
are the property of their respective owners.
----------------
Except as set forth in the financial statements or as otherwise indicated
herein, information in this Prospectus (i) gives effect to the reincorporation
of the Company from California to Delaware to be effected prior to the closing
of this offering, (ii) gives effect to the conversion of all of the Company's
outstanding shares of Preferred Stock into shares of Common Stock, which will
occur automatically upon the closing of this offering, and (iii) assumes that
the Underwriters' over-allotment option is not exercised. See "Description of
Capital Stock" and "Underwriters." The Company's fiscal years ended on
December 31 from 1993 to 1997. Effective January 1, 1998, the Company changed
its fiscal year end from December 31 to a 52- or 53-week year ending on the
last Sunday in December. All general references to years relate to the above
fiscal years unless otherwise noted.
4
<PAGE>
THE COMPANY
NVIDIA designs, develops and markets 3D graphics processors and related
software that provide high performance interactive 3D graphics to the
mainstream PC market. The Company's RIVA128 graphics processor incorporates a
"fast-and-wide" 100 megahertz, 128-bit graphics and memory interface that is
designed to deliver a highly immersive, interactive 3D experience with
realistic imaging and stunning effects. The RIVA128 graphics processor
provides superior processing power at competitive prices and is architected to
take advantage of mainstream industry standards such as Microsoft
Corporation's ("Microsoft") Direct3D application programming interface
("API"). The highly integrated design of the RIVA128 graphics processor
combines high performance 3D and 2D graphics on a single chip and provides a
simpler and lower cost graphics solution relative to competing solutions,
including multi-chip or multi-board 2D/3D graphics subsystems.
Interactive 3D graphics technology is emerging as one of the most
significant new computing developments since the introduction of the graphical
user interface. The visually engaging and interactive nature of 3D graphics
responds to consumers' demands for a convincing simulation of reality beyond
what is possible with traditional 2D graphics. The fundamental interactive
capability of 3D graphics is expected to make it a natural and compelling
medium for existing and emerging applications for entertainment, Internet,
business and education.
The Company believes that a PC's interactive 3D graphics capability
represents one of the primary means by which users differentiate among various
systems. PC users today can easily differentiate the quality of graphics and
prefer personal computers that provide a superior visual experience. These
factors have dramatically increased demand for 3D graphics processors; Mercury
Research estimates that 3D graphics will be standard in every PC unit shipped
by 2001. Mercury Research also estimates that 8.6 million 3D graphics
processors were sold in 1997 and 180 million will be sold in 2001.
The Company's products allow users to enjoy a highly immersive, interactive
3D experience with compelling visual quality, realistic motion and complex
object and scene interaction at real-time frame rates. By providing this level
of performance at an affordable price to OEMs and end users, the Company
believes that it will accelerate the adoption of interactive 3D graphics
throughout the mainstream PC market. The Company's objective is to be the
leading supplier of high performance 3D graphics processors for PCs. The
Company's strategy to achieve this objective includes focusing on the
mainstream PC market, targeting leading OEM customers, extending its
technological leadership in 3D graphics and increasing its market share by
leveraging strategic alliances.
NVIDIA's products are used by five of the top ten PC OEMs in the United
States--Compaq Computer Corporation ("Compaq"), Dell Computer Corporation
("Dell"), Gateway 2000, Inc. ("Gateway 2000"), Micron Technology, Inc.
("Micron") and Packard Bell NEC, Inc. ("Packard Bell NEC")--and leading add-in
board manufacturers such as Diamond Multimedia Systems, Inc. ("Diamond") and
STB Systems, Inc. ("STB"). The Company's products have received significant
industry validation and have enabled the Company's customers to receive over
40 awards from recognized industry publications, including PC Magazine, PC
Computing, PC World, Computer Gaming World, PC Games and CNET.
NVIDIA was incorporated in California in April 1993 and intends to
reincorporate in Delaware prior to the closing of this offering. The Company's
executive offices are located at 1226 Tiros Way, Sunnyvale, California 94086,
and its telephone number is (408) 617-4000.
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered hereby. This Prospectus contains forward-
looking statements that involve risks and uncertainties. The Company's actual
results may differ materially from the results discussed in such forward-
looking statements. Factors that may cause such a difference include, but are
not limited to, those discussed below, in the sections entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" and elsewhere in this Prospectus.
Unpredictable and Fluctuating Operating Results. Many of the Company's
revenue components fluctuate and are difficult to predict, and its operating
expenses are largely independent of revenue in any particular period. It is
therefore difficult for the Company to accurately forecast revenue and profits
or losses. The Company believes that, even if it does achieve significant
sales of its products, quarterly and annual results of operations will be
affected by a variety of factors that could materially adversely affect
revenue, gross profit and results of operations. Factors that have affected
the Company's results of operations in the past, and are likely to affect the
Company's results of operations in the future, include, among others, demand
and market acceptance for the Company's products; the successful development
of next-generation products; unanticipated delays or problems in the
introduction or performance of next-generation products; market acceptance of
the products of the Company's customers; new product announcements or product
introductions by the Company's competitors; the Company's ability to introduce
new products in accordance with OEM design requirements and design cycles;
changes in the timing of product orders due to unexpected delays in the
introduction of products of the Company's customers or due to the life cycles
of such customers' products ending earlier than anticipated; fluctuations in
the availability of manufacturing capacity or manufacturing yields;
competitive pressures resulting in lower than expected average selling prices;
the volume of orders that are received and that can be fulfilled in a quarter;
the rescheduling or cancellation of customer orders; the unanticipated
termination of a strategic relationship; seasonal fluctuations associated with
the tendency of PC sales to increase in the second half of each calendar year;
and the level of expenditures for research and development and sales, general
and administrative functions of the Company. In addition, the Company believes
that quarterly and annual results of operations could be affected in the
future by other factors, including changes in the relative volume of sales of
the Company's products; seasonality in the PC market; the ability of the
Company to reduce the process geometry of its products; supply constraints for
the other components incorporated into its customers' products; the loss of a
key customer; a reduction in the amount of royalties received from ST
Microelectronics, Inc. ("ST"); costs associated with protecting the Company's
intellectual property; inventory write-downs; and foreign exchange rate
fluctuations. Any one or more of these factors could result in the Company
failing to achieve its expectations as to future revenue or net income.
Because most operating expenses are relatively fixed in the short term, the
Company may be unable to adjust spending sufficiently in a timely manner to
compensate for any unexpected sales shortfall, which could materially
adversely affect quarterly results of operations. The Company will be required
to reduce prices in response to competition or to pursue new market
opportunities. If new competitors, technological advances by existing
competitors or other competitive factors require the Company to invest
significantly greater resources than anticipated in research and development
or sales and marketing efforts, the Company's business, financial condition
and results of operations could be materially adversely affected. Accordingly,
the Company believes that period-to-period comparisons of its results of
operations should not be relied upon as an indication of future performance.
In addition, the results of any quarterly period are not indicative of results
to be expected for a full fiscal year. As a result of fluctuating operating
results or other factors discussed below, in certain future quarters the
Company's results of operations may be below the expectations of public market
analysts or investors. In such event, the market price of the Company's Common
Stock would be materially adversely affected. See "--Absence of Prior Trading
Market; Potential Volatility of Stock Price" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Limited Operating History; History of Losses; No Assurance of Profitability.
The Company has a limited operating history upon which investors may evaluate
the Company and its prospects. The Company's recent
6
<PAGE>
revenue growth may not be sustainable and should not be considered indicative
of future revenue growth, if any. As of December 31, 1997, the Company's
accumulated deficit was approximately $14.0 million. Although the Company
generated net income in the quarter ended December 31, 1997, it incurred
significant losses in each other quarter of fiscal 1997 and in each quarter of
its prior fiscal years. There can be no assurance that in the future the
Company will be profitable on a quarterly or annual basis. The Company's
prospects must be considered in light of the significant risks, challenges and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in intensely competitive and rapidly
evolving markets such as the 3D graphics processor market and semiconductor
industry. To address these risks, the Company must, among other things,
successfully increase the scope of its operations, respond to competitive and
technological developments, continue to attract, retain and motivate qualified
personnel and continue to commercialize products incorporating innovative
technologies. There can be no assurance that the Company will be successful in
addressing these risks and challenges. See "--Highly Competitive Environment;
Intel's Entry into the Market," "--Dependence on New Product Development; Need
to Manage Product Transitions," "--Management of Growth," "--Dependence on Key
Personnel" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
Dependence on Emerging Mainstream PC 3D Graphics Market. The Company's
success will depend in part upon the demand for 3D graphics for mainstream PC
applications. The market for 3D graphics on mainstream PCs has only recently
begun to emerge and is dependent on the future development of, and substantial
end-user and OEM demand for, 3D graphics functionality. As a result, there can
be no assurance that the market for mainstream PC 3D graphics computing will
continue to develop or grow at a rate sufficient to support the Company's
business. The development of the market for 3D graphics on mainstream PCs will
in turn depend on the development and availability of a large number of
mainstream PC software applications that support or take advantage of 3D
graphics capabilities. Currently there are only a limited number of such
software applications, most of which are games, and there can be no assurance
that a broader base of software applications will develop in the near term or
at all. Until very recently, the majority of multimedia PCs incorporated only
2D graphics acceleration technology, and as a result, the majority of graphics
applications currently available for mainstream PCs are written for 2D
acceleration technology. Consequently, there can be no assurance that a broad
market for full function 3D graphics on mainstream PCs will develop. If the
market for mainstream PC 3D graphics fails to develop or develops more slowly
than expected, the Company's business, financial condition and results of
operations would be materially adversely affected. See "--Dependence on the PC
Market."
Dependence upon Acceptance of the Company's 3D Graphics Solution for the
Mainstream PC Market. The Company's success will depend in part upon broad
adoption of its 3D graphics processors for high performance 3D graphics in
mainstream PC applications. The market for 3D graphics processors has been
characterized by unpredictable and sometimes rapid shifts in the popularity of
products, often caused by the publication of competitive industry benchmark
results, as well as by severe price competition and by frequent new technology
and product introductions. Only a small number of products have achieved broad
market acceptance and such market acceptance, if achieved, is difficult to
sustain due to intense competition. Since the Company has no other product
line, the Company's business, financial condition and results of operations
would be materially adversely affected if for any reason its current or future
3D graphics processors do not achieve widespread acceptance in the mainstream
PC market. If the Company is unable to complete the timely development of or
successfully and cost-effectively manufacture and deliver products that meet
the requirements of the mainstream PC market, the Company's business,
financial condition and results of operations would be materially adversely
affected. In addition, the PC industry is seasonal, and the Company expects
that its financial results in the future will be affected by such seasonality.
The sub-$1,000 segment of the mainstream PC market has grown rapidly in
recent quarters. The Company currently does not have a product offering to
address this market segment. If the Company is unable to introduce a product
that addresses this market segment and the sub-$1,000 segment continues to
account for an increasing percentage of the units sold in the mainstream PC
market, the Company's business, financial condition or results of operations
could be materially adversely affected.
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Highly Competitive Environment; Intel's Entry into the Market. The market
for 3D graphics processors for mainstream PCs in which the Company competes is
intensely competitive and is characterized by rapid technological change,
evolving industry standards and declining average selling prices. NVIDIA
believes that the principal factors of competition in this market are
performance, conformity to industry-standard APIs, software support, access to
customers and distribution channels, manufacturing capabilities and price. The
Company expects competition to increase both from existing competitors and new
market entrants with products that may be less costly than the Company's 3D
graphics processors or may provide better performance or additional features
not provided by the Company's products. There can be no assurance that the
Company will be able to compete successfully in the emerging mainstream PC 3D
graphics market.
NVIDIA's primary source of competition is from companies that provide or
intend to provide 3D graphics solutions for the mainstream PC market. These
include (i) new entrants in the 3D graphics processor market with existing
presence in the PC market, such as Intel Corporation ("Intel"), (ii) suppliers
of graphics add-in boards that utilize their internally developed graphics
chips, such as ATI Technologies, Inc. ("ATI") and Matrox Electronic Systems
Ltd. ("Matrox"), (iii) suppliers of 2D graphics chips that are introducing 3D
functionality as part of their existing solutions, such as S3 Incorporated
("S3") and Trident Microsystems, Inc. ("Trident"), (iv) companies that have
traditionally focused on the professional market and provide high end 3D
solutions for PCs and workstations, including 3Dlabs Inc., Ltd. ("3Dlabs") and
Real3D, and (v) companies with strength in the interactive entertainment
market, such as Chromatic Research, Inc. ("Chromatic"), 3Dfx Interactive, Inc.
("3Dfx") and Rendition, Inc. ("Rendition").
In February 1998, Intel announced the introduction of the i740, a 3D
graphics accelerator that is targeted at the mainstream PC market. Intel has
significantly greater resources than the Company, and there can be no
assurance that the Company's products will compete effectively against the
i740 or any future products introduced by Intel, that the Company will be able
to compete effectively against Intel or that Intel will not introduce
additional products that are competitive with the Company's products in either
performance or price or both. NVIDIA expects Intel to continue to invest
heavily in research and development and new manufacturing facilities, to
maintain its position as the largest manufacturer of PC microprocessors and
one of the largest manufacturers of motherboards, to increasingly dominate the
PC platform and to promote its product offerings through advertising campaigns
designed to engender brand loyalty among PC users. Intel may in the future
develop graphics add-in cards or graphics-enabled motherboards using its i740
3D graphics accelerators or other graphics accelerators, which could directly
compete with graphics add-in cards or graphics-enabled motherboards that the
Company's customers may develop. In addition, due to the widespread industry
acceptance of Intel's microprocessor architecture and interface architecture,
including its Accelerated Graphics Port ("AGP"), Intel exercises significant
influence over the PC industry generally, and any significant modifications by
Intel to the AGP, the microprocessor or other aspects of the PC microprocessor
architecture could result in incompatibility with the Company's technology,
which would have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, any delay in the
public release of information relating to such modifications could have a
material adverse effect on the Company's business, financial condition or
results of operations.
In addition to Intel, the Company competes with suppliers of graphics add-in
boards that utilize their internally developed graphics chips, such as ATI and
Matrox. NVIDIA also competes with companies that typically have operated in
the PC 2D graphics market and that now offer 3D graphics capability as an
enhancement to their 2D graphics solutions, such as S3 and Trident. Many of
these competitors have introduced 3D graphics functionality on new versions of
existing graphics chips. In addition, NVIDIA's competitors include companies
that traditionally have focused on the production of high end 3D graphics
systems targeted at the professional market, such as 3Dlabs and Real3D. While
these companies produce high performance 3D graphics systems, they
historically have done so at a significantly higher price point than the
Company and have focused on the professional and engineering market. Some of
these companies are developing lower cost versions of their 3D graphics
technology to bring workstation-like 3D graphics to mainstream PCs, and there
can be no assurance
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that the Company will be able to compete successfully against them. For
example, 3Dlabs markets the PERMEDIA 2, a graphics accelerator designed for
the mainstream PC market. NVIDIA also competes with companies that have
recently entered or are expected to enter the market with an integrated 3D/2D
graphics solution, but which have not traditionally manufactured 2D graphics
solutions, such as Chromatic, 3Dfx and Rendition. In addition to the Company's
known competitors, the Company anticipates that there will be new entrants in
the graphics processor market, and there can be no assurance that the Company
will compete effectively against any such new competitors.
Several of the Company's current and potential competitors have
substantially greater financial, technical, manufacturing, marketing,
distribution and other resources, greater name recognition and market
presence, broader product lines for the PC market, longer operating histories,
lower cost structures and larger customer bases than the Company. As a result,
they may be able to adapt more quickly to new or emerging technologies and
changes in customer requirements. Regardless of the relative qualities of the
Company's products, the market power, product breadth and customer
relationships of its larger competitors, particularly Intel, can be expected
to provide such competitors with substantial competitive advantages. The
Company does not seek to compete on the basis of price alone, but may be
forced to lower prices to compete effectively. There can be no assurance that
the Company will be able to compete successfully in the emerging mainstream PC
3D graphics market.
Dependence on New Product Development; Need to Manage Product Transitions.
The Company's business, financial condition and results of operations will
depend to a significant extent on its ability to successfully develop new
products for the 3D graphics market. The Company must anticipate the features
and functionality that consumers will demand, incorporate those features and
functionality into products that meet the exacting design requirements of PC
OEMs and add-in board manufacturers, price its products competitively and
introduce the products to the market within the limited window for PC OEM and
add-in board manufacturer design cycles. As a result, the Company believes
that significant expenditures for research and development will continue to be
required in the future. The success of new product introductions will depend
on several factors, including proper new product definition, timely completion
and introduction of new product designs, the ability of ST, Taiwan
Semiconductor Manufacturing Co. ("TSMC") and any additional manufacturers to
effectively manufacture new products, the ability of the Company to design
products that effectively utilize the process technologies of ST, TSMC or any
other third-party manufacturers, the quality of any new products,
differentiation of new products from those of the Company's competitors and
market acceptance of the Company's and its customers' products. There can be
no assurance that any new products the Company expects to introduce will
incorporate the features and functionality demanded by PC OEMs, add-in board
manufacturers and consumers of 3D graphics, will be successfully developed or
will be introduced within the appropriate time to meet both the PC OEMs'
design cycles and market demand. The failure by the Company to successfully
develop, introduce or achieve market acceptance for new 3D graphics products
would have a material adverse effect on the Company's business, financial
condition and results of operations.
As markets for the Company's 3D graphics processors develop and competition
increases, the Company anticipates that product life cycles will remain short
and average selling prices ("ASPs") will continue to decline. In particular,
ASPs and gross margins for the Company's 3D graphics processors are expected
to decline as each product matures and as per order unit volumes increase. As
a result, the Company will need to introduce new products and enhancements to
existing products to maintain overall average selling prices and gross
margins. In order for the Company's 3D graphics processors to achieve high
volumes, leading PC OEMs and add-in board manufacturers must select the
Company's 3D graphics processor for design into their products, and then
successfully complete the designs of their products and sell them. There can
be no assurance that the Company will successfully identify new product
opportunities, develop and bring to market in a timely fashion such new
products, that any such new products will be selected for design into PC OEMs'
and add-in board manufacturers' products, that such designs will be
successfully completed or that such products will be sold. In particular, the
Company expects to begin shipping the RIVA128ZX graphics processor in the
second quarter of 1998, and there can be no assurance that the Company will be
able to successfully manage the production transition risks with respect to
that product. Failure to achieve any of the foregoing with respect to the
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RIVA128ZX graphics processor, future products or product enhancements could
result in rapidly declining ASPs, reduced margins, reduced demand for products
or loss of market share, any of which could have a material adverse effect on
the Company's business, financial condition or results of operations. In
addition, there can be no assurance that technologies developed by others will
not render the Company's 3D graphics products non-competitive or obsolete,
which would have a material adverse effect on the Company's business,
financial condition and results of operations.
Importance of Design Wins. The Company's future success will depend in large
part on achieving design wins, which entails having its existing and future
products chosen as the 3D graphics processors for hardware components or
subassemblies designed by PC OEMs and add-in board manufacturers. In
particular, the Company's upcoming RIVA128ZX graphics processor must be
designed into PC OEMs' and add-in board manufacturers' products in order for
the Company to achieve any significant revenue from such product. PC OEMs
typically go through two design win cycles each year, and if the Company is
unable to develop products in accordance with OEMs' cycles, its business,
financial condition and results of operations could be materially adversely
affected. The failure to achieve one or more design wins would have a material
adverse effect on the Company's business, financial condition and results of
operations. The process of being qualified for inclusion in a PC OEM's product
can be lengthy and could cause the Company to miss a cycle in the demand of
end users for a particular product feature, which also could materially
adversely affect the Company's business, financial condition or results of
operations.
The Company's ability to achieve design wins will depend in part on its
ability to identify and ensure compliance with evolving industry standards.
Unanticipated changes in industry standards could render the Company's
products incompatible with products developed by major hardware manufacturers
and software developers, including Intel and Microsoft, which would require
the Company to invest significant time and resources to redesign its products
to ensure compliance with relevant standards. If the Company's products are
not in compliance with prevailing industry standards for a significant period
of time, the Company's ability to achieve design wins could be materially
adversely affected. The failure to achieve design wins, due to any of the
foregoing factors or otherwise, would result in the loss of any potential
sales volume that could be generated by such newly designed PC hardware
component or board subassembly and would give a competitive advantage to the
3D graphics processor manufacturer that achieved such design win.
Dependence on the PC Market. In 1997, the Company derived all of its revenue
from the sale or license of products for use in PCs, and the Company expects
to continue to derive substantially all of its revenue from the sale or
license of products for use in PCs. The PC market is characterized by rapidly
changing technology, evolving industry standards, frequent new product
introductions and significant price competition, resulting in short product
life cycles and regular reductions of average selling prices over the life of
a specific product. Although the PC market has grown substantially in recent
years, there can be no assurance that such growth will continue. A reduction
in sales of PCs, or a reduction in the growth rate of such sales, would likely
reduce demand for the Company's products. Moreover, such changes in demand
could be large and sudden. Since PC manufacturers often build inventories
during periods of anticipated growth, they may be left with excess inventories
if growth slows or if they have incorrectly forecast product transitions. In
such cases, PC manufacturers may abruptly suspend substantially all purchases
of additional inventory from suppliers such as the Company until the excess
inventory has been absorbed. Any reduction in the demand for PCs generally, or
for a particular product that incorporates the Company's 3D graphic
processors, could have a material adverse effect on the Company's business,
financial condition or results of operations.
Customer Concentration; Risks of Order and Shipment Uncertainties. The
Company has only a limited number of customers and its sales are highly
concentrated. The Company primarily sells its products to add-in board
manufacturers, which incorporate graphics products in the boards they sell to
PC OEMs. Sales to STB and Diamond accounted for 63% and 31%, respectively, of
the Company's total revenue in 1997. Sales to add-in board manufacturers
primarily are dependent on achieving design wins with leading PC OEMs, and the
Company believes that the large majority of its revenue in the last two
quarters was attributable to products that ultimately were incorporated into
PCs sold by Compaq, Dell, Gateway 2000, Micron and Packard Bell NEC. The
number
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of add-in board manufacturers and leading PC OEMs is limited, and the Company
expects that a small number of add-in board manufacturers directly, and a
small number of PC OEMs indirectly, will continue to account for a substantial
portion of its revenue for the foreseeable future. In particular, the Company
expects that sales to STB and Diamond will continue to account for a
substantial portion of its revenue for the foreseeable future. As a result,
the Company's business, financial condition and results of operations could be
materially adversely affected by the decision of a single PC OEM or add-in
board manufacturer to cease using the Company's products or by a decline in
the number of products sold by a single PC OEM or add-in board manufacturer or
by a small number of customers. In addition, there can be no assurance that
revenue from add-in board manufacturers or PC OEMs that have directly or
indirectly accounted for significant revenue in past periods, individually or
as a group, will continue, or if continued, will reach or exceed historical
levels in any future period.
Substantially all of the Company's sales are made on the basis of purchase
orders rather than long-term agreements. As a result, the Company may commit
resources to the production of products without having received advance
purchase commitments from customers. Any inability to sell products to which
the Company has devoted significant resources could have a material adverse
effect on the business, financial condition or results of operations of the
Company. In addition, cancellation or deferral of product orders could result
in the Company holding excess inventory, which could have a material adverse
effect on the Company's profit margins and restrict its ability to fund its
operations. The Company recognizes revenue upon shipment of products to the
customer. Refusal by customers to accept shipped products, or delays or
difficulties in collecting accounts receivable could result in significant
charges against income, which could have a material adverse effect on the
Company's business, financial condition or results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Management of Growth. The Company's rapid growth has placed, and is expected
to continue to place, a significant strain on the Company's managerial,
operational and financial resources. As of December 31, 1997, the Company had
92 employees as compared to 42 employees as of December 31, 1996, and the
Company expects that the number of its employees will increase substantially
over the next 12 months. The Company's financial and management controls,
reporting systems and procedures are very limited and will need to be upgraded
significantly. Although some new controls, systems and procedures have been
implemented, the Company's future growth, if any, will depend on its ability
to continue to implement and improve operational, financial and management
information and control systems on a timely basis, as well as its ability to
maintain effective cost controls, and any failure to do so effectively could
have a material adverse effect on the Company's business, financial condition
or results of operations. Further, the Company will be required to manage
multiple relationships with various customers and other third parties. There
can be no assurance that the Company's systems, procedures or controls will be
adequate to support the Company's operations or that the Company's management
will be able to achieve the rapid execution necessary to successfully
implement its strategy. The Company's inability to effectively manage any
future growth would have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company's
lease for its facilities will expire in August 1998, and the Company will be
required to secure larger facilities in order to accommodate its growth. An
inability of the Company to secure adequate facilities on reasonable terms, or
an inability to effectively manage the transition to larger facilities, could
have a material adverse effect on the Company's business, financial condition
or results of operations. See "Business--Employees," "--Facilities" and
"Management."
Dependence on Third-Party Manufacturers; Absence of Manufacturing Capacity;
Manufacturing Risks. The Company does not manufacture the semiconductor wafers
used for its products and does not own or operate a wafer fabrication
facility. The Company's products require wafers manufactured with state-of-
the-art fabrication equipment and techniques. Substantially all of the
Company's products currently are manufactured by ST in Crolles, France
pursuant to a strategic collaboration agreement (the "ST Agreement"), and the
Company has recently established a relationship with TSMC as a second
semiconductor manufacturer. The Company obtains manufacturing services from
both ST and TSMC on a purchase order basis, and neither ST nor TSMC has any
obligation to provide the Company with any specified minimum quantities of
product. Because the lead time
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needed to establish a strategic relationship with a new manufacturing partner
could be several months, there is no readily available alternative source of
supply for any specific product. A manufacturing disruption experienced by ST
or TSMC would impact the production of the Company's products for a
substantial period of time, which would have a material adverse effect on the
Company's business, financial condition and results of operations. For
example, in December 1997, the Company experienced low manufacturing yields at
ST. The Company believes that long-term market acceptance for the Company's
products will depend on reliable relationships with ST, TSMC and any other
manufacturers used by the Company to ensure adequate product supply to respond
to customer demand. ST currently is capacity constrained with respect to the
manufacture of the Company's products. ST has only recently begun to
manufacture the Company's products in commercial quantities, and there can be
no assurance that ST will be able to meet the Company's near-term or long-term
manufacturing requirements. In addition, the Company's relationship with TSMC
has only recently been established, and there can be no assurance that this
relationship will meet the business objectives of the Company. Both ST and
TSMC fabricate wafers for other companies, including certain competitors of
the Company, and ST also manufactures wafers for its own needs, and either
could choose to prioritize capacity for other uses or reduce or eliminate
deliveries to the Company on short notice.
There are many other risks associated with the Company's dependence upon
third-party manufacturers, including reduced control over delivery schedules,
quality assurance, manufacturing yields and cost; risks associated with
international operations; the potential lack of adequate capacity during
periods of excess demand; limited warranties on wafers supplied to the
Company; and potential misappropriation of the Company's intellectual
property. The Company is dependent primarily on ST and, to a lesser extent,
TSMC, and expects in the future to continue to be dependent upon third-party
manufacturers to produce wafers of acceptable quality and with acceptable
manufacturing yields, to deliver those wafers to the Company and its
independent assembly and testing subcontractors on a timely basis and to
allocate to the Company a portion of their manufacturing capacity sufficient
to meet the Company's needs. The Company's wafer requirements represent a very
small portion of the total production capacity of ST. Although the Company's
products are designed using ST's process design rules, there can be no
assurance that ST will be able to achieve or maintain acceptable yields or
deliver sufficient quantities of wafers on a timely basis or at an acceptable
cost. Additionally, there can be no assurance that ST will continue to devote
resources to the production of the Company's products or continue to advance
the process design technologies on which the manufacturing of the Company's
products are based. Any such difficulties would have a material adverse effect
on the Company's business, financial condition and results of operations. See
"--Dependence on Third-Party Subcontractors for Assembly and Testing," "--
Risks Associated with International Operations" and "Business--Manufacturing."
Dependence on ST Microelectronics. In addition to the Company's reliance on
ST to manufacture the Company's products, the Company licenses certain
technology on a non-exclusive basis from ST for use with the Company's
products. The inability of the Company to continue to license this technology
could result in delays or cancellations in product shipments until equivalent
technology can be identified, licensed or developed, and integrated with the
Company's products. The ST Agreement also grants ST a worldwide license to
sell the RIVA128 and RIVA128ZX graphics processors. Royalty revenue from sales
of the RIVA128 graphics processor by ST represented 6% of the Company's total
revenue in 1997. There can be no assurance that ST will continue to sell the
Company's current or future products at historical levels, or at all. If ST
ceases selling the Company's products or there is a material decline in the
number of units sold by ST in the future, the Company's business, financial
condition or results of operations could be materially adversely affected. In
February 1998, ST and 3Dlabs established a supply relationship for the
manufacture by ST of 3Dlabs' PERMEDIA 2 3D graphics accelerator. There can be
no assurance that ST will not establish similar relationships with other
competitors of the Company or that sales of the Company's products by ST will
not be adversely affected by ST's relationship with 3Dlabs or any other
competitor of the Company. Sales by ST of products similar to the Company's
products could result in a decrease in the Company's revenue, which would have
a material adverse effect on the Company's business, financial condition and
results of operations. See "--Dependence on Third-Party Manufacturers; Absence
of Manufacturing Capacity; Manufacturing Risks," "--Dependence on Third-Party
Subcontractors for Assembly and Testing" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
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Under the ST Agreement, ST also has a worldwide license to incorporate the
technology underlying the RIVA128 and RIVA128ZX graphics processors (including
the source code and architecture) (the "RIVA Technology") in its own products,
subject to certain limitations on the modification of such technology, and a
right to receive software engineering and quality support from the Company for
the RIVA Technology through December 31, 1998. There can be no assurance that
ST will not develop and market products competitive with those of the Company
that contain additional features, better functionality and lower pricing.
Because ST has substantially greater financial, technical, manufacturing,
marketing, distribution and other resources than the Company, there can be no
assurance that the Company will be able to compete successfully against any
such ST product. The failure of the Company to successfully compete against
any such ST product could have a material adverse effect on the Company's
business, financial condition or results of operations.
Dependence on Key Personnel. The Company's performance will be substantially
dependent on the performance of its executive officers and key employees, many
of whom have worked together for only a short period of time. In particular,
each of the Company's Chief Financial Officer, Vice President, Product
Marketing and Vice President, Corporate Marketing joined the Company in
December 1997. None of the Company's officers or employees is bound by an
employment agreement, and the relationships of such officers and employees
with the Company are, therefore, at will. The Company does not have "key
person" life insurance policies on any of its employees. The loss of the
services of any of its executive officers, technical personnel or other key
employees, particularly Jen-Hsun Huang, the Company's President and Chief
Executive Officer, would have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's success
will depend on its ability to identify, hire, train and retain highly
qualified technical and managerial personnel. Competition for such personnel
is intense, and there can be no assurance that the Company will be able to
identify, attract, assimilate or retain highly qualified technical and
managerial personnel in the future. The inability to attract and retain the
necessary technical and managerial personnel would have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Employees" and "Management."
Manufacturing Yields. The fabrication of semiconductors is a complex
process. Contaminants, defects in masks used to print circuits on wafers,
difficulties in the fabrication process and other factors can cause a
substantial percentage of wafers to be rejected or a significant number of die
on each wafer to be nonfunctional. These problems are difficult to diagnose
and time-consuming and expensive to remedy. As a result, semiconductor
companies frequently encounter difficulties in achieving acceptable product
yields. When production of a new product begins, as will be the case with the
RIVA128ZX graphics processor, the Company typically pays for wafers, which may
or may not have any functional products. Accordingly, the Company bears the
financial risk until production is stabilized. Once production is stabilized,
the Company pays for functional die only. The Company typically begins wafer
production in advance of stabilized yields. Failure to stabilize yields or
failure to achieve acceptable yields would materially adversely affect the
Company's revenue, gross profit and results of operations. For example, in
December 1997, the Company experienced low manufacturing yields at ST. Any
similar occurrences in the future could have a material adverse effect on the
Company's business, financial condition or results of operations.
Semiconductor manufacturing yields are a function both of product design,
which is developed largely by the Company, and process technology, which is
typically proprietary to the manufacturer. Since low yields may result from
either design or process technology failures, yield problems may not be
effectively determined or resolved until an actual product exists that can be
analyzed and tested to identify process sensitivities relating to the design
rules that are used. As a result, yield problems may not be identified until
well into the production process, and resolution of yield problems would
require cooperation by and communication between the Company and the
manufacturer. This risk is compounded by the offshore location of the
Company's manufacturers, increasing the effort and time required to identify,
communicate and resolve manufacturing yield problems. As the Company's
relationships with ST, TSMC and any additional manufacturing partners develop,
yields or product performance could be adversely affected due to difficulties
associated with adapting the Company's technology and product design to the
proprietary process technology and design rules of each
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manufacturer. Because of the Company's potentially limited access to wafer
fabrication capacity from its manufacturers, any decrease in manufacturing
yields could result in an increase in the Company's per unit costs and force
the Company to allocate its available product supply among its customers, thus
potentially adversely impacting customer relationships as well as revenue and
gross profit. There can be no assurance that the Company's wafer manufacturers
will achieve or maintain acceptable manufacturing yields in the future. The
inability of the Company to achieve planned yields from its wafer
manufacturers could have a material adverse effect on the Company's business,
financial condition or results of operations. The Company also faces the risk
of product recalls resulting from design or manufacturing defects that are not
discovered during the manufacturing and testing process. In the event of a
significant number of product returns due to a defect or recall, the Company's
business, financial condition or results of operations could be materially
adversely affected. See "--Risks Associated with International Operations."
Transition to New Manufacturing Process Technologies. The Company's future
success will depend in part upon its ability to develop products that utilize
new manufacturing process technologies. Manufacturing process technologies are
subject to rapid change and require significant expenditures for research and
development. The Company continuously evaluates the benefits of migrating to
smaller geometry process technologies in order to improve performance and
reduce costs. The Company believes that the transition of its products to
increasingly smaller geometries will be important to its competitive position.
Other companies in the industry have experienced difficulty in migrating to
new manufacturing processes and, consequently, have suffered reduced yields,
delays in product deliveries and increased expense levels. Moreover, the
Company is dependent on its relationships with its third-party manufacturers
to migrate to smaller geometry processes successfully. No assurance can be
given that the Company will be able to migrate to new manufacturing process
technologies successfully or on a timely basis. Any such failure by the
Company could have a material adverse effect on its business, financial
condition or results of operations.
Dependence on Third-Party Subcontractors for Assembly and Testing.
Substantially all of the Company's products currently are manufactured by ST
in France and assembled and tested by ST in Malta. The Company is in the
process of qualifying Anam Semiconductor ("Anam"), which is located in Korea,
to assemble and test the Company's RIVA128ZX graphics processor. The Company
does not have long-term agreements with either of these suppliers. As a result
of its dependence on third-party subcontractors for assembly and testing of
its products, the Company does not directly control product delivery schedules
or product quality. Any product shortages or quality assurance problems could
increase the costs of manufacture, assembly or testing of the Company's
products and could have a material adverse effect on the Company's business,
financial condition or results of operation. Due to the amount of time
typically required to qualify assemblers and testers, the Company could
experience significant delays in the shipment of its products if it is
required to find alternative third parties to assemble or test the Company's
products or components. Any delays in delivery of the Company's products could
have a material adverse effect on the Company's business, financial condition
or results of operations. See "Business--Manufacturing."
Risks Relating to Intellectual Property. The Company relies primarily on a
combination of patent, mask work protection, trademarks, copyrights, trade
secret laws, employee and third-party nondisclosure agreements and licensing
arrangements to protect its intellectual property. The Company has 11 patents
issued and 16 patent applications pending in the United States. The Company
has no foreign patents or patent applications. There can be no assurance that
the Company's pending patent applications or any future applications will be
approved, or that any issued patents will provide the Company with competitive
advantages or will not be challenged by third parties, or that the enforcement
of patents of others will not have an adverse effect on the Company's ability
to do business. In addition, there can be no assurance that others will not
independently develop substantially equivalent intellectual property or
otherwise gain access to the Company's trade secrets or intellectual property,
or disclose such intellectual property or trade secrets, or that the Company
can meaningfully protect its intellectual property. A failure by the Company
to effectively protect its intellectual property could have a material adverse
effect on the Company's business, financial condition or results of
operations.
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The Company attempts to protect its trade secrets and other proprietary
information through confidentiality agreements with manufacturers and other
partners, proprietary information agreements with employees and consultants
and other security measures. The Company also relies on trademarks and trade
secret laws to protect its intellectual property. Despite these efforts, there
can be no assurance that others will not gain access to the Company's trade
secrets, or that the Company can meaningfully protect its intellectual
property. In addition, effective trade secret protection may be unavailable or
limited in certain foreign countries. Although the Company intends to protect
its rights vigorously, there can be no assurance that such measures will be
successful.
The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions, which has resulted in
significant and often protracted and expensive litigation. The 3D graphics
market in particular has been characterized recently by the aggressive pursuit
of intellectual property positions, and the Company expects its competitors to
continue to pursue aggressive intellectual property positions. There currently
is no pending intellectual property litigation against the Company. However,
the Company from time to time has received notices alleging that the Company
has infringed patents or other intellectual property rights owned by third
parties. ST has certain patent licenses that in some cases may allow ST to
manufacture the Company's products without infringing third-party patents. As
the Company's products are manufactured by TSMC or other manufacturers, such
licenses will no longer benefit the Company and therefore the risk of a third-
party claim of patent infringement against the Company will increase. In the
event infringement claims are made against the Company, the Company may seek
licenses under such patents or other intellectual property rights. However,
there can be no assurance that licenses will be offered or that the terms of
any offered licenses will be acceptable to the Company. The failure to obtain
a license from a third party for technology used by the Company could cause
the Company to incur substantial liabilities and to suspend the manufacture of
products. Furthermore, the Company may initiate claims or litigation against
third parties for infringement of the Company's proprietary rights or to
establish the validity of the Company's proprietary rights. The Company has
agreed to indemnify certain customers for claims of infringement arising out
of sale of the Company's product. Litigation by or against the Company or such
customers concerning infringement would likely result in significant expense
to the Company and divert the efforts of the Company's technical and
management personnel, whether or not such litigation results in a favorable
determination for the Company. In the event of an adverse result in any such
litigation, the Company could be required to pay substantial damages (which
could include treble damages), cease the manufacture, use and sale of
infringing products, expend significant resources to develop non-infringing
technology, discontinue the use of certain processes or obtain licenses for
the infringing technology. There can be no assurance that the Company would be
successful in such development or that such licenses would be available on
reasonable terms, or at all, and any such development or license could require
expenditures by the Company of substantial time and other resources. Although
patent disputes in the semiconductor industry have often been settled through
cross-licensing arrangements, there can be no assurance that, in the event
that any third party makes a successful claim against the Company or its
customers, a cross-licensing arrangement could be reached. If a license is not
made available to the Company on commercially reasonable terms, the Company's
business, financial condition or results of operations could be materially
adversely affected.
There can be no assurance that infringement claims by third parties or
claims for indemnification by customers or end users of the Company's products
resulting from infringement claims will not be asserted in the future or that
such assertions, if proven to be true, will not materially adversely affect
the Company's business, financial condition or results of operations. Any
limitations on the Company's ability to market its products, or delays and
costs associated with redesigning its products or payments of license fees to
third parties, or any failure by the Company to develop or license a
substitute technology on commercially reasonable terms, could have a material
adverse effect on the Company's business, financial condition or results of
operations. See "Business--Patents and Proprietary Rights."
Risk of Product Defects and Incompatibilities; Product Liability. Products
as complex as those offered by the Company may contain defects or failures
when introduced or when new versions or enhancements to existing
15
<PAGE>
products are released. The Company has in the past discovered software defects
and incompatibilities with customers' hardware in certain of its products and
may experience delays or lost revenue to correct any new defects in the
future. Although the Company has not experienced material adverse effects
resulting from any such bugs, defects, failures or incompatibilities to date,
there can be no assurance that, despite testing by the Company, errors will
not be found in new products or releases after commencement of commercial
shipments in the future, which could result in loss of market share or failure
to achieve market acceptance. In addition, the Company's products typically go
through only one verification cycle prior to beginning volume production and
distribution of such products. As a result, the Company's products may contain
defects or flaws that are undetected prior to volume production and
distribution. The widespread production and distribution of defective products
could have a material adverse impact on the Company's business, financial
condition or results of operations. See "Business--NVIDIA Architecture,
Products and Products under Development."
The Company's products are an integrated component of both PCs and business
workstations. Although the Company has not experienced any product liability
claims to date, the sale and support of products by the Company may entail the
risk of such claims. In addition, any failure by the Company's products or
software to properly perform could result in claims against the Company by its
customers. The Company maintains insurance to protect against certain claims
associated with the use of its products, but there can be no assurance that
its insurance coverage would adequately cover any claim asserted against the
Company. A successful claim brought against the Company that is in excess of,
or excluded from, its insurance coverage, could have a material adverse effect
on the Company's business, financial condition or results of operations. In
addition, even claims that are ultimately unsuccessful could result in the
Company's expenditure of funds in litigation and management time and
resources. The Company has agreed to indemnify certain of its customers
against patent infringement, warranty and certain product defect claims. There
can be no assurance that the Company will not be subject to material claims in
the future, that such claims will not result in liability in excess of its
insurance coverage, that the Company's insurance will cover such claims or
that appropriate insurance will continue to be available to the Company in the
future at commercially reasonable rates.
Erosion of Average Selling Prices. The semiconductor industry, including the
3D graphics processor industry, has been characterized, and is likely to
continue to be characterized by, rapid erosion of average selling prices due
to a number of factors, including rapid technological change,
price/performance enhancements and product obsolescence. The Company
anticipates that ASPs and gross margins for its products will decrease over
product life cycles, due to competitive pressures and volume pricing
agreements. Decreasing ASPs could cause the Company to experience decreased
revenue even though the number of units sold is increasing. As a result, the
Company may experience substantial period-to-period fluctuations in future
operating results due to ASP erosion. Therefore, the Company must continue to
develop and introduce on a timely basis next-generation products and
enhancements to existing new products that incorporate additional or new
features and functionalities and that can be sold at higher ASPs. Failure to
achieve the foregoing could cause the Company's revenue and gross margins to
decline, which would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Risks Associated with International Operations. The Company's reliance on
foreign third-party manufacturing, assembly and testing operations subjects it
to a number of risks associated with conducting business outside of the United
States. These risks include unexpected changes in, or impositions of,
legislative or regulatory requirements, delays resulting from difficulty in
obtaining export licenses for certain technology, tariffs, quotas and other
trade barriers and restrictions, longer payment cycles, potentially adverse
taxes, the burdens of complying with a variety of foreign laws and other
factors beyond the Company's control. The Company also is subject to general
political risks in connection with its international trade relationships.
Although the Company has not to date experienced any material adverse effect
on its business, financial condition or results of operations as a result of
such regulatory, political and other factors, there can be no assurance that
such factors will not have a material adverse effect on the Company's
business, financial condition or results of operations in the future or
require the Company to modify its current business practices. In addition,
16
<PAGE>
the laws of certain foreign countries in which the Company's products are or
may be manufactured or sold, including various countries in Asia, may not
protect the Company's products or intellectual property rights to the same
extent as do the laws of the United States and thus make the possibility of
piracy of the Company's technology and products more likely. Currently, all of
the Company's arrangements with third-party manufacturers provide for pricing
and payment in U.S. dollars, and to date the Company has not engaged in any
currency hedging activities, although it may do so in the future. Although
currency fluctuations have been insignificant to date, there can be no
assurance that fluctuations in currency exchange rates will not have a
material adverse effect on the Company's business, financial condition or
results of operations in the future.
Cyclical Nature of the Semiconductor Industry. The semiconductor industry
historically has been characterized by rapid technological change, cyclical
market patterns, significant ASP erosion, fluctuating inventory levels,
alternating periods of overcapacity and capacity constraints, variations in
manufacturing costs and yields and significant expenditures for capital
equipment and product development. In addition, the industry has experienced
significant economic downturns at various times, characterized by diminished
product demand and accelerated erosion of ASPs. The Company may experience
substantial period-to-period fluctuations in results of operations due to
general semiconductor industry conditions.
Future Capital Needs; Uncertainty of Additional Funding. If the Company
continues to increase production of its products, it will be required to
invest significant working capital in inventory and accounts receivable. The
Company also intends to continue to invest heavily in research and development
for its existing products and for new product development. The Company's
future liquidity and capital requirements will depend upon numerous factors,
including the costs and timing of expansion of research and product
development efforts and the success of these development efforts, the costs
and timing of expansion of sales and marketing activities, the extent to which
the Company's existing and new products gain market acceptance, competing
technological and market developments, the costs involved in maintaining and
enforcing patent claims and other intellectual property rights, available
borrowings under line of credit arrangements and other factors. The Company
believes that the proceeds from this offering, together with the Company's
current cash balances and cash generated from operations, will be sufficient
to meet the Company's operating and capital requirements for at least the next
12 months. However, there can be no assurance that the Company will not
require additional financing within this time frame. The Company may be
required to raise additional funds through public or private financing,
strategic relationships or other arrangements. There can be no assurance that
such additional funding, if needed, will be available on terms attractive to
the Company, or at all. Furthermore, any additional equity financing may be
dilutive to stockholders, and debt financing, if available, may involve
restrictive covenants. Strategic arrangements, if necessary to raise
additional funds, may require the Company to relinquish its rights to certain
of its technologies or products. The failure of the Company to raise capital
when needed could have a material adverse effect on the Company's business,
financial condition or results of operations. See "--Unpredictable and
Fluctuating Operating Results," "--Limited Operating History; History of
Losses; No Assurance of Profitability," "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Year 2000 Compliance. Many existing computer systems and applications and
other 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.
As a result, in less than two years, computer systems and applications used by
many companies may need to be upgraded to comply with "Year 2000"
requirements. Significant uncertainty exists in the computer industry
concerning the potential effects associated with such compliance. The Company
relies on its systems in operating and monitoring many significant aspects of
its business, including financial systems (such as general ledger, accounts
payable, accounts receivable, inventory and order management), customer
services, infrastructure and network and telecommunications equipment. The
Company also relies directly and indirectly on the systems of external
business enterprises such as customers, suppliers, creditors, financial
organizations and domestic and international governments. The Company
currently estimates that its costs associated with Year 2000 compliance,
including any costs associated with the consequences of incomplete or untimely
resolution of Year 2000 compliance issues, will not have a material adverse
effect on the Company's business, financial
17
<PAGE>
condition or results of operations in any given year. However, the Company has
not extensively investigated and does not believe that it has fully identified
such impact and has not concluded that it can resolve it without disruption of
its business or without incurring significant expense. In addition, even if
the Company's internal systems are not materially affected by Year 2000
compliance issues, the Company could be affected through disruption in the
operation of the enterprises with which the Company interacts.
There can be no assurance that the Company's products will be Year 2000
compliant, that third-party products with which the Company's products
interface will be Year 2000 compliant or that any changes to third-party
products made in response to Year 2000 compliance issues will not render the
Company's products incompatible with such third-party products.
Concentration of Stock Ownership. Upon completion of this offering, the
Company's executive officers and directors, together with entities affiliated
with such individuals, will beneficially own approximately % of the
Company's Common Stock (approximately % if the Underwriters' over-
allotment option is exercised in full). Accordingly, these stockholders will
be able to exercise control over matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. These transactions include proxy contests, mergers involving the
Company, tender offers, open market purchase programs or other purchases of
Common Stock that could give stockholders of the Company the opportunity to
realize a premium over the then-prevailing market price for their shares of
Common Stock. See "Principal Stockholders."
Absence of Prior Trading Market; Potential Volatility of Stock Price. Prior
to this offering, there has been no public market for the Common Stock. There
can be no assurance that an active trading market will develop or, if one
develops, that it will be maintained. The initial public offering price of the
Common Stock will be established by negotiation among the Company and the
Underwriters. See "Underwriters" for factors to be considered in determining
the initial public offering price. The market price of the shares of Common
Stock could be subject to significant fluctuations in response to the
Company's operating results, announcements of new products by the Company or
its competitors, and other factors, including general economic and market
conditions. In addition, the stock market in recent years has experienced and
continues to experience extreme price and volume fluctuations, which have
affected the market price of the stock of many companies, and particularly
technology companies, and which have often been unrelated or disproportionate
to the operating performance of these companies. These fluctuations, as well
as a shortfall in sales or earnings compared to securities analysts
expectations, changes in analysts recommendations or projections or general
economic and market conditions, may adversely affect the market price of the
Common Stock. In the past, securities class action litigation has often been
instituted following periods of volatility in the market price for a company's
securities. Such litigation could result in substantial costs and a diversion
of management attention and resources, which could have a material adverse
effect on the Company's business, financial condition or results of
operations.
Anti-Takeover Provisions. The Company's Certificate of Incorporation (the
"Certificate") authorizes the Board of Directors to issue up to 2,000,000
shares of Preferred Stock and to determine the powers, designations,
preferences, rights, qualifications, limitations and restrictions, including
voting rights, of those shares without any further vote or action by the
stockholders. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The Certificate and Bylaws, among
other things, provide for a classified Board of Directors, require that
stockholder actions occur at duly called meetings of the stockholders, limit
who may call special meetings of stockholders and require advance notice of
stockholder proposals and director nominations. These and other provisions
could have the effect of making it more difficult for a third party to acquire
a majority of the outstanding voting stock of the Company, discourage a
hostile bid or delay, prevent or deter a merger, acquisition or tender offer
in which the Company's stockholders could receive a premium for their shares,
or a proxy contest for control of the Company or other change in the Company's
management. See "Management" and "Description of Capital Stock."
Shares Eligible for Future Sale. The sale of a substantial number of shares
of Common Stock in the public market following this offering could adversely
affect the market price of the Common Stock. Upon the closing
18
<PAGE>
of this offering, the Company will have outstanding an aggregate of
shares of Common Stock, assuming no exercise of outstanding options and
warrants, of which 23,468,797 shares of Common Stock are "Restricted Shares"
subject to restrictions under the Securities Act of 1933, as amended (the
"Securities Act"). Restricted Shares may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 promulgated under the Securities Act. Holders of certain
shares of the Company's Common Stock, including all officers and directors,
have agreed with the representatives of the Underwriters (the "Lock-Up
Agreements"), subject to certain exceptions, not to offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (whether such shares or any such securities are then owned by
such person or are thereafter acquired directly from the Company), or to enter
into any swap or similar arrangement that transfers, in whole or in part, the
economic risks of ownership of the Common Stock (a "disposition"), without the
prior written consent of Morgan Stanley & Co. Incorporated for a period of 180
days after the date of this Prospectus. As a result of such contractual
restrictions and the provisions of Rule 144 and 701, the Restricted Shares
will be available for sale in the public market as follows: (i) 113,558 shares
will be eligible for immediate sale on the date of this Prospectus; (ii)
4,886,442 shares will be eligible for sale 90 days after the date of this
Prospectus; (iii) 22,129,653 shares will be eligible for sale upon expiration
of lock-up agreements 180 days after the date of this Prospectus and (iv) the
remaining shares will be eligible for sale from time to time thereafter upon
expiration of the Company's right to repurchase such shares. In addition,
certain stockholders of the Company have the right to register shares of
Common Stock for sale in the public market, and the Company intends to
register shares of Common Stock authorized for issuance under the Company's
equity incentive plans shortly following the closing of this offering. See
"Description of Capital Stock" and "Shares Eligible for Future Sale."
Dilution; Absence of Cash Dividends. Purchasers of the shares of Common
Stock offered hereby will experience immediate and substantial dilution in the
net tangible book value of their investment from the initial public offering
price. Additional dilution will occur upon exercise of outstanding options and
warrants. See "Dilution" and "Shares Eligible for Future Sale." The Company
has never paid any dividends and does not anticipate paying dividends in the
foreseeable future. See "Dividend Policy."
19
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby are estimated to be approximately
$ ($ if the Underwriters' over-allotment option is
exercised in full), at an assumed initial public offering price of $ per
share and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company. The Company intends to use
approximately $ million of the net proceeds to repay certain accounts
payable. The balance of the net proceeds will be used for general corporate
purposes, including capital expenditures and working capital. The Company
expects to spend approximately $10.0 million for capital expenditures in 1998.
The amounts and timing of the Company's actual expenditures will depend upon
numerous factors, including the status of the Company's research and
development efforts, the amount of cash generated by the Company's operations,
the level of the Company's sales and marketing activities and the impact of
competition. Pending such uses, the Company intends to invest the net proceeds
of this offering in short-term, investment-grade, interest-bearing securities.
DIVIDEND POLICY
The Company has never paid any cash dividends on its capital stock and does
not anticipate paying cash dividends for the foreseeable future.
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997 (i) on an actual basis, (ii) on a pro forma basis giving
effect to the conversion of all outstanding shares of Preferred Stock into
shares of Common Stock upon the closing of this offering and (iii) on a pro
forma as adjusted basis to reflect the receipt by the Company of the estimated
net proceeds from the sale of the shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $ per
share and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital lease obligations, less current
portion....................................... $ 1,891 $ 1,891 $ 1,891
-------- -------- --------
Stockholders' equity:
Preferred Stock, $.001 par value; actual--
10,000,000 shares authorized, 9,327,087
shares issued and outstanding; pro forma and
pro forma as adjusted-- 2,000,000 shares
authorized, no shares issued and
outstanding................................. 9 -- --
Common Stock, $.001 par value; 200,000,000
shares authorized; actual--14,140,585 shares
issued and outstanding; pro forma--
23,467,672 shares issued and outstanding;
pro forma as adjusted--shares issued and
outstanding(1).............................. 14 23
Additional paid-in capital................... 22,902 22,902
Deferred compensation........................ (2,038) (2,038)
Accumulated deficit.......................... (13,991) (13,991)
-------- -------- --------
Total stockholders' equity................. 6,896 6,896
-------- -------- --------
Total capitalization..................... $ 8,787 $ 8,787 $
======== ======== ========
</TABLE>
- --------
(1) Excludes as of February 28, 1998 (i) 5,531,833 shares of Common Stock
issuable upon the exercise of options outstanding at a weighted average
exercise price of $3.30 per share, (ii) 158,806 shares of Common Stock
issuable upon the exercise of warrants outstanding at a weighted average
exercise price of $2.10 per share, (iii) 4,426,457 shares reserved for
future grants under the Company's 1998 Equity Incentive Plan, (iv) 300,000
shares reserved for future grants under the Company's 1998 Non-Employee
Directors' Stock Option Plan and (v) 500,000 shares reserved for issuance
pursuant to the Company's 1998 Employee Stock Purchase Plan. See
"Management--Employee Benefit Plans" and Notes 3 and 8 of Notes to
Financial Statements.
21
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of December 31, 1997
was approximately $6.9 million or $.29 per share of Common Stock. Pro forma
net tangible book value per share is equal to the Company's total tangible
assets less its total liabilities divided by the number of shares of Common
Stock outstanding (assuming the conversion of all outstanding shares of
Preferred Stock into Common Stock). After giving effect to the sale by the
Company of the shares of Common Stock offered hereby (at an assumed
initial public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company), the as adjusted net tangible book value of the Company as of
December 31, 1997 would have been $ , or $ per share. This
represents an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution of $
per share to new public investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $
Pro forma net tangible book value per share as of December
31, 1997................................................... $.29
Increase in pro forma net tangible book value per share
attributable to new public investors.......................
----
As adjusted net tangible book value per share after the
offering.....................................................
--------
Dilution per share to new public investors.................... $
========
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1997, the difference between the number of shares of Common Stock purchased
from the Company (assuming the conversion of all outstanding shares of
Preferred Stock into Common Stock), the total cash consideration paid and the
average price per share paid by the existing stockholders and by the new
public investors (at an assumed initial public offering price of $ per
share and before deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by the Company):
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
------------------ ------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 23,467,672 % $20,672,000 % $.88
New public investors.............
---------- ------ ----------- ------
Total.......................... 100.0% $ 100.0%
========== ====== =========== ======
</TABLE>
The foregoing assumes no exercise of outstanding stock options or warrants.
As of February 28, 1998, (i) options to purchase 5,531,833 shares of Common
Stock at a weighted average exercise price of $3.30 per share were
outstanding, of which options to purchase 2,239,648 of such shares were
immediately exercisable, and (ii) warrants to purchase 158,806 shares of
Common Stock at a weighted average exercise price of $2.10 per share were
outstanding. To the extent that outstanding options or warrants are exercised,
there will be further dilution to new investors. See "Management--Employee
Benefit Plans" and Note 3 of Notes to Financial Statements.
22
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
Company's financial statements and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included herein. The statement of operations data for the years ended December
31, 1995, 1996 and 1997 and the balance sheet data as of December 31, 1996 and
1997 have been derived from and should be read in conjunction with the audited
financial statements of the Company and the notes thereto included elsewhere
in this Prospectus that have been audited by KPMG Peat Marwick LLP,
independent auditors. The statement of operations data for the period from
inception (April 5, 1993) to December 31, 1993 and the year ended December 31,
1994 are derived from audited financial statements and the notes thereto not
included in this Prospectus. The balance sheet data as of December 31, 1993,
1994 and 1995 are derived from audited financial statements and the notes
thereto not included in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION YEAR ENDED DECEMBER 31,
(APRIL 5, 1993) TO ----------------------------------
DECEMBER 31, 1993 1994 1995 1996 1997
------------------ ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenue........... $ -- $ -- $ 1,182 $ 3,912 $29,071
Cost of revenue......... -- -- 1,549 3,038 21,226
------- ------- ------- ------- -------
Gross profit (loss)..... -- -- (367) 874 7,845
Operating expenses:
Research and
development.......... 204 361 2,426 1,218 6,632
Sales, general and
administrative....... 302 990 3,677 2,649 3,773
------- ------- ------- ------- -------
Total operating
expenses........... 506 1,351 6,103 3,867 10,405
------- ------- ------- ------- -------
Operating loss.......... (506) (1,351) (6,470) (2,993) (2,560)
Interest and other
income (expense), net.. 22 (10) 93 (84) (131)
------- ------- ------- ------- -------
Net loss............ $ (484) $(1,361) $(6,377) $(3,077) $(2,691)
======= ======= ======= ======= =======
Basic and diluted net
loss per share(1)...... $ (.07) $ (.19) $ (.56) $ (.27) $ (.21)
======= ======= ======= ======= =======
Shares used in basic and
diluted per share
computation(1)......... 6,784 7,048 11,365 11,383 12,677
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $1,605 $4,555 $3,872 $3,133 $ 6,551
Total assets............................... 1,786 5,450 6,793 5,525 25,038
Capital lease obligations, less current
portion................................... 76 249 1,137 617 1,891
Total stockholders' equity................. 1,659 4,629 4,013 1,037 6,896
</TABLE>
- --------
(1) See Note 1 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in per share computations.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's financial statements and notes thereto and the other financial
information included elsewhere in this Prospectus. Except for the historical
information contained herein, the discussions in this Prospectus contain
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those discussed herein. Factors
that could cause or contribute to such differences include, but are not
limited to, those discussed below and in the section entitled "Risk Factors,"
as well as those discussed elsewhere in this Prospectus.
OVERVIEW
NVIDIA designs, develops and markets 3D graphics processors that provide
high performance interactive 3D graphics to the mainstream PC market. The
Company incurred losses in each quarter from inception through the third
quarter of 1997 and in each year. As of December 31, 1997, the Company had an
accumulated deficit of approximately $14.0 million. Since its inception in
April 1993 through the end of 1994, NVIDIA was in the development stage and
was primarily engaged in product development and product testing. The Company
introduced its first product, the NV1, in May 1995. The NV1 was a multimedia
accelerator that provided 3D graphics, video and audio for interactive
multimedia, and was targeted primarily to the game console market. The NV1 was
developed in the absence of industry standards with the goal of establishing
the Company's proprietary NV technology as a 3D graphics standard. By the end
of 1996, the PC industry had broadly adopted Microsoft's Direct3D and Silicon
Graphics Inc.'s ("SGI's") OpenGL 3D APIs. As a result, the Company experienced
a significant reduction in revenue from sales of the NV1 and stopped selling
the NV1 in the first quarter of 1996. The Company also ceased development of
the NV2, a product designed for a game console platform, and began developing
the RIVA128 graphics processor. In August 1997, the Company introduced the
RIVA128 graphics processor, which is designed to be compatible with
Microsoft's Direct3D and is the first in a family of high performance graphics
products targeted at the mainstream PC market.
All of the Company's revenue in 1995 and 1996 was derived from the sale and
license of the NV1, and substantially all of the Company's revenue in 1997 was
derived from the sale and license of the RIVA128 graphics processor. The
Company expects that substantially all of its revenue for the foreseeable
future will be derived from the sale and license of its 3D graphics processors
in the mainstream PC market. The Company recognizes product sales revenue upon
shipment, net of allowances and recognizes royalty revenue upon shipment of
product to the licensee's customers. Since the Company has no other product
line, the Company's business, financial condition and results of operations
would be materially adversely affected if for any reason its graphics
processors do not achieve widespread acceptance in the mainstream PC market.
A majority of the Company's sales have been to a limited number of customers
and its sales are highly concentrated. The Company sells its graphics
processors to add-in board manufacturers such as Diamond and STB, which
incorporate these processors in the boards they sell to PC OEMs, retail
outlets and systems integrators. The average selling prices for the Company's
products, as well as its customers' products, vary by distribution channel.
All of the Company's sales are made on the basis of purchase orders rather
than long-term agreements. Diamond accounted for 86% and 82% of the Company's
total revenue in 1995 and 1996, respectively. STB and Diamond accounted for
63% and 31%, respectively, of the Company's total revenue in 1997. The number
of potential customers for the Company's products is limited, and the Company
expects that sales to STB and Diamond will continue to account for a
substantial portion of its revenue for the foreseeable future. Currently, all
of the Company's product sales and its arrangements with its third-party
manufacturers provide for pricing and payment in U.S. dollars, and the Company
has not engaged in any foreign currency hedging activities, although it may do
so in the future.
As markets for the Company's 3D graphics processors develop and competition
increases, the Company anticipates that product life cycles will remain short
and ASPs will continue to decline. In particular, ASPs and
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gross margins for the Company's 3D graphics processors are expected to decline
as each product matures and as per order unit volumes increase. Thus, the
Company will need to introduce new products and enhancements to existing
products to maintain overall average selling prices and gross margins.
Furthermore, in order for the Company's 3D graphics processors to achieve high
volumes, leading PC OEMs and add-in board manufacturers must select the
Company's 3D graphics processor for design into their products, and then
successfully complete the designs of their products and sell them. In
particular, the Company expects to begin shipping the RIVA128ZX graphics
processor in 1998, and there can be no assurance that the Company will be able
to successfully manage the production transition risks with respect to that
product. Failure to achieve any of the foregoing with respect to the RIVA128ZX
graphics processor, future products or product enhancements could result in
rapidly declining ASPs, reduced margins, reduced demand for products or loss
of market share, any of which could have a material adverse effect on the
Company's business, financial condition or results of operations.
The Company utilizes ST and TSMC to produce the Company's semiconductor
wafers and independent contractors to perform assembly, test and packaging.
The Company depends on these suppliers to allocate to the Company a portion of
their manufacturing capacity sufficient to meet the Company's needs, to
produce products of acceptable quality and at acceptable manufacturing yields
and to deliver those products to the Company on a timely basis. ST currently
is capacity constrained with respect to the manufacture of the Company's
products. ST has only recently begun to manufacture the Company's products in
commercial quantities, and there can be no assurance that ST will be able to
meet the Company's near-term or long-term manufacturing requirements. In
addition, the Company's relationship with TSMC has only recently been
established, and there can be no assurance that this relationship will meet
the business objectives of the Company. As the Company's relationships with
ST, TSMC and any additional manufacturing partners develop, yields or product
performance could be adversely affected due to difficulties associated with
adapting the Company's technology and product design to the proprietary
process technology and design rules of each manufacturer. A manufacturing
disruption experienced by either of these manufacturers would impact the
production of the Company's products, which would have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company obtains manufacturing services from both ST and TSMC
on a purchase order basis, and neither ST nor TSMC has any obligation to
provide the Company with any specified minimum quantities of product. Both ST
and TSMC fabricate wafers for other companies, including certain competitors
of the Company, and ST also manufactures wafers for its own needs, and either
could choose to prioritize capacity for other uses or reduce or eliminate
deliveries to the Company on short notice. In addition, the Company purchases
wafers and dies and pays an agreed price for wafers meeting certain acceptance
criteria only after the production yields for a product stabilize. Once
production is stabilized, the Company will pay for functional die only.
Accordingly, because TSMC has only recently begun to manufacture products for
the Company, until the production yields of its product at TSMC stabilize, the
Company must pay an agreed price for wafers regardless of yield.
The Company has in the past entered into contractual agreements with third
parties to provide design, development and support services on a best efforts
basis. All amounts funded to the Company under these agreements were non-
refundable once paid. The Company recorded reductions to research and
development expense based on the percentage-of-completion method, limited by
the amounts funded, and recorded primarily as a reduction to research and
development expenses. The Company developed the NV2 under contract with a
third party and recorded a credit to research and development of $2.0 million
in 1995 and $3.0 million in 1996. Also, as part of a strategic collaboration
agreement with ST, the Company received contract funding in support of
research and development and marketing efforts for the RIVA128 and RIVA128ZX
graphics processors. Accordingly, the Company recorded $2.0 million in 1996
and approximately $2.3 million in 1997 as a reduction primarily to research
and development, and, to a lesser extent to sales, general and administrative
expenses. The Company is obligated to provide continued development and
support to ST through the end of 1998 and expects to record contract funding
of approximately $2.5 million in 1998. The Company does not have any plans to
enter into contractual development arrangements and does not expect contract
funding in the future.
RESULTS OF OPERATIONS
The Company first generated revenue from sales of its current 3D graphics
processor product in the third quarter of 1997, when the Company began
commercial shipment of the RIVA128 graphics processor. Prior to
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that time, the Company's revenue was derived from the sale of products that
were targeted at the game console market. These products were discontinued in
1996 due to their proprietary standards and market changes. Moreover, expenses
prior to the third quarter of 1997 related primarily to product development
and product testing. As a result, the Company believes that period-to-period
comparisons of annual operating results are less meaningful than an analysis
of recent quarterly operating results. Accordingly, the Company is providing a
discussion and analysis of its results of operations that is primarily focused
upon the four quarters ended December 31, 1997.
The following table presents certain quarterly statement of operations data
for the four quarters ended December 31, 1997. This quarterly information is
unaudited, but has been prepared on the same basis as the audited annual
financial statements, and in the opinion of the Company's management includes
all adjustments, consisting only of normal recurring adjustments, necessary
for a fair presentation of the information for the periods presented. The
unaudited quarterly information should be read in conjunction with the
Company's audited financial statements and the notes thereto included
elsewhere herein. The growth in revenue and improvement in results of
operations experienced by the Company in recent quarters are not necessarily
indicative of future results. In addition, in light of its significant growth
in the recent year, the Company believes that period-to-period comparisons of
its financial results should not be relied upon as an indication of future
performance.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------
MARCH 30, JUNE 29, SEPT. 28, DEC. 31,
1997 1997 1997 1997
--------- -------- --------- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (IN THOUSANDS, EXCEPT SHARE DATA)
Revenue:
Product................................ $ 65 $ 6 $ 5,154 $22,055
Royalty................................ -- -- 312 1,479
------- ------- ------- -------
Total revenue........................ 65 6 5,466 23,534
------- ------- ------- -------
Cost of revenue.......................... 208 150 4,546 16,322
Gross profit (loss).................. (143) (144) 920 7,212
Operating expenses:
Research and development............... 616 512 2,312 3,192
Sales, general and administrative...... 385 569 991 1,828
------- ------- ------- -------
Total operating expenses............. 1,001 1,081 3,303 5,020
------- ------- ------- -------
Operating income (loss).................. (1,144) (1,225) (2,383) 2,192
Interest and other income (expense), net. (32) (40) (30) (29)
------- ------- ------- -------
Net income (loss).................... $(1,176) $(1,265) $(2,413) $ 2,163
------- ------- ------- -------
Basic net income (loss) per share........ $ (.10) $ (.11) $ (.18) $ .15
======= ======= ======= =======
Diluted net income (loss) per share...... $ (.10) $ (.11) $ (.18) $ .09
======= ======= ======= =======
Shares used in basic per share
computation............................. 11,578 11,662 13,328 14,074
Shares used in diluted per share
computation............................. 11,578 11,662 13,328 24,942
</TABLE>
REVENUE
Product Revenue. Product revenue increased from less than $100,000 in the
first two quarters of 1997 to $5.2 million and $22.1 million in the third and
fourth quarters of 1997, respectively. This increase was due to sales from the
RIVA128 graphics processor, which was introduced in August 1997. Unit
shipments increased in the fourth quarter compared to the third quarter due to
the shipment of product over an entire quarter as well as increased market
acceptance of the RIVA128 graphics processor, while average selling prices
declined slightly in the fourth quarter. In December 1997, the Company's sales
of the RIVA128 graphics processor were negatively affected due to low
manufacturing yields at ST, the Company's sole manufacturer. Any similar
manufacturing difficulties with ST or other third-party manufacturers in the
future could have a material adverse
26
<PAGE>
impact on the Company's business, financial condition or results of
operations. In addition, there can be no assurance that the Company will be
able to increase or maintain its market share or that declines in ASPs for 3D
graphics processors will not accelerate as the market develops and competition
increases. See "Risk Factors--Erosion of Average Selling Prices" and
"Dependence on Third-Party Manufacturers; Absence of Manufacturing Capacity;
Manufacturing Risks."
Royalty Revenue. The Company has granted ST a license to sell the RIVA128
and the RIVA128ZX graphics processors. Royalty revenue from ST's sales of the
RIVA128 graphics processor was $312,000 and $1.5 million in the third and
fourth quarters of 1997, respectively. If ST were to stop selling the
Company's products or if there were a material decline in the number of units
sold by ST in the future, the Company's business, financial condition and
results of operations would be materially adversely affected. See "Risk
Factors--Dependence on ST Microelectronics."
GROSS PROFIT (LOSS)
Gross profit consists of total revenue less cost of revenue. Cost of revenue
consists primarily of the costs of semiconductors purchased from the Company's
contract manufacturers, manufacturing support costs (labor and overhead
associated with such purchases) and shipping costs. Substantially all of the
gross loss in the first two quarters of 1997 was attributable to increases in
fixed manufacturing support costs. Introduction in August 1997 and subsequent
sales of the RIVA128 graphics processor contributed to gross profit in the
third quarter of 1997. Gross profit increased in the fourth quarter of 1997
due primarily to increased sales of the RIVA128 graphics processor, which were
partially offset by lower average selling prices. Gross profit also increased
in the third and fourth quarters of 1997 due to increases in royalty revenue
from ST's sales of the RIVA128 graphics processor. Excluding royalty revenue,
gross margin on product revenue was 11.8% and 26.0% in the third and fourth
quarters of 1997, respectively. The increase in gross margin on product
revenue in the fourth quarter of 1997 was primarily due to lower per unit
production costs. The Company has been capacity constrained since the
introduction of the RIVA128 graphics processor and has not experienced any
material inventory build up. Gross profit and gross margin could be affected
in the future by various factors, including changes in the volume of the
Company's products, competitive pressures resulting in lower than expected
ASPs, reduction in the amount of royalty revenue received from ST and
inventory write-downs.
OPERATING EXPENSES
Research and Development. Research and development expenses consist
primarily of salaries and benefits, cost of development tools and software,
and consultant costs, net of contract funding from ST. Research and
development expenses before adjustments for contract funding were $1.4
million, $1.7 million, $2.3 million and $3.2 million in the first, second,
third and fourth quarters, respectively. Research and development expenses
generally increased during the period, primarily due to additional personnel
and related costs. The Company anticipates that it will continue to devote
substantial resources to research and development and that these expenses will
increase in absolute dollars in 1998.
Sales, General and Administrative. Sales, general and administrative
expenses consist primarily of salaries, commissions and bonuses earned by
sales, marketing and administrative personnel, promotional expenses and travel
and entertainment, net of contract funding received from ST. Sales, general
and administrative expenses increased in each of the four quarters ended
December 31, 1997, primarily due to incremental promotional expenses,
additional personnel and, in the third and fourth quarters of 1997,
commissions and bonuses on sales of the RIVA128 graphics processor. The
Company expects that sales and marketing expenses will continue to increase in
absolute dollars as the Company expands its sales and marketing efforts and
increases promotional activities, and that general and administrative expenses
will increase in connection with expenses associated with being a public
company and the Company's expected move to a larger facility in the third
quarter of 1998.
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STOCK-BASED COMPENSATION
With respect to certain stock options granted to employees in 1997, the
Company recorded deferred compensation of $2.1 million. The Company amortized
approximately $62,000 of the deferred compensation in the fourth quarter of
1997 and will amortize the remainder over the four-year vesting periods of the
options. The Company expects to record an additional $2.1 million of deferred
compensation for options granted to employees in the first quarter of 1998,
which also will be amortized over the four-year vesting periods of the
options. See Note 3 of Notes to Financial Statements.
INTEREST AND OTHER INCOME (EXPENSE), NET
Interest expense primarily comprises interest incurred as a result of
capital lease obligations. Interest expense generally increased during the
period as a result of additional equipment leased in support of the Company's
increased development activities. The increases in interest expense were
offset by increased interest income during the period. Interest income
primarily comprises interest earned on the Company's cash and cash
equivalents. Interest income increased in the third and fourth quarters as a
result of increased cash balances resulting from proceeds from the sale of
preferred stock in the third quarter of 1997.
DEFERRED TAX ASSETS
The Company had deferred tax assets for federal income tax purposes of
approximately $6.3 million as of December 31, 1997, consisting primarily of
net operating loss carryforwards that can be used to offset taxable income in
future years. The deferred tax assets are fully offset by a valuation
allowance. Future equity offerings combined with sales of the Company's equity
during the preceding three years may constitute changes in ownership under the
Internal Revenue Code of 1986, and could limit the use of the Company's net
operating loss carryforwards existing as of the date of the ownership change.
Realization of the deferred tax assets also will depend on future taxable
income.
FACTORS AFFECTING OPERATING RESULTS
The Company's quarterly and annual results of operations will be affected by
a variety of factors that could materially adversely affect revenue, gross
profit and results of operations. Factors that have affected the Company's
results of operations in the past, and are likely to affect the Company's
results of operations in the future, include, among others, demand and market
acceptance of the Company's products; the successful development of next-
generation products; unanticipated delays or problems in the introduction or
performance of next-generation products; market acceptance of the products of
the Company's customers; new product announcements or product introductions by
the Company's competitors; the Company's ability to introduce new products in
accordance with OEM design requirements and design cycles; changes in the
timing of product orders due to unexpected delays in the introduction of
products of the Company's customers or due to the life cycles of such
customers' products ending earlier than anticipated; fluctuations in the
availability of manufacturing capacity or manufacturing yields; competitive
pressures resulting in lower than expected average selling prices; the volume
of orders that are received and that can be fulfilled in a quarter; the
rescheduling or cancellation of customer orders; the unanticipated termination
of a strategic relationship; seasonal fluctuations associated with the
tendency of PC sales to increase in the second half of each calendar year; and
the level of expenditures for research and development of sales, general and
administrative functions of the Company. In addition, the Company believes
that quarterly and annual results of operations could be affected in the
future by other factors, including changes in the relative volume of sales of
the Company's products; seasonality in the PC market; the ability of the
Company to reduce the process geometry of its products; supply constraints for
the other components incorporated into its customers' products; the loss of a
key customer; a reduction in the amount of royalties received from ST; costs
associated with protecting the Company's intellectual property; inventory
write-downs and foreign exchange rate fluctuations. Any one or more of these
factors could result in the Company failing to achieve its expectations as to
future revenue or net income.
Because most operating expenses are relatively fixed in the short term, the
Company may be unable to adjust spending sufficiently in a timely manner to
compensate for any unexpected sales shortfall, which could
28
<PAGE>
materially adversely affect quarterly results of operations. The Company will
be required to reduce prices in response to competition or to pursue new
market opportunities. If new competitors, technological advances by existing
competitors or other competitive factors require the Company to invest
significantly greater resources than anticipated in research and development
or sales and marketing efforts, the Company's business, financial condition
and results of operations could be materially adversely affected. Accordingly,
the Company believes that period-to-period comparisons of its results of
operations should not be relied upon as an indication of future performance.
In addition, the results of any quarterly period are not indicative of results
to be expected for a full fiscal year. As a result of fluctuating operating
results or other factors discussed above, in certain future quarters the
Company's results of operations may be below the expectations of public market
analysts or investors. In such event, the market price of the Company's Common
Stock would be materially adversely affected.
In 1997, the Company derived all of its revenue from the sale or license of
products for use in PCs, and the Company expects to continue to derive
substantially all of its revenue from the sale or license of products for use
in PCs. As a result, failure of the demand for 3D graphics in the mainstream
PC market to increase, or reductions or fluctuations in the demand for PCs,
would have a material adverse effect on the Company's business, financial
condition and results of operations. The PC industry is seasonal, and the
Company expects that its financial results in the future will be affected by
such seasonality.
YEAR 2000 COMPLIANCE
Many existing computer systems and applications and other 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. As a result, in less than
two years, computer systems and applications used by many companies may need
to be upgraded to comply with "Year 2000" requirements. The Company relies on
its systems in operating and monitoring many significant aspects of its
business, including financial systems (such as general ledger, accounts
payable, accounts receivable, inventory and order management), customer
services, infrastructure and network and telecommunications equipment. The
Company also relies directly and indirectly on the systems of external
business enterprises such as customers, suppliers, creditors, financial
organizations and domestic and international governments. The Company
currently estimates that its costs associated with Year 2000 compliance,
including any costs associated with the consequences of incomplete or untimely
resolution of Year 2000 compliance issues, will not have a material adverse
effect on the Company's business, financial condition or results of
operations. However, the Company has not extensively investigated and does not
believe it has fully identified such impact and has not concluded that it can
resolve it without disruption of its business or without incurring significant
expense. In addition, even if the Company's internal systems are not
materially affected by Year 2000 compliance issues, the Company could be
affected through disruption in the operation of the enterprises with which the
Company interacts.
29
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
private sales of convertible preferred stock totaling $19.7 million and, to a
lesser extent, equipment lease financing and proceeds received from the
exercise of employee stock options. As of December 31, 1997, the Company had
$6.5 million in cash and cash equivalents and no outstanding bank
indebtedness. The Company has historically held its cash balances in cash
equivalents such as money market funds or as cash. The Company places its
money market funds with high credit quality financial institutions and limits
the amount of exposure with any one financial institution.
Net cash used in operating activities was $6.1 million in 1995, $300,000 in
1996 and $1.2 million in 1997. The decrease from 1995 to 1996 was a result of
a smaller operating loss and higher deferred contract funding in 1996, and the
increase from 1996 to 1997 was a result of substantial increases in accounts
receivable in 1997, partially offset by an increase in accounts payable. The
Company's accounts receivable are highly concentrated and three customers
accounted for all accounts receivable in 1997. Although the Company has not
experienced any bad debt write-offs to date, there can be no assurance that
the Company will not be required to write off bad debt in the future, which
would have a material adverse effect on the Company's business, financial
condition and results of operations.
To date, the Company's investing activities have consisted primarily of
purchases of property and equipment. As of December 31, 1997, the Company did
not have any material commitments other than commitments under operating and
capital leases. See Note 4 of Notes to Financial Statements. The Company's
capital expenditures, including capital leases, increased from $1.4 million in
1995 to $5.8 million in 1997, due to additional capital leases and purchases
of computer equipment, including workstations and servers to support the
Company's increased research and development activities. The Company expects
its capital expenditures to increase as the Company further expands its
research and development initiatives and as its employee base grows. The
timing and amount of future capital expenditures will depend primarily on the
Company's future growth. The Company expects to spend approximately $10.0
million for capital expenditures in 1998.
The Company believes that the net proceeds from this offering, together with
its existing cash balances and anticipated cash flows from operations, will be
sufficient to meet the Company's operating and capital requirements for at
least the next 12 months, although the Company could be required, or could
elect, to raise additional funds during such period. The Company's future
liquidity and capital requirements will depend upon numerous factors,
including the costs and timing of expansion of research and product
development efforts and the success of these development efforts, the costs
and timing of expansion of sales and marketing activities, the extent to which
the Company's existing and new products gain market acceptance, competing
technological and market developments, the costs involved in maintaining and
enforcing patent claims and other intellectual property rights, available
borrowings under line of credit arrangements and other factors. The Company
expects that it may need to raise additional equity or debt financing in the
future. There can be no assurance that such additional financing will be
available at all, or that such financing, if available will be obtainable on
terms favorable to the Company and will not be dilutive to the Company's then-
current stockholders.
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BUSINESS
OVERVIEW
NVIDIA designs, develops and markets 3D graphics processors and related
software that provide high performance interactive 3D graphics to the
mainstream PC market. The Company's RIVA128 graphics processor incorporates a
"fast-and-wide" 100 megahertz, 128-bit graphics processing architecture and is
designed to deliver a highly immersive, interactive 3D experience with
realistic imagery and stunning effects. The RIVA128 graphics processor
provides superior processing power at competitive prices and is architected to
take advantage of mainstream industry standards such as Microsoft's Direct3D.
The highly integrated design of the RIVA128 graphics processor combines high
performance 3D and 2D graphics on a single chip and provides a simpler and
lower cost graphics solution relative to competing solutions, including multi-
chip or multi-board 2D/3D graphics subsystems.
NVIDIA designed the RIVA128 graphics processor to enable PC OEMs and add-in
board manufacturers to build award-winning products by delivering state-of-
the-art interactive 3D graphics capability to end users while maintaining
affordable prices. The Company believes that by developing 3D graphics
solutions that provide superior performance and address the key requirements
of the mainstream PC market, it will accelerate the adoption of 3D graphics
throughout this market. The benefits and performance of the RIVA128 graphics
processor have received significant industry validation and have enabled the
Company's customers to win over 40 industry awards. NVIDIA's products
currently are designed into products offered by five of the top ten PC OEMs in
the United States--Compaq, Dell, Gateway 2000, Micron and Packard Bell NEC--
and by leading add-in board manufacturers such as Diamond and STB.
INDUSTRY BACKGROUND
Interactive 3D graphics technology is emerging as one of the most
significant new computing developments since the introduction of the graphical
user interface. The visually engaging and interactive nature of 3D graphics
responds to consumers' demands for a convincing simulation of reality beyond
what is possible with traditional 2D graphics. The fundamental interactive
capability of 3D graphics is expected to make it a natural and compelling
medium for existing and emerging applications for entertainment, Internet,
business and education.
Interactive 3D graphics is required across various computing and
entertainment platforms, such as workstations, specialized arcade systems and
home gaming consoles. However, the mainstream PC market has only recently
begun to transition from traditional 2D graphics to high quality, interactive
3D graphics. Continuing advancements in semiconductor manufacturing have made
available more powerful and affordable microprocessors and 3D graphics
processors, both of which are essential to deliver interactive 3D graphics to
the mainstream PC market. Additionally, the industry has broadly adopted
Microsoft's 3D application programming interface ("API"), Direct3D, which
serves as a common and standard language between software applications and 3D
graphics processors. This has spurred the development of numerous compelling
3D titles, and subsequently strong consumer demand.
The Company believes that a PC's interactive 3D graphics capability
represents one of the primary means by which users differentiate among various
systems. PC users today can easily differentiate the quality of graphics and
prefer personal computers that provide a superior visual experience. These
factors have dramatically increased demand for 3D graphics processors. Mercury
Research estimates that 3D graphics will be standard in every PC unit shipped
by 2001. Mercury Research also estimates 8.6 million 3D graphics processors
were sold in 1997 and 180 million will be sold in 2001.
The technology required to create interactive and visually engaging 3D
graphics is algorithmically complex and computationally intensive. To deliver
high quality interactive 3D graphics, advanced 3D graphics processors require
millions of transistors to process billions of arithmetic operations per
second. Current 3D graphics processors are over ten times more complex than 2D
accelerators and comparable to the complexity of the
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Pentium microprocessor. Yet despite recent advances, PC 3D graphics available
today cannot deliver in real time the quality of graphics seen in the film
"Toy Story." Such 3D graphics required over 100 powerful workstations and over
800,000 computer hours to render the film's 114,000 frames, with each frame
requiring an average of seven hours to render. For mainstream PCs to provide
this level of 3D graphics capability, the performance of 3D graphics
processors will need to be improved by several more orders of magnitude. To
approach "real world" graphics performance even beyond that seen in "Toy
Story," graphics processors would require significant further improvement in
performance.
The demanding requirements of high performance 3D graphics present
significant new challenges for semiconductor graphics companies in the
mainstream PC market. Certain suppliers offer 3D graphics solutions that only
address specific niches of the market, such as the gaming or CAD/CAM markets.
These solutions typically have been relatively expensive, in some cases
involving multiple chips on an add-in card, with separate chips for 2D
graphics and 3D graphics processing. Furthermore, these niche 3D solutions
often require content providers to develop to proprietary APIs other than
Microsoft's Direct3D in order to achieve the necessary performance. The higher
product costs and API limitations have made it difficult for such targeted 3D
graphics solutions to achieve widespread acceptance in the mainstream PC
market. On the other end of the spectrum, traditional 2D graphics suppliers
have attempted to leverage their installed base by adding 3D graphics
functionality to their 2D graphics architectures. However, 3D graphics
algorithms and architectures are significantly more complex than those of 2D
graphics, and the traditional 2D graphics suppliers face many challenges to
develop and provide cost-effective high performance 3D graphics.
The Company believes that a substantial market opportunity exists for
providers of high performance 3D graphics products for the mainstream PC
market, particularly as high performance 3D graphics have become an
increasingly important requirement and point of differentiation for PC OEMs.
Consumer PC users demand a compelling visual experience and compatibility with
existing and next-generation 3D graphics applications at an affordable price.
Application developers require high performance, standards-based 3D
architectures with broad market penetration. Since graphics is a key point of
differentiation, PC OEMs continually seek to incorporate leading-edge cost-
effective 3D graphics solutions to build award-winning products. The Company
believes that providers of interactive 3D graphics solutions will compete
based on their ability to leverage their technology expertise to
simultaneously meet the needs of end users, application developers and OEMs.
THE NVIDIA SOLUTION
NVIDIA has developed a family of 3D graphics processors and related software
that provides high performance interactive 3D graphics to the mainstream PC
market. The Company's products allow users to enjoy a highly immersive,
interactive 3D experience with compelling visual quality, realistic motion and
complex object and scene interaction at real-time frame rates. By providing
this level of performance at an affordable price to OEMs and end users, the
Company believes that it will accelerate the adoption of interactive 3D
graphics throughout the mainstream PC market. The Company's products are used
by leading PC OEMs, such as Compaq, Dell, Gateway 2000, Micron and Packard
Bell NEC, and leading add-in board manufacturers, such as Diamond and STB. The
Company's products have received significant industry validation and have
enabled the Company's customers to receive over 40 industry awards.
The key features and benefits of the Company's solution are as follows:
High Performance. The RIVA128 graphics processor's 128-bit architecture
combined with a proprietary texture cache can process 1.5 million polygons per
second and maintain a fill rate of 100 million texture mapped pixels per
second. This performance is driven by the processing power of its 5 GFLOPS
(billions of floating point operations per second) floating point polygon
setup engine and its 15 BOPS (billions of operations per second) integer pixel
processing engine. The RIVA128 graphics processor also includes an extensive
set of reference drivers that translate between the software API and hardware.
The software driver is designed to maximize performance of the graphics
processor and to maintain compatibility with each successive generation of the
Company's products. The software drivers have the flexibility to be
continually enhanced in order to further improve the performance of the
processors. The Company believes that the high performance of the
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RIVA128 graphics processor provides a competitive advantage to the Company's
OEM customers, enabling them to differentiate their systems from those of
other PC vendors.
Standards-Based. The RIVA128 products are architected to take full advantage
of industry standards such as Microsoft's Direct3D. The standards-compliant
design of the RIVA128 graphics processor provides OEMs maximum flexibility in
the design and use of the system. In particular, the Company believes that its
focus on the Microsoft Direct3D API positions it well in the mainstream PC
market as this standard proliferates and supports more advanced 3D visuals.
Microsoft's Direct3D API has gained broad developer support, with numerous 3D
titles currently using this API.
Integrated Design. The RIVA128 graphics processor is a highly integrated
single-chip processor that supports high performance interactive 3D graphics
applications while simultaneously optimizing 2D graphics and providing VGA
compatibility and DVD playback. By integrating 2D graphics and 3D graphics on
one chip, the Company believes that it has standardized the platform for
developers and provided a graphics solution that is simpler and lower cost
relative to competing solutions, including multi-chip or multi-board 2D/3D
graphics subsystems.
128-bit Architecture. The Company's 128-bit product architecture and leading
technology enable it to provide products with state-of-the-art interactive 3D
graphics performance and superior processing power. With its "fast-and-wide"
100 megahertz, 128-bit graphics and memory interface, the RIVA128 graphics
processor delivers 3D graphics with great detail, smooth shading, high frame
rates and overall stunning effects, while maintaining volume pricing for
multimedia and entertainment applications.
STRATEGY
The Company's objective is to be the leading supplier of high performance 3D
graphics processors for PCs. The Company's strategy to achieve this objective
includes the following key elements:
Focus on the Mainstream PC Market. The Company's strategy is to achieve
market leadership in the high volume mainstream PC market by providing award-
winning performance at competitive prices. By developing 3D graphics solutions
that provide superior performance and address the key requirements of the
mainstream PC market, NVIDIA believes that it will accelerate the adoption of
3D graphics throughout the mainstream PC market. As part of its strategy to
address the broadest segment of the PC market, the Company has closely aligned
its product development with Microsoft's Direct3D API, rather than creating
and promoting a proprietary API. The Company believes this alignment with
Direct3D maximizes third-party software support.
Target Leading OEMs. The Company's strategy is to enable its leading OEM
customers to differentiate their products in a highly competitive marketplace
by using NVIDIA's high performance 3D graphics processors. NVIDIA believes
that design wins with these industry leaders provide market validation of its
products, increase brand awareness and enhance the Company's ability to
penetrate additional leading customer accounts. In addition, the Company
believes that close relationships with OEMs will allow the Company to better
anticipate and address customer needs with its future generation of products.
NVIDIA's products currently are designed into products offered by five of the
top ten PC OEMs in the United States--Compaq, Dell, Gateway 2000, Micron and
Packard Bell NEC--and by leading add-in board manufacturers such as Diamond
and STB.
Extend Technological Leadership in 3D Graphics. NVIDIA believes that its
products provide superior interactive 3D graphics to the mainstream PC market.
The Company is focused on leveraging its advanced engineering capabilities to
accelerate the quality and performance of 3D graphics in PCs. A fundamental
aspect of NVIDIA's strategy is to actively recruit the best 3D graphics
engineers in the industry, and NVIDIA believes that it has assembled an
exceptionally experienced and talented engineering team. The Company intends
to leverage this advantage to achieve new levels of graphics features and
performance, enabling customers to achieve award-winning performance in their
products.
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Increase Market Share by Leveraging Strategic Alliances. The Company
believes that substantial market share will be important to achieving success
in the 3D graphics business. The Company intends to achieve a leading share of
the market by devoting substantial resources towards establishing NVIDIA's
brand and leading product capabilities as the de facto graphics standard for
end users, application developers and OEMs. The Company has leveraged the
RIVA128 graphics processor architecture to achieve broader market penetration
by forming a strategic alliance with ST that gives ST the right to manufacture
products for sale.
NVIDIA ARCHITECTURE, PRODUCTS AND PRODUCTS UNDER DEVELOPMENT
3D PROCESSING TECHNOLOGY BACKGROUND
3D graphics processors create two-dimensional images, which can be displayed
on computer monitors or other output devices, from computer specifications of
three-dimensional objects or "models." These two-dimensional images are
typically the perspective view of the objects from an eye-point that changes
with time, and as such are computationally very intensive. The 3D effect
arises from a variety of visual cues, such as perspective, occlusion, surface
shading, shadows, focus and motion. Convincing realism arises from precise
calculation of these and other effects, and these calculations require
dedicated processors, which provide far more power and bandwidth than
microprocessors can deliver.
The 3D graphics process is a series of specialized steps, often referred to
as the 3D graphics pipeline. Typically, the microprocessor chooses an eye-
point and decides which objects should be displayed. These are commonly
communicated to the graphics subsystem via a software interface, such as
Microsoft's Direct3D or SGI's OpenGL. The processing itself occurs in several
steps, as depicted and described below:
GEOMETRY POLYGON
MODEL -- PROCESSING -- SETUP -- RASTERIZATION -- DISPLAY
Model. The model typically is expressed as a set of polygons, such as
triangles, that form the basic shape of a three-dimensional object and
have attributes such as position and color at each vertex.
Geometry processing. Geometry processing transforms the original
position and orientation of the polygons to their new position on the
screen. Based on their position and orientation, some aspects of their
surface color and lighting can be computed. The 3D visual cues of
perspective and motion are handled during this stage. These
calculations require very high floating-point computation power and are
performed by the host microprocessor.
Polygon setup. Polygon setup calculates the slopes of the polygon
sides and various other derivatives that greatly accelerate the
rasterization process. Although early graphics devices performed these
calculations in the host microprocessor, today's 3D graphics processor
perform these calculations, permitting significantly higher
performance.
Rasterization. Rasterization computes the color and other information
for every pixel (dot on the screen) that a transformed polygon touches.
A number of complex algorithms compute the color uniquely for each
pixel, as well as perform the remaining visual cues, such as shading,
shadows, focus and occlusion. This is the most computationally
intensive step of the graphics pipeline and the processors are required
to perform up to 1,000 calculations per pixel, with this number
increasing rapidly.
Display. Display consists of sequentially reading out the color of
each pixel at a rate matched to the monitor. Unlike the other stages in
the 3D graphics pipeline, which are purely digital, the signals to the
monitor are analog, and the frequencies are far higher.
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The complexity of the different steps in the 3D graphics pipeline requires
billions of floating-point and integer operations in real time to deliver a
realistic and interactive experience. Image quality determines whether 3D
computer representation looks realistic, and 3D performance determines whether
a 3D system conveys a sense of fluid motion in real time. If the performance
is below a certain threshold, a 3D system can in fact reduce the productivity
or the enjoyment of the user, even if the image quality is high. The challenge
with high quality 3D is to deliver the processing power required to perform
these computations without creating bottlenecks in the 3D graphics pipeline.
NVIDIA PROCESSOR ARCHITECTURE
The RIVA128 graphics processor is highly integrated and delivers high frame
rate 3D graphics, as well as 2D graphics, VGA and video processing in a single
processor. The primary functional units of the RIVA128 graphics processor are
the 3D geometry processing unit, the 2D engine, the 3D pixel processor, the
texture cache and the Palette-DAC and video processor. The following
illustrates the primary components of the RIVA128 graphics processor:
[Description of illustration: Depiction of RIVA128 3D graphics processor, with
the following functional areas labelled: 3D Geometry Processing Unit, Texture
Cache, Video Port, 2D Engine, 3D Pixel Processor, Palette-DAC and Video
Processor, VGA, Internal Bus, Memory Controller, PCI/AGP Interface.]
The RIVA128 3D Graphics Processor
3D Geometry Processing Unit. This engine performs the polygon setup
and lighting calculations and prepares data for pixel processing. This
5 GFLOPs floating point engine processes up to five million triangles
per second.
2D Engine. The 2D rendering engine provides high performance for 2D
applications. The 2D engine is necessary for applications such as those
used in a business environment where 2D objects are drawn to and moved
around on the computer monitor. Examples include Windows-based
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applications such as Microsoft Word, Powerpoint or Excel. The presence
of high performance 2D graphics is a critical function for 3D graphics
processors targeted for the mainstream PC market.
3D Pixel Processor. The 3D pixel processor calculates pixel colors
and other attributes to be rendered to the computer screen. It includes
advanced rendering capabilities, such as 32-bit RGB Gouraud shading,
alpha blending, perspective correct per pixel fog and perspective
correct specular highlights.
Texture Cache. The texture cache provides high performance, local
texture storage for the pixel processing engine.
Palette-DAC and Video Processor. The RIVA128 graphics processor
Palette-DAC pipeline accelerates full-motion video playback, sustaining
30 frames per second while retaining high quality color resolution,
implementing true bilinear filtering for scaled video, and compensating
for filtering losses using edge enhancement algorithms.
NVIDIA PRODUCTS
The RIVA128 graphics processor enables PC OEMs and add-in board
manufacturers to satisfy end-user performance requirements by providing visual
realism and real-time interactivity. The RIVA128 graphics processor
incorporates 3.5 million transistors and operates on 100 MHz clock speed,
enabling it to perform 20 billion operations per second. The RIVA128 graphics
processor breaks through bottlenecks created by the computationally intensive
requirements of 3D graphics by providing superior processing power.
The highly integrated RIVA128 graphics processor delivers high frame rate 3D
graphics, as well as 2D graphics, VGA and video processing in a single
processor. The RIVA128 graphics processor also includes a rich set of
reference drivers and tools that translate between software API and hardware.
These drivers also provide the ability to connect to and process data from
external video devices. The software driver is designed to maximize
performance of the graphics processor and to maintain compatibility with each
successive generation of the Company's products. The software drivers have the
flexibility to be continually enhanced in order to further improve the
performance of the processors. The RIVA128 graphics processor has received
significant industry validation and has enabled the Company's customers to
receive over 40 industry awards. Key features of the RIVA128 graphics
processor include the following:
Standard API Compatibility. The RIVA128 graphics processor supports
applications written for the two most widely accepted industry standard
graphics APIs, Microsoft's Direct3D and SGI's OpenGL.
5 GFLOPs Polygon Setup Engine. Polygon setup minimizes the number of
format conversions and other calculations performed by the host
microprocessor. The polygon setup engine can operate at a sustained
rate of 1.5 million triangles per second or a peak rate of five million
triangles per second.
Full 3D Feature Set. The full 3D feature set includes perspective
correct texturing, bi-linear filtering, Z-buffer, LOD MIP-mapping,
lighting and alpha blending.
128-bit Graphics Engine and Memory Interface. The "fast and wide"
128-bit memory interface provides 1.6 gigabytes per second bandwidth to
local frame buffer memory, which results in industry-leading
performance and graphics realism.
230 MHz Integrated RAMDAC. The 230 MHz integrated RAMDAC allows for
high resolution, high refresh rate output to computer monitors.
NTSC/PAL TV Output. NTSC/PAL television output allows connections to
television monitors.
Media Port. The media port allows direct input from television
signals and MPEG2/DVD devices.
The RIVA128 graphics processor is produced using a .35 micron manufacturing
process. The Company introduced the RIVA128 graphics processor in April 1997
and began shipping in volume in August 1997.
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NVIDIA PRODUCTS UNDER DEVELOPMENT
The RIVA128ZX graphics processor extends the functionality and performance
of the RIVA128 graphics processor and includes two additional design features,
AGP 2X and an 8MB (megabyte) frame buffer. The AGP 2X, Intel's newest graphics
bus, doubles the available bandwidth between the microprocessor and the
graphics engine. With AGP 2X support, the RIVA128ZX graphics processor is
designed to process more complex 3D computer representations more efficiently.
Doubling the size of the frame buffer to 8MB provides the RIVA128ZX graphics
processor with the ability to support higher resolution displays with more
colors, resulting in a richer real-time experience.
The RIVA128ZX graphics processor is produced using a .35 micron
manufacturing process and is scheduled for shipment in 1998.
SALES AND MARKETING
NVIDIA's sales strategy is a key part of its objective to become the leading
supplier of high performance 3D graphics processors for PCs. In order to meet
customer and end-user requirements and achieve design wins, the Company's
sales team works closely with PC OEMs, add-in board manufacturers and industry
trend setters to define product features, performance, price and timing of new
products. Members of the Company's sales team have a high level of technical
expertise and product and industry knowledge to support a competitive and
complex design win process. NVIDIA also employs a highly skilled team of
application engineers to assist PC OEMs and add-in board manufacturers in
designing, testing and qualifying system designs that incorporate NVIDIA
products. The Company believes that the depth and quality of this design
support are key to improving PC OEMs' and add-in board manufacturers' time-to-
market, maintaining a high level of customer satisfaction among PC OEMs and
add-in board manufacturers and fostering relationships that encourage its
customers to use the next-generation of NVIDIA's products.
In the 3D graphics market, the sales process involves influencing leading PC
OEMs' and add-in board manufacturers' graphics processor purchasing decisions,
achieving key design wins and supporting the product design into high volume
production. These design wins in turn influence the retail and system
integrator channel that is serviced by add-in board manufacturers. The
Company's distribution strategy is to work with a relatively small number of
leading add-in board manufacturers that have relationships with a broad range
of major PC OEMs and/or strong brand name recognition in the retail channel.
Currently, the Company sells the RIVA128 3D graphics processor directly to
add-in board manufacturers, such as Diamond and STB, which in turn sell boards
with the RIVA128 graphics processor to leading OEMs, such as Compaq, Dell,
Gateway, Micron and Packard Bell NEC, to retail outlets, such as BestBuy and
CompUSA, and to a large number of system integrators. In 1997, sales to STB
and Diamond accounted for 63% and 31%, respectively, of the Company's total
revenue.
The Company also has a strategic collaboration agreement with ST (the "ST
Agreement"), pursuant to which ST manufactures the RIVA128 graphics processor,
sells it to the Company and distributes the RIVA128 graphics processor on the
Company's behalf. ST is entitled under the ST Agreement to sell the RIVA128
graphics processor in consideration for a royalty payment to the Company. ST
also is entitled under this agreement to manufacture and sell the RIVA128ZX
graphics processor. Under the ST Agreement ST also has a worldwide license to
incorporate the technology underlying the RIVA128 and RIVA128ZX graphics
processors (including the source code and architecture) (the "RIVA
Technology") in its own products, subject to certain limitations on the
modification of such technology, and a right to receive software engineering
and quality assurance support from the Company for the RIVA Technology through
December 31, 1998. The Company believes that its relationship with ST allows
it to realize broad market penetration, increase sales leverage and achieve
greater brand awareness. Royalty revenue received from ST pursuant to the ST
Agreement represented 6% of the Company's total revenue in 1997.
The NVIDIA sales effort is accompanied by a variety of product and corporate
marketing activities, including technical support and product launches. As
part of the product launch effort, the Company demonstrates new products to
highlight their capabilities. NVIDIA believes these demonstrations help
position
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its products favorably relative to products of its competitors. The Company
also maintains close relationships with key industry analysts and trade press,
conducts frequent press tours and participates, with its add-in board
manufacturers and OEM customers, in benchmark tests executed by key trade
publications. In addition, the Company sponsors and participates in industry
tradeshows, marketing communications and market development activities
designed to generate awareness of the Company and its products. The Company
intends to continue to devote significant resources toward establishing brand
recognition, including advertising in key newspapers and trade magazines and
participation in graphics newsgroups and web sites. The Company also uses its
corporate web site to promote the Company and its products.
To encourage software title developers and publishers to develop games
optimized for platforms utilizing the Company's products, the Company seeks to
establish and maintain strong relationships in the software development
community. Engineering and marketing personnel interact with and visit key
software developers to promote and discuss the Company's products, seeking
product requirements and solving technical problems. The Company's developer
program makes products available to partners prior to volume availability to
encourage the development of software titles that are optimized for the
Company's products.
MANUFACTURING
The Company has a "fabless" manufacturing strategy whereby the Company
employs world class suppliers for all phases of the manufacturing process,
including fabrication, assembly and testing. This strategy leverages the
expertise of industry-leading, ISO-certified suppliers in such areas as
fabrication, assembly, quality control and assurance, reliability and testing,
and allows the Company to avoid the significant costs and risks associated
with owning and operating such manufacturing operations. These suppliers also
are responsible for procurement of raw materials used in the production of the
Company's products. As a result, the Company can focus its resources on
product design, quality assurance, marketing and customer support.
The RIVA128 graphics processor is currently fabricated for the Company by
ST, which is one of the ten largest semiconductor manufacturers in the world.
ST currently produces the semiconductor die for the Company using a .35 micron
Complementary Metal-Oxide Semiconductor (CMOS) process technology. ST then
assembles and packages the semiconductor die, tests the finished product, and
ships the finished product to the Company. ST has fabrication operations
located in Crolles, France and assembly and testing operations located in
Malta. The Company has recently begun using TSMC to manufacture the RIVA128ZX
graphics processor, although it has not yet received volume quantities of any
products from TSMC. The products manufactured by TSMC will be assembled in
Korea by Anam and initially tested in California by Digital Testing Service,
although the Company intends to have volume testing performed by Anam in the
future. The Company currently is seeking an additional source of supply for
both assembly and test.
The fabrication of semiconductors is a complex process. Contaminants,
defects in masks used to print circuits on wafers, difficulties in the
fabrication process and other factors can cause a substantial percentage of
wafers to be rejected or a significant number of die on each wafer to be
nonfunctional. These problems are difficult to diagnose and time-consuming and
expensive to remedy. As a result, semiconductor companies frequently encounter
difficulties in achieving acceptable product yields. When production of a new
product begins, as will be the case with the RIVA128ZX graphics processor, the
Company typically pays for wafers, which may or may not have any functional
products. Accordingly, the Company bears the financial risk until production
is stabilized. Once production is stabilized, the Company pays for functional
die only. Because TSMC has only recently begun to manufacture products for the
Company, until the production yields of its product at TSMC stabilize, the
Company must pay an agreed price for wafers regardless of yield. Failure to
stabilize yields or failure to achieve acceptable yields from any current or
future third-party manufacturer would materially adversely affect the
Company's business, financial condition and results of operations. For
example, in December 1997, the Company experienced low manufacturing yields at
ST.
The Company receives semiconductor products from its subcontractors,
performs incoming quality assurance and ships them to its add-in board
manufacturer customers, such as Diamond and STB, from its
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location in Sunnyvale. The add-in board manufacturers then produce boards,
combine NVIDIA software with their own software and ship the product to the
retail market as add-in boards or to OEMs, such as Compaq, Dell Gateway 2000,
Micron and Packard Bell NEC, for inclusion in the OEMs' products.
In the event of production difficulties, shortages or delays experienced by
any one of its suppliers, the Company's business, financial condition or
results of operation may be adversely impacted. Furthermore, although quality
assurance measures have been taken, there can be no guarantee against defects
affecting the quality, performance or reliability of the Company's products.
Any such defects could require costly product recalls or cessation of
shipments, adversely affecting the Company's business, financial condition and
results of operations, and resulting in a decline of revenues, increased costs
(associated with return, repair, replacement and shrinkage associated with
such defects), cancellations or rescheduling of customer orders and shipments.
See "Risk Factors--Dependence on Third-Party Manufacturers; Absence of
Manufacturing Capacity; Manufacturing Risks," "--Dependence on ST
Microelectronics," "--Manufacturing Yields," "--Transition to New
Manufacturing Process Technologies," "--Dependence on Third-Party
Subcontractors for Assembly and Testing" and "--Risks of Product Defects and
Incompatibilities; Product Liability."
RESEARCH AND DEVELOPMENT
The Company believes that the continued introduction of new and enhanced
products designed to deliver leading 3D graphics performance will be essential
to its future success. NVIDIA's research and development strategy is to focus
on concurrently developing multiple generations of devices using independent
design teams. The Company's research and development team has enabled NVIDIA
to deliver award-winning products to its OEM customers. The Company's products
have enabled its customers to win over 40 awards from recognized industry
publications, including PC Magazine, PC Computing, PC World, Computer Gaming
World, PC Games and CNET.
NVIDIA's research and development efforts are performed within specialized
groups consisting of software engineering, hardware engineering, VLSI design
engineering, process engineering, and architecture and algorithms. These
groups act as a pipeline designed to allow the efficient simultaneous
development of new products. The software engineering group is responsible for
the development of drivers for the various software APIs. The hardware
engineering group designs and develops new product hardware. The VLSI design
engineering group maps the Company's design ideas to specific silicon
structures, and the process engineering group determines how these devices
will be fabricated and communicates with the Company's manufacturers. The
architecture and algorithms group is responsible for maintaining and further
developing what the Company believes is an extensible product architecture,
allowing the Company to continually add features to its products without
sacrificing compatibility or incurring significant redesign costs.
A critical component of the Company's product development effort is its
partnerships with leaders in the CAD industry. The Company has invested
significant resources to develop relationships with industry leaders,
including Avant! Corporation, Cadence Design Systems, Inc. and Synopsys, Inc.
The Company believes that by forming these relationships, and utilizing next-
generation development tools to design, simulate and verify its products,
NVIDIA will be able to remain at the forefront of the 3D graphics market and
to continue to develop products on a rapid basis that utilize leading-edge
technology.
The Company has substantially increased its engineering and technical
resources and has over 60 full-time employees engaged in research and
development. Expenditures for research and development before adjustments for
contract funding were $2.4 million, $1.2 million and $6.6 million in 1995,
1996 and 1997, respectively.
COMPETITION
The market for 3D graphics processors for mainstream PCs in which the
Company competes is intensely competitive and is characterized by rapid
technological change, evolving industry standards and declining average
selling prices. NVIDIA believes that the principal factors of competition in
this market are performance,
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conformity to industry-standard APIs, software support, access to customers
and distribution channels, manufacturing capabilities and price. The Company
expects competition to increase both from existing competitors and new market
entrants with products that may be less costly than the Company's 3D graphics
processors or may provide better performance or additional features not
provided by the Company's products. There can be no assurance that the Company
will be able to compete successfully in the emerging mainstream PC graphics
market.
NVIDIA's primary source of competition is from companies that provide or
intend to provide 3D graphics solutions for the mainstream PC market. These
include (i) new entrants in the 3D graphics processor market with existing
presence in the PC market, such as Intel, (ii) suppliers of graphics add-in
boards that utilize their internally developed graphics chips, such as ATI and
Matrox, (iii) suppliers of 2D graphics chips that are introducing 3D
functionality as part of their existing solutions, such as S3 and Trident,
(iv) companies that have traditionally focused on the professional market and
provide high end 3D solutions for PCs and workstations, including 3Dlabs and
Real3D, and (v) companies with strength in the interactive entertainment
market, such as Chromatic, 3Dfx and Rendition.
In February 1998, Intel announced the introduction of the i740, a 3D
graphics accelerator that is targeted at the mainstream PC market. Intel has
significantly greater resources than the Company, and there can be no
assurance that the Company's products will compete effectively against the
i740 or any future products introduced by Intel, that the Company will be able
to compete effectively against Intel or that Intel will not introduce
additional products that are competitive with the Company's products in either
performance or price or both. NVIDIA expects Intel to continue to invest
heavily in research and development and new manufacturing facilities, to
maintain its position as the largest manufacturer of PC microprocessors and
one of the largest manufacturers of motherboards, to increasingly dominate the
PC platform and to promote its product offerings through advertising campaigns
designed to engender brand loyalty among PC users. Intel may in the future
develop graphics add-in cards or graphics-enabled motherboards using its i740
3D graphics accelerators or other graphics accelerators, which could directly
compete with graphics add-in cards or graphics-enabled motherboards that the
Company's customers may develop. In addition, due to the widespread industry
acceptance of Intel's microprocessor architecture and interface architecture,
including its AGP, Intel exercises significant influence over the PC industry
generally, and any significant modifications by Intel to the AGP, the
microprocessor or other aspects of the PC microprocessor architecture could
result in incompatibility with the Company's technology, which would have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, any delay in the public release of
information relating to such modifications could have a material adverse
effect on the Company's business, financial condition or results of
operations.
In addition to Intel, the Company competes with suppliers of graphics add-in
boards that utilize their internally developed graphics chips, such as ATI and
Matrox. NVIDIA also competes with companies that typically have operated in
the PC 2D graphics market and that now offer 3D graphics capability as an
enhancement to their 2D graphics solutions, such as S3 and Trident. Many of
these competitors have introduced 3D graphics functionality on new versions of
existing graphics chips. In addition, the Company's competitors include
companies that traditionally have focused on the production of high-end 3D
graphics systems targeted at the professional market, such as 3Dlabs,
Intergraph, Real3D and SGI. While these companies produce high performance 3D
graphics systems, they historically have done so at a significantly higher
price point than the Company and have focused on the professional and
engineering market. Some of these companies are developing lower cost versions
of their 3D graphics technology to bring workstation-like 3D graphics to
mainstream PCs, and there can be no assurance that the Company will be able to
compete successfully against them. For example, 3Dlabs markets the PERMEDIA 2,
a graphics accelerator designed for the mainstream PC market. NVIDIA also
competes with companies that have recently entered or are expected to enter
the market with an integrated 3D/2D graphics solution, but which have not
traditionally manufactured 2D graphics solutions, such as Chromatic, 3Dfx and
Rendition. In addition to the Company's known competitors, the Company
anticipates that there will be new entrants in the graphics processor market,
and there can be no assurance that the Company will compete effectively
against any such new competitors.
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Several of the Company's current and potential competitors have
substantially greater financial, technical, manufacturing, marketing,
distribution and other resources, greater name recognition and market
presence, broader product lines for the PC market, longer operating histories,
lower cost structures and larger customer bases than the Company. As a result,
they may be able to adapt more quickly to new or emerging technologies and
changes in customer requirements. Regardless of the relative qualities of the
Company's products, the market power, product breadth and customer
relationships of its larger competitors, particularly Intel, can be expected
to provide such competitors with substantial competitive advantages. The
Company does not seek to compete on the basis of price alone, but may be
forced to lower prices to compete effectively. There can be no assurance that
the Company will be able to compete successfully in the emerging mainstream PC
3D graphics market.
PATENTS AND PROPRIETARY RIGHTS
The Company relies primarily on a combination of patent, mask-work
protection, trademarks, copyrights, trade secret laws, employee and third-
party nondisclosure agreements and licensing arrangements to protect its
intellectual property. The Company has 11 issued patents and 16 patent
applications pending in the United States. The Company has no foreign patents
or patent applications. There can be no assurance that the Company's pending
patent application or any future applications will be approved, that any
issued patents will provide the Company with competitive advantages or will
not be challenged by third parties, or that the patents of others will not
have an adverse effect on the Company's ability to do business. In addition,
there can be no assurance that others will not independently develop
substantially equivalent intellectual property or otherwise gain access to the
Company's trade secrets or intellectual property, or disclose such
intellectual property or trade secrets, or that the Company can effectively
protect its intellectual property. A failure by the Company to meaningfully
protect its intellectual property could have a material adverse effect on the
Company's business, financial condition or results of operations.
The Company attempts to protect its trade secrets and other proprietary
information through confidentiality agreements with manufacturers and other
partners, proprietary information agreements with employees and consultants
and other security measures. The Company also relies on trademarks and trade
secret laws to protect its intellectual property. Despite these efforts, there
can be no assurance that others will not gain access to the Company's trade
secrets, or that the Company can meaningfully protect its intellectual
property. In addition, effective trade secret protection may be unavailable or
limited in certain foreign countries. Although the Company intends to protect
its rights vigorously, there can be no assurance that such measures will be
successful.
The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions, which has resulted in
significant and often protracted and expensive litigation. The 3D graphics
market in particular has been characterized recently by the aggressive pursuit
of intellectual property positions, and the Company expects its competitors to
continue to pursue aggressive intellectual property positions. There is
currently no pending intellectual property litigation against the Company.
However, the Company from time to time has received notices alleging that the
Company has infringed patents or other intellectual property rights owned by
third parties. ST has certain patent licenses that in some cases may allow ST
to manufacture the Company's products without infringing third-party patents.
As the Company's products are manufactured by TSMC or other manufacturers,
such licenses will no longer benefit the Company and therefore the risk of a
third-party claim of patent infringement against the Company will increase. In
the event infringement claims are made against the Company, the Company may
seek licenses under such patents or other intellectual property rights.
However, there can be no assurance that licenses will be offered or that the
terms of any offered licenses will be acceptable to the Company. The failure
to obtain a license from a third party for technology used by the Company
could cause the Company to incur substantial liabilities and to suspend the
manufacture of products. Furthermore, the Company may initiate claims or
litigation against third parties for infringement of the Company's proprietary
rights or to establish the validity of the Company's proprietary rights. The
Company has agreed to indemnify certain customers for claims of infringement
arising out of sale of the Company's product. Litigation by or against the
Company or such customers concerning infringement would likely result in
significant expense to the Company and divert the efforts of the Company's
technical and
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management personnel, whether or not such litigation results in a favorable
determination for the Company. In the event of an adverse result in any such
litigation, the Company could be required to pay substantial damages, (which
could include treble damages) cease the manufacture, use and sale of
infringing products, expend significant resources to develop non-infringing
technology, discontinue the use of certain processes or obtain licenses for
the infringing technology. There can be no assurance that the Company would be
successful in such development or that such licenses would be available on
reasonable terms, or at all, and any such development or license could require
expenditures by the Company of substantial time and other resources. Although
patent disputes in the semiconductor industry have often been settled through
cross-licensing arrangements, there can be no assurance that, in the event
that any third party makes a successful claim against the Company or its
customers, a cross-licensing arrangement could be reached. If a license is not
made available to the Company on commercially reasonable terms, the Company's
business, financial condition or results of operations could be materially
adversely affected.
There can be no assurance that infringement claims by third parties or
claims for indemnification by other customers or end users of the Company's
products resulting from infringement claims will not be asserted in the future
or that such assertions, if proven to be true, will not materially adversely
affect the Company's business, financial condition or results of operations.
Any limitations on the Company's ability to market its products, or delays and
costs associated with redesigning its products or payments of license fees to
third parties, or any failure by the Company to develop or license a
substitute technology on commercially reasonable terms could have a material
adverse effect on the Company's business, financial condition and results of
operations.
EMPLOYEES
As of December 31, 1997, the Company had 92 employees, 62 of whom were
engaged in engineering and 30 of whom were engaged in sales, marketing,
operations and administrative positions. No employee of the Company is covered
by collective bargaining agreements, and the Company believes that its
relationship with its employees is good.
The Company's ability to operate successfully will depend in significant
part upon the continued service of certain key technical and managerial
personnel, and its continuing ability to attract and retain additional highly
qualified technical and managerial personnel. Competition for such personnel
is intense, and there can be no assurance that the Company can retain such
personnel or that it can attract or retain other highly qualified technical
and managerial personnel in the future, including key sales and marketing
personnel. The loss of key personnel or the inability to hire and retain
qualified personnel could have a material adverse effect on the Company's
business, financial condition or results of operations. See "Risk Factors--
Dependence on Key Personnel."
FACILITIES
The Company leases approximately 34,000 square feet in one building in
Sunnyvale, California, pursuant to a lease that expires in August 1998.
Although, the Company believes that it will be able to secure facilities
adequate to meet its needs for the foreseeable future, an inability of the
Company to timely secure adequate facilities on reasonable terms, or an
inability to effectively manage the transition to larger facilities, could
have a material adverse effect on the Company's business, financial condition
or results of operations.
42
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
Certain information regarding the Company's executive officers, key
employees and directors as of February 28, 1998 is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jen-Hsun Huang.............. 35 President, Chief Executive Officer and Director
Jeffrey D. Fisher........... 39 Vice President, Sales
David B. Kirk............... 37 Chief Scientist
Chris A. Malachowsky........ 38 Vice President, Engineering
Lewis R. Paceley............ 42 Vice President, Corporate Marketing
Curtis R. Priem............. 38 Chief Technical Officer
Geoffrey G. Ribar........... 39 Chief Financial Officer
Daniel F. Vivoli............ 37 Vice President, Product Marketing
Richard J. Whitacre......... 42 Vice President, Operations and Engineering
Tench Coxe (1).............. 40 Director
Harvey C. Jones, Jr.(1)..... 45 Director
William J. Miller........... 52 Director
A. Brooke Seawell(2)........ 50 Director
Mark A. Stevens(2).......... 38 Director
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Jen-Hsun Huang co-founded the Company in April 1993 and has served as
President, Chief Executive Officer and a member of the Board of Directors of
the Company since its inception. From 1985 to 1993, Mr. Huang was employed at
LSI Logic Corporation, a computer chip manufacturer, where he held a variety
of positions, most recently as Director of Coreware business unit responsible
for LSI's "system-on-a-chip" strategy. From 1983 to 1985, Mr. Huang was a
microprocessor designer for Advanced Micro Devices, a semiconductor company.
Mr. Huang holds a B.S.E.E. degree from Oregon State University and an M.S.E.E.
degree from Stanford University.
Jeffrey D. Fisher has been Vice President, Sales for the Company since July
1994. From September 1988 to July 1994, Mr. Fisher held various positions at
Weitek Corporation, a semiconductor technology company, where his last
position was as Director of World Wide Sales. Mr. Fisher holds a B.S.E.E.
degree from Purdue University and an M.B.A. degree from Santa Clara
University.
David B. Kirk has been Chief Scientist for the Company since January 1997.
From June 1996 to January 1997, Dr. Kirk was a software and technical
management consultant. From 1993 to 1996, Dr. Kirk was Chief Scientist, Head
of Technology for Crystal Dynamics, a video game manufacturing company. From
1989 to 1991, Dr. Kirk was an engineer for Apollo Systems Division of Hewlett-
Packard Company. Dr. Kirk has authored seven patents relating to graphics
design and has authored more than 50 articles on graphics technology. Dr. Kirk
holds B.S. and M.S. degrees in Mechanical Engineering from the Massachusetts
Institute of Technology and M.S. and Ph.D. degrees in Computer Science from
the California Institute of Technology.
Chris A. Malachowsky co-founded the Company in April 1993 and has been Vice
President, Engineering for the Company since that time. From 1987 until April
1993, Mr. Malachowsky was a Senior Staff Engineer for Sun Microsystems, Inc.,
a supplier of enterprise network computing products. From 1980 to 1986, Mr.
Malachowsky was a manufacturing design engineer at Hewlett-Packard Company.
Mr. Malachowsky was a co-inventor of Sun Microsystems' GX graphics
architecture and has authored 29 patents, most of which relate to graphics.
Mr. Malachowsky holds a B.S.E.E. degree from the University of Florida and an
M.S.C.S. degree from Santa Clara University.
43
<PAGE>
Lewis R. Paceley has been Vice President, Corporate Marketing for the
Company since December 1997. From January 1996 until September 1997, Mr.
Paceley was Vice President, Marketing for Cyrix Corporation, a computer
processor manufacturer. From 1982 until December 1995, Mr. Paceley held
various positions at Intel, where his last position was as Marketing Director,
Pentium Pro. Mr. Paceley holds a B.E. degree from Vanderbilt University and an
M.S.E. degree from the University of Michigan.
Curtis R. Priem co-founded the Company in April 1993 and has been Chief
Technical Officer for the Company since that time. From 1986 to January 1993,
Mr. Priem was Senior Staff Engineer at Sun Microsystems where he architected
the GX graphics products, including the world's first single chip GUI
accelerator. From 1984 to 1986, Mr. Priem was a hardware engineer at GenRad,
Inc., a supplier of diagnostic equipment for electronic products. From 1982 to
1984, Mr. Priem was a staff engineer for Vermont Microsystems, Inc., a
personal computer company, where he architected IBM's Professional Graphics
Adapter, the PC industry's first graphics processor. Mr. Priem has authored 51
patents, all of which relate to graphics and I/O. Mr. Priem holds a B.S.E.E.
degree from Rensselaer Polytechnic Institute.
Geoffrey G. Ribar joined the Company as Chief Financial Officer in December
1997. From 1982 to December 1997, Mr. Ribar served in various positions at
AMD, where his last position was Vice President and Corporate Controller. Mr.
Ribar holds a B.S. degree in Chemistry and an M.B.A. degree from the
University of Michigan.
Daniel F. Vivoli has been Vice President, Product Marketing for the Company
since December 1997. From October 1988 to December 1997, Mr. Vivoli held
various positions at Silicon Graphics, Inc., a computing technology company,
including Product Marketing Director, Director of Marketing--Advanced Graphics
Division and --Interactive Systems Division, and finally Vice President of
Marketing. From 1983 to 1988, Mr. Vivoli held various marketing positions at
Hewlett-Packard Company. Mr. Vivoli holds a B.S.E.E. degree from the
University of Illinois at Champaign-Urbana.
Richard J. Whitacre has been Vice President, Operations for the Company
since July 1994. From 1990 to July 1994, Mr. Whitacre was Director of
Engineering and then Vice President of Operations for SEEQ Technology
Incorporated, a semiconductor company. From 1977 to 1990, Mr. Whitacre held
various engineer and management positions at National Semiconductor
Corporation, a semiconductor company. Mr. Whitacre holds a B.S.E.E. degree
from the University of Illinois.
Tench Coxe has been a director of the Company since June 1993. Mr. Coxe is a
general partner of the general partner of Sutter Hill Ventures, a venture
capital investment firm. Prior to joining Sutter Hill Ventures in 1987, Mr.
Coxe was Director of Marketing and MIS at Digital Communication Associates.
Mr. Coxe holds a B.A. degree in Economics from Dartmouth College and an M.B.A.
degree from the Harvard Business School. Mr. Coxe also serves on the Board of
Directors of Avant! Corporation, Edify Corporation and SQL Financials
International, Inc.
Harvey C. Jones, Jr. has served as a director of the Company since November
1993. Since December 1987, Mr. Jones has held various positions at Synopsys,
Inc., a developer of electronic design automation products, where he served as
President through December 1992, as Chief Executive Officer until January 1994
and as Chairman of the Board until February 1998. Prior to joining Synopsys,
Mr. Jones served as President and Chief Executive Officer of Daisy Systems
Corporation, an electronic design automation company that Mr. Jones co-founded
in 1981. Mr. Jones currently serves on the Board of Directors of Synopsys and
Remedy Corporation, a client/server applications software company. Mr. Jones
holds a B.S. degree in Mathematics and Computer Sciences from Georgetown
University and an M.S. degree in Management from the Massachusetts Institute
of Technology.
William J. Miller has served as a director of the Company since November
1994. Mr. Miller has been Chief Executive Officer and Chairman of the Board of
Avid Technology, Inc., a provider of digital tools for multimedia, since April
1996 and has served as President of Avid Technology since September 1996. From
44
<PAGE>
March 1992 to October 1995, Mr. Miller served as Chief Executive Officer of
Quantum Corporation, a developer of information storage products. He was a
member of the Board of Directors, and Chairman thereof, from, respectively,
May 1992 and September 1993 to August 1995. From 1981 to March 1992, he served
in various positions at Control Data Corporation, a supplier of computer
hardware, software and services, most recently as Executive Vice President and
President, Information Services. Mr. Miller holds a B.A. and a J.D. degree
from the University of Minnesota. Mr. Miller serves on the Board of Directors
of Innovex, Inc. and Waters Corporation.
A. Brooke Seawell has served as a director of the Company since December
1997. Since January 1997, Mr. Seawell has been Executive Vice President and
Chief Financial Officer for NetDynamics, Inc., an Internet applications
company. From 1991 to January 1997, Mr. Seawell was Senior Vice President and
Chief Financial Officer of Synopsys. Mr. Seawell holds a B.A. degree in
Economics and an M.B.A. degree in Finance and Accounting from Stanford
University. Mr. Seawell serves on the Board of Directors of several privately
held companies.
Mark A. Stevens has served as a director of the Company since June 1993. Mr.
Stevens has been a general partner of the general partner of Sequoia Capital,
a venture capital investment firm, since March 1993. Prior to that time,
beginning in July 1989, he was an associate at Sequoia Capital. Prior to
joining Sequoia, he held technical sales and marketing positions at Intel. Mr.
Stevens holds a B.S.E.E. degree, a B.A. degree in Economics and an M.S. degree
in Computer Engineering from the University of Southern California and an
M.B.A. degree from Harvard Business School. Mr. Stevens currently serves on
the Board of Directors of Aspect Development, Inc., a client/server
applications software company, and several privately held companies.
The Company's Board of Directors (the "Board") is currently comprised of six
directors. Directors are elected by the stockholders at each annual meeting of
stockholders to serve until the next annual meeting of stockholders or until
their successors are duly elected and qualified. The Company's Certificate of
Incorporation, which will become effective upon the completion of this
offering, provide that the Board will be divided into two classes, Class I and
Class II, with each class serving staggered two-year terms. The Class I
directors, initially Messrs. Coxe, Huang and Jones, will stand for reelection
or election at the 1999 annual meeting of stockholders. The Class II
directors, initially Messrs. Miller, Seawell and Stevens will stand for
reelection or election at the 2000 annual meeting of stockholders.
BOARD COMMITTEES
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, which currently consists of Messrs. Seawell and Stevens,
reviews the internal accounting procedures of the Company and consults with
and reviews the services provided by the Company's independent auditors. The
Compensation Committee, which currently consists of Messrs. Coxe and Jones,
reviews and recommends to the Board the compensation and benefits of the
Company. The Compensation Committee also administers the issuance of stock
options and other awards under the Company's 1998 Equity Incentive Plan, 1998
Employee Stock Purchase Plan and 1998 Non-Employee Directors' Stock Option
Plan. See "--Employee Benefit Plans."
DIRECTOR COMPENSATION
Directors currently do not receive any cash compensation for their services
as members of the Board of Directors, although they are reimbursed for certain
expenses in connection with attendance at Board and Committee meetings. In
July 1996, each of Messrs. Coxe and Stevens were granted an option to purchase
50,000 shares of the Company's Common Stock at an exercise price of $.36 per
share. In November 1993 and August 1996, Mr. Jones was granted options to
purchase 75,000 and 70,000 shares of the Company's Common Stock at exercise
prices of $.05 and $.36 per share, respectively. In November 1994 and June
1996, Mr. Miller was granted options to purchase 75,000 and 50,000 shares of
the Company's Common Stock at exercise prices of $.05 and $.36 per share,
respectively. In December 1997, Mr. Seawell was granted an option to purchase
50,000 shares of the Company's Common Stock at an exercise price of $3.15 per
share. Non-employee directors also are eligible to participate in the
Company's 1998 Non-Employee Directors' Stock Option Plan. See "--Employee
Benefit Plans."
45
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to October 1997, the Company did not have a Compensation Committee of
the Board of Directors, and the entire Board participated in all compensation
decisions, except that Mr. Huang did not participate in decisions relating to
his compensation. In October 1997, the Board formed the Company's Compensation
Committee to review and recommend to the Board the compensation and benefits
for the Company's executive officers and administer the Company's stock
purchase and stock option plans. Certain of the Company's directors, or
affiliated entities, have purchased securities of the Company. See "Certain
Transactions" and "Principal Stockholders."
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded or paid by the
Company during the fiscal year ended December 31, 1997 to (i) the Company's
Chief Executive Officer and (ii) the four other most highly compensated
officers receiving compensation in excess of $100,000 in fiscal 1997
hereinafter (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE(/1/)
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------ ------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION SALARY ($) OPTIONS (#)
--------------------------- ------------ ------------
<S> <C> <C>
Jen-Hsun Huang........................................ $149,134 0
President and Chief Executive Officer
Jeffrey D. Fisher..................................... 202,122 75,000
Vice President, Sales
Richard J. Whitacre................................... 138,750 175,000
Vice President, Operations and Engineering
Chris A. Malachowsky.................................. 135,721 0
Vice President, Engineering
Curtis R. Priem....................................... 133,125 0
Chief Technical Officer
</TABLE>
- --------
(1) In accordance with the rules of the Securities and Exchange Commission
(the "Commission"), the compensation described in this table does not
include medical, group life insurance or other benefits received by the
Named Executive Officers which are available generally to all salaried
employees of the Company and certain perquisites and other personal
benefits received by the Named Executive Officers, which do not exceed the
lesser of $50,000 or 10% of any such officers salary and bonus disclosed
in this table.
46
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended December 31, 1997 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENTAGE OF PRICE APPRECIATION FOR
UNDERLYING TOTAL OPTIONS OPTION TERM ($)(3)
OPTIONS GRANTED IN EXERCISE PRICE EXPIRATION ----------------------
NAME GRANTED(1) FISCAL 1997(2) ($/SHARE) DATE 5% 10%
---- ---------- -------------- -------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jen-Hsun Huang.......... 0 --% $ -- -- --% --%
Jeffrey D. Fisher....... 50,000 1.0 .36 3/23/07
25,000 .5 .36 5/12/07
Richard J. Whitacre..... 175,000 3.6 .36 3/23/07
Chris A. Malachowsky.... 0 -- -- -- -- --
Curtis R. Priem......... 0 -- -- -- -- --
</TABLE>
- --------
(1) Options generally vest at a rate of 25% on the first anniversary of the
vesting commencement date and 6.25% each quarter thereafter and have a
term of 10 years. Options are immediately exercisable; however, the shares
purchasable under such options are subject to repurchase by the Company at
the original exercise price paid per share upon the optionee's cessation
of service prior to the vesting of such shares.
(2) Based on an aggregate of 4,841,232 shares subject to options granted to
persons who were employees of the Company in the fiscal year ended
December 31, 1997, including the Named Executive Officers.
(3) The potential realizable value is calculated based on the term of the
option at the time of grant (10 years) and an assumed initial public
offering price of $ per share. Stock price appreciation of 5% and 10%
is assumed pursuant to rules promulgated by the Securities and Exchange
Commission and does not represent the Company's prediction of its stock
price performance. The potential realizable value is calculated based on
the deemed value at the date of grant and assumes that the deemed value
appreciates from the date of grant at the indicated annual rate compounded
annually for the entire term of the option and that the option is
exercised at the exercise price and sold on the last day of its term at
the appreciated price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND 1997 YEAR-END OPTION
VALUES
The following table sets forth for each of the Named Executive Officers the
number and value of securities underlying unexercised options held by the
Named Executive Officers at December 31, 1997:
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON UNEXERCISED OPTIONS AT DECEMBER IN-THE-MONEY OPTIONS AT
EXERCISE VALUE 31, 1997 (#) DECEMBER 31, 1997 ($)(2)
NAME (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE
- ---- ----------- ------------ ------------------------------- -------------------------
<S> <C> <C> <C> <C>
Jen-Hsun Huang.......... 0 $ -- -- $ --
Jeffrey D. Fisher....... 0 0 135,000/0 376,650/0
Richard J. Whitacre..... 30,000 0 205,000/0 571,950/0
Chris A. Malachowsky.... 0 -- -- --
Curtis R. Priem......... 0 -- -- --
</TABLE>
- --------
(1) Options are immediately exercisable; however, the shares purchasable under
such options are subject to repurchase by the Company at the original
exercise price paid per share upon the optionee's cessation of service
prior to the vesting of such shares.
(2) Based on the difference between the fair market value of the Common Stock
at December 31, 1997 as determined by the Board of Directors and the
exercise price.
47
<PAGE>
EMPLOYEE BENEFIT PLANS
1998 EQUITY INCENTIVE PLAN
The Company's 1998 Equity Incentive Plan (the "Incentive Plan") was adopted
in February 1998 and replaces the Company's Equity Incentive Plan adopted in
May 1993 (as amended in March 1995, January 1996 and December 1997). An
aggregate of 15,000,000 shares of Common Stock currently are authorized for
issuance under the Incentive Plan. However, each year on January 1, starting
with January 1, 1999, the aggregate number of shares of Common Stock that are
available for issuance under the Incentive Plan will automatically be
increased by a number of shares equal to 5% of the Company's outstanding
shares of Common Stock on such date.
The Incentive Plan provides for the grant of incentive stock options, as
defined under the Internal Revenue Code of 1986, as amended (the "Code"), to
employees (including officers and employee directors) and nonstatutory stock
options, restricted stock purchase awards and stock bonuses to employees
(including officers and employee directors), directors and consultants of the
Company and its affiliates. The Incentive Plan is administered by the
Compensation Committee, which determines the recipients and types of awards to
be granted, including the exercise price, number of shares subject to the
award and the exercisability thereof.
The terms of options granted under the Incentive Plan may not exceed 10
years. The Compensation Committee determines the exercise price of options
granted under the Incentive Plan. However, the exercise price for an incentive
stock option cannot be less than 100% of the fair market value of the Common
Stock on the date of the option grant, and the exercise price for a
nonstatutory stock option cannot be less than 85% of the fair market value of
the Common Stock on the date of the option grant. Options granted under the
Incentive Plan vest at the rate specified in the option agreement. Generally,
the optionee may not transfer a stock option other than by will or the laws of
descent or distribution. However, an optionee may designate a beneficiary who
may exercise the option following the optionee's death. An optionee whose
service relationship with the Company or any affiliate ceases for any reason
may exercise vested options for the term provided in the option agreement.
No incentive stock option (and prior to the Company's stock being publicly
traded, no nonstatutory stock option) may be granted to any person who, at the
time of the grant, owns (or is deemed to own) stock possessing more than 10%
of the total combined voting power of the Company or any affiliate of the
Company, unless the option exercise price is at least 110% of the fair market
value of the stock subject to the option on the date of grant and the term of
the option does not exceed five years from the date of grant. In addition, the
aggregate fair market value, determined at the time of grant, of the shares of
Common Stock with respect to which incentive stock options are exercisable for
the first time by an optionee during any calendar year (under the Incentive
Plan and all other stock plans of the Company and its affiliates) may not
exceed $100,000.
When the Company becomes subject to Section 162(m) of the Code (which denies
a deduction to publicly held corporations for certain compensation paid to
specified employees in a taxable year to the extent that the compensation
exceeds $1,000,000), no person may be granted options under the Incentive Plan
covering more than 1,000,000 shares of Common Stock in any calendar year.
Shares subject to stock awards that have expired or otherwise terminated
without having been exercised in full again become available for the grant of
awards under the Incentive Plan. The Compensation Committee has the authority
to reprice outstanding options or to offer optionees the opportunity to
replace outstanding options with new options for the same or a different
number of shares. Both the original and new options will count toward the Code
Section 162(m) limitation set forth above.
Restricted stock purchase awards granted under the Incentive Plan may be
granted pursuant to a repurchase option in favor of the Company in accordance
with a vesting schedule and at a price determined by the Compensation
Committee. Stock bonuses may be awarded in consideration of past services
without a purchase payment. Rights under a stock bonus or restricted stock
bonus agreement generally may not be transferred other than by will or the
laws of descent and distribution during such period as the stock awarded
pursuant to such an agreement remains subject to the agreement.
48
<PAGE>
If there is any sale of substantially all of the Company's assets, any
merger or any consolidation in which the Company is not the surviving
corporation, all outstanding awards under the Incentive Plan either will be
assumed or substituted for by any surviving entity. If the surviving entity
determines not to assume or substitute for such awards, the time during which
awards held by persons still serving the Company or an affiliate may be
exercised will be accelerated and the awards terminated if not exercised prior
to the sale of assets, merger or consolidation.
As of February 28, 1998, 4,682,110 shares of Common Stock had been issued
upon the exercise of options granted under the Incentive Plan, options to
purchase 5,481,833 shares of Common Stock were outstanding and 4,426,457
shares remained available for future grant. The Incentive Plan will terminate
in February 2008 unless terminated by the Board before then. As of February
28, 1998, stock awards or restricted stock covering 647,932 shares of the
Company's Common Stock had been granted under the Incentive Plan.
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In February 1998, the Board adopted the 1998 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan") to provide for the automatic grant of
options to purchase shares of Common Stock to non-employee directors of the
Company who are not employees of or consultants to the Company or an affiliate
of the Company (a "Non-Employee Director"). The Compensation Committee
administers the Directors' Plan. The aggregate number of shares of Common
Stock that may be issued pursuant to options granted under the Directors' Plan
is 300,000 shares.
Pursuant to the terms of the Directors' Plan, after the effective date of
the initial public offering of the Company's Common Stock, each person who is
elected or appointed for the first time to be a Non-Employee Director
automatically shall, upon the date of his or her initial election or
appointment to be a Non-Employee Director by the Board or stockholders of the
Company, be granted an option to purchase Fifty Thousand (50,000) shares of
Common Stock (an "Initial Grant").
On March 30, 1998 and on the day following each Annual Meeting of
Shareholders of the Company ("Annual Meeting"), commencing with the Annual
Meeting in 1999, each person who is then a Non-Employee Director automatically
shall be granted one or more options to purchase shares of Common Stock
(individually, an "Annual Grant") as follows: (i) Each Non-Employee Director
who has attended at least seventy-five percent (75%) of the regularly
scheduled meetings of the Board held during such person's tenure as a Non-
Employee Director since the preceding Annual Meeting (or since March 30, 1997
for the grant on March 30, 1998) shall be granted an option to purchase Twenty
Thousand (20,000) shares of Common Stock of the Company; provided, however,
that if the person has not been serving as a Non-Employee Director for the
entire period since the prior Annual Meeting, then the number of shares
granted shall be reduced pro rata for each full quarter prior to the date of
grant during which such person did not serve as a Non-Employee Director; and
(ii) each Non-Employee Director who is a member of a committee of the Board
and who has attended at least seventy-five percent (75%) of the regularly
scheduled meetings of such committee held during such person's tenure as a
Non-Employee Director since the preceding Annual Meeting (or since March 30,
1997 for the grant on March 30, 1998) shall be granted an option to purchase
Five Thousand (5,000) shares of Common Stock of the Company for each such
committee; provided, however, that if the person has not been serving on such
committee since the prior Annual Meeting, then the number of shares granted
shall be reduced pro rata for each full quarter prior to the date of grant
during which such person did not serve as a Non-Employee Director. Initial
Grants will vest monthly over the four-year period following the date of grant
such that the entire Initial Grant shall become exercisable on the fourth
anniversary of the date of grant. Annual Grants made pursuant to the
Directors' Plan will vest monthly over the one-year period following the date
of grant such that the entire grant shall become exercisable on the one-year
anniversary of the date of grant.
The exercise price of the options granted under the Directors' Plan will be
equal to the fair market value of the Common Stock on the date of grant. No
option granted under the Directors' Plan may be exercised after the expiration
of 10 years from the date it was granted. Options granted under the Directors'
Plan generally are non-
49
<PAGE>
transferable except to family members, a family trust, a family partnership or
a family limited liability company. However, an optionee may designate a
beneficiary who may exercise the option following the optionee's death. An
optionee whose service relationship with the Company or any affiliate (whether
as a Non-Employee Director of the Company or subsequently as an employee,
director or consultant of either the Company or an affiliate) ceases for any
reason may exercise vested options for the term provided in the option
agreement (12 months generally, 18 months in the event of death).
If there is any sale of substantially all of the Company's assets, any
merger or any consolidation in which the Company is not the surviving
corporation or other change in control of the Company, all outstanding awards
under the Directors' Plan either will be assumed or substituted for by any
surviving entity. If the surviving entity determines not to assume or
substitute for such awards, the awards shall terminate if not exercised prior
to such sale of assets, merger or consolidation.
EMPLOYEE STOCK PURCHASE PLAN
In February 1998, the Board approved the Employee Stock Purchase Plan (the
"Purchase Plan"), covering an aggregate of 500,000 shares of Common Stock. The
Purchase Plan is intended to qualify as an "employee stock purchase plan"
within the meaning of Section 423 of the Code. Under the Purchase Plan, the
Board may authorize participation by eligible employees, including officers,
in periodic offerings following the adoption of the Purchase Plan. The
offering period for any offering will be no longer than 27 months.
Employees are eligible to participate if they are employed by the Company or
an affiliate of the Company designated by the Board. Employees who participate
in an offering generally can have up to 10% of their earnings withheld
pursuant to the Purchase Plan and applied, on specified dates determined by
the Board, to the purchase of shares of Common Stock. The Board may increase
this percentage in its discretion, up to 15%. The price of Common Stock
purchased under the Purchase Plan will be equal to 85% of the lower of the
fair market value of the Common Stock on the commencement date of each
offering period or the relevant purchase date. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with the
Company.
In the event of certain changes of control, the Board has discretion to
provide that each right to purchase Common Stock will be assumed or an
equivalent right substituted by the successor corporation, or the Board may
shorten the offering period and provide for all sums collected by payroll
deductions to be applied to purchase stock immediately prior to the change in
control. The Purchase Plan will terminate at the Board's direction or when all
of the shares reserved for issuance under the Purchase Plan have been issued.
401(K) PLAN
The Company maintains the NVIDIA Corporation 401(k) Retirement Plan (the
"401(k) Plan") for eligible employees ("Participants"). A Participant may
contribute up to 20% of his or her total annual compensation to the 401(k)
Plan, up to a statutorily prescribed annual limit. The annual limit for 1998
is $10,000. Each Participant is fully vested in his or her deferred salary
contributions. Participant contributions are held and invested by the 401(k)
Plan's trustee. The Company may make discretionary contributions as a
percentage of Participant contributions, subject to established limits. To
date, the Company has made no contributions to the 401(k) Plan on behalf of
the Participants. The 401(k) Plan is intended to qualify under Section 401 of
the Code, so that contributions by employees or by the Company to the 401(k)
Plan, and income earned on the 401(k) Plan contributions, are not taxable to
employees until withdrawn from the 401(k) Plan, and so that contributions by
the Company, if any, will be deductible by the Company when made.
50
<PAGE>
CERTAIN TRANSACTIONS
In August 1997, Harvey C. Jones, Jr., a director of the Company, purchased
24,334 shares of the Company's Series D Preferred Stock for an aggregate
purchase price of $127,997. The Company sold these securities pursuant to a
preferred stock purchase agreement and an investors' rights agreement on
substantially the same terms as the other investors of Series D Preferred
Stock, including registration rights, information rights and a right of first
refusal, among other provisions standard in venture capital financings.
INDEMNIFICATION AND LIMITATION OF DIRECTOR AND OFFICER LIABILITY
In February 1998, the Board authorized the Company to enter into indemnity
agreements with each of the Company's directors and executive officers. The
form of indemnity agreement provides that the Company will indemnify against
any and all expenses of the director or executive officer who incurred such
expenses because of his or her status as a director or executive officer, to
the fullest extent permitted by the Company's Bylaws and Delaware law. In
addition, as permitted by Section 145 of the Delaware General Corporation Law,
the Bylaws of the Company provide that (i) the Company is required to
indemnify its directors and executive officers to the fullest extent permitted
by the Delaware General Corporation Law, (ii) the Company may, in its
discretion, indemnify other officers, employees and agents as set forth in the
Delaware General Corporation Law, (iii) to the fullest extent permitted by the
Delaware General Corporation Law, the Company is required to advance all
expenses incurred by its directors and executive officers in connection with a
legal proceeding (subject to certain exceptions), (iv) the rights conferred in
the Bylaws are not exclusive, (v) the Company is authorized to enter into
indemnification agreements with its directors, officers, employees and agents
and (vi) the Company may not retroactively amend the Bylaws provisions
relating to indemnity.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of February 28, 1998,
and as adjusted to reflect the sale of the shares of Common Stock offered
hereby by (i) each of the Company's Named Executive Officers, (ii) each of the
Company's directors, (iii) each holder of more than 5% of the Company's Common
Stock and (iv) all current directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)
SHARES ------------------------
BENEFICIALLY PRIOR TO AFTER
BENEFICIAL OWNERS OWNED(1) OFFERING OFFERING
- ----------------- ------------ ---------- ----------
<S> <C> <C> <C>
Entities associated with Sequoia
Capital VI(2)........................ 3,095,902 13.2% %
3000 Sand Hill Road
Suite 280, Building 4
Menlo Park, California 94025
Jen-Hsun Huang(3)(4).................. 3,000,000 12.8
Chris A. Malachowsky(3)(5)............ 3,000,000 12.8
Curtis R. Priem(3).................... 3,000,000 12.8
Entities associated with Sutter Hill
Ventures(6).......................... 2,792,404 11.9
755 Page Mill Road, Suite A-200
Palo Alto, California 94304
Jeffrey D. Fisher(7).................. 360,200 1.5
Richard J. Whitacre(8)................ 387,800 1.6
Tench Coxe(6)(9)...................... 2,842,404 12.1
Harvey C. Jones, Jr.(10).............. 269,334 1.1
William J. Miller(11)................. 181,844 *
A. Brooke Seawell..................... -- *
Mark A. Stevens(2)(12)................ 3,145,902 13.4
All directors and executive officers
as a group(10 persons)(13)........... 16,187,484 68.0
</TABLE>
- --------
*Less than 1%.
(1) Percentage of beneficial ownership is based on 23,468,797 shares of
Common Stock outstanding on an as-converted basis as of February 28, 1998
and on shares of Common Stock outstanding after the completion
of this offering. Shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of February 28, 1998 are deemed
outstanding for the purpose of computing the percentage ownership of the
person holding such options but are not deemed outstanding for computing
the percentage ownership of any other person. Unless otherwise indicated
below, the persons and entities named in the table have sole voting and
sole investment power with respect to all shares beneficially owned,
subject to community property laws where applicable.
(2) Includes (i) 2,566,589 shares held by Sequoia Capital VI, (ii) 258,947
shares held by Sequoia Capital Growth Fund, (iii) 141,021 shares held by
Sequoia Technology Partners VI, (iv) 81,237 shares held by Sequoia XXIII,
(v) 27,778 shares held by Sequoia XXIV, (vi) 16,528 shares held by
Sequoia Technology Partners III, (vii) 2,433 shares held by SQP 1997 and
(viii) 1,369 shares held by Sequoia 1997. Mr. Stevens, a director of the
Company, is a general partner of the general partner of Sequoia Capital
VI and a general partner of Sequoia Technology Partners VI, and therefore
may be deemed to beneficially own the shares currently owned by such
entities. Mr. Stevens disclaims beneficial ownership of the shares held
by such entities, except to the extent of his pecuniary interest therein.
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<PAGE>
(3) The address for Messrs. Huang, Malachowsky and Priem is: c/o NVIDIA
Corporation, 1226 Tiros Way, Sunnyvale, California 94086.
(4) Held by The Jen-Hsun and Lori Huang Living Trust dated May 1, 1995, of
which Mr. Huang is the trustee. Also includes 220,000 shares held by
Karen Mills Gambec, as Trustee of The Jen-Hsun Huang and Lori Lynn Huang
1995 Irrevocable Children's Trust and 220,500 shares held by various
family members, as to which Mr. Huang does not have voting or dispositive
power or beneficial ownership thereof.
(5) Includes 2,052,000 shares held by The Chris and Melody Malachowsky Living
Trust dated October 20, 1994, of which Mr. Malachowsky is the trustee and
238,500 shares held by Malachowsky Investments L.P., of which Mr.
Malachowsky and his wife are general partners. Also includes 660,000
shares held by John M. Scott, as Trustee of The Chris Malachowsky and
Melody Malachowsky 1994 Irrevocable Trust and 49,500 shares held by
various family members, as to which Mr. Malachowsky does not have voting
or dispositive power thereof.
(6) Includes 1,813,275 shares held by Sutter Hill Ventures, a California
Limited Partnership ("Sutter Hill"). Mr. Coxe, a director of the Company,
shares voting and investing power with four other managing directors of
Sutter Hill Ventures LLC, the general partner of Sutter Hill. Includes
979,129 shares held of record by the five managing directors of Sutter
Hill Ventures LLC and their related family entities. Mr. Coxe disclaims
beneficial ownership of the shares held by the other persons and entities
associated with Sutter Hill, except to the extent of his pecuniary
interest therein.
(7) Includes 225,200 shares subject to a right of repurchase that expires
ratably through July 1998. Includes 135,000 shares of Common Stock
issuable upon the early exercise of options vesting through May 2001.
(8) Includes 152,800 and 30,000 shares subject to rights of repurchase that
expire ratably through July 1998 and August 2000, respectively. Includes
205,000 shares of Common Stock issuable upon the early exercise of
options vesting through May 2001.
(9) Includes 50,000 shares subject to a right of repurchase that expires
ratably through July 2000.
(10) Includes 70,000 shares subject to a right of repurchase that expires
ratably through August 2000.
(11) Includes 75,000 and 50,000 shares subject to rights of repurchase that
expire ratably through November 1998 and June 2000, respectively.
(12) Includes 50,000 shares subject to a right of repurchase that expires
ratably through July 2000.
(13) Includes 340,000 shares issuable upon exercise of options held by all
directors and executive officers within 60 days of February 28, 1998. See
footnotes (7) and (8).
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 200,000,000 shares of Common Stock, par value $.001
per share, and 2,000,000 shares of Preferred Stock, par value $.001 per share
("Preferred Stock").
COMMON STOCK
As of December 31, 1997, there were 23,467,672 shares of Common Stock
(including shares of Preferred Stock that will be converted into Common Stock
upon completion of this offering) outstanding held of record by 182
stockholders.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any outstanding shares of the Preferred
Stock, the holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of a liquidation,
dissolution, or winding up of the Company, holders of the Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and the liquidation preferences of any outstanding shares of Preferred Stock.
Holders of Common Stock have no preemptive rights and no right to convert
their Common Stock into any other securities. There are no redemption or
sinking fund provisions applicable to the Common Stock. All outstanding shares
of Common Stock are, and all shares of Common Stock to be outstanding upon the
completion of this offering will be, fully paid and non-assessable.
PREFERRED STOCK
Pursuant to the Restated Certificate the Board of Directors has the
authority, without further action by the stockholders, to issue up to
2,000,000 shares of Preferred Stock in one or more series and to fix the
designations, powers, preferences, privileges, and relative participating,
optional, or special rights and the qualifications, limitations, or
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which
may be greater than the rights of the Common Stock. The Board of Directors,
without stockholder approval, can issue Preferred Stock with voting,
conversion, or other rights that could adversely affect the voting power and
other rights of the holders of Common Stock. Preferred Stock could thus be
issued quickly with terms calculated to delay or prevent a change in control
of the Company or make removal of management more difficult. Additionally, the
issuance of Preferred Stock may have the effect of decreasing the market price
of the Common Stock, and may adversely affect the voting and other rights of
the holders of Common Stock. Upon the completion of this offering, there will
be no shares of Preferred Stock outstanding and the Company has no current
plans to issue any of the authorized Preferred Stock.
REGISTRATION RIGHTS
Pursuant to an agreement between the Company and the holders (or their
permitted transferees) ("Holders") of approximately 9,327,087 shares of Common
Stock (assuming the conversion of all outstanding Preferred Stock upon the
completion of this offering) and warrants to purchase 29,706 shares of Common
Stock, the Holders are entitled to certain rights with respect to the
registration of such shares under the Securities Act. If the Company proposes
to register its Common Stock, subject to certain exceptions, under the
Securities Act, the Holders are entitled to notice of the registration and are
entitled at the Company's expense to include such shares therein, provided
that the managing underwriters have the right to limit the number of such
shares included in the registration. The registration rights with respect to
this offering have been waived. In addition, certain of the Holders may
require the Company, at its expense, on no more than one occasion, to file a
registration statement under the Securities Act with respect to their shares
of Common Stock. Such rights may not be exercised until 60 days after the
completion of this offering. Further, certain Holders may require the Company,
once every 12 months and, on no more than two occasions, at the Company's
expense to register the
54
<PAGE>
shares on Form S-3 when such form becomes available to the Company, subject to
certain conditions and limitations. Such right expires on the fifth
anniversary of completion of this offering.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF CHARTER DOCUMENTS AND DELAWARE LAW
CHARTER DOCUMENTS
The Company's Certificate of Incorporation (the "Certificate") and Bylaws
include a number of provisions that may have the effect of deterring hostile
takeovers or delaying or preventing changes in control or management of the
Company. First, the Certificate provides that all stockholder action must be
effected at a duly called meeting of holders and not by a consent in writing.
Second, the Bylaws provide that special meetings of the holders may be called
only by (i) the Chairman of the Board of Directors, (ii) the Chief Executive
Officer, or (iii) the Board of Directors pursuant to a resolution adopted by
the Board of Directors. Third, the Certificate and the Bylaws provide for a
classified Board of Directors. The Certificate includes a provision requiring
cumulative voting for directors only if required by applicable California law.
Under cumulative voting, a minority stockholder holding a sufficient
percentage of a class of shares may be able to ensure the election of one or
more directors. As a result of the provisions of the Certificate and
applicable California and Delaware law, at any annual meeting whereby the
Company had at least 800 stockholders as of the end of the fiscal year prior
to the record date for such annual meeting, stockholders will not be able to
cumulate votes for directors. Finally, the Bylaws establish procedures,
including advance notice procedures with regard to the nomination of
candidates for election as directors and stockholder proposals. These
provisions of the Certificate and Bylaws could discourage potential
acquisition proposals and could delay or prevent a change in control or
management of the Company. Such provisions also may have the effect of
preventing changes in the management of the Company. See "Management", "Risk
Factors--Effects of Certain Charter and Bylaw Provisions."
DELAWARE TAKEOVER STATUTE
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). In general, Section 203 prohibits a
publicly held Delaware corporation, such as the Company shall become upon the
completion of this offering from engaging in a "business combination" with a
person characterized as an "interested stockholder" for a period of three
years after the date of the transaction pursuant to which such person became
an interested stockholder, unless the business combination is approved in a
manner prescribed by Delaware law. For purposes of Section 203, a business
combination includes a merger, asset sale or other transaction resulting in a
financial benefit to the interested stockholder, and an "interested
stockholder" is a person who, together with affiliates and associates, owns
(or within three years prior, did own) 15% or more of the Company's voting
stock.
TRANSFER AGENT AND REGISTRAR
has been appointed as the transfer agent and
registrar for the Company's Common Stock.
55
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices from time to
time. Furthermore, since only a limited number of shares will be available for
sale following this offering as a result of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock of the Company in the public market after these restrictions
lapse could adversely affect the prevailing market price and the ability of
the Company to raise equity capital in the future.
Upon the completion of this offering, the Company will have outstanding an
aggregate of shares of Common Stock, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options and
warrants. Of these shares, all of the shares sold in this offering will be
freely tradable without restrictions or further registration under the
Securities Act, unless such shares are purchased by "affiliates" of the
Company as that term is defined in Rule 144 under the Securities Act (the
"Affiliates"). The remaining 23,468,797 shares of Common Stock held by
existing stockholders are "restricted securities" as that term is defined in
Rule 144 under the Securities Act ("Restricted Shares"). Restricted Shares may
be sold in the public market only if registered or if they qualify for an
exemption from registration pursuant to Rules 144, 144(k) or 701 promulgated
under the Securities Act, which are summarized below. All officers and
directors and certain stockholders holding an aggregate of 23,257,211 shares
of the Company's Common Stock have agreed, subject to certain exceptions, not
to offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly of
indirectly (or enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership
of), any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Common Stock, for a period of 180
days after the date of this Prospectus, without the prior written consent of
Morgan Stanley & Co. Incorporated. Morgan Stanley & Co. Incorporated may in
its sole discretion choose to release a certain number of these shares from
such restrictions prior to the expiration of such 180-day period.
Approximately 5,000,000 shares of Common Stock of the Company (less shares
available for sale within 90 days following the date of this Prospectus),
which does not include any shares held by officers and directors, may be
released from such contractual restrictions following 90 days after the date
of this Prospectus at the discretion of the Company. As a result of such
contractual restrictions and the provisions of Rule 144 and 701, the
Restricted Shares will be available for sale in the public market as follows:
(i) 113,558 shares will be eligible for immediate sale on the date of this
Prospectus; (ii) 4,886,442 shares will be eligible for sale 90 days after the
date of this Prospectus; (iii) 22,129,653 shares will be eligible for sale
upon expiration of lock-up agreements 180 days after the date of this
Prospectus and (iv) the remaining shares will be eligible for sale from time
to time thereafter upon expiration of the Company's right to repurchase such
shares .
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least one year (including
the holding period of any prior owner except an Affiliate) would be entitled
to sell within any three-month period a number of shares that does not exceed
the greater of: (i) 1% of the number of shares of Common Stock then
outstanding (which will equal approximately shares immediately after
this offering); or (ii) the average weekly trading volume of the Common Stock
on the Nasdaq National Market during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale. Sales under Rule 144
are also subject to certain manner of sale provisions and notice requirements
and to the availability of current public information about the Company. Under
Rule 144(k), a person who is not deemed to have been an Affiliate of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an Affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144; therefore,
unless otherwise contractually restricted, shares which qualify as "144(k)
shares" on the date of this Prospectus may be sold immediately upon the
completion of this offering. Subject to certain limitations on the aggregate
offering price of a transaction and other conditions, employees, directors,
officers, consultants or advisors may rely on Rule 701 with respect to the
resale of securities originally
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<PAGE>
purchased from the Company prior to the date the issuer becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), pursuant to written compensatory benefit plans or written
contracts relating to the compensation of such persons. In addition, the
Securities and Exchange Commission has indicated that Rule 701 will apply to
typical stock options granted by an issuer before it becomes subject to the
reporting requirements of the Exchange Act, along with the shares acquired
upon exercise of such options (including exercises after the date of this
Prospectus). Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this Prospectus, may be sold by persons
other than Affiliates subject only to the manner of sale provisions of Rule
144, and by Affiliates under Rule 144 without compliance with its holding
period requirements.
Upon completion of this offering, the holders of approximately 9,356,793
shares of Common Stock currently outstanding or issuable upon conversion of
Preferred Stock, or their transferees, will be entitled to certain rights with
respect to the registration of such shares under the Securities Act. See
"Description of Capital Stock--Registration Rights." Registration of such
shares under the Securities Act would result in such shares becoming freely
tradable without restriction under the Securities Act (except for share
purchases by affiliates) immediately upon the effectiveness of such
registration.
The Company intends to file a registration statement under the Securities
Act covering 10,708,290 shares of Common Stock reserved or to be reserved for
issuance under the Equity Incentive Plan, the Purchase Plan and the Directors'
Plan. See "Management--Employee Benefit Plans." Such registration statement is
expected to be filed and become effective as soon as practicable after the
effective date of this offering. Accordingly, shares registered under such
registration statement will, subject to Rule 144 volume limitations applicable
to Affiliates, be available for sale in the open market, beginning 180 days
after the date of the Prospectus, unless such shares are subject to vesting
restrictions with the Company.
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<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement (the "Underwriting Agreement"), the Underwriters named below (the
"Underwriters"), for whom Morgan Stanley & Co. Incorporated, Hambrecht & Quist
LLC and CIBC Oppenheimer Corp. are acting as representatives (the
"Representatives"), have agreed severally to purchase, and the Company has
agreed to sell to them, severally, the respective number of shares of Common
Stock set forth opposite their respective names below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated.....................................
Hambrecht & Quist LLC.................................................
CIBC Oppenheimer Corp.................................................
---------
Total.............................................................
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of Common Stock offered hereby (other than
those covered by the over-allotment option described below) if any such shares
are taken.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the initial public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ per share under the public offering price.
Any Underwriter may allow, and such dealers may reallow, a concession not in
excess of $ per share to other Underwriters or to certain dealers. After
the initial offering of the shares of Common Stock, the offering price and
other selling terms may from time to time be varied by the Representatives.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock at the initial public offering price set
forth on the cover page hereof, less underwriting discounts and commissions.
The Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
Common Stock offered hereby. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock as
the number set forth next to such Underwriter's name in the preceding table
bears to the total number of shares of Common Stock set forth next to the
names of all Underwriters in the preceding table.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
Each of the Company and the directors, executive officers, certain other
stockholders and option holders of the Company has agreed, subject to certain
exceptions that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the Underwriters, it will not during the period
ending 180 days after the date of this Prospectus (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer, lend or dispose of, directly
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<PAGE>
or indirectly, any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise, except under
certain limited circumstances. The restrictions described in this paragraph do
not apply to (a) the sale of Shares to the Underwriters, (b) the issuance by
the Company of shares of Common Stock upon exercise of an option or a warrant
outstanding on the date of this Prospectus and described as such in the
Prospectus, (c) the issuance by the Company of shares of Common Stock under
the Equity Incentive Plan, the Directors' Plan and the Purchase Plan or (d)
transactions by any person other than the Company relating to shares of Common
Stock or other securities acquired in open market transactions after the
completion of the offering of the Shares. See "Shares Eligible for Future
Sale."
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the Common Stock, the Underwriters may bid for, and purchase,
shares of Common Stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an Underwriter or a dealer for
distributing the Common Stock in the offering, if the syndicate repurchases
previously distributed Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Common Stock above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the Common Stock
or any other securities of the Company. The initial public offering price for
the Common Stock will be determined by negotiations among the Company and the
Representatives. Among the factors to be considered in determining the initial
public offering price will be the future prospects of the Company and its
industry in general, sales, earnings and certain other financial and operating
information of the Company in recent periods, and the price-earnings ratios,
price-sales ratios, market prices of securities and certain financial and
operating information of companies engaged in activities similar to those of
the Company. The estimated initial public offering price range set forth on
the cover page of this Preliminary Prospectus is subject to change as a result
of market conditions and other factors.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Cooley Godward llp ("Cooley Godward"), San Francisco, California.
Certain legal matters related to the offering will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California. As of the date of this Prospectus, certain partners and
associates of Cooley Godward own through investment partnerships an aggregate
of 124,591 shares of Common Stock of the Company. James C. Gaither, a partner
of Cooley Godward, owns 44,289 of Common Stock of the Company and has an
option to purchase 50,000 shares of the Company's Common Stock.
EXPERTS
The financial statements of the Company as of December 31, 1996 and 1997,
and for each of the years in the three-year period ended December 31, 1997,
have been included in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent auditors, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.
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ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and such Common Stock, reference is
made to the Registration Statement and to the exhibits and schedules filed
therewith. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the Registration
Statement may be inspected by anyone without charge at the Commission's
principal office in Washington, D.C., and copies of all or any part of the
Registration Statement may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the Registration Statement may be obtained from such offices upon payment of
the fees prescribed by the Commission. The Commission maintains a World Wide
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission. The address of the site is http://www.sec.gov.
60
<PAGE>
NVIDIA CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of KPMG Peat Marwick LLP, Independent Auditors..................... F-2
Balance Sheets as of December 31, 1996 and 1997........................... F-3
Statements of Operations for the Years Ended December 31, 1995, 1996 and
1997..................................................................... F-4
Statements of Stockholders' Equity for the Years Ended December 31, 1995,
1996 and 1997............................................................ F-5
Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and
1997..................................................................... F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
FORM OF INDEPENDENT AUDITORS' REPORT
When the reincorporation of the Company in Delaware described in Note 8 of
the Notes to Financial Statements has been consummated, we will be in a
position to render the following report.
KPMG Peat Marwick LLP
The Board of Directors and Stockholders
NVIDIA Corporation:
We have audited the accompanying balance sheets of NVIDIA Corporation (the
Company) as of December 31, 1996 and 1997, and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1997. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NVIDIA Corporation as of
December 31, 1996 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1997,
in conformity with generally accepted accounting principles.
Mountain View, California
February 17, 1998
F-2
<PAGE>
NVIDIA CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
-------- --------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents................................ $ 3,133 $ 6,551
Accounts receivable...................................... 1,041 12,487
Prepaid expenses and other current assets................ 104 303
-------- --------
Total current assets................................. 4,278 19,341
Property and equipment, net................................ 1,144 5,536
Deposits and other assets.................................. 103 161
-------- --------
$ 5,525 $ 25,038
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable......................................... $ 277 $ 11,572
Accrued liabilities...................................... 2,872 3,245
Current portion of capital lease obligations............. 722 1,434
-------- --------
Total current liabilities............................ 3,871 16,251
-------- --------
Capital lease obligations, less current portion............ 617 1,891
-------- --------
Commitments................................................ -- --
Stockholders' equity:
Convertible preferred stock, $.001 par value; 10,000,000
shares authorized;
7,888,275 and 9,327,087 shares issued and outstanding in
1996 and 1997, respectively; aggregate liquidation
preference of $19,827 in 1997.......................... 8 9
Common stock, $.001 par value; 200,000,000 shares
authorized; 11,567,374 and 14,140,585 shares issued and
outstanding in 1996 and 1997, respectively.............. 12 14
Additional paid-in capital............................... 12,317 22,902
Deferred compensation.................................... -- (2,038)
Accumulated deficit...................................... (11,300) (13,991)
-------- --------
Total stockholders' equity........................... 1,037 6,896
-------- --------
$ 5,525 $ 25,038
======== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
NVIDIA CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Revenue:
Product.......................................... $ 1,103 $ 3,710 $ 27,280
Royalty.......................................... 79 202 1,791
------- ------- --------
Total revenue.................................. 1,182 3,912 29,071
Cost of revenue.................................... 1,549 3,038 21,226
------- ------- --------
Gross profit (loss)................................ (367) 874 7,845
------- ------- --------
Operating expenses:
Research and development......................... 2,426 1,218 6,632
Sales, general and administrative................ 3,677 2,649 3,773
------- ------- --------
Total operating expenses....................... 6,103 3,867 10,405
------- ------- --------
Operating loss................................. (6,470) (2,993) (2,560)
Interest and other income (expense), net........... 93 (84) (131)
------- ------- --------
Net loss....................................... (6,377) (3,077) (2,691)
======= ======= ========
Basic and diluted net loss per share............... $ (.56) $ (.27) $ (.21)
======= ======= ========
Shares used in basic and diluted per share
computation....................................... 11,365 11,383 12,677
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
NVIDIA CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED ACCUMU- STOCK-
---------------- ----------------- PAID-IN COMPEN- LATED HOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL SATION DEFICIT EQUITY
--------- ------ ---------- ------ ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1994................... 6,693,831 $ 7 11,365,300 $11 $ 6,456 $ -- $ (1,846) $ 4,628
Issuance of Series B
preferred stock........ 416,667 -- -- -- 750 -- -- 750
Exercise of Series B
warrants............... 13,888 -- -- -- 25 -- -- 25
Issuance of Series C
preferred stock, net of
issuance costs of $14.. 750,000 1 -- -- 4,985 -- -- 4,986
Net loss................ -- -- -- -- -- -- (6,377) (6,377)
--------- --- ---------- --- ------- ------- -------- -------
Balances, December 31,
1995................... 7,874,386 8 11,365,300 11 12,216 -- (8,223) 4,012
Exercise of Series B
warrants............... 13,889 -- -- -- 25 -- -- 25
Issuance of common stock
and stock options for
services............... -- -- 2,200 -- 25 -- -- 25
Issuance of common stock
upon exercise of stock
options................ -- -- 199,874 1 51 -- -- 52
Net loss................ -- -- -- -- -- -- (3,077) (3,077)
--------- --- ---------- --- ------- ------- -------- -------
Balances, December 31,
1996................... 7,888,275 8 11,567,374 12 12,317 -- (11,300) 1,037
Issuance of Series D
preferred stock, net of
issuance costs of $30.. 1,438,812 1 -- -- 7,537 -- -- 7,538
Grant of common stock
options for lease
financing and
consulting services.... -- -- -- -- 120 -- -- 120
Issuance of common stock
upon exercise of stock
options................ -- -- 2,573,211 2 828 -- -- 830
Deferred compensation
related to grant of
common stock options... -- -- -- -- 2,100 (2,100) -- --
Amortization of deferred
compensation........... -- -- -- -- -- 62 -- 62
Net loss................ -- -- -- -- -- -- (2,691) (2,691)
--------- --- ---------- --- ------- ------- -------- -------
Balances, December 31,
1997................... 9,327,087 $ 9 14,140,585 $14 $22,902 $(2,038) $(13,991) $ 6,896
========= === ========== === ======= ======= ======== =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
NVIDIA CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(6,377) $(3,077) $ (2,691)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 524 802 1,363
Stock options granted in exchange for lease
financing and services........................ 25 50 120
Amortization of deferred compensation.......... -- -- 62
Changes in operating assets and liabilities:
Accounts receivable.......................... (458) (24) (11,446)
Prepaid expenses and other current assets.... (592) 44 (199)
Deposits and other assets.................... (65) (19) (58)
Accounts payable............................. 510 (506) 11,295
Accrued liabilities.......................... 300 2,451 373
------- ------- --------
Net cash used in operating activities...... (6,133) (279) (1,181)
------- ------- --------
Cash flows used in investing activities--purchases
of property and equipment......................... (5) (9) (2,732)
------- ------- --------
Cash flows from financing activities:
Net proceeds from sale of common stock........... -- 51 830
Net proceeds from sale of preferred stock........ 5,762 -- 7,538
Payments under capital leases.................... (307) (502) (1,037)
------- ------- --------
Net cash provided by (used in) financing
activities................................ 5,455 (451) 7,331
------- ------- --------
Change in cash and cash equivalents................ (683) (739) 3,418
Cash and cash equivalents at beginning of year..... 4,555 3,872 3,133
------- ------- --------
Cash and cash equivalents at end of year........... $ 3,872 $ 3,133 $ 6,551
======= ======= ========
Cash paid for interest............................. $ 152 $ 215 $ 267
======= ======= ========
Noncash financing and investing activity--assets
recorded under capital lease...................... $ 1,430 $ 265 $ 3,023
======= ======= ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
NVIDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
NVIDIA Corporation (the "Company") designs, develops and markets 3D
interactive graphics processors and related software for the mainstream PC
market. The Company operates primarily in one business segment in the United
States.
Fiscal Year
The Company's fiscal years ended on December 31 prior to December 31, 1997.
Effective January 1, 1998, the Company changed its fiscal year end from
December 31 to a 52- or 53-week year ending on the last Sunday in December.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a
maturity of three months or less at the time of purchase to be cash
equivalents.
Inventories
Inventories consist of finished goods that are stated at the lower of first-
in, first-out cost or market. Inventories were immaterial as of December 31,
1996 and 1997.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based on estimated useful lives, generally three to
four years. Depreciation expense includes the amortization of assets recorded
under capital leases. Leasehold improvements and assets recorded under capital
leases are amortized over the shorter of the lease term or the estimated
useful life of the asset.
Software Development Costs
Software development costs are expensed as incurred until the technological
feasibility of the related product has been established. After technological
feasibility is established, any additional software development costs would be
capitalized in accordance with Financial Accounting Standards Board Statement
of Financial Accounting Standards ("SFAS") No. 86, Capitalization of Software
Development Costs. Through December 31, 1997, the Company's process for
developing software was essentially completed concurrently with the
establishment of technological feasibility, and, accordingly, no software
costs have been capitalized to date. Software development costs incurred prior
to achieving technological feasibility are charged to research and development
expense as incurred.
Revenue Recognition
Revenue from product sales to original equipment manufacturers are
recognized upon shipment, net of any allowances for returns. While the Company
has not yet sold products through distributors, the Company's policy on sales
to distributors will be to defer recognition of sales and related gross profit
until the distributors resell the product. Royalty revenue is recognized upon
shipment of product by the licensee to its customers.
F-7
<PAGE>
NVIDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Research and Development Arrangements
The Company enters into contractual agreements to provide design,
development and support services on a best efforts basis. All amounts funded
to the Company under these agreements are non-refundable once paid. The
Company recorded reductions to research and development expense based on the
percentage-of-completion method, limited by the amounts funded.
Accounting for Stock-Based Compensation
The Company uses the intrinsic value method to account for its stock-based
employee compensation plans.
Income Taxes
The Company records income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those temporary differences are expected
to be recorded or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.
Net Loss Per Share
Basic net loss per share is computed using the weighted average number of
common shares outstanding during the period. Diluted net loss per share is
computed using the weighted average number of common and dilutive common
equivalent shares outstanding during the period, using either the as-if-
converted method for convertible preferred stock or the treasury stock method
for options and warrants. The effect of including convertible preferred stock,
options and warrants would have been antidilutive during all periods presented
and, as a result, such effect has been excluded from the computation of
diluted net loss per share. See Note 3 for information regarding potentially
dilutive outstanding shares of, and warrants to purchase, convertible
preferred stock and outstanding options to purchase common stock. Pursuant to
SEC Staff Accounting Bulletin No. 98, common stock and convertible preferred
stock issued for nominal consideration and options and warrants granted for
nominal consideration prior to the anticipated effective date of the initial
public offering (IPO) are included in the calculation of basic and diluted net
loss per share, as if they were outstanding for all periods presented. To
date, the Company has not had any issuances or grants for nominal
consideration.
Fair Value of Financial Instruments
The carrying value of cash, cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value due to the short
maturity of those instruments.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the recorded 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 these estimates.
F-8
<PAGE>
NVIDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) BALANCE SHEET COMPONENTS
Certain balance sheet components are as follows:
Property and Equipment
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Purchased engineering software........................... $ -- $ 3,158
Test equipment........................................... 187 1,467
Computer equipment....................................... 2,209 3,264
Leasehold improvements................................... 69 74
Office furniture and equipment........................... 159 259
Assets held for lease.................................... -- 157
------- -------
2,624 8,379
Accumulated depreciation and amortization................ (1,480) (2,843)
------- -------
Property and equipment, net............................ $ 1,144 $ 5,536
======= =======
</TABLE>
Accrued Liabilities
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
------ ------
(IN
THOUSANDS)
<S> <C> <C>
Advances on development agreement........................... $2,500 $2,500
Other....................................................... 372 745
------ ------
$2,872 $3,245
====== ======
</TABLE>
(3) STOCKHOLDERS' EQUITY
Convertible Preferred Stock
In 1993, the Company sold 4,303,000 shares of Series A preferred stock at
$0.50 per share, net of $22,000 of issuance costs. In 1994, the Company sold
2,390,831 shares of Series B preferred stock at $1.80 per share, net of
$57,000 of issuance costs. In 1995, the Company sold 416,667 shares of Series
B preferred stock at $1.80 per share. In 1995, the Company sold 750,000 shares
of Series C preferred stock at $6.67 per share, net of $14,000 of issuance
costs. On August 19 and September 12, 1997, the Company sold an aggregate of
1,438,812 shares of Series D preferred stock at $5.26 per share, net of
$30,000 of issuance costs.
The rights, preferences, and privileges of the holders of Series A, B, C and
D convertible preferred stock are as follows:
. Dividends are noncumulative and payable only upon declaration by the
Board of Directors at a rate of $.04, $.144, $.533 and $.42 per share
for Series A, B, C and D preferred stock, respectively.
. Holders of Series A, B, C and D preferred stock have a liquidation
preference of $.50, $1.80, $6.67, and $5.26 per share, respectively,
plus any declared but unpaid dividends over holders of common stock.
. Each holder of preferred stock has voting rights equal to common stock
on an "as-if-converted" basis.
. Each share of preferred stock may be converted into common stock at the
option of the holder on a one-for-one basis, subject to adjustment to
protect against dilution. Automatic conversion will occur upon the
earlier of a vote of holders of at least two-thirds of the shares of
preferred stock then outstanding or upon the closing of an initial
public offering of common stock in which the aggregate proceeds exceed
$15,000,000 and the offering price equals or exceeds $10.00 per share.
F-9
<PAGE>
NVIDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Warrants
During the period 1993 through 1997, the Company granted warrants to
purchase 80,000; 66,877; 10,000 and 29,706 of Series A, B, C and D preferred
stock, respectively, in connection with lease financing and services. These
warrants are exercisable at $.50, $1.80, $6.67 and $5.26 for shares of Series
A, B, C and D preferred stock, respectively, and expire from 2003 to 2007. At
December 31, 1997, warrants to purchase 80,000, 39,100, 10,000 and 29,706
shares of Series A, B, C and D preferred stock, respectively, were
outstanding.
The fair value of all warrant issuances calculated using the Black-Scholes
option pricing model was not material, using the following assumptions:
dividend yield - none; expected life - contractual term; risk free interest
rates - 6.0% to 6.5%; volatility - 60%.
Options
The Equity Incentive Plan (the "Plan"), as amended and restated on February
17, 1998, provides for the issuance of up to 15,000,000 shares of the
Company's common stock to directors, employees and consultants. The Plan
provides for the issuance of stock bonuses, restricted stock purchase rights,
incentive stock options or nonstatutory stock options.
Pursuant to the Plan, the exercise price for incentive stock options is at
least 100% of the fair market value on the date of grant or for employees
owning in excess of 10% of the voting power of all classes of stock, 110% of
the fair market value on the date of grant. For nonstatutory stock options,
the exercise price is no less than 85% of the fair market value on the date of
grant.
Options generally expire in 10 years. Vesting periods are determined by the
Board of Directors; however, options generally vest ratably over four years
beginning one year after the date of grant. Options may be exercised prior to
full vesting. Any unvested shares so purchased are subject to a repurchase
right in favor of the Company with the repurchase price to be equal to the
original purchase price of the stock. The right to repurchase at the original
price shall lapse at a minimum rate of 20% per year over five years from the
date the option was granted. As of December 31, 1997, there were 1,942,897
such shares subject to repurchase.
The Company accounts for the plan using the intrinsic value method. As such,
compensation expense is recorded if on the date of grant the current fair
value per share of the underlying stock exceeds the exercise price per share.
With respect to certain options granted during 1997, the Company has recorded
deferred compensation of $2,100,000 for the difference at the grant date
between the exercise price per share and the fair value per share, based upon
independent valuations and management's estimate of the fair value of the
Company's stock on the various grant dates of the common stock underlying the
options. This amount is being amortized on a straight line basis over the
vesting period of the individual options, generally four years.
Had compensation cost for the Company's stock-based compensation plan been
determined consistent with SFAS No. 123, the Company's net loss would have
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Net loss:
As reported......................................... $6,377 $3,077 $2,691
Pro forma........................................... 6,389 3,109 2,796
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following weighted-average assumptions: no
dividend yield; risk free interest rate of 6.5%; and expected life for the
option of five years.
F-10
<PAGE>
NVIDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A summary of option transactions under the Plan follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
AVAILABLE SHARES UNDER PRICE PER
FOR GRANT OPTION SHARE
---------- ------------ ---------
<S> <C> <C> <C>
Balances, December 31, 1994............. 459,707 143,000 $ .09
Authorized............................ 1,500,000 -- --
Granted............................... (1,490,375) 1,490,375 .18
Exercised............................. -- (12,500) .18
---------- ----------
Balances, December 31, 1995............. 469,332 1,620,875 .17
Authorized............................ 4,000,000 -- --
Granted............................... (1,756,860) 1,756,860 .31
Exercised............................. -- (407,581) .20
Canceled.............................. 794,134 (794,134) .19
---------- ----------
Balances, December 31, 1996............. 3,506,606 2,176,020 .27
Authorized............................ 2,000,000 -- --
Granted............................... (4,950,857) 5,000,857 1.43
Exercised............................. -- (2,573,211) .32
Canceled.............................. 868,208 (868,208) .29
---------- ----------
Balances, December 31, 1997............. 1,423,957 3,735,458 $ .28
========== ==========
</TABLE>
During 1997, the Company granted Common Stock options within the Plan to
consultants for services rendered. The fair value of all option grants to non-
employees calculated using the Black-Scholes option pricing model was
$120,000, using the following assumptions: dividend yield--none; expected
life--contractual term; risk free interest rates--6.0% to 6.5%; volatility--
60%. Options to purchase 50,000 shares of Common Stock were granted to an
outside investor during the Series D preferred stock offering.
The weighted-average fair value of options granted during 1995, 1996 and
1997 was $.05, $.08 and $.79, respectively. At December 31, 1997, 2,230,458
shares were exercisable.
The following table summarizes information about stock options outstanding
as of December 31, 1997:
<TABLE>
<CAPTION>
OUTSTANDING
---------------------
WEIGHTED-
AVERAGE
REMAINING NUMBER
EXERCISE NUMBER CONTRACTUAL OF SHARES
PRICES OF SHARES LIFE EXERCISABLE
-------- --------- ----------- -----------
<S> <C> <C> <C>
$ .05.................................... 3,000 6.50 3,000
.18.................................... 50,000 7.08 50,000
.36.................................... 1,034,833 9.07 1,034,833
1.30.................................... 796,000 9.70 781,000
2.64.................................... 1,155,500 9.91 345,500
3.15.................................... 696,125 9.98 16,125
--------- ---- ---------
$ .05 - $3.15............................ 3,735,458 9.60 2,230,458
========= =========
</TABLE>
F-11
<PAGE>
NVIDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(4) COMMITMENTS
The Company leases a facility in Sunnyvale, California under operating lease
agreements that expire in August 1998. The Company is committed to pay
approximately $499,000 of future minimum lease payments under this agreement
during 1998. Rent expense for 1995, 1996 and 1997 was approximately $325,000,
$408,000 and $426,000, respectively.
In addition to the facility lease, the Company also leases certain computers
and equipment under capital leases with the option to purchase the assets upon
termination of the leases. As of December 31, 1997, future minimum lease
payments, including costs to exercise buyout options under capital leases,
were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Year ending December 31:
1998.......................................................... $1,589
1999.......................................................... 1,442
2000.......................................................... 934
2001.......................................................... 7
------
Total lease payments........................................ 3,972
Less amount representing interest, at rates ranging from 9% to
12%............................................................ 647
------
Present value of minimum lease payments......................... 3,325
Less current portion............................................ 1,434
------
Long-term portion........................................... $1,891
======
</TABLE>
Assets recorded under capital leases included in property and equipment were
$2,314,000 and $4,765,000 as of December 31, 1996 and 1997, respectively.
Accumulated amortization thereon was $1,233,000 and $2,137,000 as of December
31, 1996 and 1997, respectively.
(5) INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....................... $ 3,374 $ 3,743
Plant and equipment--depreciation differences.......... 127 173
Advances on development contract....................... 996 996
Research credit carryforwards.......................... 617 1,058
Stock options.......................................... -- 72
Other reserves and accruals............................ 107 229
------- -------
Total gross deferred tax assets...................... 5,221 6,271
Less valuation allowance............................... (5,221) (6,271)
------- -------
Net deferred tax assets.............................. $ -- $ --
======= =======
</TABLE>
The net increase in the valuation allowance was approximately $1,800,000 and
$1,050,000 for the years ended December 31, 1996 and 1997, respectively. The
Company believes that sufficient uncertainty exists with respect to future
realization of these deferred tax assets; therefore, it has established a
valuation allowance against all net deferred tax assets.
F-12
<PAGE>
NVIDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company has net operating loss carryforwards for federal income tax
return purposes of approximately $10,000,000, which can be used to reduce
future taxable income. These carryforwards expire in 2008 through 2012. As of
December 31, 1997, the Company had California operating loss carryforwards of
approximately $5,000,000 available to offset future income subject to
California franchise tax. The difference between the federal loss
carryforwards and the California loss carryforwards results primarily from a
50% limitation on California loss carryforwards, and certain research and
development costs that were deferred for California tax purposes. The
California net operating loss carryforwards expire in various amounts from
1998 through 2002. The Company also has federal and California tax credit
carryforwards of approximately $600,000 and $450,000, respectively, as of
December 31, 1997. These tax credits expire through 2012.
Under the Tax Reform Act of 1986, the amounts of any benefit from net
operating losses and credits that can be carried forward may be limited in the
event of an ownership change as defined in the Internal Revenue Code, Section
382.
(6) DEVELOPMENT AGREEMENTS
The Company has a strategic collaboration agreement with ST
Microelectronics, Inc. ("ST") for the manufacture, marketing, and sale of
certain of the Company's products. In 1996, ST paid the Company $2,500,000 for
advanced royalty payments and agreed to partially support the research and
development and marketing efforts for certain of the Company's products. The
Company recorded a reduction to research and development cost of $1,580,000
and $1,936,000 in 1996 and 1997, respectively, and a reduction to sales,
general and administrative expense of $495,000 and $420,000 in 1996 and 1997,
respectively. In January of 1998, ST agreed to forgive the $2,500,000 in
advanced royalty payments in exchange for the Company's obligation to provide
ST continued development and support on certain products developed through the
end of 1998. Accordingly, $2,500,000 is included in accrued liabilities at
December 31, 1996 and 1997.
In May 1995, the Company entered into a five year strategic alliance
agreement (the "Agreement") with a third party to develop a product, the NV2,
using the Company's technology with the purpose of incorporating the NV2 into
such third party's products. The third party made nonrefundable payments to
the Company to develop the NV2. The Company recorded a reduction to research
and development of $2,000,000 in 1995 and $3,000,000 in 1996. As part of this
agreement, the third party also purchased in July 1995, 750,000 shares of
Series C convertible preferred stock for $5,000,000. The third party revised
its product development plans, and the Company terminated the development of
this particular technology in 1996.
(7) RISK AND UNCERTAINTIES
Product Concentration. The Company designs, develops and markets 3D graphics
processors for the mainstream PC market. Substantially all of the Company's
revenue from product sales in 1997 was derived from sales of one product, the
RIVA128 graphics processor. Since the Company has no other product line, the
Company's business, financial condition and results of operations would be
materially adversely affected if for any reason its current or future 3D
graphics processors do not achieve widespread acceptance in the mainstream PC
market.
Customer Concentration. The Company has only a limited number of customers
and its sales are highly concentrated. The Company primarily sells its
products to add-in board manufacturers, which incorporate graphics products in
the boards they sell to PC OEMs. Product revenue from STB Systems, Inc.
("STB") and Diamond Multimedia Systems, Inc. ("Diamond") accounted for 63% and
31%, respectively, of the Company's 1997 revenue and in 1996 and 1995 Diamond
accounted for 82% and 86%, respectively, of revenue. Sales to add-in board
manufacturers are primarily dependent on achieving design wins with leading PC
OEMs, and the Company believes that the large majority of its 1997 revenue was
attributable to products that ultimately were
F-13
<PAGE>
NVIDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
incorporated into PCs sold by Compaq, Dell, Gateway, Micron and Packard Bell
NEC. As a result, the Company's business, financial condition and results of
operations could be materially adversely affected by the decision of a single
PC OEM or add-in board manufacturer to cease using the Company's products or
by a decline in the number of PCs or boards sold by a single PC OEM or add-in
board manufacturers or by a small number of customers.
Accounts receivable as of December 31, 1997 were $6,261,000 and $5,768,000
from STB and Diamond, respectively.
Markets. In 1997, the Company derived all of its revenue from the sale or
license of products for use in PCs. The PC market is characterized by rapidly
changing technology, evolving industry standards, frequent new product
introductions and significant price competition, resulting in short product
life cycles and regular reductions in average selling prices over the life of
a specific product. In addition, the Company's success will depend in part
upon the emerging mainstream PC 3D graphics market. This market has only
recently begun to emerge and is dependent on future development of a
substantial customer and computer manufacturer demand for 3D graphics
functionality. If the market for mainstream PC 3D graphics fails to develop or
develops more slowly than expected, the Company's business, financial
condition and results of operations could be materially adversely affected.
Intellectual Property. The Company relies primarily on a combination of
patent, mask work protection, trademarks, copyrights, trade secret laws,
employee and third-party nondisclosure agreements and licensing arrangements
to protect its intellectual property. Vigorous protection and pursuit of
intellectual property rights or positions characterize the semiconductor
industry, which in turn has resulted in significant and often protracted and
expensive litigation. The 3D graphics market in particular has been
characterized recently by the aggressive pursuit of intellectual property
positions. Infringement claims by third parties or claims for indemnification
by customers or end users of the Company's products resulting from
infringement claims could be asserted in the future and such assertions, of
proven to be true, could materially adversely affect the Company's business,
financial condition and results of operations. Any limitations on the
Company's ability to market its products, or delays and costs associated with
redesigning its products or payments of license fees to third parties, or any
failure by the Company to develop or license a substitute technology on
commercially reasonable terms, could have a material adverse effect on the
Company's business, financial condition and results of operations.
(8) SUBSEQUENT EVENTS
Reincorporation
On February 17, 1998, the Board of Directors approved the Company's
reincorporation in the state of Delaware. Following shareholder approval, the
Certificate of Incorporation of the Delaware successor corporation will
authorize 200,000,000 shares of common stock, $.001 par value per share, and
10,000,000 shares of preferred stock, $.001 par value per share. The
accompanying financial statements have been retroactively restated to give
effect to the reincorporation.
Employee Stock Purchase Plan.
In February 1998, the Board approved the 1998 Employee Stock Purchase Plan
(the "Purchase Plan"), covering an aggregate of 500,000 shares of Common
Stock. The Purchase Plan is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Code. Under the Purchase Plan,
the Board may authorize participation by eligible employees, including
officers, in periodic offerings following the adoption of the Purchase Plan.
The offering period for any offering will be no longer than 27 months.
F-14
<PAGE>
NVIDIA CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Employees are eligible to participate if they are employed by the Company or
an affiliate of the Company designated by the Board. Employees who participate
in an offering generally can have up to 10% of their earnings withheld
pursuant to the Purchase Plan and applied, on specified dates determined by
the Board, to the purchase of shares of Common Stock. The Board may increase
this percentage in its discretion, up to 15%. The price of Common Stock
purchased under the Purchase Plan will be equal to 85% of the lower of the
fair market value of the Common Stock on the commencement date of each
offering period or the relevant purchase date. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with the
Company.
Non-Employee Directors' Stock Option Plan
In February 1998, the Board adopted the 1998 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan") to provide for the automatic grant of
options to purchase shares of Common Stock to non-employee directors of the
Company who are not employees of or consultants to the Company or an affiliate
of the Company (a "Non-Employee Director"). The Compensation Committee
administers the Directors' Plan. The aggregate number of shares of Common
Stock that may be issued pursuant to options granted under the Directors' Plan
is 300,000 shares.
F-15
<PAGE>
INSIDE BACK COVER
[Description of illustrations: Depiction of a bee on a computer screen in the
following phases of graphic rendering--wire frame, Gouraud shading, texture
mapping and bump mapping with lighting and reflections.]
<PAGE>
[LOGO OF BC]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the
sale of the shares of Common Stock being registered. All the amounts shown are
estimates except for the SEC registration fee, the NASD filing fee and the
Nasdaq National Market application fee.
<TABLE>
<S> <C>
SEC Registration fee.......................................... $ 11,800
NASD filing fee............................................... 4,500
Nasdaq National Market listing fee............................ 95,000
Blue sky qualification fees and expenses...................... 5,000
Printing and engraving expenses............................... 150,000
Legal fees and expenses....................................... 400,000
Accounting fees and expenses.................................. 175,000
Transfer agent and registrar fees............................. 10,000
Miscellaneous................................................. 298,700
----------
Total..................................................... $1,150,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
As permitted by Section 145 of the Delaware General Corporation Law, the
Bylaws of the Company provide that (i) the Company is required to indemnify
its directors and executive officers to the fullest extent permitted by the
Delaware General Corporation Law, (ii) the Company may, in its discretion,
indemnify other officers, employees and agents as set forth in the Delaware
General Corporation Law, (iii) to the fullest extent not prohibited by the
Delaware General Corporation Law, the Company is required to advance all
expenses incurred by its directors and executive officers in connection with a
legal proceeding (subject to certain exceptions), (iv) the rights conferred in
the Bylaws are not exclusive, (v) the Company is authorized to enter into
indemnification agreements with its directors, officers, employees and agents
and (vi) the Company may not retroactively amend the Bylaws provisions
relating to indemnity.
The Company has entered into agreements with its directors and executive
officers that require the Company to indemnify such persons against expenses,
judgments, fines, settlements and other amounts that such person becomes
legally obligated to pay (including expenses of a derivative action) in
connection with any proceeding, whether actual or threatened, to which any
such person may be made a party by reason of the fact that such person is or
was a director or officer of the Company or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Company. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant
and its officers and directors for certain liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since February 1, 1995, the Registrant has sold and issued the following
unregistered securities:
(1) In July 1995, the Company sold 750,000 shares of the Company's Series
C Preferred Stock for an aggregate purchase price of $5,000,000.
II-1
<PAGE>
(2) In October 1995, the Company issued, in connection with an equipment
lease, a warrant to purchase 5,400 shares of Series C Preferred Stock at an
exercise price of $6.67 per share.
(3) In October 1996, the Company issued, in connection with equipment
leases, a warrant to purchase 200 shares of Series B Preferred Stock at an
exercise price of $1.80 per share and a warrant to purchase 4,600 shares of
Series C Preferred Stock at an exercise price of $6.67.
(4) In August and September 1997, the Company sold an aggregate of
1,438,812 shares of Series D Preferred Stock to certain investors for an
aggregate purchase price of $7,568,151.
(5) In August 1997, the Company issued, in connection with an equipment
lease, a warrant to purchase 7,843 shares of Series D Preferred Stock at an
exercise price of $5.26 per share.
(6) In October 1997, the Company issued, in connection with an equipment
leases, warrants to purchase an aggregate of 21,863 shares of Series D
Preferred Stock at an exercise price of $5.26 per share.
(7) In October 1997, the Company issued an option to purchase 50,000
shares of Common Stock at an exercise price of $2.64 per share.
(8) From February 1, 1995 to February 28, 1998, the Company granted stock
options to employees, directors and consultants covering an aggregate of
9,742,360 shares of the Company's Common Stock, at exercise prices varying
from $0.18 to $7.70. Of such shares, 2,996,810 shares have been issued and
sold pursuant to the exercise of such options. Options to purchase
1,882,549 shares of Common Stock have been canceled or have lapsed without
being exercised or otherwise been canceled. Stock awards for an aggregate
of 17,932 shares were issued at purchase prices varying from $0.18 to
$0.36.
The Company claimed exemptions under the Securities Act from registration
under the Securities Act for the sale and issuance of securities in the
transaction described in paragraphs (1) through (7) by virtue of Section 4(2)
or Regulation D promulgated thereunder as transactions not involving public
offering. The purchasers in each case represented their intention to acquire
the securities for investment only and not with a view to the distribution
thereof. Appropriate legends are affixed to the stock certificates issued in
such transactions. All recipients either received adequate information about
the Registrant or had access, through employment or other relationships, to
such information.
The sales and issuances in the transactions described in paragraph (8) above
were deemed to be exempt from registration under the Securities Act by virtue
of Rule 701 promulgated thereunder, in that they were issued pursuant to a
written compensatory benefit plan, as provided by Rule 701.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Company.
3.2 Bylaws of the Company.
3.3 Form of Amended and Restated Certificate of Incorporation to be
filed upon completion of this offering.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2* Specimen Stock Certificate.
4.3 Second Amended and Restated Investors' Rights Agreement, dated
August 19, 1997 between the Company and the parties indicated
thereto.
5.1* Opinion of Cooley Godward llp.
10.1 Form of Indemnity Agreement between Registrant and each of its
directors and officers.
10.2 1998 Equity Incentive Plan.
10.3 Form of Incentive Stock Option Agreement under the 1998 Equity
Incentive Plan.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.4 Form of Nonstatutory Stock Option Agreement under the 1998
Equity Incentive Plan.
10.5 1998 Employee Stock Purchase Plan.
10.6 Form of Employee Stock Purchase Plan Offering.
10.7 1998 Non-Employee Directors' Stock Option Plan.
10.8 Form of Nonstatutory Stock Option Agreement under the 1998 Non-
Employee Directors' Stock Option Plan (Initial Grant).
10.9 Form of Nonstatutory Stock Option Agreement under the 1998 Non-
Employee Directors' Stock Option Plan (Annual Grant).
10.10* Amended and Restated Strategic Collaboration Agreement, dated
March , 1998, between the Company and ST Microelectronics,
Inc.
10.11 Sublease Agreement, dated February 16, 1995, between Amdahl
Corporation and the Company, as amended on March 1, 1995 and
September 1, 1995.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2* Consent of Cooley Godward llp (reference is made to Exhibit
5.1).
24.1 Power of Attorney. Reference is made to the signature page.
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES.
Schedules not listed above are omitted because they are not required, they
are not applicable or the information is already included in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide 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
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described in Item 14, 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 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 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 Act, the information omitted from the form
of prospectus as filed as part of the registration statement in reliance upon
Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to
be part of the registration statement as of the time it was declared
effective, (2) for the purpose of determining any liability under the 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 this offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof, and (3) to remove from registration
by means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SUNNYVALE, STATE OF
CALIFORNIA, ON THE 6TH DAY OF MARCH 1998.
NVIDIA Corporation
/s/ Jen-Hsun Huang
By: _________________________________
Jen-Hsun Huang
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS JEN-HSUN
HUANG AND GEOFFREY G. RIBAR AS HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT,
EACH ACTING ALONE, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM
AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY OR
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT ON FORM S-1, AND TO SIGN ANY REGISTRATION STATEMENT FILED UNDER RULE
462 UNDER THE SECURITIES ACT OF 1933 INCLUDING POST-EFFECTIVE AMENDMENTS)
THERETO, AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND ALL DOCUMENTS IN
CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING
UNTO SAID ATTORNEY-IN-FACT AND AGENT, FULL POWER AND AUTHORITY TO DO AND
PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND
ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD
DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT
AND AGENT, OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE
DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Jen-Hsun Huang President, Chief Executive March 6, 1998
____________________________________ Officer and Director
Jen-Hsun Huang (Principal Executive
Officer)
/s/ Geoffrey G. Ribar Chief Financial Officer March 6, 1998
____________________________________ (Principal Financial and
Geoffrey G. Ribar Accounting Officer)
/s/ Tench Coxe Director March 6, 1998
____________________________________
Tench Coxe
/s/ Harvey C. Jones, Jr. Director March 6, 1998
____________________________________
Harvey C. Jones, Jr.
/s/ William J. Miller Director March 6, 1998
____________________________________
William J. Miller
/s/ A. Brooke Seawell Director March 6, 1998
____________________________________
A. Brooke Seawell
/s/ Mark A. Stevens Director March 6, 1998
____________________________________
Mark A. Stevens
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Company.
3.2 Bylaws of the Company.
3.3 Form of Amended and Restated Certificate of Incorporation to be
filed upon completion of this offering.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2* Specimen Stock Certificate.
4.3 Second Amended and Restated Investors' Rights Agreement, dated
August 19, 1997 between the Company and the parties indicated
thereto.
5.1* Opinion of Cooley Godward llp.
10.1 Form of Indemnity Agreement between Registration and each of its
directors and officers.
10.2 1998 Equity Incentive Plan.
10.3 Form of Incentive Stock Option Agreement under the 1998 Equity
Incentive Plan.
10.4 Form of Nonstatutory Stock Option Agreement under the 1998 Equity
Incentive Plan.
10.5 1998 Employee Stock Purchase Plan.
10.6 Form of Employee Stock Purchase Plan Offering.
10.7 1998 Non-Employee Directors' Stock Option Plan.
10.8 Form of Nonstatutory Stock Option Agreement under the 1998 Non-
Employee Directors' Stock Option Plan (Initial Grant).
10.9 Form of Nonstatutory Stock Option Agreement under the 1998 Non-
Employee Directors' Stock Option Plan (Annual Grant).
10.10* Amended and Restated Strategic Collaboration Agreement, dated March
, 1998, between the Company and ST Microelectronics, Inc.
10.11 Sublease Agreement, dated February 16, 1995, between Amdahl
Corporation and the Company, as amended on March 1, 1995 and
September 1, 1995.
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors.
23.2* Consent of Cooley Godward llp (reference is made to Exhibit 5.1).
24.1 Power of Attorney. Reference is made to the signature page.
27.1 Financial Data Schedule.
</TABLE>
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*To be filed by amendment.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
NVIDIA DELAWARE CORPORATION
The undersigned, a natural person (the "Sole Incorporator"), for the
purpose of organizing a corporation to conduct the business and promote the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware hereby certifies that:
I.
The name of this corporation is NVIDIA Delaware Corporation.
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, and the name of
the registered agent of the corporation in the State of Delaware at such address
is the Incorporating Services.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is Two Hundred Ten
Million shares (210,000,000). Two Hundred Million (200,000,000) shares shall be
Common Stock, each having a par value of one-tenth of one cent ($.001). Ten
Million (10,000,000) shares shall be Preferred Stock, each having a par value of
one-tenth of one cent ($.001).
B. The Preferred Stock may be divided into such number of series as the
Board of Directors may determine. Subject to the provisions of paragraph 6, the
Board of Directors is authorized to determine and alter the rights, preferences,
privileges and restrictions granted to and imposed upon the Preferred Stock or
any series thereof with respect to any wholly unissued class or series of
Preferred Stock, and to fix the number of shares of any series of Preferred
Stock and the designation of any such series of Preferred Stock. The Board of
Directors, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series, may increase or decrease (but not below the number of
shares of such series then outstanding) the number of shares of any series
subsequent to the issue of shares of that series.
C. The Preferred Stock shall be divided into series and shall consist of
Series A Preferred Stock, of which the corporation is authorized to issue Four
Million Three Hundred
1.
<PAGE>
Eighty-Three Thousand Shares (4,383,000), Series B Preferred Stock, of which the
corporation is authorized to issue Two Million Eight Hundred Seventy-Nine
Thousand Seven Hundred Nineteen (2,879,719) shares, Series C Preferred Stock, of
which the corporation is authorized to issue Seven Hundred Sixty Thousand
(760,000) shares, and Series D Preferred Stock, of which the corporation is
authorized to issue One Million Eight Hundred Thousand (1,800,000) shares.
D. The relative rights, preferences, privileges and restrictions of the
Common Stock, the Series B Preferred Stock, the Series C Preferred Stock, and
the Series D Preferred Stock shall be in all respects identical, except for and
subject to the following provisions:
1. DIVIDENDS. The holders of the then outstanding Preferred Stock
shall be entitled to receive on a pari passu basis, out of assets legally
available therefor, dividends at the rate of Four Cents ($0.04) per annum for
each share of Series A Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares), Fourteen and Four-Tenths
Cents ($0.144) per annum for each share of Series B Preferred Stock (as adjusted
for any stock dividends, combinations or splits with respect to such shares),
Fifty-Three and Three-Tenths Cents ($0.533) per annum for each share of Series C
Preferred Stock (as adjusted for any stock dividends, combinations or splits
with respect to such shares) and Forty-Two Cents ($0.42) per annum for each
share of Series D Preferred Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) when, as and if declared by
the board of directors. The right to such dividends shall be noncumulative. No
dividends (other than those payable solely in the Common Stock of the
corporation) shall be paid on any Common Stock of the corporation during any
fiscal year of the corporation until dividends in the total amount of Four Cents
($0.04) per share on the Series A Preferred Stock, Fourteen and Four-Tenths
Cents ($0.144) per share on the Series B Preferred Stock, Fifty-Three and Three-
Tenths Cents ($0.533) per share on the Series C Preferred Stock and Forty-Two
Cents ($0.42) per share on the Series D Preferred Stock shall have been paid or
declared and set apart during that fiscal year. No right shall accrue to holders
of shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock by reason of the fact that dividends
on said shares are not declared in any prior year, nor shall any undeclared or
unpaid dividend bear or accrue any interest.
2. LIQUIDATION PREFERENCE.
(A) In the event of any liquidation, dissolution, or winding up
of the corporation, whether voluntary or involuntary, the holders of the
Preferred Stock shall be entitled to receive on a pari passu basis, prior and in
preference to any distribution of any of the assets or surplus funds of the
corporation to the holders of the Common Stock by reason of their ownership
thereof, (i) an amount equal to the sum of Fifty Cents ($0.50) per share, One
Dollar Eighty Cents per share ($1.80), Six Dollars Sixty-Six and 6,667/10,000ths
Cents ($6.666667), Five Dollars and Twenty-Six Cents ($5.26) per share for each
share, respectively, of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock then held by them, and
(ii) an amount equal to any dividends declared but unpaid on the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock then held by them. If, upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Preferred Stock shall
be insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire assets and funds of the
2.
<PAGE>
corporation legally available for distribution shall be distributed ratably
among the holders of the Preferred Stock in proportion to the preferential
amount each such holder is otherwise entitled to receive.
(B) After payment to the holders of the Preferred Stock of the
amount set forth in Section 2(a) above, the entire remaining assets and funds of
the corporation legally available for distribution shall be distributed among
the holders of the Common Stock in proportion to the shares of Common Stock then
held by them.
(C) For purposes of Section 2(a), (i) any acquisition of the
corporation by means of a merger or other form of corporate reorganization in
which outstanding shares of the corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a mere reincorporation transaction) or (ii) a sale
of all or substantially all of the assets of the corporation or (iii) any
transaction or series of related transactions by the corporation in which in
excess of fifty percent (50%) of the corporation's voting power is transferred,
shall be treated as a liquidation, dissolution or winding up of the corporation
and shall entitle the holders of Preferred Stock to receive at the closing in
cash, securities or other property an amount as specified in Section 2(a).
3. CONVERSION. The holders of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall
have conversion rights as follows:
(A) RIGHT TO CONVERT.
(I) Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at the office of the
corporation or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing Fifty
Cents ($0.50) by the Conversion Price applicable to such share, determined as
hereinafter provided, in effect on the date the certificate is surrendered for
conversion. The price at which shares of Common Stock shall be deliverable upon
conversion of shares of the Series A Preferred Stock (the "Series A Conversion
Price") shall initially be Fifty Cents ($0.50) per share of Common Stock. Such
initial Series A Conversion Price shall be adjusted as hereinafter provided.
(II) Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at the office of the
corporation or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing One Dollar
Eighty Cents ($1.80) by the Conversion Price applicable to such share,
determined as hereinafter provided, in effect on the date the certificate is
surrendered for conversion. The price at which shares of Common Stock shall be
deliverable upon conversion of shares of the Series B Preferred Stock (the
"Series B Conversion Price") shall initially be One Dollar Eighty Cents ($1.80)
per share of Common Stock. Such initial Series B Conversion Price shall be
adjusted as hereinafter provided.
(III) Each share of Series C Preferred Stock shall be
convertible, at the option of the holder thereof, at the office of the
corporation or any transfer agent for such
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stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing Six Dollars Sixty-Six and 6,667/10,000ths Cents
($6.666667) by the Conversion Price applicable to such share, determined as
hereinafter provided, in effect on the date the certificate is surrendered for
conversion. The price at which shares of Common Stock shall be deliverable upon
conversion of shares of the Series C Preferred Stock (the "Series C Conversion
Price") shall initially be Six Dollars Sixty-Six and 6,667/10,000ths Cents
($6.666667) per share of Common Stock. Such initial Series C Conversion Price
shall be adjusted as hereinafter provided.
(IV) Each share of Series D Preferred Stock shall be
convertible, at the option of the holder thereof, at the office of the
corporation or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing Five
Dollars and Twenty-Six Cents ($5.26) by the Conversion Price applicable to such
share, determined as hereinafter provided, in effect on the date the certificate
is surrendered for conversion. The price at which shares of Common Stock shall
be deliverable upon conversion of shares of the Series D Preferred Stock (the
"Series D Conversion Price") shall initially be Five Dollars and Twenty-Six
Cents ($5.26) per share of Common Stock. Such initial Series D Conversion Price
shall be adjusted as hereinafter provided.
(B) AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock shall automatically be converted into shares of Common Stock at the then-
Series A Conversion Price, Series B Conversion Price, Series C Conversion Price
or Series D Conversion Price, as applicable, upon the earlier of (i) the date
specified by vote or written consent or agreement of holders of at least two-
thirds of the shares of Preferred Stock then outstanding, or (ii) immediately
upon the closing of the sale of the corporation's Common Stock in a firm
commitment, underwritten public offering registered under the Securities Act of
1933, as amended (the "Securities Act") other than a registration relating
solely to a transaction under Rule 145 under such Act (or any successor thereto)
or to an employee benefit plan of the corporation; provided, that such shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock shall only be automatically converted if the public
offering price (prior to underwriters' discounts and expenses) of such offering
is equal to or exceeds Ten Dollars ($10.00) per share of Common Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) and the aggregate proceeds to the corporation and/or any selling
stockholders (after deduction for underwriting discounts, commissions and
expenses) exceed Fifteen Million Dollars ($15,000,000).
(C) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the corporation or any transfer agent for such
stock, and shall give written notice to the corporation at such office that such
holder elects to convert the same and shall state therein the name or names in
which he wishes the certificate or certificates for shares of Common Stock to be
issued (except that no such notice of intent to convert shall be necessary in
the event of an automatic conversion pursuant to Section 3(b) above). The
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Preferred Stock, a certificate or certificates for the
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number of shares of Common Stock to which he shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of surrender of the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
(D) ADJUSTMENTS TO CONVERSION PRICES FOR COMMON STOCK DIVIDENDS
AND FOR COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event that this
corporation shall declare or pay, without consideration, any dividend or other
distribution on the then outstanding shares of Common Stock payable in Common
Stock or in any right to acquire Common Stock for no consideration, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or otherwise
than by payment of a dividend in Common Stock or in any right to acquire Common
Stock), or in the event that the then outstanding shares of Common Stock shall
be combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, then the applicable Conversion Price for a
series of Preferred Stock in effect immediately prior to such event shall,
concurrently with the effectiveness of such event, be proportionately decreased
or increased, as appropriate. In the event that this corporation shall declare
or pay, without consideration, any dividend on the then outstanding shares of
Common Stock payable in any right to acquire Common Stock for no consideration,
then the corporation shall be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Common Stock.
(E) DIVIDENDS AND DISTRIBUTIONS PAYABLE IN SECURITIES OTHER THAN
COMMON STOCK. In the event that this corporation shall declare or pay, without
consideration, any dividend or other distribution on the then outstanding shares
of Common Stock payable in securities of the corporation other than Common Stock
or in any right to acquire securities of the corporation other than Common Stock
for no consideration and other than as otherwise adjusted in this Section 3,
then in each such event provision shall be made so that the holders of each then
outstanding series of Preferred Stock shall be entitled to receive a
proportionate share of any such dividend or distribution as though they were the
holders of the number of shares of Common Stock of the corporation into which
their shares of Preferred Stock are convertible as of the record date fixed for
the determination of the holders of Common Stock of the corporation entitled to
receive such dividend or other distribution.
(F) ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the
Common Stock issuable upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for in
Section 3(d) above or a merger or other reorganization referred to in Section
2(c) above), the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price and Series D Conversion Price then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted so that the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall be
convertible into, in lieu of the number of shares of Common Stock which the
holders would
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otherwise have been entitled to receive, a number of shares of such other class
or classes of stock equivalent to the number of shares of Common Stock that
would have been subject to receipt by the holders upon conversion of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock immediately before that change. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 3
with respect to the rights of the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock after the
capital reorganization, reclassification or other action to the end that the
provisions of this Section 3 (including adjustment of the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price and Series D
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock) shall be applicable after such
action and be as nearly equivalent as possible.
(G) ADJUSTMENTS TO CONVERSION PRICES FOR DILUTIVE ISSUANCES.
(I) If at any time or from time to time after the
effective date of this amended and restated certificate of incorporation, the
corporation issues or sells, or is deemed by the express provisions of this
subsection (g) to have issued or sold, Additional Shares of Common Stock (as
hereinafter defined), other than pursuant to an adjustment or dividend provided
for under Sections 3(d), 3(e) or 3(f) hereof, for an Effective Price (as
hereinafter defined) less than the then effective Series A Conversion Price,
Series B Conversion Price or Series D Conversion Price, then and in each such
case the then existing Series A Conversion Price, Series B Conversion Price
and/or Series D Conversion Price shall be reduced, as of the opening of business
on the date of such issue or sale, to a price determined by multiplying the
Series A Conversion Price, Series B Conversion Price or Series D Conversion
Price, as applicable, by a fraction, (x) the numerator of which shall be (A) the
number of shares of Common Stock deemed outstanding (as defined below)
immediately prior to such issue or sale, plus (B) the number of shares of Common
Stock which the aggregate consideration received (as defined in subsection
(g)(ii)) by the corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Series A Conversion Price, Series B
Conversion Price or Series D Conversion Price, and (y) the denominator of which
shall be the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale plus the total number of
Additional Shares of Common Stock so issued. For the purposes of the preceding
sentence, the number of shares of Common Stock deemed to be outstanding as of a
given date shall be the sum of (1) the number of shares of Common Stock actually
outstanding, (2) the number of shares of Common Stock into which the then
outstanding shares of Preferred Stock could be converted if fully converted on
the day immediately preceding the given date, and (3) the number of shares of
Common Stock which could be obtained through the exercise or conversion of all
other rights, options and convertible securities on the day immediately
preceding the given date.
(II) For the purpose of making any adjustment required
under this Section 3(g), the consideration received by the corporation for any
issue or sale of securities shall (A) to the extent it consists of cash, be
computed at the net amount of cash received by the corporation after deduction
of any underwriting or similar commissions, compensation or concessions paid or
allowed by the corporation in connection with such issue or sale but without
deduction of any expenses payable by the corporation, (B) to the extent it
consists of property
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other than cash, be computed at the fair value of that property as determined in
good faith by the board of directors, and (C) if Additional Shares of Common
Stock, Convertible Securities (as hereinafter defined) 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
corporation 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 of directors to be allocable to such Additional Shares of Common
Stock, Convertible Securities or rights or options.
(III) For the purpose of the adjustment required under this
Section 3(g), if the corporation issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares
of Common Stock is less than the Series A Conversion Price, Series B Conversion
Price or Series D Conversion Price, then and in each such case the corporation
shall be deemed to have issued at the time of the issuance of such rights or
options or Convertible Securities the maximum number of Additional Shares of
Common Stock issuable upon exercise or conversion thereof and to have received
as consideration for the issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the corporation 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 corporation upon the exercise of such rights or options, plus, in the
case of Convertible Securities, the minimum amounts of consideration, if any,
payable to the corporation (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion
thereof; provided that if in the case of Convertible Securities the minimum
amounts of such consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the corporation shall be deemed to
have received the minimum amounts of consideration without reference to such
clauses; provided further that if the minimum amount of consideration payable to
the corporation upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or non-
occurrence of specified events other than by reason of antidilution adjustments,
the Effective Price shall be recalculated using the figure to which such minimum
amount of consideration is reduced; and provided further that if the minimum
amount of consideration payable to the corporation upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the corporation upon the exercise or
conversion of such rights, options or Convertible Securities.
No further adjustment of the Series A Conversion Price, Series B Conversion
Price or Series D Conversion Price, as adjusted upon the issuance of such
rights, options or Convertible Securities, shall be made as a result of the
actual issuance of Additional Shares of Common Stock on the exercise of any such
rights or options or the conversion of any such Convertible Securities. If any
such rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the Series A
Conversion Price, Series B Conversion Price and/or Series D Conversion Price, as
adjusted upon the issuance of such rights, options or Convertible Securities,
shall be readjusted to the Series A Conversion Price, Series B Conversion Price
or Series D Conversion Price, as applicable, which would have been in effect had
an adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of
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Common Stock, if any, actually issued or sold on the exercise of such rights or
options or rights of conversion of such Convertible Securities, and such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration actually received by the corporation upon such exercise, plus the
consideration, if any, actually received by the corporation for the granting of
all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the corporation (other than
by cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities, provided that such
readjustment shall not apply to prior conversions of Series A Preferred Stock,
Series B Preferred Stock or Series D Preferred Stock.
(IV) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the corporation or deemed to be issued pursuant
to this Section 3(g), whether or not subsequently reacquired or retired by the
corporation other than:
(A) any shares of Common Stock issuable pursuant to
an adjustment or dividend provided for under Sections 3(d), 3(e) or 3(f) hereof;
(B) any shares of Common Stock issued upon conversion
of the Preferred Stock;
(C) any options or warrants to purchase Common Stock
or Preferred Stock and any shares of Common Stock or Preferred Stock issued or
issuable upon conversion or exercise of any options or warrants outstanding on
the effective date of this amended and restated certificate of incorporation;
(D) any shares of Common Stock issued pursuant to the
exchange, conversion or exercise of any options, warrants or other rights which
have previously been incorporated into computations hereunder on the date such
options, warrants or rights were issued; and
(E) any shares of Common Stock (and/or options,
warrants or other Common Stock purchase rights, and the Common Stock issued
pursuant to such options, warrants or purchase rights), as adjusted for splits,
stock dividends, reorganizations and the like, issued or issuable (but excluding
shares issued upon the exercise of options outstanding on the effective date of
this amended and certificate of incorporation) to employees, officers, directors
or consultants of the corporation with the approval of the board of directors of
the corporation pursuant to any stock option plan, stock incentive or purchase
plan or agreement of the corporation.
(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 corporation under this Section 3(g), into the aggregate
consideration received, or deemed to have been received by the corporation for
such issue under this Section 3(g), for such Additional Shares of Common Stock.
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(H) NO IMPAIRMENT. The corporation will not, by amendment
of its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock against impairment.
(I) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of any Conversion Price pursuant to this Section
3, the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock, each holder of Series B Preferred Stock,
each holder of Series C Preferred Stock and each holder of Series D Preferred
Stock a certificate executed by the corporation's chief financial officer
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The corporation shall, upon
the written request at any time of any holder of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the applicable Conversion Prices
for the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock at the time in effect, and (iii) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock.
(J) NOTICES OF RECORD DATE. In the event that the
corporation shall propose at any time: (i) to declare any dividend or
distribution upon its Common Stock, whether in cash, property, stock or other
securities, whether or not a regular cash dividend and whether or not out of
earnings or earned surplus; (ii) to offer for subscription pro rata to the
holders of any class or series of its stock any additional shares of stock of
any class or series or other rights; (iii) to effect any reclassification or
recapitalization of its capital stock outstanding involving a change in the
capital stock; or (iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all of its assets, or
to voluntarily or involuntarily liquidate, dissolve or wind up; then, in
connection with each such event, the corporation shall send to the holders of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock:
(A) at least twenty (20) days' prior written notice of
the date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
Stock (or other securities) shall be entitled thereto) or for determining rights
to vote, if any, in respect of the matters referred to in (iii) and (iv) above;
and
(B) in the case of the matters referred to in (iii)
and (iv) above, at least twenty (20) days' prior written notice of the date when
the same shall take place (and specifying the date on which the holders of
Common Stock (or other securities) shall be
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entitled to exchange their Common Stock (or other securities) for securities or
other property deliverable upon the occurrence of such event).
(K) ISSUE TAXES. The corporation shall pay any and all
issue and other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock pursuant
hereto; provided, however, that the corporation shall not be obligated to pay
any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
(L) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
corporation 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 Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D 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 Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D 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
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock, the corporation 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, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to this
certificate of incorporation.
(M) FRACTIONAL SHARES. No fractional share shall be issued
upon the conversion of any share or shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock. All
shares of Common Stock (including fractions thereof) issuable upon conversion of
more than one share of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock by a holder thereof shall
be aggregated for purposes of determining whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation,
the conversion would result in the issuance of a fraction of a share of Common
Stock, the corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors).
(N) NOTICES. Any notice required by the provisions of this
Section 3 to be given to the holder of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the corporation.
4. VOTING RIGHTS. Each holder of issued and outstanding shares
of Series A Preferred Stock, each holder of issued and outstanding shares of
Series B Preferred Stock, each holder of issued and outstanding shares of Series
C Preferred Stock and each holder of issued and outstanding shares of Series D
Preferred Stock shall be entitled to the number of votes equal
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to the number of shares of Common Stock into which such shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock could be converted pursuant to Section 3 hereof and shall have
voting rights and powers equal to the voting rights and powers of the Common
Stock (except as otherwise expressly provided herein or as required by law,
voting together with the Common Stock as a single class) and shall be entitled
to notice of any stockholders' meeting in accordance with the Bylaws of the
corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward). Each holder of Common Stock shall be entitled to one (1) vote
for each share of Common Stock held.
5. PROTECTIVE PROVISIONS.
(A) PREFERRED STOCK. So long as shares of Preferred Stock
are outstanding, the corporation shall not, without first obtaining the approval
(by vote or written approval, as provided by law) of the holders of more that
fifty percent (50%) of the outstanding shares of Preferred Stock voting as a
single class on an as-converted basis:
(I) effect the issuance or create any new class of
shares senior to the Preferred Stock with respect to dividends or other
distributions or liquidations;
(II) effect any merger of the corporation with or into
another entity (other than a wholly owned subsidiary corporation) or sale of all
or substantially all of the corporation's assets; or
(III) effect any dividend or other distribution on the
corporation's capital stock.
(B) SERIES B PREFERRED STOCK. So long as shares of Series B
Preferred Stock are outstanding, the corporation shall not, without first
obtaining the approval (by vote or written approval, as provided by law) of the
holders of more that fifty percent (50%) of the outstanding shares of Series B
Preferred Stock voting as a series:
(I) alter or change the rights, preferences or
privileges of the Series B Preferred Stock materially and adversely;
(II) increase the number of shares of Series B
Preferred Stock designated pursuant to the certificate of of incorporation; or
(III) amend the corporation's certificate of
incorporation or bylaws materially and adversely to the Series B Preferred
Stock.
(C) SERIES C PREFERRED STOCK. So long as shares of Series C
Preferred Stock are outstanding, the corporation shall not, without first
obtaining the approval (by vote or written approval, as provided by law) of the
holders of more that fifty percent (50%) of the outstanding shares of Series C
Preferred Stock voting as a series:
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(I) alter or change the rights, preferences or
privileges of the Series C Preferred Stock materially and adversely;
(II) increase the number of shares of Series C
Preferred Stock designated pursuant to the certificate of incorporation; or
(III) amend the corporation's certficiate of
incorporation or bylaws materially and adversely to the Series C Preferred
Stock.
(D) SERIES D PREFERRED STOCK. So long as shares of Series D
Preferred Stock are outstanding, the corporation shall not, without first
obtaining the approval (by vote or written approval, as provided by law) of the
holders of more that fifty percent (50%) of the outstanding shares of Series D
Preferred Stock voting as a series:
(I) alter or change the rights, preferences or
privileges of the Series D Preferred Stock materially and adversely;
(II) increase the number of shares of Series D
Preferred Stock designated pursuant to the certificate of incorporation; or
(III) amend the corporation's certificate of
incorporation or bylaws materially and adversely to the Series D Preferred
Stock.
6. NO REISSUANCE OF PREFERRED STOCK.
(A) No share or shares of Series A Preferred Stock acquired
by the corporation 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 corporation shall be authorized to issue.
(B) No share or shares of Series B Preferred Stock acquired
by the corporation 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 corporation shall be authorized to issue.
(C) No share or shares of Series C Preferred Stock acquired
by the corporation 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 corporation shall be authorized to issue.
(D) No share or shares of Series D Preferred Stock acquired
by the corporation 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 corporation shall be authorized to issue.
V.
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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. 1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. 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 initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1933 Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into two classes designated as Class
I and Class II, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of two years. At the second
annual meeting of stockholders following the Closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of two years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
two years to succeed the directors of the class whose terms expire at such
annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. Subject to the rights of the holders of any series of Preferred
Stock, the Board of Directors or any individual director may be removed from
office at any time (i) with cause by the affirmative vote of the holders of a
majority of the voting power of all of the then outstanding stock of voting
stock of the Corporation, entitled to vote at an election of directors (the
"Voting Stock") or (ii) without cause by the affirmative vote of the holders of
at least sixty-six and two thirds (66-2/3%) of the voting power of all the then
outstanding shares of Voting Stock.
4. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full
13.
<PAGE>
term of the director for which the vacancy was created or occurred and until
such director's successor shall have been elected and qualified.
5. In the event that Section 2115(a) of the California Corporations
Code is applicable to this corporation, then the following shall apply:
(A) Every stockholder entitled to vote in any election of
directors of this corporation may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit;
(B) No stockholder, however, may cumulate such stockholder's votes
for one or more candidates unless (i) the names of such candidates have been
properly placed in nomination, in accordance with the Bylaws of the corporation,
prior to the voting, (ii) the stockholder has given advance notice to the
corporation of the intention to cumulative votes pursuant to the Bylaws, and
(iii) the stockholder has given proper notice to the other stockholders at the
meeting, prior to voting, of such stockholder's intention to cumulate such
stockholder's votes; and
(C) If any stockholder has given proper notice, all stockholders
may cumulate their votes for any candidates who have been properly placed in
nomination. The candidates receiving the highest number of votes of the shares
entitled to be voted for them up to the number of directors to be elected by
such shares shall be declared elected.
B. 1. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the Voting Stock. The Board of Directors shall
also have the power to adopt, amend or repeal Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. 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.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware
14.
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General Corporation Law is amended after approval by the stockholders of this
Article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director shall be
eliminated or limited to the fullest extent permitted by the Delaware General
corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
VIII.
The name and the mailing address of the Sole Incorporator is as follows:
NAME MAILING ADDRESS
Mitchell R. Truelock Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, CA 94111-3580
IN WITNESS WHEREOF, this Certificate has been subscribed this 23rd day of
February, 1998 by the undersigned who affirms that the statements made herein
are true and correct.
____________________________________
Mitchell R. Truelock
Sole Incorporator
15.
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
NVIDIA CORPORATION
(A DELAWARE CORPORATION)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Article I Offices............................................................................. 1
Section 1. Registered Office.............................................................. 1
Section 2. Other Offices.................................................................. 1
Article II Corporate Seal..................................................................... 1
Section 3. Corporate Seal................................................................. 1
Article III Stockholders' Meetings............................................................ 1
Section 4. Place Of Meetings.............................................................. 1
Section 5. Annual Meetings................................................................ 1
Section 6. Special Meetings............................................................... 3
Section 7. Notice Of Meetings............................................................. 4
Section 8. Quorum......................................................................... 4
Section 9. Adjournment And Notice Of Adjourned Meetings................................... 4
Section 10. Voting Rights.................................................................. 5
Section 11. Joint Owners Of Stock.......................................................... 5
Section 12. List Of Stockholders........................................................... 5
Section 13. Action Without Meeting......................................................... 5
Section 14. Organization................................................................... 6
Article IV Directors.......................................................................... 7
Section 15. Number And Term Of Office...................................................... 7
Section 16. Powers......................................................................... 7
Section 17. Classes Of Directors........................................................... 7
Section 18. Vacancies...................................................................... 7
Section 19. Resignation.................................................................... 8
Section 20. Removal........................................................................ 8
Section 21. Meetings....................................................................... 8
(a) Annual Meetings........................................................................ 8
(b) Regular Meetings....................................................................... 8
(c) Special Meetings....................................................................... 8
(d) Telephone Meetings..................................................................... 9
</TABLE>
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
(e) Notice Of Meetings..................................................................... 9
(f) Waiver Of Notice....................................................................... 9
Section 22. Quorum And Voting.............................................................. 9
Section 23. Action Without Meeting......................................................... 9
Section 24. Fees And Compensation.......................................................... 10
Section 25. Committees..................................................................... 10
(a) Executive Committee.................................................................... 10
(b) Other Committees....................................................................... 10
(c) Term................................................................................... 10
(d) Meetings............................................................................... 11
Section 26. Organization................................................................... 11
Article V Officers............................................................................ 11
Section 27. Officers Designated............................................................ 11
Section 28. Tenure And Duties Of Officers.................................................. 12
(a) General................................................................................ 12
(b) Duties Of Chairman Of The Board Of Directors........................................... 12
(c) Duties Of President.................................................................... 12
(d) Duties Of Vice Presidents.............................................................. 12
(e) Duties Of Secretary.................................................................... 12
(f) Duties Of Chief Financial Officer...................................................... 12
Section 29. Delegation Of Authority........................................................ 13
Section 30. Resignations................................................................... 13
Section 31. Removal........................................................................ 13
Article VI Execution Of Corporate Instruments And Voting Of Securities Owned By The
Corporation............................................................................ 13
Section 32. Execution Of Corporate Instruments............................................. 13
Section 33. Voting Of Securities Owned By The Corporation.................................. 14
Article VII Shares Of Stock................................................................... 14
Section 34. Form And Execution Of Certificates............................................. 14
</TABLE>
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 35. Lost Certificates.............................................................. 15
Section 36. Transfers...................................................................... 15
Section 37. Fixing Record Dates............................................................ 15
Section 38. Registered Stockholders........................................................ 15
Article VIII Other Securities Of The Corporation.............................................. 16
Section 39. Execution Of Other Securities.................................................. 16
Article IX Dividends.......................................................................... 16
Section 40. Declaration Of Dividends....................................................... 16
Section 41. Dividend Reserve............................................................... 16
Article X Fiscal Year......................................................................... 17
Section 42. Fiscal Year.................................................................... 17
Article XI Indemnification.................................................................... 17
Section 43. Indemnification Of Directors, Executive Officers, Other Officers,
Employees And Other Agents............................................................. 17
(a) Directors And Executive Officers....................................................... 17
(b) Other Officers, Employees and Other Agents............................................. 17
(c) Expenses............................................................................... 17
(d) Enforcement............................................................................ 18
(e) Non-Exclusivity Of Rights.............................................................. 18
(f) Survival Of Rights..................................................................... 19
(g) Insurance.............................................................................. 19
(h) Amendments............................................................................. 19
(i) Saving Clause.......................................................................... 19
(j) Certain Definitions.................................................................... 19
Article XII Notices........................................................................... 20
Section 44. Notices........................................................................ 20
(a) Notice To Stockholders................................................................. 20
(b) Notice To Directors.................................................................... 20
(c) Affidavit Of Mailing................................................................... 20
</TABLE>
iii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
(d) Time Notices Deemed Given.............................................................. 20
(e) Methods Of Notice...................................................................... 20
(f) Failure To Receive Notice.............................................................. 21
(g) Notice To Person With Whom Communication Is Unlawful................................... 21
(h) Notice To Person With Undeliverable Address............................................ 21
Article XIII Amendments....................................................................... 21
Section 45. Amendments..................................................................... 21
Right Of First Refusal......................................................................... 22
Section 46. Right Of First Refusal......................................................... 22
Article XIV Loans To Officers................................................................. 24
Section 46. Loans To Officers.............................................................. 24
</TABLE>
iv.
<PAGE>
BYLAWS
OF
NVIDIA CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(A) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(B) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To
be properly brought before an annual meeting, business must be: (A) specified
in the notice of meeting (or any
1.
<PAGE>
supplement thereto) given by or at the direction of the Board of Directors, (B)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (C) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received 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; provided, however,
that in the event that no annual meeting was held in the previous year or the
date of the annual meeting has been changed by more than thirty (30) days from
the date contemplated at the time of the previous year's proxy statement, notice
by the stockholder to be timely must be so received not earlier than the close
of business on the ninetieth (90th) day prior to such annual meeting and not
later than the close of business on the later of the sixtieth (60th) day prior
to such annual meeting or, in the event public announcement of the date of such
annual meeting is first made by the corporation fewer than seventy (70) days
prior to the date of such annual meeting, 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. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business and
(v) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, stockholders must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this paragraph (b), and, if he should
so determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(C) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes
2.
<PAGE>
to nominate for election or re-election as a director: (A) the name, age,
business address and residence address of such person, (B) the principal
occupation or employment of such person, (C) the class and number of shares of
the corporation which are beneficially owned by such person, (D) a description
of all arrangements or understandings between the stockholder and each nominee
and any other person or persons (naming such person or persons) pursuant to
which the nominations are to be made by the stockholder, and (E) any other
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 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 5. At the request of the Board of Directors,
any person nominated by a stockholder for election as a director shall furnish
to the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if he should so determine, he shall so declare at the meeting,
and the defective nomination shall be disregarded.
(D) For purposes of this Section 5, "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 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(A) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors, shall fix.
(B) If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing, specifying the
general nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within
sixty (60) days after the receipt of the
3.
<PAGE>
request, the person or persons requesting the meeting may set the time and place
of the meeting and give the notice. Nothing contained in this paragraph (b)
shall be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
Section 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
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. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that 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. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of
4.
<PAGE>
the adjourned meeting if the time and place thereof are announced at the meeting
at which the adjournment is taken. At the adjourned meeting, the corporation may
transact any business which might have been transacted at the original meeting.
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, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list 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
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(A) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a
5.
<PAGE>
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum 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.
(B) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(C) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is
consented to is such as would have required the filing of a certificate under
any section of the General Corporation Law of the State of Delaware if such
action had been voted on by stockholders at a meeting thereof, then the
certificate filed under such section shall state, in lieu of any statement
required by such section concerning any vote of stockholders, that written
consent has been given in accordance with Section 228 of the General Corporation
Law of Delaware.
(D) Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(A) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(B) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and
6.
<PAGE>
constituted proxies and such other persons as the chairman shall permit,
restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. CLASSES OF DIRECTORS. 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 Initial Public Offering, the
directors shall be divided into three classes designated as Class I and Class
II. Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. At the first annual meeting of
stockholders following the closing of the Initial Public Offering, the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of two years. At the second annual meeting of
stockholders following the Closing of the Initial Public Offering, the term of
office of the Class II directors shall expire and Class II directors shall be
elected for a full term of two years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of two years to succeed
the directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of
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the Board of Directors. 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 and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Bylaw in the case of the death,
removal or resignation of any director.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. REMOVAL. Subject to the rights of the holders of any series
of Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time (i) with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation entitled to vote at an election of directors
(the "Voting Stock") or (ii) without cause by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all the then-outstanding shares of the Voting Stock.
SECTION 21. MEETINGS.
(A) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(B) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(C) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors.
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(D) TELEPHONE MEETINGS. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting 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
by such means shall constitute presence in person at such meeting.
(E) NOTICE OF MEETINGS. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least twenty-
four (24) hours before the date and time of the meeting, or sent in writing to
each director by first class mail, charges prepaid, at least three (3) days
before the date of the meeting. Notice of any meeting may be waived in writing
at any time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the 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.
(F) WAIVER OF NOTICE. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(A) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.
(B) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, 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 of Directors or
committee, as the case may be, consent thereto in writing,
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and such writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(A) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the 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 which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by
Delaware the General Corporation Law to be submitted to stockholders for
approval, or (ii) adopting, amending or repealing any bylaw of the corporation.
(B) OTHER COMMITTEES. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(C) TERM. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. 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, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
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(D) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special 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. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
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SECTION 28. TENURE AND DUTIES OF OFFICERS.
(A) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(B) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(C) DUTIES OF PRESIDENT. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(D) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(E) DUTIES OF SECRETARY. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(F) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as
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required by the Board of Directors or the President. The Chief Financial
Officer, subject to the order of the Board of Directors, shall have the custody
of all funds and securities of the corporation. The Chief Financial Officer
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time. The President may direct the
Treasurer or any Assistant Treasurer, or the Controller or any Assistant
Controller to assume and perform the duties of the Chief Financial Officer in
the absence or disability of the Chief Financial Officer, and each Treasurer and
Assistant Treasurer and each Controller and Assistant Controller shall perform
other duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by
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the Chairman of the Board of Directors, or the President or any Vice President,
and by the Secretary or Treasurer or any Assistant Secretary or Assistant
Treasurer. All other instruments and documents requiring the corporate
signature, but not requiring the corporate seal, may be executed as aforesaid or
in such other manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers,
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designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 36. TRANSFERS.
(A) Transfers of record of shares of stock of the corporation shall
be made only upon its books by the holders thereof, in person or by attorney
duly authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(B) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(A) 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, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. 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 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
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ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(A) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and executive
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or executive officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
(B) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the Delaware General Corporation Law.
(C) EXPENSES. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding,
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whether civil, criminal, administrative or investigative, if a determination is
reasonably and promptly made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to the proceeding, or (ii)
if such quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, that the facts known to the decision-making party at the time such
determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.
(D) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
executive officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct.
(E) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
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(F) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(G) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
(H) AMENDMENTS. Any repeal or modification of this Bylaw shall only
be prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(I) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(J) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer,
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officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(A) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(B) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(C) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(D) TIME NOTICES DEEMED GIVEN. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(E) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
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(F) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(G) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(H) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the Voting Stock. The
Board of Directors shall also have the power to adopt, amend, or repeal Bylaws.
21.
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ARTICLE XIII
RIGHT OF FIRST REFUSAL
SECTION 46. RIGHT OF FIRST REFUSAL. No stockholder shall sell, assign,
pledge, or in any manner transfer any of the shares of stock of the corporation
or any right or interest therein, whether voluntarily or by operation of law, or
by gift or otherwise, except by a transfer which meets the requirements
hereinafter set forth in this bylaw:
(A) If the stockholder desires to sell or otherwise transfer any of
his shares of stock, then the stockholder shall first give written notice
thereof to the corporation. The notice shall name the proposed transferee and
state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer.
(B) For thirty (30) days following receipt of such notice, the
corporation shall have the option to purchase all (but not less than all) of the
shares specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the stockholder, the
corporation shall have the option to purchase a lesser portion of the shares
specified in said notice at the price and upon the terms set forth therein. In
the event of a gift, property settlement or other transfer in which the proposed
transferee is not paying the full price for the shares, and that is not
otherwise exempted from the provisions of this Section 46, the price shall be
deemed to be the fair market value of the stock at such time as determined in
good faith by the Board of Directors. In the event the corporation elects to
purchase all of the shares or, with consent of the stockholder, a lesser portion
of the shares, it shall give written notice to the transferring stockholder of
its election and settlement for said shares shall be made as provided below in
paragraph (d).
(C) The corporation may assign its rights hereunder.
(D) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of the transferring stockholder as specified in said
transferring stockholder's notice, the Secretary of the corporation shall so
notify the transferring stockholder and settlement thereof shall be made in cash
within thirty (30) days after the Secretary of the corporation receives said
transferring stockholder's notice; provided that if the terms of payment set
forth in said transferring stockholder's notice were other than cash against
delivery, the corporation and/or its assignee(s) shall pay for said shares on
the same terms and conditions set forth in said transferring stockholder's
notice.
(E) In the event the corporation and/or its assignees(s) do not elect
to acquire all of the shares specified in the transferring stockholder's notice,
said transferring stockholder may, within the sixty-day period following the
expiration of the option rights granted to the corporation and/or its
assignees(s) herein, transfer the shares specified in said transferring
stockholder's notice which were not acquired by the corporation and/or its
assignees(s) as specified in said transferring stockholder's notice. All shares
so sold by said transferring stockholder shall continue to be subject to the
provisions of this bylaw in the same manner as before said transfer.
22.
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(F) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A stockholder's transfer of any or all shares held either
during such stockholder's lifetime or on death by will or intestacy to such
stockholder's immediate family or to any custodian or trustee for the account of
such stockholder or such stockholder's immediate family or to any limited
partnership of which the shareholder, members of such shareholder's immediate
family or any trust for the account of such shareholder or such shareholder's
immediate family will be the general of limited partner(s) of such partnership.
"Immediate family" as used herein shall mean spouse, lineal descendant, father,
mother, brother, or sister of the stockholder making such transfer.
(2) A stockholder's bona fide pledge or mortgage of any shares
with a commercial lending institution, provided that any subsequent transfer of
said shares by said institution shall be conducted in the manner set forth in
this bylaw.
(3) A stockholder's transfer of any or all of such stockholder's
shares to the corporation or to any other stockholder of the corporation.
(4) A stockholder's transfer of any or all of such stockholder's
shares to a person who, at the time of such transfer, is an officer or director
of the corporation.
(5) A corporate stockholder's transfer of any or all of its
shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the
corporate stockholder, or pursuant to a sale of all or substantially all of the
stock or assets of a corporate stockholder.
(6) A corporate stockholder's transfer of any or all of its
shares to any or all of its stockholders.
(7) A transfer by a stockholder which is a limited or general
partnership to any or all of its partners or former partners.
In any such case, the transferee, assignee, or other recipient shall receive and
hold such stock subject to the provisions of this bylaw, and there shall be no
further transfer of such stock except in accord with this bylaw.
(G) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be transferred by the transferring stockholder).
This bylaw may be amended or repealed either by a duly authorized action of the
Board of Directors or by the stockholders, upon the express written consent of
the owners of a majority of the voting power of the corporation.
23.
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(H) Any sale or transfer, or purported sale or transfer, of
securities of the corporation shall be null and void unless the terms,
conditions, and provisions of this bylaw are strictly observed and followed.
(I) The foregoing right of first refusal shall terminate on either of
the following dates, whichever shall first occur:
(1) On February 16, 2008; or
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.
(J) The certificates representing shares of stock of the corporation
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION
AND/OR ITS ASSIGNEE(S), AS PROVIDED IN THE BYLAWS OF THE
CORPORATION."
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
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EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
NVIDIA CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, hereby certifies
as follows:
1. The name of the corporation is NVIDIA Corporation.
2. The corporation's original Certificate of Incorporation was filed with
the Secretary of State on __________________, 1998.
3. The Amended and Restated Certificate of Incorporation of this
corporation, in the form attached hereto as Exhibit A, has been duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and by the
stockholders of the corporation.
4. The Amended and Restated Certificate of Incorporation so adopted reads
in full as set forth in Exhibit A attached hereto and hereby incorporated by
reference.
IN WITNESS WHEREOF, NVIDIA Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by its Chairman of the Board
and Chief Executive Officer and attested to by its Secretary this ____ day of
______________, 1998.
_____________________________________
JEN-HSUN HUANG
President and Chief Executive Officer
ATTEST:
_____________________________
GEOFFREY RIBAR
Secretary
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NVIDIA CORPORATION
I.
The name of this corporation is NVIDIA Corporation.
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, and the name of
the registered agent of the corporation in the State of Delaware at such address
is Incorporating Services.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is Two Hundred Two
Million (202,000,000) shares. Two Hundred Million (200,000,000) shares shall be
Common Stock, each having a par value of one-tenth of one cent ($.001). Two
Million (2,000,000) shares shall be Preferred Stock, each having a par value of
one-tenth of one cent ($.001).
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
V.
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:
1.
<PAGE>
A. 1. The management of the business and the conduct of the affairs of
the Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, and to any
restrictions or limitations of applicable law following the closing of the
initial public offering pursuant to an effective registration statement under
the Securities Act of 1933, as amended (the "1933 Act"), covering the offer and
sale of Common Stock to the public (the "Initial Public Offering"), the
directors shall be divided into two classes designated as Class I and Class II.
Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. At the first annual meeting of
stockholders following the closing of the Initial Public Offering, the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of two years. At the second annual meeting of
stockholders following the closing of the Initial Public Offering, the term of
office of the Class II directors shall expire and Class II directors shall be
elected for a full term of two years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of two years to succeed
the directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. Subject to the rights of the holders of any series of Preferred
Stock, the Board of Directors or any individual director may be removed from
office at any time (i) with cause by the affirmative vote of the holders of a
majority of the voting power of all the then outstanding shares of voting stock
of the Corporation, entitled to vote at an election of directors (the "Voting
Stock") or (ii) without cause by the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of the then
outstanding shares of Voting Stock.
4. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, 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 and until such
director's successor shall have been elected and qualified.
5. In the event that Section 2115(a) of the California Corporations
Code is applicable to this corporation, then the following shall apply:
A. Every stockholder entitled to vote in any election of
directors of this corporation may cumulate such stockholder's votes and give one
candidate a number of
2.
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votes equal to the number of directors to be elected multiplied by the number of
votes to which the stockholder's shares are otherwise entitled, or distribute
the stockholder's votes on the same principle among as many candidates as such
stockholder thinks fit;
B. No stockholder, however, may cumulate such stockholder's
votes for one or more candidates unless (i) the names of such candidates have
been properly placed in nomination, in accordance with the Bylaws of the
corporation, prior to the voting, (ii) the stockholder has given advance notice
to the corporation of the intention to cumulative votes pursuant to the Bylaws,
and (iii) the stockholder has given proper notice to the other stockholders at
the meeting, prior to voting, of such stockholder's intention to cumulate such
stockholder's votes; and
C. If any stockholder has given proper notice, all stockholders
may cumulate their votes for any candidates who have been properly placed in
nomination. The candidates receiving the highest number of votes of the shares
entitled to be voted for them up to the number of directors to be elected by
such shares shall be declared elected.
B. 1. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of voting stock of the Corporation entitled to vote
at an election of directors (the "Voting Stock"). The Board of Directors shall
also have the power to adopt, amend, or repeal Bylaws.
2. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
3. 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 and following the closing of the Initial Public Offering no action
shall be taken by the stockholders by written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
VI.
A. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
3.
<PAGE>
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
4.
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EXHIBIT 4.3
NVIDIA CORPORATION
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is made and entered into as of August 19, 1997, by and among NVIDIA
CORPORATION, a California corporation (the "Company"), and the persons
identified on Exhibit A attached hereto (the "Shareholders").
In consideration of the mutual promises and covenants set forth
herein, the Shareholders who are parties to that certain First Restated
Investors' Rights Agreement dated as of December 19, 1994 (the "Original Date")
and amended by Amendment Number One as of January 23, 1995 and by Amendment
Number Two as of July 5, 1995 (the "Prior Agreement") hereby agree that all
provisions of, rights granted and covenants made in the Prior Agreement are
extinguished by the execution hereof and that such Prior Agreement shall be
superseded and replaced in its entirety by this Agreement, and the parties
hereto further agree as follows:
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS.
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
(a) "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(b) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(c) "FORM S-3" shall mean such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the Commission which permits inclusion or incorporation
of substantial information by reference to other documents filed by the Company
with the Commission.
(d) "HOLDER" shall mean any Shareholder who holds Registrable
Securities and any holder of Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with
Section 1.10 hereof.
(e) "INITIATING HOLDERS" shall mean any Holder or Holders who in the
aggregate hold more than fifty percent (50%) of the outstanding Registrable
Securities.
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(f) "OTHER SHAREHOLDERS" shall mean persons other than Holders who, by
virtue of agreements with the Company, are entitled to include their securities
in certain registrations hereunder.
(g) "REGISTRABLE SECURITIES" shall mean (i) shares of Common Stock
issued or issuable pursuant to the conversion of the Shares and (ii) any Common
Stock of the Company issued or issuable as a dividend or other distribution with
respect to or in exchange for or in replacement of the shares referenced in (i)
above, provided, however, that Registrable Securities shall not include any
shares of Common Stock which have previously been registered or which have been
sold to the public.
(h) The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
(i) "REGISTRATION EXPENSES" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and expenses of any regular or special audits incident to or
required by any such registration, but shall not include Selling Expenses and
fees and disbursements of counsel for the Holders (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
(j) "RESTRICTED SECURITIES" shall mean any security of the Company
required to bear a legend the same or similar to the legend set forth in Section
3.8 of the Series D Preferred Stock Purchase Agreement of even date herewith.
(k) "RULE 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(l) "RULE 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(m) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(n) "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for any Holder (other than the fees and
disbursements of counsel included in Registration Expenses).
(o) "SHARES" shall mean the Company's Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.
2.
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1.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. If the Company shall receive from the
Initiating Holders at any time not earlier than the earlier of (i) three (3)
years after the Original Date or (ii) one (1) year after the effective date of
the first registration statement filed by the Company covering an underwritten
offering of any of its securities to the general public, a written request that
the Company effect any registration with respect to the lesser of at least
twenty-five percent (25%) of the Registrable Securities or all or a part of the
Registrable Securities having an aggregate offering price, net of underwriting
discounts and expenses related to the issuance, exceeding Five Million Dollars
($5,000,000) (as adjusted for any stock dividends, combinations or splits with
respect to such shares), then the Company will:
(i) within ten (10) days after its receipt thereof, give written
notice of the proposed registration to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration (including, without limitation, filing post-effective amendments,
appropriate qualifications under applicable blue sky or other state securities
laws, and appropriate compliance with the Securities Act) as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within twenty (20)
days after such written notice from the Company is effective.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 1.2:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification, or compliance, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act;
(B) After the Company has initiated one such registration
pursuant to this Section 1.2(a) counting for these purposes only (i)
registrations which have been declared or ordered effective and pursuant to
which securities have been sold, and (ii) registrations which have been
withdrawn by the Holders as to which the Holders have not elected to bear the
Registration Expenses pursuant to Section 1.4 hereof;
(C) During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing of, and ending
on a date sixty (60) days after the effective date of, a Company-initiated
registration; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;
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(D) If the Initiating Holders propose to dispose of shares of
Registrable Securities which may be immediately registered on Form S-3 pursuant
to a request made under Section 1.5 hereof;
(E) If the Initiating Holders do not request that such offering
be firmly underwritten by underwriters of nationally recognized standing
selected by the Initiating Holders (subject to the consent of the Company, which
consent shall not be unreasonably withheld);
(F) If the Company and the Initiating Holders are unable to
obtain the commitment of the underwriter described in clause (E) above to firmly
underwrite the offer; or
(G) With respect to any Registrable Securities which, in the
opinion of counsel to the Company, may be sold under Rule 144.
(b) DELAYS IN REGISTRATION. Subject to the foregoing clauses (A)
through (G), the Company shall file a registration statement covering the
Registrable Securities so requested to be registered as soon as practicable
after receipt of the request or requests of the Initiating Holders; provided,
however, that if (i) in the good faith judgment of the Board of Directors of the
Company, such registration would be seriously detrimental to the Company and the
Board of Directors of the Company concludes, as a result, that it is necessary
to defer the filing of such registration statement at such time, and (ii) the
Company shall furnish to such Holders a certificate signed by the President 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 for such
registration statement to be filed in the near future and that it is, therefore,
necessary to defer the filing of such registration statement, then the Company
shall have the right to defer such filing for the period during which such
disclosure would be seriously detrimental, provided (except as provided in
clause (C) above) that the Company may not defer the filing for a period of more
than six (6) months after receipt of the request of the Initiating Holders, and,
provided further, that the Company shall not defer its obligation in this manner
more than once in any twelve (12) month period.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Section 1.2(b) and 1.12 hereof,
include other securities of the Company with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company.
(c) UNDERWRITING. The right of any Holder to registration pursuant to
Section 1.2 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 with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he or it holds.
(d) PROCEDURES. If the Company shall request inclusion in any
registration pursuant to Section 1.2 of securities being sold for its own
account, or if other persons shall request inclusion in any
4.
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registration pursuant to Section 1.2, the Initiating Holders shall, on behalf of
all Holders, offer to include such securities in the underwriting and may
condition such offer on their acceptance of the further applicable provisions of
this Section 1 (including Section 1.11). The Company shall (together with all
Holders and other persons proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for such underwriting
by a majority in interest of the Initiating Holders, which underwriters are
reasonably acceptable to the Company. Notwithstanding any other provision of
this Section 1.2, if the representative of the underwriters advises the
Initiating Holders in writing that marketing factors require a limitation on the
number of shares to be underwritten, the number of shares to be included in the
underwriting or registration shall be allocated as set forth in Section 1.12
hereof. If a person who has requested inclusion in such registration as provided
above does not agree to the terms of any such underwriting, such person shall be
excluded therefrom by written notice from the Company, the underwriter or the
Initiating Holders. The securities so excluded shall also be withdrawn from the
registration and if the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to this Section
1.2(d), then the Company shall offer to all holders who have retained rights to
include securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
shares so withdrawn, with such shares to be allocated among such Holders
requesting additional inclusion in accordance with Section 1.12.
1.3 COMPANY REGISTRATION.
(a) NOTICE. If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders exercising their respective demand registration rights (other than
pursuant to Section 1.2 or 1.5 hereof), other than (i) a registration on SEC
Form S-1, S-2, S-3 or SB-2 or similar forms that may be promulgated in the
future relating solely to employee benefit plans, (ii) a registration on SEC
Form S-4 or similar form that may be promulgated in the future relating solely
to a Rule 145 transaction, or (iii) a registration on any registration form that
does not permit secondary sales, the Company will: (I) promptly give to each
Holder written notice thereof, and (II) use its best efforts to include in such
registration, except as set forth in Section 1.3(b) below, and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made by any Holder within ten (10) days after the
written notice from the Company described in clause (I) above is given. Such
written request may specify all or a part of a Holder's Registrable Securities.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a). In such event, the right of any Holder to
registration pursuant to this Section 1.3 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 securities through such underwriting shall
(together with the Company and the other holders of securities of the Company
with registration rights to participate therein distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected by the
Company.
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Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) limit the number
of Registrable Securities to be included in the registration and underwriting.
The Company shall so advise all holders of securities requesting registration,
and the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated first to the Company for
securities being sold for its own account and thereafter as set forth in Section
1.12 hereof. If any person does not agree to the terms of any such
underwriting, he or it shall be excluded therefrom by written notice from the
Company or the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
If shares are so withdrawn from the registration or if the number of shares
of Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, the Company shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among the persons requesting additional inclusion in accordance with
Section 1.12 hereof.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1.3, and all Registration Expenses incurred in connection with two
registrations, qualifications, or compliances pursuant to Section 1.5 hereof and
the one registration pursuant to Section 1.2 hereof, and reasonable fees of one
counsel for the selling Shareholders in the case of registration pursuant to
Section 1.2 hereof, shall be borne by the Company; provided, however, that if
the Holders bear the Registration Expenses for any registration proceeding begun
pursuant to Section 1.2 and subsequently withdrawn by the Holders registering
shares therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 1.2 hereof. All Selling Expenses relating to
securities so registered shall be borne by the holders of such securities pro
rata on the basis of the number of shares of securities so registered on their
behalf.
1.5 REGISTRATION ON FORM S-3.
(a) After its initial public offering, the Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms. After the Company has qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this Section 1,
the Holders of Registrable Securities shall have the right to request
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
methods of disposition of such shares by such Holder or Holders), provided,
however, that the Company shall not be obligated to effect any such registration
if (i) 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) on Form S-3 at an aggregate price
to the public of less than One Million Dollars ($1,000,000), or (ii) in the
event that the Company shall furnish the certification described in Section
1.2(b) or (iii) in a given twelve (12) month period, after the Company has
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effected one (1) such registration in any such period or (iv) it is to be
effected more than five (5) years after the Company's initial public offering.
(b) If a request complying with the requirements of Section 1.5(a)
hereof is delivered to the Company, the provisions of Sections 1.2(a)(i) and
(ii) and Section 1.2(b) hereof shall apply to such registration. If the
registration is for an underwritten offering, the provisions of Sections 1.2(c)
and 1.2(d) hereof shall apply to such registration.
1.6 REGISTRATION PROCEDURES. In the case of each registration effected by
the Company pursuant to Section 1 hereof, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such 120-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company; and (ii) in the case of any
registration of Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120-day period shall be extended,
if necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 145, or any successor rule
under the Securities Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Securities Act or (II) reflects facts or events representing a
material or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be included
in (I) and (II) above to be contained in periodic reports filed pursuant to
Section 13 or 15(d) of the Exchange Act in the registration statement;
(b) Prepare and file with the Commission 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 such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a Holder
from time to time may reasonably request;
(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
7.
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(e) 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 light of the circumstances then existing;
(f) Furnish, at the request of a majority of the Holders participating
in the registration, 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 letter dated as of
such date, customarily given by 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.
(g) Cause all such Registrable Securities registered pursuant
thereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration; and
(i) In connection with any underwritten public offering pursuant to a
registration statement filed pursuant to Section 1.2 hereof, the Company will
enter into an underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests the underwriting agreement will contain customary contribution
provisions. Each Holder participating in such underwriting shall also enter
into and perform its obligations under such an agreement.
1.7 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification, or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls within the meaning of
Section 15 of the Securities Act any underwriter, against all expenses, claims,
losses, damages, and liabilities (or actions, proceedings, or settlements in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular, or other document (including any related registration statement,
notification, or the like) incident to any such registration,
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qualification, or compliance, or based on 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, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners and each
person controlling such Holder, each such underwriter, and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending or settling any such
claim, loss, damage, liability, or action, provided that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such Holder
or underwriter and stated to be specifically for use therein. It is agreed that
the indemnity agreement contained in this Section 1.7(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
has not been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners and each underwriter, if any, of the Company's securities
covered by such a registration statement, each person who controls the Company
or such underwriter within the meaning of Section 15 of the Securities Act, each
other such Holder and Other Shareholder, and each of their officers, directors,
and partners, and each person controlling such Holder or Other Shareholder,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular, or other document, or 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, and will reimburse the
Company and such Holders, Other Shareholders, directors, officers, partners,
persons, underwriters, or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action, in each case to the extent, but only
to the extent that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular, or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein; provided, however, that the
obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 1.7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's
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expense, and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 1.7, to the extent such failure is not
prejudicial. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.7 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
1.8 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder, if any, as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Section 1.
1.9 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) Make and keep public information regarding the Company available
as those terms are understood and defined in Rule 144 under the Securities Act,
at all times from and after ninety (90) days following 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;
10.
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(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements; and
(c) So long as a Shareholder owns any Restricted Securities to furnish
to such Shareholder 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 Exchange Act (at any time after it has become subject
to such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company as a
Shareholder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Shareholder to sell any such securities without
registration.
1.10 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register securities granted to a Holder by the Company under this
Section 1 may be transferred or assigned by a Holder only to a transferee or
assignee of not less than one hundred thousand (100,000) shares of Registrable
Securities (as presently constituted and subject to subsequent adjustments for
stock splits, stock dividends, reverse stock splits, and the like), provided
that the Company is given written notice at the time of or within a reasonable
time after said transfer or assignment, stating the name and address of the
transferee or assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned, and, provided further,
that the transferee or assignee of such rights assumes the obligations of such
Holder under this Section 1.
1.11 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, a Shareholder
shall not sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by such Shareholder (other than those included in the
registration) during the one hundred eighty (180) day period following the
effective date of a registration statement of the Company filed under the
Securities Act, provided that:
(a) such agreement shall only apply to the first such registration
statement of the Company, including securities to be sold on its behalf to the
public in an underwritten offering; and
(b) all Holders of one percent (1%) or more of the Company's
outstanding equity securities and officers and directors of the Company enter
into similar agreements.
The obligations described in this Section 1.11 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose stop-
transfer instructions with respect to the shares (or securities) subject to the
foregoing restriction until the end of said 180-day period.
11.
<PAGE>
1.12 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in
which all of the Registrable Securities and other shares of Common Stock of the
Company (including shares of Common Stock issued or issuable upon conversion of
shares of any currently unissued series of Preferred Stock of the Company) with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or other selling shareholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated among the Holders and other selling shareholders requesting
inclusion of shares pro rata on the basis of the number of shares of Registrable
Securities and Other Shares that would be held by such Holders and other selling
shareholders, assuming conversion; provided, however, that in no event shall the
amount of Registrable Securities and Other Shares included in such registration
be reduced below twenty percent (20%) of the total amount of securities included
in such registration, unless such registration is the initial public offering of
the Company's securities, in which case the Registrable Securities and Other
Shares may be excluded if the underwriters make the determination described in
subsection 1.3(b) above and no other shareholders' securities are included. If
any Holder or other selling shareholder does not request inclusion of the
maximum number of shares of Registrable Securities and Other Shares allocated to
it pursuant to the above-described procedure, the remaining portion of its
allocation shall be reallocated among those requesting Holders and other selling
shareholders whose allocations did not satisfy their requests pro rata on the
basis of the number of shares of Registrable Securities and Other Shares which
would be held by such Holders and other selling shareholders, assuming
conversion, and this procedure shall be repeated until all of the shares of
Registrable Securities and Other Shares which may be included in the
registration on behalf of the Holders and other selling shareholders have been
so allocated. The Company shall not limit the number of Registrable Securities
to be included in a registration pursuant to this Agreement in order to include
shares held by shareholders with no registration rights or to include stock
issued to founders of the Company or any other shares of stock issued to
employees, officers, directors, or consultants pursuant to the Company's Equity
Incentive Plan, or with respect to registration under Section 1.5 hereof, in
order to include in such registration securities registered for the Company's
own account.
1.13 DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.14 TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
request registration or inclusion in any registration pursuant to Section 1.2,
1.3 or 1.5 shall terminate on the closing of the first Company-initiated
registered public offering of Common Stock of the Company, provided that all
shares of Registrable Securities held or entitled to be held upon conversion by
such Holder may immediately be sold under Rule 144 during any ninety (90) day
period, or on such date after the closing of the first Company-initiated
registered public offering of Common Stock of the Company as all shares of
Registrable Securities held or entitled to be held upon conversion by such
Holder may immediately be sold under Rule 144 during any ninety (90) day period;
provided, however, that the provisions of this Section 1.14 shall not apply to
any Holder who owns more than one percent (1%) of the Company's outstanding
stock until the earlier of (i) such time as such Holder owns less than one
percent (1%) of the outstanding stock
12.
<PAGE>
of the Company, or (ii) the expiration of two (2) years after the closing of the
first registered public offering of Common Stock of the Company.
2. COVENANTS OF THE COMPANY.
2.1 FINANCIAL INFORMATION. The Company will furnish the following reports
(i) to Sega Enterprises, Ltd., (ii) to Itochu Corporation and Itochu Technology,
Inc., collectively, (iii) to Worldview Technology Partners I, L.P. and its
affiliates (collectively, "Worldview"), so long as Worldview owns at least four
hundred thousand (400,000) shares of Preferred Stock or Common Stock issued upon
conversion of the Preferred Stock, or any combination thereof, (iv) to any other
Holder, so long as such Holder (and its affiliates) owns at least one million
(1,000,000) shares of Preferred Stock or Common Stock issued upon conversion of
the Preferred Stock, or any combination thereof (as presently constituted and
subject to subsequent adjustment for stock splits, stock dividends, reverse
stock splits, recapitalizations and the like):
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as at the end of such
fiscal year, and consolidated statements of income and cash flows of the Company
and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures for the previous fiscal year, all
in reasonable detail and certified by independent public accountants of
recognized national standing selected by the Company.
(b) As soon as practicable after the end of the first, second, and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within forty-five (45) days thereafter, a consolidated balance sheet
of the Company and its subsidiaries, if any, as of the end of each such
quarterly period, and consolidated statements of income and cash flows of the
Company and its subsidiaries for such period and for the current fiscal year to
date, prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, subject to changes resulting
from normal year-end audit adjustments, all in reasonable detail and certified
by the principal financial or accounting officer of the Company, except that
such financial statements need not contain the notes required by generally
accepted accounting principles.
(c) From the date the Company becomes subject to the reporting
requirements of the Exchange Act (which shall include any successor federal
statute), and in lieu of the financial information required pursuant to Sections
2.1(a) and (b), copies of its annual reports on Form 10-K and it quarterly
reports on Form 10-Q, respectively.
2.2 INSPECTION. The Company shall permit (i) Sega Enterprises, Ltd. and
(ii) any other Holder, so long as such Holder (and its affiliates) owns at least
one million (1,000,000) shares of Preferred Stock or Common Stock issued upon
conversion of the Preferred Stock, or any combination thereof (as presently
constituted and subject to subsequent adjustment for stock splits, stock
dividends, reverse stock splits,
13.
<PAGE>
recapitalizations and the like), at such Holder'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 Holder; provided, however,
that the Company shall not be obligated pursuant to this Section 2.2 to provide
access to any information that it reasonably considers to be a trade secret or
similar confidential information.
2.3 TERMINATION OF COVENANTS. The covenants set forth in this Section 2
shall terminate and be of no further force and effect after the time of
effectiveness of the Company's first firm commitment underwritten public
offering registered under the Securities Act, and such covenants shall terminate
and be of no further force and effect as to any particular Holder is or becomes,
or is or becomes controlled by, a competitor of the Company. Each Shareholder
agrees that any and all information obtained pursuant to Sections 2.1 and 2.2
shall be deemed proprietary and confidential to the Company and will not be
disclosed to any person or entity without the prior written consent of the
Company, which consent shall not be unreasonably withheld, except as required by
law or judicial process; provided, however, that, notwithstanding the foregoing,
a Shareholder may disclose such information without the prior consent of the
Company to its partners, associates or employees on an as-needed basis in order
to evaluate this investment and as may be reasonably necessary to continue to
evaluate the Company.
3. MISCELLANEOUS.
3.1 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties and no party shall be liable or bound to any other party in
any manner by any warranties, representations, or covenants except as
specifically set forth herein.
3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within the State
of California.
3.4 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and, except as otherwise noted herein, shall be
deemed effectively given upon personal delivery, delivery by nationally
recognized courier or upon deposit with the United States Post Office, (by first
class mail, postage prepaid) addressed: (a) if to the Company, at 1226 Tiros
Way, Sunnyvale, CA 94086 (or at such other address as the Company shall have
furnished to the Holders in writing), to the attention of the President and (b)
if to a Holder, at the latest address of such person shown on the Company's
records.
3.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.
<PAGE>
3.6 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing rights of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance, either retroactively or prospectively, and either for
a specified period of time or indefinitely), with the written consent of the
Company and the holders of not less than fifty percent (50%) of the Registrable
Securities of the Company (treated as if converted at the conversion rate then
in effect and including, for such purposes, on a proportional basis, any shares
of Common Stock into which any Registrable Securities have been converted that
has not been sold to the public). Any amendment or waiver effected in
accordance with this Section shall be binding upon each Holder of Registrable
Securities then outstanding (including securities into which such securities
have been converted), each future holder of all such securities, and the
Company. Upon the effectuation of each such amendment or waiver, the Company
shall promptly give written notice thereof to the record holders of Registrable
Securities who have not previously consented thereto in writing.
3.8 FUTURE SHAREHOLDERS. Any person who acquires securities of the
Company which are, or are convertible into or exercisable for, Registrable
Securities may automatically become a party to this Agreement (without the
consent of the Holders) by execution and delivery to the Company of a
counterpart of this Agreement. Upon delivery of such counterpart, (a) the
signature pages and Exhibit hereto shall be amended to reflect the name of such
new party, and (b) such new party shall thereafter be deemed a "Holder" for
purposes of this Agreement.
3.9 SEVERABILITY. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
3.10 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power, or remedy accruing to any Holder upon any breach, default or
noncompliance of the Company under this Agreement shall impair any such right,
power, or remedy, nor shall it be construed to be a waiver of any such breach,
default or noncompliance, or any acquiescence therein, or of any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent, or approval of any kind or character on the Holders'
part of any breach, default or noncompliance under this Agreement or any waiver
on the Holders' part of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the extent specifically set forth in
such writing, and that all remedies, either under this Agreement, the Company's
Amended and Restated Articles of Incorporation, the Company's Bylaws, or
otherwise afforded to any Holder shall be cumulative and not alternative.
15.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Second Amended
and Restated Investors' Rights Agreement effective as of the date first above
written.
THE COMPANY:
NVIDIA CORPORATION
By:
---------------------------------
Jen-Hsun Huang, President
[SHAREHOLDER SIGNATURES BEGIN ON THE FOLLOWING PAGE]
<PAGE>
THE SHAREHOLDERS:
JAPAN ASSOCIATED FINANCE CO., LTD.
By:
---------------------------------
Masaki Yoshida
President
JAFCO G-5 INVESTMENT ENTERPRISE PARTNERSHIP
By:
-----------------------------------
Japan Associated Finance Co., Ltd.,
Its Executive Partner
By:
-----------------------------------
Masaki Yoshida
President
U.S. INFORMATION TECHNOLOGY
INVESTMENT ENTERPRISE PARTNERSHIP
By:
-----------------------------------
Japan Associated Finance Co., Ltd.,
Its Executive Partner
By:
-----------------------------------
Masaki Yoshida
President
<PAGE>
SEQUOIA CAPITAL VI,
a California Limited Partnership
SEQUOIA TECHNOLOGY PARTNERS VI,
a California Limited Partnership
SEQUOIA XXIII,
a California Limited Partnership
SEQUOIA XXIV,
a California Limited Partnership
SEQUOIA TECHNOLOGY PARTNERS III
SEQUOIA GROWTH FUND
SQP 1997
SEQUOIA 1997
By:
-----------------------------------
General Partner, on behalf of each
of the above entities
JONES LIVING TRUST, DTD 7/27/90
By:
-----------------------------------
Title:
--------------------------------
- --------------------------------------
HARRIS BARTON
- --------------------------------------
THOMAS VARDELL
<PAGE>
SUTTER HILL VENTURES,
a California Limited Partnership
By:
--------------------------------------
Sutter Hill Management Company, L.P.
By:
--------------------------------------
General Partner
PAUL M. & MARSHA R. WYTHES,
TRUSTEES, THE WYTHES LIVING TRUST
By:
--------------------------------------
Title:
-----------------------------------
TOW PARTNERS,
a California Limited Partnership
By:
--------------------------------------
General Partner
- --------------------------------------
DAVID L. ANDERSON
ANVEST, L.P.
a California Limited Partnership
By:
--------------------------------------
General Partner
<PAGE>
- --------------------------------------
G. LEONARD BAKER
- --------------------------------------
DAVID R. GOLOB
- --------------------------------------
JAMES C. GAITHER
- --------------------------------------
RONALD L. PERKINS
- --------------------------------------
TENCH COXE
GENSTAR INVESTMENT CORPORATION
By:
--------------------------------------
Title:
-----------------------------------
<PAGE>
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO TENCH COXE
By:
--------------------------------------
Title:
-----------------------------------
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO DAVID L. ANDERSON
By:
--------------------------------------
Title:
-----------------------------------
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO WILLIAM H. YOUNGER, JR.
By:
--------------------------------------
Title:
-----------------------------------
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO SHERRYL W. HOSSACK
By:
--------------------------------------
Title:
-----------------------------------
<PAGE>
- --------------------------------------
HARVEY C. JONES, JR.
- --------------------------------------
WILLIAM J. MILLER
THE BOARD OF TRUSTEES OF THE
LELAND STANFORD JUNIOR UNIVERSITY
By:
--------------------------------------
Title:
-----------------------------------
GC&H INVESTMENTS,
a California general partnership
By:
--------------------------------------
John L. Cardoza, Executive Partner
COOLEY GODWARD LLP
By:
--------------------------------------
Lee Benton, Managing Partner
<PAGE>
- --------------------------------------
MARSHALL A. SMITH III
MARSHALL A. AND CLAUDIA L. SMITH
- --------------------------------------
Marshall A. Smith III
- --------------------------------------
Claudia L. Smith
- --------------------------------------
JOANNE C. KNIGHT
ITOCHU CORPORATION
By:
--------------------------------------
Title:
-----------------------------------
ITOCHU TECHNOLOGY, INC.
By:
--------------------------------------
Title:
-----------------------------------
SEGA ENTERPRISES, LTD.
By:
--------------------------------------
Title:
-----------------------------------
<PAGE>
WORLDVIEW TECHNOLOGY PARTNERS I, L.P.
By:
--------------------------------------
Title:
-----------------------------------
WORLDVIEW TECHNOLOGY INTERNATIONAL I, L.P.
By:
--------------------------------------
Title:
-----------------------------------
WORLDVIEW STRATEGIC PARTNERS I, L.P.
By:
--------------------------------------
Title:
-----------------------------------
<PAGE>
WILLIAM H. YOUNGER, JR., TRUSTEE OF
THE YOUNGER LIVING TRUST
By:
--------------------------------------
Title:
-----------------------------------
<PAGE>
- --------------------------------------
Y. ERIC CHO
- --------------------------------------
GERALD HSU
<PAGE>
EXHIBIT A
LIST OF SHAREHOLDERS
U.S. Information Technology Investment
Enterprise Partnership
Toshiba Building, 10th Floor, 1-1-1
Shibaura Minato-ku
Tokyo, Japan 105
Attention: Mr. James Wei
JAFCO G-5 Investment Enterprise Partnership
Toshiba Building, 10th Floor, 1-1-1
Shibaura Minato-ku
Tokyo, Japan 105
Attention: Mr. James Wei
Japan Associated Finance Co., Ltd.
Toshiba Building, 10th Floor, 1-1-1
Shibaura Minato-ku
Tokyo, Japan 105
Attention: Mr. James Wei
Sequoia Capital VI,
a California limited partnership
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Attention: Barbara Russell
Sequoia Technology Partners VI,
a California limited partnership
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Attention: Barbara Russell
Sequoia XXIII,
a California limited partnership
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Attention: Barbara Russell
A-1
<PAGE>
Sequoia XXIV,
a California limited partnership
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Attention: Barbara Russell
Sequoia Growth Fund
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Attention: Barbara Russell
Sequoia Technology Partners III
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Attn: Barbara Russell
SQP 1997
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Attn: Barbara Russell
Sequoia 1997
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Attn: Barbara Russell
Jones Living Trust, DTD 7/27/90
c/o Sequoia Technology Partners
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Attn: Barbara Russell
A-2
<PAGE>
Harris Barton
c/o Sequoia Technology Partners
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Attn: Barbara Russell
Thomas Vardell
c/o Sequoia Technology Partners
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
Attn: Barbara Russell
Sutter Hill Ventures,
a California limited partnership
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Attention: Sherryl W. Hossack
Tow Partners,
a California limited partnership
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Attention: Sherryl W. Hossack
Genstar Investment Corporation
Metro Tower, Suite 1170
Foster City, CA 94404
Attention: R. D. Paterson
Ronald L. Perkins
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Tench Coxe
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Wells Fargo Bank, Trustee
SHV M/P/T FBO Tench Coxe
Attention: Annick Prasad
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Wells Fargo Bank, Trustee
SHV M/P/T FBO David L. Anderson
Attention: Annick Prasad
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
A-3
<PAGE>
Wells Fargo Bank, Trustee
SHV M/P/T FBO William H. Younger, Jr.
Attention: Annick Prasad
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
The Board of Trustees of The
Leland Stanford Junior University
c/o Stanford Management Company
2770 Sand Hill Road
Menlo Park, CA 94025
Attention: Carol Gilmer
Harvey C. Jones, Jr.
Synopsys, Inc.
700 East Middlefield Road
Mountain View, CA 94043
William J. Miller
Avid Technology
Metropolitan Technology Park
One Park West
Tewksbury, MA 01876
GC&H Investments,
a California general partnership
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Attention: John Cardoza
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Attention: Lee Benton
A-4
<PAGE>
Marshall A. Smith III
26535 Weston Drive
Los Altos Hills, CA 94022
Marshall A. and Claudia L. Smith
26535 Weston Drive
Los Altos Hills, CA 94022
Joanne C. Knight
793 View Street
Mountain View, CA 94041
ITOCHU Corporation
2-5-1 Kita Aoyama, Minato-ku
Tokyo, Japan 107-77
Attn: Mr. Toshihisa Adachi
Deputy Manager of
Information Technology Section #1
in Information Technology & Engineering Dept.
ITOCHU Technology, Inc.
3100 Patrick Henry Drive
Santa Clara, CA 95054
Attn: Mr. Shinzo Nakano
Sega Enterprises, Ltd.
2-12, Haneda, 1 Chome
Ohta-ku, Tokyo 144
Japan
Attn: Mr. Tsuneo Naito
Managing Director
David Anderson
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Attn: Sherryl W. Hossack
Paul M. & Marsha R. Wythes, Trustees,
The Wythes Living Trust
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Attn: Sherryl W. Hossack
A-5
<PAGE>
Anvest, L.P.
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Attn: Sherryl W. Hossack
G. Leonard Baker
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Attn: Sherryl W. Hossack
David R. Golob
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Attn: Sherryl W. Hossack
James C. Gaither
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Attn: Sherryl W. Hossack
Wells Fargo Bank, Trustee
SHV M/P/T FBO Sherryl W. Hossack
Attention: Annick Prasad
P.O. Box 63050 MAC 0188-161
San Francisco, CA 94163
Worldview Technology Partners I, L.P.
435 Tasso Street, Suite 120
Palo Alto, CA 94301
Attn: Mike Orsak
Worldview Technology International I, L.P.
435 Tasso Street, Suite 120
Palo Alto, CA 94301
Attn: Mike Orsak
Worldview Strategic Technology Partners I, L.P.
435 Tasso Street, Suite 120
Palo Alto, CA 94301
Attn: Mike Orsak
A-6
<PAGE>
William H. Younger, Jr., Trustee
of the Younger Living Trust
755 Page Mill Road Suite A-200
Palo Alto, CA 94304
Attn: Sherryl W. Hossack
Y. Eric Cho
20401 Kirkmont Drive
Saratoga, CA 95070
Gerald Hsu
c/o Avanti Corp.
46871 Bayside Parkway
Fremont, CA 9458
A-7
<PAGE>
EXHIBIT 10.1
INDEMNITY AGREEMENT
This Agreement is made and entered into this ____ day of ___________, 1998
by and between NVIDIA CORPORATION, a Delaware corporation (the "Corporation"),
and ____________________ ("Agent").
RECITALS
Whereas, Agent performs a valuable service to the Corporation in his
capacity as a director of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware Corporation Law, as amended (the
"Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as a director of the
Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as a director
after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as a
director of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless and
indemnify Agent to the fullest extent authorized or permitted by the provisions
of the Bylaws and the Code, as the same may be amended from time to time (but,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than the Bylaws or the Code permitted prior to
adoption of such amendment).
1.
<PAGE>
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(A) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(B) otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and Section 43
of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(A) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(B) on account of Agent's conduct that was knowingly fraudulent or
deliberately dishonest or that constituted willful misconduct; on account of
Agent's conduct that constituted a breach of Agent's duty of loyalty to the
Corporation or resulted in any personal profit or advantage to which Agent was
not legally entitled;
(C) on account of Agent's conduct that constituted a breach of
Agent's duty of loyalty to the Corporation or resulted in any personal profit
or advantage to which Agent was not legally entitled;
(D) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(E) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes 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); or
(F) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the Corporation, (iii) such indemnification is provided by
the Corporation, in its sole discretion, pursuant to the powers
2.
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vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(A) the Corporation will be entitled to participate therein at its
own expense;
(B) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded that there may be a conflict of interest
between the Corporation and Agent in the conduct of the defense of such action
or (iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of Agent's
separate counsel shall be at the expense of the Corporation. The Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of the Corporation or as to which Agent shall have made
the conclusion provided for in clause (ii) above; and
3.
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(C) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim for
indemnification is made under Section 3 hereof (other than an action brought to
enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(A) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
4.
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(B) The Corporation shall 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 Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. ENTIRE AGREEMENT. This Agreement and the agreements referenced herein
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof, and any and all other written or oral agreements existing
between the parties hereto pertaining to the subject matters hereof are
superseded and expressly canceled.
15. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware. 16. AMENDMENT AND
TERMINATION. No amendment, modification, termination or cancellation of this
Agreement shall be effective unless in writing signed by both parties hereto.
16. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed
by both parties hereto.
17. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
18. HEADINGS. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
19. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(A) If to Agent, at the address indicated on the signature page
hereof.
(B) If to the Corporation, to
NVIDIA Corporation
1226 Tiros Way
Sunnyvale, CA 94086
or to such other address as may have been furnished to Agent by the Corporation.
5.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
NVIDIA CORPORATION
By:_____________________________________________
Jen-Hsun Huang
President and
Chief Executive Officer
AGENT
By:_____________________________________________
Name:___________________________________________
Address:__________________________________
__________________________________
6.
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EXHIBIT 10.2
NVIDIA CORPORATION
1998 EQUITY INCENTIVE PLAN
ADOPTED FEBRUARY 17, 1998
APPROVED BY SHAREHOLDERS _______________, 1998
TERMINATION DATE: FEBRUARY 16, 2008
1. PURPOSES.
(A) The Plan is an amendment and restatement of the Company's existing
Equity Incentive Plan adopted May 21, 1993 (the "Prior Plan"). The Prior Plan
hereby is amended and restated in its entirety as the 1998 Equity Incentive Plan
and shall become effective on the date of approval of the Plan by the Board (the
"Effective Date"). No options shall be granted under the Prior Plan from and
after the Effective Date. The terms of the Prior Plan (other than the aggregate
number of shares issuable thereunder) shall remain in effect and apply to all
options granted pursuant to the Prior Plan.
(B) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, and (iv) rights to purchase
restricted stock.
(C) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(D) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to Section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.
2. DEFINITIONS.
(A) Affiliate means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(B) Board means the Board of Directors of the Company.
(C) Code means the Internal Revenue Code of 1986, as amended.
(D) Common Stock means the common stock of the Company.
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(E) Committee means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(F) Company means NVIDIA Corporation.
(G) Consultant means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors. The term "Consultant" shall include
members of the Board of Directors of an Affiliate.
(H) Continuous Service means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant or a Director of an Affiliate will not
constitute an interruption of Continuous Service as an Employee. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of: (i) any leave of absence approved by the Board or the chief executive
officer of the Company, including sick leave, military leave, or any other
personal leave; or (ii) transfers between the Company, its Affiliates or their
successors.
(I) Covered Employee means the Chief Executive Officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(J) Director means a member of the Board.
(K) Employee means any person, including an Officer or Director, employed
by the Company or any Affiliate. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.
(L) Exchange Act means the Securities Exchange Act of 1934, as amended.
(M) Fair Market Value means, as of any date, the value of the Common Stock
determined as follows:
(I) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such system or exchange (or the exchange with the greatest volume of
trading in Common Stock) on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
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(II) If the Common Stock is quoted on the Nasdaq Small-Cap Market or
is regularly quoted by a recognized securities dealer but selling prices are not
reported, the Fair Market Value of a share of Common Stock shall be the mean
between the bid and asked prices for the Common Stock on the last market trading
day prior to the day of determination, as reported in the Wall Street Journal or
such other source as the Board deems reliable;
(III) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Board.
(IV) Prior to the Listing Date, the value of the Common Stock shall
be determined in a manner consistent with Section 260.140.50 of Title 10 of the
California Code of Regulations.
(N) Listing Date means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(O) Incentive Stock Option means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(P) Non-Employee Director means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or subsidiary for services rendered as a consultant or in
any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act Regulation S-K)), does not possess an interest in
any other transaction as to which disclosure would be required under Item 404(a)
of Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(Q) Nonstatutory Stock Option means an Option not intended to qualify as
an Incentive Stock Option.
(R) Officer means (i) before the Listing Date, any person designated by
the Company as an officer and (ii) on and after the Listing Date, a person who
is an officer of the Company within the meaning of Section 16 of the Exchange
Act and the rules and regulations promulgated thereunder.
(S) Option means a stock option granted pursuant to the Plan.
(T) Option Agreement means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
3.
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(U) Optionee means an Employee, Director or Consultant who holds an
outstanding Option.
(V) Outside Director means a Director of the Company who either (i) is not
a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(W) Plan means this NVIDIA Corporation 1998 Equity Incentive Plan.
(X) Rule 16b-3 means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(Y) Stock Award means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(Z) Stock Award Agreement means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(AA) Ten Percent Shareholder means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates.
3. ADMINISTRATION.
(A) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(B) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(I) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
or a combination of the foregoing; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a person shall
be permitted to receive stock pursuant to a Stock Award; and the number of
shares with respect to which a Stock Award shall be granted to each such person.
(II) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any
4.
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Stock Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(III) To amend the Plan or a Stock Award as provided in Section 13.
(IV) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(C) The Board may delegate administration of the Plan to a Committee or
Committees of one or more members of the Board, and the term "Committee" shall
apply to any person or persons to whom such authority has been delegated. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan. In the discretion of the Board, a Committee may consist solely of two
or more Outside Directors, in accordance with Code Section 162(m), or solely of
two or more Non-Employee Directors, in accordance with Rule 16b-3. Within the
scope of such authority, the Board or the Committee may (1) delegate to a
committee of one or more members of the Board who are not Outside Directors the
authority to grant Stock Awards to eligible persons who are either (a) not then
Covered Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or (b) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code,
and/or (2) delegate to a committee of one or more members of the Board who are
not Non-Employee Directors the authority to grant Stock Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate fifteen million (15,000,000) shares of the Company's
Common Stock. Notwithstanding the foregoing, on each January 1, commencing with
January 1, 1999, the aggregate number of shares of Common Stock that are
available for issuance under the Incentive Plan shall automatically be increased
by a number of shares of Common Stock equal to five percent (5%) of the
Company's outstanding shares of Common Stock on that date. If any Stock Award
shall for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the stock not acquired under such Stock Award
shall revert to and again become available for issuance under the Plan.
5.
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(B) Except as adjusted pursuant to Section 12 of the Plan, however, no
more than fifteen million (15,000,000) of the shares eligible for issuance under
the Plan shall be issued upon the exercise of Incentive Stock Options under the
Plan.
(C) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
(D) Prior to the Listing Date, at no time shall the total number of shares
issuable upon exercise of all outstanding Options and the total number of shares
provided for under any stock bonus or similar plan of the Company exceed the
applicable percentage as calculated in accordance with the conditions and
exclusions of Section 260.140.45 of Title 10 of the California Code of
Regulations, based on the shares of the Company which are outstanding at the
time the calculation is made.
5. ELIGIBILITY.
(A) Incentive Stock Options may be granted only to Employees. Stock Awards
other than Incentive Stock Options may be granted only to Employees, Directors
or Consultants.
(B) No person shall be eligible for the grant of an Option or an award of
purchase of restricted stock if, at the time of grant, such person owns (or is
deemed to own pursuant to Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any of its Affiliates unless the exercise price of such Option
is at least one hundred ten percent (110%) of the Fair Market Value of such
stock at the date of grant, the exercise price of such restricted stock award is
at least one hundred percent (100%) of the Fair Market Value of such stock at
the date of grant and the Stock Award is not exercisable after the expiration of
five years from the date of grant. After the Listing Date, this provision shall
apply only to Incentive Stock Options.
(C) Subject to the provisions of Section 12 relating to adjustments upon
changes in stock, no employee shall be eligible to be granted Options covering
more than one million (1,000,000) shares of the Common Stock during any calendar
year. This subsection shall not apply prior to the Listing Date and, following
the Listing Date, this subsection shall not apply until (i) the earliest of: (A)
the first material modification of the Plan (including any increase to the
number of shares reserved for issuance under the Plan in accordance with Section
4); (B) the issuance of all of the shares of Common Stock reserved for issuance
under the Plan; (C) the expiration of the Plan; or (D) the first meeting of
shareholders at which Directors of the Company are to be elected that occurs
after the close of the third calendar year following the calendar year in which
occurred the first registration of an equity security under Section 12 of the
Exchange Act; or (ii) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.
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6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(A) TERM. No Option shall be exercisable after the expiration of ten years
from the date it was granted.
(B) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the fair market value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted.
(C) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (a) by delivery to the Company of other Common Stock, (b) according to a
deferred payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock) with the person to
whom the Option is granted or to whom the Option is transferred pursuant to
subsection 6(d), or (C) in any other form of legal consideration that may be
acceptable to the Board; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment. In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(D) TRANSFERABILITY. An Incentive Stock Option and, prior to the Listing
Date, a Nonstatutory Stock Option shall not be transferable except by will or by
the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Incentive Stock Option is granted only by
such person. After the Listing Date, a Nonstatutory Stock Option shall be
transferable to the extent provided in the Option Agreement. If the Nonstatutory
Stock Option does not provide for transferability, then the Nonstatutory Stock
Option shall not be transferable except by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the person to whom
the Option is granted only by such person. Notwithstanding the foregoing
provisions of subsection 6(f), the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
(E) VESTING. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the
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Option may become exercisable ("vest") with respect to some or all of the shares
allotted to that period, and may be exercised with respect to some or all of the
shares allotted to such period and/or any prior period as to which the Option
became vested but was not fully exercised. The Option may be subject to such
other terms and conditions on the time or times when it may be exercised which
may be based upon performance or other criteria as the Board may deem
appropriate. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(F) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection, Options granted prior to the Listing Date shall provide
for vesting of the total number of shares at a rate of at least twenty percent
(20%) per year over five (5) years from the date the Option was granted, subject
to reasonable conditions such as continued employment. However, in the case of
such Options granted to officers, directors or consultants (within the meaning
of Section 260.140.41 of Title 10 of the California Code of Regulations), the
Option may become fully exercisable, subject to reasonable conditions such as
continued employment, at any time or during any period established by the
Company; for example, the vesting provision of the Option may provide for
vesting of less than twenty percent (20%) per year of the total number of shares
subject to the Option.
(G) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months after
the termination of the Optionee's Continuous Service (or such longer or shorter
period specified in the Option Agreement, which, for Options granted prior to
the Listing Date, shall not be less than thirty (30) days unless such
termination is for cause), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the Optionee does not
exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(H) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Service
terminates as a result of the Optionee's disability, the Optionee may exercise
his or her Option, (to the extent such Optionee was entitled to exercise it at
the date of termination) but only within such period of time ending on the
earlier of (i) the date twelve (12) months following such termination (or such
longer or shorter period specified in the Option Agreement, which, for Options
granted prior to the Listing Date, shall not be less than six (6) months) or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(I) DEATH OF OPTIONEE. In the event of the death of an Optionee during, or
within a period specified in the Option after the termination of, the Optionee's
Continuous Status as an Employee, Director, or Consultant, the Option may be
exercised (to the extent the Optionee was
8.
<PAGE>
entitled to exercise the Option at the date of death) by the Optionee's estate,
by a person who acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the option upon the Optionee's
death pursuant to subsection 6(d), but only within the period ending on the
earlier of (i) the date eighteen (18) months following the date of death (or
such longer or shorter period specified in the Option Agreement, which, for
Options granted prior to the Listing Date, shall not be less than six (6)
months), or (ii) the expiration of the term of such Option as set forth in the
Option Agreement. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(J) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time before the Optionee's Continuous
Service terminates to exercise the Option as to any part or all of the shares
subject to the Option prior to the full vesting of the Option. Subject to the
repurchase option limitations specified in subsection 11(h), any unvested shares
so purchased may be subject to a repurchase right in favor of the Company or to
any other restriction the Board determines to be appropriate.
(K) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the Re-
Load Option on the date of exercise of the original Option or, in the case of a
Re-Load Option which is an Incentive Stock Option and which is granted to a ten
percent (10%) shareholder (as described in subsection 5(c)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board or Committee may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 11(d) of the Plan and in Section 422(d) of the
Code. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load
Option shall be subject to the availability of sufficient shares under
subsection 4(a) and shall be subject to such other terms and conditions as the
Board or Committee may determine.
9.
<PAGE>
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(A) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement but in no event shall the purchase
price be less than eighty five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit. For grants prior to the
Listing Date, the purchase price under each restricted stock purchase agreement
shall not be less than eighty-five percent (85%) of the stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.
(B) TRANSFERABILITY. Rights to purchase shares under a stock bonus or
restricted stock purchase agreement granted prior to the Listing Date shall not
be transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Stock Award
is granted only by such person. Rights to purchase shares under a stock bonus or
restricted stock purchase agreement granted on or after the Listing Date shall
be transferable by the grantee only upon such terms and conditions as are set
forth in the applicable Stock Award Agreement, as the Board shall determine in
its discretion, so long as stock awarded under such Stock Award Agreement
remains subject to the terms of the agreement.
(C) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in their discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(D) VESTING. Subject to the repurchase option limitations specified in
subsection 11(h), shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(E) TERMINATION OF CONTINUOUS SERVICE. Subject to the repurchase option
limitations specified in subsection 11(h), in the event a Participant's
Continuous Service
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terminates, the Company may repurchase or otherwise reacquire any or all of the
shares of stock held by that person which have not vested as of the date of
termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.
8. CANCELLATION AND RE-GRANT OF OPTIONS.
The Board or the Committee shall have the authority to effect, at any time
and from time to time, (i) the repricing of any outstanding Options, and (ii)
with the consent of the affected holders of Options, the cancellation of any
outstanding Options under the Plan and the grant in substitution therefor of new
Options under the Plan covering the same or different numbers of shares of
stock, but having an exercise price per share not less than eighty five percent
(85%) of the Fair Market Value (one hundred percent (100%) of the Fair Market
Value in the case of an Incentive Stock Option or, in the case of an Incentive
Stock Option granted to a ten percent (10%) shareholder (as described in
subsection 5(c)), not less than one hundred ten percent (110%) of the Fair
Market Value) per share of stock on the new grant date.
9. COVENANTS OF THE COMPANY.
(A) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(B) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
11. MISCELLANEOUS.
(A) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest in accordance with the Plan, notwithstanding the provisions in
the Stock Award stating the time at which it may first be exercised or the time
during which it will vest.
(B) Neither an Employee, Director or Consultant nor any person to whom a
Stock Award is transferred under subsection 6(d) or 7(b) shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
11.
<PAGE>
(C) Prior to the Listing Date, as required by Section 260.140.46 of Title
10 of the California Code of Regulations, the Company shall deliver financial
statements to Participants at least annually. This subsection shall not apply to
key Employees whose duties in connection with the Company assure them access to
equivalent information.
(D) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Director or Consultant) or shall affect
the right of the Company or any Affiliate to terminate the employment or
relationship as a Director or Consultant of any Employee, Director, Consultant
or other holder of Stock Awards with or without cause.
(E) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(F) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(d)
or 7(b), as a condition of exercising or acquiring stock under any Stock Award,
(i) to give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (1) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(2) as to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(G) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the Common Stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of Common Stock.
12.
<PAGE>
(H) The terms of any repurchase option shall be specified in the Stock
Award and may be either at fair market value or at not less than the original
purchase price. As required by Section 260.140.41 and Section 260.140.42 of
Title 10 of the California Code of Regulations, any repurchase option in a Stock
Award granted prior to the Listing Date and held by a person other than an
Officer, Director or Consultant shall be upon the terms described below :
(I) If repurchase option gives the Company the right to repurchase
the shares upon termination of employment at not less than the fair market value
of the shares to be purchased on the date of termination of employment, then (1)
the right to repurchase shall be exercised for cash or cancellation of purchase
money indebtedness for the shares within ninety (90) days of termination of
employment (or in the case of shares issued upon exercise of Stock Awards after
the date of termination, within ninety (90) days after the date of the exercise)
or such longer period as may be agreed to by the Company and the Participant
(for example, for purposes of satisfying the requirements of Section 1202(c)(3)
of the Code regarding "qualified small business stock"), and (2) the right
terminates when the shares become publicly traded.
(II) If repurchase option gives the Company the right to repurchase
the shares upon termination of employment at the original purchase price, then
(1) the right to repurchase at the original purchase price shall lapse at the
rate of at least twenty percent (20%) of the shares per year over five (5) years
from the date the Stock Award is granted (without respect to the date the Stock
Award was exercised or became exercisable) and (2) the right to repurchase shall
be exercised for cash or cancellation of purchase money indebtedness for the
shares within ninety (90) days of termination of employment (or in the case of
shares issued upon exercise of Options after the date of termination, within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock").
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject to
any Stock Award (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or otherwise), the Plan will be appropriately adjusted in
the class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the outstanding Stock Awards will be appropriately adjusted
in class(es) and number of shares and price per share of stock subject to such
outstanding Stock Awards.
(B) In the event of a dissolution or liquidation of the Company, then,
upon advance written notice by the Company of at least ten (10) business days to
the holders of any Stock Awards outstanding under the Plan, such Stock Awards
shall be terminated if not exercised (if applicable) prior to such event.
(C) In the event of (1) a sale of substantially all of the assets of the
Company, (2) a merger or consolidation in which the Company is not the surviving
corporation or (3) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other
13.
<PAGE>
property, whether in the form of securities, cash or otherwise, then any
surviving corporation or acquiring corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar stock awards (including
an award to acquire the same consideration paid to the shareholders in the
transaction described in this subsection for those outstanding under the Plan.
In the event any surviving corporation or acquiring corporation refuses to
assume such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, then with respect to Stock Awards held by persons
whose Continuous Service has not terminated, the vesting of such Stock Awards
(and, if applicable, the time during which such Stock Awards may be exercised)
shall be accelerated upon prior written notice by the Company to the holders of
such Stock Awards at least five (5) business days prior to such event and the
Stock Awards shall terminate if not exercised (if applicable) at or prior to
such event. With respect to any other Stock Awards outstanding under the Plan,
upon advance written notice by the Company of at least five (5) business days to
the holders of such Stock Awards, such Stock Awards shall terminate if not
exercised (if applicable) prior to such event.
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(A) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company to the extent shareholder approval is necessary to satisfy the
requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities
exchange listing requirements.
(B) The Board may in its sole discretion submit any other amendment to the
Plan for shareholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(C) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees,
Directors or Consultants with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(D) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(E) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
14.
<PAGE>
14. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate at the close of business on February 16,
2008, which shall be within ten (10) years from the date the Plan is adopted by
the Board or approved by the shareholders of the Company, whichever is sooner.
Notwithstanding the foregoing, all Incentive Stock Options shall be granted, if
at all, no later than the last day preceding the tenth (10th) anniversary of the
earlier of (i) the date on which the latest increase in the maximum number of
shares issuable under the Plan was approved by the shareholders of the Company
or (ii) the date such amendment was adopted by the Board. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(B) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Stock Award was granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the date adopted by the Board, but no
Options or rights to purchase restricted stock shall be exercised, and no stock
bonuses shall be granted under the Plan, unless and until the Plan has been
approved by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted by the Board.
15.
<PAGE>
EXHIBIT 10.3
NVIDIA CORPORATION
INCENTIVE STOCK OPTION
1998 EQUITY INCENTIVE PLAN
TO THE OPTIONEE IDENTIFIED ON THE STOCK OPTION COVER SHEET:
NVIDIA Corporation, a Delaware corporation (the "Company"), pursuant to its
1998 Equity Incentive Plan (the "Plan"), has this day granted to you, the
optionee named on the stock option cover sheet, an option to purchase shares of
the common stock of the Company ("Common Stock"). This option is intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's
employees, (including officers), directors and consultants.
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option are
set forth in the stock option cover sheet. Subject to the limitations contained
herein, this option shall be exercisable with respect to each installment shown
below on or after the date of vesting applicable to such installment, as set
forth in the stock option cover sheet.
2. (A) The exercise price of this option is set forth on the stock option
cover sheet, being not less than the fair market value of the Common Stock on
the date of grant of this option.
(B) Payment of the exercise price per share is due in full upon
exercise of all or any part of each installment which has accrued to you. You
may elect, to the extent permitted by applicable statutes and regulations, to
make payment of the exercise price under one of the following alternatives:
(I) Payment of the exercise price per share in cash (including
check) at the time of exercise;
(II) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company prior to the issuance of Common Stock;
(III) Provided that at the time of exercise the Company's Common
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise; or
1.
<PAGE>
(IV) Payment by a combination of the methods of payment
permitted by subparagraph 2(b)(i) through 2(b)(iii) above.
3. This option may not be exercised for any number of shares which would
require the issuance of anything other than whole shares.
4. Notwithstanding anything to the contrary contained herein, this option
may not be exercised unless the shares issuable upon exercise of this option are
then registered under the Securities Act of 1933, as amended (the "Securities
Act"), or, if such shares are not then so registered, the Company has determined
that such exercise and issuance would be exempt from the registration
requirements of the Securities Act.
5. The term of this option commences on the date hereof and, unless sooner
terminated as set forth below or in the Plan, terminates on the date set forth
as the termination date in the stock option cover sheet (which date shall be no
more than ten (10) years from date the is option is granted). In no event may
this option be exercised on or after the date on which it terminates. This
option shall terminate prior to the expiration of its term as follows: three
(3) months after the termination of your employment with the Company or an
affiliate of the Company (as defined in the Plan) for any reason or for no
reason unless:
(A) such termination of employment is due to your permanent and total
disability (within the meaning of Section 422(c)(6) of the Code), in which event
the option shall terminate on the earlier of the termination date set forth
above or twelve (12) months following such termination of employment; or
(B) such termination of employment is due to your death, in which
event the option shall terminate on the earlier of the termination date set
forth above or eighteen (18) months after your death; or
(C) during any part of such three (3) month period the option is not
exercisable solely because of the condition set forth in paragraph 4 above, in
which event the option shall not terminate until the earlier of the termination
date set forth above or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of employment.
However this option may be exercised following termination of employment
only as to that number of shares as to which it was exercisable on the date of
termination of employment under the provisions of paragraph 1 of this option.
6. (A) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to the Plan.
(B) By exercising this option you agree that:
2.
<PAGE>
(I) the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding
obligation of the Company arising by reason of (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of shares acquired upon
such exercise; and
(II) you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of this option that occurs within two (2) years after the
date of this option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of this option.
(III) if requested by the Company (or a representative of the
underwriters), in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, you will not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Act as may be requested by the Company or the representative of the
underwriters. You further agree that the Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
7. This option is not transferable, except by will or by the laws of
descent and distribution, and is exercisable during your life only by you. By
delivering written notice to the Company, in a form satisfactory to the Company,
you may designate a third party who, in the event of your death, shall
thereafter be entitled to exercise this option.
8. This option is not an employment contract and nothing in this option
shall be deemed to create in any way whatsoever any obligation on your part to
continue in the employ of the Company, or of the Company to continue your
employment with the Company.
9. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
10. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of paragraph 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
Dated the grant date set forth on the cover sheet.
Effective only if executed on the cover sheet by an officer of the Company
duly authorized by the Board of Directors.
3.
<PAGE>
EXHIBIT 10.4
NVIDIA CORPORATION
NONSTATUTORY STOCK OPTION
1998 EQUITY INCENTIVE PLAN
TO THE OPTIONEE IDENTIFIED ON THE STOCK OPTION COVER SHEET:
NVIDIA Corporation, a Delaware corporation (the "Company"), pursuant to its
1998 Equity Incentive Plan (the "Plan") has this day granted to you, the
optionee named on the stock option cover sheet, an option to purchase shares of
the common stock of the Company ("Common Stock"). This option is not intended
to qualify as and will not be treated as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants.
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option are
set forth in the stock option cover sheet. Subject to the limitations contained
herein, this option shall be exercisable with respect to each installment shown
below on or after the date of vesting applicable to such installment, as set
forth in the stock option cover sheet.
2. (A) The exercise price of this option is set forth on the stock option
cover sheet, being not less than eighty-five percent (85%) of the fair market
value of the Common Stock on the date of grant of this option.
(B) Payment of the exercise price per share is due in full upon
exercise of all or any part of each installment which has accrued to you. You
may elect, to the extent permitted by applicable statutes and regulations, to
make payment of the exercise price under one of the following alternatives:
(I) Payment of the exercise price per share in cash (including
check) at the time of exercise;
(II) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company prior to the issuance of Common Stock;
(III) Provided that at the time of exercise the Company's Common
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise; or
1.
<PAGE>
(IV) Payment by a combination of the methods of payment
permitted by subparagraph 2(b)(i) through 2(b)(iii) above.
3. This option may not be exercised for any number of shares which would
require the issuance of anything other than whole shares.
4. Notwithstanding anything to the contrary contained herein, this option
may not be exercised unless the shares issuable upon exercise of this option are
then registered under the Securities Act of 1933, as amended (the "Securities
Act") or, if such Shares are not then so registered, the Company has determined
that such exercise and issuance would be exempt from the registration
requirements of the Securities Act.
5. The term of this option commences on the date hereof and, unless sooner
terminated as set forth below or in the Plan, terminates on the date set forth
as the termination date in the stock option cover sheet (which date shall be no
more than ten (10) years from the date this option is granted). In no event
may this option be exercised on or after the date on which it terminates. This
option shall terminate prior to the expiration of its term as follows: three
(3) months after the termination of your employment with the Company or an
affiliate of the Company (as defined in the Plan) for any reason or for no
reason unless:
(A) such termination of employment is due to your permanent and total
disability (within the meaning of Section 422(c)(6) of the Code), in which event
the option shall terminate on the earlier of the termination date set forth
above or twelve (12) months following such termination of employment; or
(B) such termination of employment is due to your death, in which
event the option shall terminate on the earlier of the termination date set
forth above or eighteen (18) months after your death; or
(C) during any part of such three (3) month period the option is not
exercisable solely because of the condition set forth in paragraph 4 above, in
which event the option shall not terminate until the earlier of the termination
date set forth above or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of employment.
However, this option may be exercised following termination of employment
only as to that number of shares as to which it was exercisable on the date of
termination of employment under the provisions of paragraph 1 of this option.
6. (A) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to the Plan.
(B) By exercising this option you agree that:
2.
<PAGE>
(I) the Company may require you to enter an arrangement
providing for the cash payment by you to the Company of any tax withholding
obligation of the Company arising by reason of: (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of shares acquired upon
such exercise; and
(II) if requested by the Company (or a representative of the
underwriters), in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, you will not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Act as may be requested by the Company or the representative of the
underwriters. You further agree that the Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
7. This option is not transferable, except by will or by the laws of
descent and distribution, and is exercisable during your life only by you. By
delivering written notice to the Company, in a form satisfactory to the Company,
you may designate a third party who, in the event of your death, shall
thereafter be entitled to exercise this option.
8. This option is not an employment contract and nothing in this option
shall be deemed to create in any way whatsoever any obligation on your part to
continue in the employ of the Company, or of the Company to continue your
employment with the Company. In the event that this option is granted to you in
connection with the performance of services as a consultant or director,
references to employment, employee and similar terms shall be deemed to include
the performance of services as a consultant or a director, as the case may be,
provided, however, that no rights as an employee shall arise by reason of the
use of such terms.
9. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
10. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of paragraph 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
Dated the grant date set forth on the cover sheet.
Effective only if executed on the cover sheet by an officer of the Company
duly authorized by the Board of Directors.
3.
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EXHIBIT 10.5
NVIDIA CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED FEBRUARY 17, 1998
APPROVED BY SHAREHOLDERS _____________, 1998
NO TERMINATION DATE
1. PURPOSE.
(A) The purpose of the 1998 Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of NVIDIA Corporation, a Delaware corporation
(the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may be given an opportunity to
purchase stock of the Company.
(B) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(C) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(D) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(A) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(B) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(I) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(II) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(III) To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
1.
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(IV) To amend the Plan as provided in paragraph 13.
(V) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.
(C) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee")
constituted in accordance with the requirements of Rule 16b-3 ("Rule 16b-3")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate Five Hundred Thousand (500,000)
shares of the Company's common stock (the "Common Stock"). If any right granted
under the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(A) The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
(B) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
2.
<PAGE>
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(A) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan, unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be equal to or greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan,
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(B) The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(I) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(II) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(III) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the end of
the Offering, he or she will not receive any right under that Offering.
(C) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(D) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's
3.
<PAGE>
rights to purchase stock of the Company or any Affiliate to accrue at a rate
which exceeds twenty five thousand dollars ($25,000) of fair market value of
such stock (determined at the time such rights are granted) for each calendar
year in which such rights are outstanding at any time.
(E) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(A) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined by the Board or the Committee in each Offering)
during the period which begins on the Offering Date (or such later date as the
Board or the Committee determines for a particular Offering) and ends on the
date stated in the Offering, which date shall be no later than the end of the
Offering. The Board or the Committee shall establish one or more dates during an
Offering (the "Purchase Date(s)") on which rights granted under the Plan shall
be exercised and purchases of Common Stock carried out in accordance with such
Offering.
(B) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(C) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(I) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(II) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(A) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such
4.
<PAGE>
employee's Earnings during the Offering (as defined by the Board or Committee in
each Offering). The payroll deductions made for each participant shall be
credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce
(including to zero) or increase such payroll deductions, and an eligible
employee may begin such payroll deductions, after the beginning of any Offering
only as provided for in the Offering. A participant may make additional payments
into his or her account only if specifically provided for in the Offering and
only if the participant has not had the maximum amount withheld during the
Offering.
(B) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon such withdrawal
from the Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(C) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee) under the Offering, without interest.
(D) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE.
(A) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted
5.
<PAGE>
rights under the Plan, as provided in paragraph 5, in which case such amount
shall be distributed to the participant after such final Purchase Date, without
interest. The amount, if any, of accumulated payroll deductions remaining in any
participant's account after the purchase of shares which is equal to the amount
required to purchase whole shares of stock on the final Purchase Date of an
Offering shall be distributed in full to the participant after such Purchase
Date, without interest.
(B) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(A) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(B) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A SHAREHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
6.
<PAGE>
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or other transaction
not involving the receipt of consideration by the Company), the Plan and
outstanding rights will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the class(es) and number of shares and
price per share of stock subject to outstanding rights. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(B) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) the acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act
or any comparable successor provisions (excluding any employee benefit plan, or
related trust, sponsored or maintained by the Company or any Affiliate of the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors, then, as determined by the
Board in its sole discretion (i) any surviving or acquiring corporation may
assume outstanding rights or substitute similar rights for those under the Plan,
(ii) such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(A) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company to the extent shareholder approval is necessary for the Plan to
satisfy the requirements of Section 423 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(B) The Board may in its sole discretion submit any other amendment to the
Plan for shareholder approval, including.
(C) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
7.
<PAGE>
(D) Rights and obligations under any rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with the consent
of the person to whom such rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as necessary to ensure that
the Plan and/or rights granted under the Plan comply with the requirements of
Section 423 of the Code.
14. 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 the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant 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 the Plan in the event
of such participant's death during an Offering.
(B) The participant may change such designation of beneficiary 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 the Plan who is living at the time of
such participant's death, the Company shall deliver such shares and/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 sole discretion, may deliver such shares and/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.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the shares subject to the Plan's share reserve, as increased and/or adjusted
from time to time, have been issued under the terms of the Plan. No rights may
be granted under the Plan while the Plan is suspended or after it is terminated.
(B) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under the Plan comply with the requirements of Section 423 of the
Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day that the Company's initial
public offering of shares of common stock becomes effective (the "Effective
Date"), but no rights granted under the Plan shall be exercised unless and until
the Plan has been approved by the shareholders of the Company within twelve (12)
months before or after the date the Plan is adopted by the Board or the
Committee, which date may be prior to the Effective Date.
8.
<PAGE>
EXHIBIT 10.6
NVIDIA Corporation
1998 Employee Stock Purchase Plan Offering
ADOPTED FEBRUARY 17, 1998
1. GRANT; OFFERING DATE.
(A) The Board of Directors of NVIDIA Corporation, a Delaware corporation
(the "Company"), pursuant to the Company's 1998 Employee Stock Purchase Plan
(the "Plan"), hereby authorizes the grant of rights to purchase shares of the
common stock of the Company ("Common Stock") to all Eligible Employees (an
"Offering"). The first Offering shall begin on the effective date of the initial
public offering of the Company's Common Stock and end on July 31, 1999 (the
"Initial Offering"). The Initial Offering will be divided into two (2) shorter
Purchase Periods of approximately six (6) months in duration, with the initial
Purchase Period ending on January 31, 1999 and the second Purchase Period ending
on July 31, 1999.
(B) Thereafter, commencing on August 1, 1999 an Offering shall be one (1)
year in length, shall begin on each August 1 and shall be divided into two (2)
shorter Purchase Periods of approximately six (6) months in duration. The first
day of an Offering is that Offering's "Offering Date." January 31 and July 31
shall be that Offering's "Purchase Dates."
(C) If an Offering Date does not fall on a day during which the Company's
Common Stock is actively traded, then the Offering Date shall be the next
subsequent day during which the Company's Common Stock is actively traded.
(D) Prior to the commencement of any Offering, the Board of Directors (or
the Committee described in subparagraph 2(c) of the Plan, if any) may change any
or all terms of such Offering and any subsequent Offerings. The granting of
rights pursuant to each Offering hereunder shall occur on each respective
Offering Date unless, prior to such date (a) the Board of Directors (or such
Committee) determines that such Offering shall not occur, or (b) no shares
remain available for issuance under the Plan in connection with the Offering.
2. ELIGIBLE EMPLOYEES.
All employees of the Company and each of its Affiliates (as defined in the
Plan) incorporated in the United States, shall be granted rights to purchase
Common Stock under each Offering on the Offering Date (an "Eligible Employee").
Notwithstanding the foregoing, the following employees shall not be Eligible
Employees or be granted rights under an Offering: (i) part-time or seasonal
employees whose customary employment is less than 20 hours per week or five
months per calendar year or (ii) 5% shareholders (including ownership through
unexercised options) described in subparagraph 5(c) of the Plan.
3. RIGHTS.
(A) Subject to the limitations contained herein and in the Plan, on each
Offering Date each Eligible Employee shall be granted the right to purchase the
number of shares of Common Stock purchasable with up to ten percent (10%) of
such Eligible Employee's Earnings paid
1.
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during such Offering after the Eligible Employee first commences participation;
provided, however, that no employee may purchase Common Stock on a particular
Purchase Date that would result in more than ten percent (10%) of such
employee's Earnings in the period from the Offering Date to such Purchase Date
having been applied to purchase shares under all ongoing Offerings under the
Plan and all other Company plans intended to qualify as "employee stock purchase
plans" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). For this Offering, "Earnings" means the total compensation paid to an
employee, including all salary, wages (including amounts elected to be deferred
by the employee, that would otherwise have been paid, under any cash or deferred
arrangement established by the Company), overtime pay, commissions, bonuses, and
other remuneration paid directly to the employee, but excluding profit sharing,
the cost of employee benefits paid for by the Company, education or tuition
reimbursements, imputed income arising under any Company group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company under any employee benefit plan, and similar items of compensation.
(B) Subject to the limitations contained herein and in the Plan, each
employee who was not eligible on the Offering Date but who first becomes an
Eligible Employee during the Offering shall, on the next February 1 during that
Offering, be granted the right to purchase the number of shares of Common Stock
purchasable with up to ten percent (10%) of such employee's Earnings paid during
his or her participation in such Offering, which right shall be deemed to be a
part of the Offering. Such right shall have the same characteristics as any
rights originally granted under the Offering, except that (i) the date on which
such a right is granted shall be the "Offering Date" of such right for all
purposes, including determination of the exercise price of such right; and (ii)
the Offering for such right shall begin on its Offering Date and end coincident
with the end of the ongoing Offering.
(C) Notwithstanding the foregoing, the maximum number of shares of Common
Stock an Eligible Employee may purchase on any Purchase Date in an Offering
shall be such number of shares as has a fair market value (determined as of the
Offering Date for such Offering) equal to (x) $25,000 multiplied by the number
of calendar years in which the right under such Offering has been outstanding at
any time, minus (y) the fair market value of any other shares of Common Stock
(determined as of the relevant Offering Date with respect to such shares) which,
for purposes of the limitation of Section 423(b)(8) of the Code, are attributed
to any of such calendar years in which the right is outstanding. The amount in
clause (y) of the previous sentence shall be determined in accordance with
regulations applicable under Section 423(b)(8) of the Code based on (i) the
number of shares previously purchased with respect to such calendar years
pursuant to such Offering or any other Offering under the Plan, or pursuant to
any other Company plans intended to qualify as "employee stock purchase plans"
under Section 423 of the Code, and (ii) the number of shares subject to other
rights outstanding on the Offering Date for such Offering pursuant to the Plan
or any other such Company plan.
(D) The maximum aggregate number of shares available to be purchased by
all Eligible Employees under an Offering shall be the number of shares remaining
available under the Plan on the Offering Date. If the aggregate purchase of
shares of Common Stock upon exercise of rights granted under the Offering would
exceed the maximum aggregate number of
2.
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shares available, the Board shall make a pro rata allocation of the shares
available in a uniform and equitable manner.
4. PURCHASE PRICE.
The purchase price of the Common Stock under the Offering shall be the
lesser of eighty-five percent (85%) of the fair market value of the Common Stock
on the Offering Date or eighty-five percent (85%) of the fair market value of
the Common Stock on the Purchase Date, in each case rounded up to the nearest
whole cent per share. For the Initial Offering, the fair market value of the
Common Stock at the time when the Offering commences shall be the price per
share at which shares of Common Stock are first sold to the public in the
Company's initial public offering as specified in the final prospectus with
respect to that offering.
5. PARTICIPATION.
(A) An Eligible Employee may elect to participate in an Offering only at
the beginning of the Offering, or such later date specified in subparagraph
3(b). An Eligible Employee shall become a participant in an Offering by
delivering an agreement authorizing payroll deductions. Such deductions must be
in whole percentages, with a minimum percentage of one percent (1%) and a
maximum percentage of ten percent (10%) of earnings. A participant may not make
additional payments into his or her account. The agreement shall be made on such
enrollment form as the Company or a designated Affiliate provides, and must be
delivered to the Company or designated Affiliate at least ten (10) days before
the Offering Date, or before such later date specified in subparagraph 3(b), to
be effective, unless a later time for filing the enrollment form is set by the
Board for all Eligible Employees with respect to a given Offering Date. For the
Initial Offering, the time for filing an enrollment form and commencing
participation for individuals who are Eligible Employees on the Offering Date
for the Initial Offering may be after the Offering Date, as determined by the
Company and communicated to such Eligible Employees. (If the agreement
authorizing payroll deductions is required to be delivered to the Company or
designated Affiliate a specified number of days before the Offering Date to be
effective, then an employee who becomes eligible during the required delivery
period shall not be considered to be an Eligible Employee at the beginning of
the Offering but may elect to participate during the Offering as provided in
subparagraph 3(b).)
(B) A participant may reduce (including to zero) his or her participation
level once (and only once) during a Purchase Period, effective as soon as
administratively practicable. Any such change in participation shall be made by
delivering a notice to the Company or a designated Affiliate in such form and at
such time as the Company provides. In addition, a participant may increase or
decrease his or her deductions prior to the beginning of a new Purchase Period
or Offering to be effective at the beginning of such new Purchase Period or
Offering. Except as otherwise specifically provided herein, a participant may
not increase or decrease his or her participation level during the course of an
Offering.
(C) A participant may withdraw from an Offering and receive his or her
accumulated payroll deductions from the Offering (reduced to the extent, if any,
such deductions have been used to acquire Common Stock for the participant on
any prior Purchase Dates), without interest, at any time prior to the end of the
Offering, excluding only each ten (10) day period immediately
3.
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preceding a Purchase Date by delivering a withdrawal notice to the Company in
such form as the Company provides. A participant who has withdrawn from an
Offering shall not again participate in such Offering but may participate in
subsequent Offerings under the Plan by submitting a new participation agreement
in accordance with the terms thereof.
6. PURCHASES.
Subject to the limitations contained herein, on each Purchase Date, each
participant's accumulated payroll deductions (without any increase for interest)
shall be applied to the purchase of whole shares of Common Stock, up to the
maximum number of shares permitted under the Plan and the Offering.
7. NOTICES AND AGREEMENTS.
Any notices or agreements provided for in an Offering or the Plan shall be
given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering shall be deemed effectively given upon
receipt or, in the case of notices and agreements delivered by the Company, five
(5) days after deposit in the United States mail, postage prepaid.
8. EXERCISE CONTINGENT ON SHAREHOLDER APPROVAL.
The rights granted under an Offering are subject to the approval of the
Plan by the shareholders as required for the Plan to obtain treatment as a tax-
qualified employee stock purchase plan under Section 423 of the Code.
9. OFFERING SUBJECT TO PLAN.
Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of an Offering and those of the Plan (including
interpretations, amendments, rules and regulations that may from time to time be
promulgated and adopted pursuant to the Plan), the provisions of the Plan shall
control.
4.
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EXHIBIT 10.7
NVIDIA CORPORATION
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ADOPTED FEBRUARY 17, 1998
APPROVED BY SHAREHOLDERS _________________, 1998
TERMINATION DATE: FEBRUARY 16, 2008
1. PURPOSE.
(A) The purpose of the 1998 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of Nvidia Corporation (the
"Company") who is not otherwise at the time of grant an employee of or
consultant to the Company or of any Affiliate of the Company (each such person
being hereafter referred to as a "Non-Employee Director") will be given an
opportunity to purchase stock of the Company.
(B) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
(C) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(A) The Board of Directors of the Company (the "Board") shall administer
the Plan unless and until the Board delegates administration to a committee, as
provided in subparagraph 2(b).
(B) The Board may delegate administration of the Plan to a committee
composed of two (2) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate Three Hundred Thousand (300,000)
shares of the Company's common stock. If any option granted under the Plan shall
for any reason expire or otherwise terminate without having been exercised in
full, the stock not purchased under such option shall again become available for
the Plan.
1.
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(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(A) After the effective date of the initial public offering of the
Company's common stock (the "IPO Date"), each person who is elected or
appointed for the first time to be a Non-Employee Director automatically
shall, upon the date of his or her initial election or appointment to be a Non-
Employee Director by the Board or shareholders of the Company be granted an
option to purchase Fifty Thousand (50,000) shares of common stock of the
Company on the terms and conditions set forth herein (an "Initial Grant").
(B) On March 30, 1998 and on the day following each Annual Meeting of
Shareholders of the Company ("Annual Meeting"), commencing with the Annual
Meeting in 1999, each person who is then a Non-Employee Director automatically
shall be granted one or more options to purchase shares of common stock of the
Company on the following terms and conditions (individually, an "Annual
Grant"):
(i) Each Non-Employee Director who has attended at least
seventy-five percent (75%) of the regularly scheduled meetings of the Board
held during such person's tenure as a Non-Employee Director since the
preceding Annual Meeting (or since March 30, 1997 for the grant on March 30,
1998) shall be granted an option to purchase Twenty Thousand (20,000) shares
of common stock of the Company; provided, however, that if the person has not
been serving as a Non-Employee Director for the entire period since the prior
Annual Meeting, then the number of shares granted shall be reduced pro rata
for each full quarter prior to the date of grant during which such person did
not serve as a Non-Employee Director.
(ii) Each Non-Employee Director who is a member of a committee of
the Board and who has attended at least seventy-five percent (75%) of the
regularly scheduled meetings of such committee held during such person's
tenure as a Non-Employee Director since the preceding Annual Meeting (or since
March 30, 1997 for the grant on March 30, 1998) shall be granted an option to
purchase Five Thousand (5,000) shares of common stock of the Company for each
such committee; provided, however, that if the person has not been serving on
such committee since the prior Annual Meeting, then the number of shares
granted shall be reduced pro rata for each full quarter prior to the date of
grant during which such person did not serve as a Non-Employee Director.
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(A) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ten (10) years
from the date of grant ("Expiration Date"). If the optionee's service as a Non-
Employee Director of the Company or an employee, member of the Board of
Directors or consultant to the Company or any Affiliate terminates for any
reason or for no reason, the option shall terminate on the earlier of the
Expiration Date or the date twelve (12) months following the date of termination
of all such service; provided, however, that if such termination of service is
due to the optionee's death, the option shall terminate on the earlier of the
Expiration Date or eighteen (18) months following the date of the optionee's
death.
(B) The exercise price of each option shall be equal to one hundred
percent (100%) of the Fair Market Value of the stock (as such term is defined in
subsection 9(d)) subject to such option on the date such option is granted.
(C) The optionee may elect to make payment of the exercise price under one
of the following alternatives:
(I) Payment of the exercise price per share in cash at the time of
exercise;
2.
<PAGE>
(II) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at its Fair Market
Value on the date preceding the date of exercise; or
(III) Payment pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company either prior to the issuance of shares of the
Company's common stock or pursuant to the terms of irrevocable instructions
issued by the optionee prior to the issuance of shares of the Company's common
stock.
(IV) Payment by a combination of the methods of payment specified in
subparagraph 6(c)(i) through 6(c)(iii) above.
(D) An option shall be transferable only to the extent specifically
provided in the option agreement; provided, however, that if the option
agreement does not specifically provide for the transferability of an option,
then the option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person (or by his guardian or
legal representative) or transferee pursuant to such an order. Notwithstanding
the foregoing, the optionee may, by delivering written notice to the Company in
a form satisfactory to the Company, designate a third party who, in the event of
the death of the optionee, shall thereafter be entitled to exercise the option.
(E) The Annual Grant shall vest monthly over the one (1)-year period
following the date of grant such that the entire Annual Grant shall become
exercisable on the one (1)-year anniversary of the date of grant of the option,
provided that the optionee has, during the entire period prior to such vesting
installment date, continuously served as a director or employee of
or consultant to the Company or any Affiliate of the Company, whereupon such
option shall become fully vested and exercisable in accordance with its terms
with respect to that portion of the shares represented by that installment.
(F) The Initial Grant shall vest monthly over the four (4)-year period
following the date of grant such that the entire Initial Grant shall become
exercisable on the fourth anniversary of the date of grant of the option,
provided that the optionee has, during the entire period prior to such vesting
installment date, continuously served as a director or employee of
or consultant to the Company or any Affiliate of the Company, whereupon such
option shall become fully vested and exercisable in accordance with its terms
with respect to that portion of the shares represented by that installment.
(G) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and (ii)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the option for such person's own
3.
<PAGE>
account and not with any present intention of selling or otherwise distributing
the stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise of the option has been registered under a then currently-effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or (ii) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may require
any optionee to provide such other representations, written assurances or
information that the Company shall determine is necessary, desirable or
appropriate to comply with applicable securities laws as a condition of granting
an option to the optionee or permitting the optionee to exercise the option. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(H) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(A) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(B) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(A) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
4.
<PAGE>
(B) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate in any capacity or shall affect any right of the
Company, its Board or shareholders or any Affiliate, to remove any Non-Employee
Director pursuant to the Company's Bylaws and the provisions of Delaware general
corporation law.
(C) In connection with each option made pursuant to the Plan, it shall be
a condition precedent to the Company's obligation to issue or transfer shares to
a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal, state or local withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
(D) As used in this Plan, "Fair Market Value" means, as of any date, the
value of the common stock of the Company determined as follows:
(I) If the common stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable; or
(II) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding options will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding options. Such adjustments shall be made by the Board, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company.")
(B) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or any
5.
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comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or any Affiliate of the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then to the extent not prohibited by
applicable law, (i) any surviving or acquiring corporation shall assume any
options outstanding under the Plan or shall substitute similar options
(including an option to acquire the same consideration paid to the shareholders
in the transaction described in this subparagraph 10(b)) for those outstanding
under the Plan, or (ii) such options shall continue in full force and effect. In
the event any surviving or acquiring corporation refuses to assume such options,
or to substitute similar options for those outstanding under the Plan, then such
options shall be terminated if not exercised prior to such event.
11. AMENDMENT OF THE PLAN.
(A) The Board at any time, and from time to time, may amend the Plan
and/or some or all outstanding options granted under the Plan. However, except
as provided in paragraph 10 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the shareholders of the Company
to the extent shareholder approval is necessary for the Plan to satisfy the
requirements of Rule 16b-3 under the Exchange Act or any Nasdaq or securities
exchange listing requirements.
(B) Rights and obligations under any option granted before any amendment
of the Plan shall not be impaired by such amendment unless (i) the Company
requests the consent of the person to whom the option was granted and (ii) such
person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate ten (10) years after the date adopted by
the Board. No options may be granted under the Plan while the Plan is suspended
or after it is terminated.
(B) Suspension or termination of the Plan shall not impair rights and
obligations under any option granted while the Plan is in effect, except with
the consent of the person to whom the option was granted.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(A) The Plan shall become effective on the same day that the Company's
initial public offering of shares of common stock becomes effective, subject to
the condition subsequent that the shareholders of the Company approve the Plan.
(B) No option granted under the Plan shall be exercised or exercisable
unless and until the condition of subparagraph 13(a) above has been met.
6.
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EXHIBIT 10.8
NVIDIA Corporation
1998 Non-Employee Directors' Stock Option Plan
Nonstatutory Stock Option
(Initial Grant)
_______________, Optionee:
On __________________, 199__, an option was automatically granted to you
(the "optionee") pursuant to the NVIDIA Corporation (the "Company") 1998 Non-
Employee Directors' Stock Option Plan (the "Plan") to purchase shares of the
Company's common stock ("Common Stock"). This option is not intended to qualify
---
and will not be treated as an "incentive stock option" within the meaning of
---
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for Non-Employee Directors (as defined in
the Plan).
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
_________________________ (_________) shares.
2. The exercise price of this option is _________________________
($________) per share, such amount being equal to the Fair Market Value (as
defined in the Plan) of the Common Stock on the date of grant of this option.
3. This option shall vest monthly over the four (4)-year period following
the date of grant such that the entire option shall become exercisable on the
fourth anniversary of the date of grant, provided that, during the entire period
prior to such vesting installment date, you have continuously served as a Non-
Employee Director of the Company or employee or member of the Board of Directors
of or consultant to the Company or any Affiliate of the Company. If your service
as a Non-Employee Director or employee or member of the Board of Directors of or
consultant to the Company or any Affiliate of the Company terminates for any
reason or for no reason, this option shall be exercisable only to the extent
vested on such termination date, and shall terminate to the extent not exercised
on the earlier of the Expiration Date (as defined below) or the date twelve (12)
months following the date of termination of all such service; provided, however,
that if such termination of service is due to your death, this option shall
terminate on the earlier of the Expiration Date or eighteen (18) months
following the date of your death.
4. (a) You may exercise this option, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to Section 6 of
the Plan. You may exercise this option only for whole shares.
1.
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(B) You may elect to pay the exercise price under one of the following
alternatives:
(I) Payment in cash or check at the time of exercise;
(II) Provided that at the time of the exercise the Common Stock
is publicly traded and quoted regularly in the Wall Street Journal, payment by
delivery of shares of Common Stock already owned by you, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interest, which Common
Stock shall be valued at its Fair Market Value on the date preceding the date of
exercise;
(III) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company either prior to the issuance of shares of the Common
Stock or pursuant to the terms of irrevocable instructions issued by you prior
to the issuance of shares of the Common Stock; or
(IV) Payment by a combination of the methods of payment specified
in subparagraphs (i) through (iii) above.
(C) By exercising this option you agree that the Company may require
you to enter an arrangement providing for the cash payment by you to the Company
of any tax-withholding obligation of the Company arising by reason of the
exercise of this option. Notwithstanding anything to the contrary contained
herein, you may not exercise this option unless the shares issuable upon
exercise of this option are then registered under the Securities Act of 1933, as
amended (the "Securities Act"), or, if such shares are not then so registered,
the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act.
5. This option is not transferable except (i) by will or by the laws of
descent and distribution, (ii) by written designation which takes effect upon
your death, (iii) by written instruction, in a form accepted by the Company, to
your spouse, children, stepchildren, or grandchildren (whether adopted or
natural), to a trust, family limited liability company or family partnership
created solely for the benefit of you and the foregoing persons, or (iv) to your
former spouse (if transfer is pursuant to a judicial decree dissolving your
marriage). During your life this Option is exercisable only by you or a
transferee satisfying the above conditions. The right of a transferee to
exercise the transferred portion of this Option after your termination of
employment with the Company shall terminate in accordance with your right of
exercise under Section 5 of this Option, and after your death under Section 6 of
this Option (treating the transferee as a person who acquired the right to
exercise this Option by bequest or inheritance. The terms of this Option shall
be binding upon the transferees, executors, administrators, heirs, successors,
and assigns of the Optionee. Notwithstanding the foregoing, by delivering
written notice to the Company, in a form satisfactory to the Company, you may
designate a third party who, in the event of your death, shall thereafter be
entitled to exercise this option.
2.
<PAGE>
6. The term of this option ("Expiration Date") is ten (10) years measured
from the grant date, subject, however, to earlier termination upon your
termination of service, as set forth in Section 6 of the Plan.
7. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
8. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto, and its provisions are hereby made a part of this
option, including without limitation the provisions of Section 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
9. Notwithstanding anything to the foregoing, this option shall not be
---
exercisable in whole or in part unless and until the Company's shareholders have
approved the Plan.
Dated the ____ day of _____________, 19___.
Very truly yours,
NVIDIA CORPORATION
By:_______________________________________
Duly authorized on behalf of the Board of
Directors
ATTACHMENT:
1998 Non-Employee Directors' Stock Option Plan
3.
<PAGE>
The Undersigned:
(A) Acknowledges receipt of the foregoing option and the attachment
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(B) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its Affiliates regarding the acquisition of Common Stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options and any other stock awards previously granted and
delivered to the undersigned under stock award plans of the Company and (ii) the
following agreements only:
NONE:________________________________
OTHER:_______________________________
_______________________________
_______________________________
_____________________________________
Optionee
<PAGE>
NOTICE OF EXERCISE
NVIDIA Corporation
1226 Tiros Way
Sunnyvale, CA 94085 Date of Exercise:__________________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Stock option dated: _______________
Number of shares as to which
option is exercised: _______________
Certificates to be
issued in name of: _______________
Total exercise price: $______________
Cash payment delivered
herewith: $______________
Value of __________ shares
of common stock delivered
herewith/1/: _______________
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the Company's 1998 Non-Employee Directors'
Stock Option Plan and (ii) to provide for the payment by me to you (in the
manner designated by you) of your withholding obligation, if any, relating to
the exercise of this option.
Very truly yours,
_______________________________________
_______________________
/1/ Shares must meet the public trading requirements set forth in the
option. Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
<PAGE>
EXHIBIT 10.9
NVIDIA Corporation
1998 Non-Employee Directors' Stock Option Plan
Nonstatutory Stock Option
(Annual Grant)
_______________, Optionee:
On __________________, 199___, an option was automatically granted to you
(the "optionee") pursuant to the NVIDIA Corporation (the "Company") 1998 Non-
Employee Directors' Stock Option Plan (the "Plan") to purchase shares of the
Company's common stock ("Common Stock"). This option is not intended to qualify
---
and will not be treated as an "incentive stock option" within the meaning of
---
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for Non-Employee Directors (as defined in
the Plan).
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
________________________ (________) shares.
2. The exercise price of this option is _________________________
($________) per share, such amount being equal to the Fair Market Value (as
defined in the Plan) of the Common Stock on the date of grant of this option.
3. This option shall vest monthly over the one (1)-year period following
the date of grant such that the entire option shall become exercisable on the
one (1)-year anniversary of the date of grant, provided that, during the entire
period prior to such vesting installment date, you have continuously served as a
Non-Employee Director or employee or member of the Board of Directors of or
consultant to the Company or any Affiliate of the Company. If your service as a
Non-Employee Director or employee or member of the Board of Directors of or
consultant to the Company or any Affiliate of the Company terminates for any
reason or for no reason, this option shall be exercisable only to the extent
vested on such termination date, and shall terminate to the extent not exercised
on the earlier of the Expiration Date (as defined below) or the date twelve (12)
months following the date of termination of all such service; provided, however,
that if such termination of service is due to your death, this option shall
terminate on the earlier of the Expiration Date or eighteen (18) months
following the date of your death.
4. (a) You may exercise this option, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to Section 6 of
the Plan. You may exercise this option only for whole shares.
1.
<PAGE>
(B) You may elect to pay the exercise price under one of the
following alternatives:
(I) Payment in cash or check at the time of exercise;
(II) Provided that at the time of the exercise the Common Stock
is publicly traded and quoted regularly in the Wall Street Journal, payment by
delivery of shares of Common Stock already owned by you, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interest, which Common
Stock shall be valued at its Fair Market Value on the date preceding the date of
exercise;
(III) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company either prior to the issuance of shares of the Common
Stock or pursuant to the terms of irrevocable instructions issued by you prior
to the issuance of shares of the Common Stock; or
(IV) Payment by a combination of the methods of payment
specified in subparagraphs (i) through (iii) above.
(C) By exercising this option you agree that the Company may require
you to enter an arrangement providing for the cash payment by you to the Company
of any tax-withholding obligation of the Company arising by reason of the
exercise of this option. Notwithstanding anything to the contrary contained
herein, you may not exercise this option unless the shares issuable upon
exercise of this option are then registered under the Securities Act of 1933, as
amended (the "Securities Act"), or, if such shares are not then so registered,
the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act.
5. This option is not transferable except (i) by will or by the laws of
descent and distribution, (ii) by written designation which takes effect upon
your death, (iii) by written instruction, in a form accepted by the Company, to
your spouse, children, stepchildren, or grandchildren (whether adopted or
natural), to a trust, family limited liability company or family partnership
created solely for the benefit of you and the foregoing persons, or (iv) to your
former spouse (if transfer is pursuant to a judicial decree dissolving your
marriage). During your life this Option is exercisable only by you or a
transferee satisfying the above conditions. The right of a transferee to
exercise the transferred portion of this Option after your termination of
employment with the Company shall terminate in accordance with your right of
exercise under Section 5 of this Option, and after your death under Section 6 of
this Option (treating the transferee as a person who acquired the right to
exercise this Option by bequest or inheritance. The terms of this Option shall
be binding upon the transferees, executors, administrators, heirs, successors,
and assigns of the Optionee. Notwithstanding the foregoing, by delivering
written notice to the Company, in a form satisfactory to the Company, you may
designate a third party who, in the event of your death, shall thereafter be
entitled to exercise this option.
2.
<PAGE>
6. The term of this option ("Expiration Date") is ten (10) years measured
from the grant date, subject, however, to earlier termination upon your
termination of service, as set forth in Section 6 of the Plan.
7. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
8. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto, and its provisions are hereby made a part of this
option, including without limitation the provisions of Section 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the
provisions of this option and those of the Plan, the provisions of the Plan
shall control.
9. Notwithstanding anything to the foregoing, this option shall not be
---
exercisable in whole or in part unless and until the Company's shareholders have
approved the Plan.
Dated the ____ day of ____, 19___.
Very truly yours,
NVIDIA CORPORATION
By:_____________________________________________
Duly authorized on behalf of the Board of
Directors
ATTACHMENT:
1998 Non-Employee Directors' Stock Option Plan
3.
<PAGE>
The Undersigned:
(A) Acknowledges receipt of the foregoing option and the attachment
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(B) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its Affiliates regarding the acquisition of Common Stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options and any other stock awards previously granted and
delivered to the undersigned under stock award plans of the Company and (ii) the
following agreements only:
NONE:____________________________
OTHER:___________________________
___________________________
___________________________
_______________________________________
Optionee
4.
<PAGE>
NOTICE OF EXERCISE
NVIDIA Corporation
1226 Tiros Way
Sunnyvale, CA 94085 Date of Exercise:____________________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Stock option dated: _______________
Number of shares as to which
option is exercised: _______________
Certificates to be
issued in name of: _______________
Total exercise price: $______________
Cash payment delivered
herewith: $______________
Value of __________ shares
of common stock delivered
herewith/1/: _______________
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the Company's 1998 Non-Employee Directors'
Stock Option Plan and (ii) to provide for the payment by me to you (in the
manner designated by you) of your withholding obligation, if any, relating to
the exercise of this option.
Very truly yours,
_________________________________________
________________________
/1/ Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or
security interests. Certificates must be endorsed or accompanied by an
executed assignment separate from certificate.
5.
<PAGE>
EXHIBIT 10.11
SUBLEASE AGREEMENT
I.
DEFINED TERMS
Base Rent
Monthly: $ 28,432.50
Annually: $341,190.00
Broker:
Sublessor: Wayne Mascia
Sublessee: Cornish & Carey Commercial
Building: 432 Lakeside Drive; Sunnyvale, California
Effective Date: February 16, 1995
Expiration Date: August 31, 1997
Landlord: Oakmead Investments, a general partnership
Master Lease: That certain Net Lease Agreement between Landlord and
Sublessor dated November 7, 1983, as amended by that
certain First Amendment to Lease dated April 1, 1992
(the "First Amendment")
Permitted Uses: General office, research and development, storage and
distribution of electronic components
Premises: Improved real property as more particularly described in
the Master Lease, attached hereto as EXHIBIT A,
consisting of approximately 59,885 rentable square feet.
Rent
Commencement Date: March 1, 1995
Security
Deposit: 18.955
Sublessee: NVIDIA CORPORATION
Sublessee's
Address: 432 Lakeside Drive
Sunnyvale, California
Attn: Rich Whitacre
Phone: (408) 720-6119
Sublessor: AMDAHL CORPORATION, a Delaware corporation
1.
<PAGE>
Sublessor's
Address: 1250 East Arques Avenue
Mail Stop 110
P.O. Box 3470
Sunnyvale, California 94088-3470
Attn: Director, Corporate Real Estate
Phone: (408) 746-6639
Sublet Space: That portion of the Premises, as more particularly
described in the Sublet Space Floor Plan, attached
hereto as EXHIBIT B, consisting of approximately 29,100
rentable square feet, but by agreement, charged as
27,875 rentable square feet for the purpose of
determining the Base Rent.
Term: Thirty (30) months, subject to extension pursuant to
the terms of Section 1.2 of this Sublease
Exhibits: Exhibit A Master Lease
Exhibit B Sublet Space Floor Plan
Exhibit C Tenant Improvements
II.
This SUBLEASE AGREEMENT ("Sublease") is entered as of the Effective Date by
and between Sublessor and Sublessee.
The parties enter this Sublease on the basis of the following facts,
understandings and intentions:
A. Sublessor is presently a lessee of the Premises in the Building
pursuant to the Master Lease by and between Landlord and Sublessor. A copy of
the Master Lease with all exhibits and addenda thereto is attached hereto as
EXHIBIT A.
B. Sublessor desires to sublease the Sublet Space to Sublessee and
Sublessee desires to sublease the Sublet Space from Sublessor on all of the
terms, covenants and conditions hereinafter set forth.
C. All of the terms and definitions in the Defined Terms section are
incorporated herein by this reference.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties, the parties hereto agree as follows:
1. SUBLEASE. Sublessor shall sublease to Sublessee, and Sublessee shall
sublease from Sublessor, the Sublet Space for the Term upon all of the terms,
covenants and conditions herein contained. In addition, Sublessor shall lease to
Sublessee, and Sublessee shall lease from Sublessor, any and all permanent
improvements ("Improvements") on the Sublet Space constructed as well as all
such Improvements constructed by or for Sublessee and/or owned by
2.
<PAGE>
Sublessor, upon all of the terms, covenants and conditions herein contained. As
used herein, "Sublet Space" shall include the Sublet Space and the Improvements.
1.1 EARLY OCCUPANCY. Notwithstanding anything to the contrary in this
Sublease, Sublessee and Sublessee's employees, agents, contractors and suppliers
shall have the right at any time after February 20, 1995 (the "Early Occupancy
Date") to enter the Premises, at their sole risk, solely to install Sublessee's
furniture, trade fixtures, communications equipment and other equipment therein;
provided, however, that (i) Sublessee's early entry shall not unreasonably
interfere with any of Sublessor's activities on the Premises during such period;
(ii) such entry on the Premises shall be on all of the terms of this Sublease,
except that Sublessee shall not be required to pay any Base Rent hereunder
during any period of early entry; (iii) during such period of early occupancy,
Sublessee shall be liable for utility and trash collection which exceed
Sublessor's "moth ball" rate; and (iv) Sublessee shall provide Sublessor before
such entry with certificates of the insurance required of Sublessee pursuant to
the terms of this Sublease.
1.2 RENEWAL TERM. Provided (i) Sublessee is not in default under the terms
of this Sublease for more than five (5) days after Sublessor's delivery of
written notice thereof to Sublessee at the time this renewal is exercised or at
the commencement of the Renewal Term (as defined below), (ii) Sublessee is
occupying at least ninety percent (90%) of the Sublet Space, including any
Available Space, (iii) Sublessor has not given more than two (2) notices of
default in any twelve (12) month period for nonpayment of monetary obligations,
(iv) the Master Lease is then in full force and effect, and (v) Sublessee's
then-existing financial condition is at least as favorable as Sublessee's
financial condition as of the Commencement Date, in Sublessor's sole discretion,
Sublessee shall have the option to renew this Sublease for either (and not both)
(A) one (1) period of one (1) year, or (B) a term equal to the remaining portion
of the term of the Master Lease (either, a "Renewal Term"). The Renewal Term
shall be on all the terms and conditions of this Sublease, except that (a) Base
Rent for the Renewal Term shall be ninety-five percent (95%) of the then-
existing Market Rent (as defined below), and (b) after Sublessee's exercise of
the Renewal Term, Sublessee shall have no further rights to any renewal of the
Term of this Sublease. Sublessee must exercise its option to renew this Sublease
by giving Sublessor written notice (an "Extension Notice") of its election to do
so no later than one hundred twenty (120) days prior to the end of the initial
Term. Any notice not given in a timely manner shall be void; and Sublessee shall
be deemed to have waived its renewal rights. The Renewal Term set forth herein
is personal to Sublessee and any Affiliate thereof and shall not be included in
any assignment of this Sublease.
1.2.1 MARKET RENT. The term "Market Rent" shall mean the monthly
amount per rentable square foot in the Sublet Space that a willing, non-equity,
non-renewal, non-expansion new tenant would pay and a willing landlord would
accept at arm's length for space in a comparable building or buildings, with
comparable tenant improvements (provided that the value of any tenant
improvements installed in the Sublet Space at Sublessee's sole expense shall not
be included as a factor in determining the Market Rent), in a comparable
location, giving appropriate consideration to monthly rental rates per rentable
square foot, the presence or absence of rent escalation clauses such as
operating expense and tax pass-throughs, length of lease term, size and location
of premises being leased, if any, and other generally applicable terms and
conditions of tenancy for a similar building or buildings.
3.
<PAGE>
No earlier than sixty (60) and no later than thirty (30) days prior to the
Expiration Date, Sublessor and Sublessee, upon notice from Sublessor, shall have
a period of thirty (30) days in which to agree on the Market Rent. If they agree
within that period, they shall immediately execute an amendment to this Lease
stating the Base Monthly Rent for such period.
If Sublessor and Sublessee are unable to agree upon the Market Rent within
such thirty (30) day period, then the dispute shall proceed to arbitration
conducted pursuant to the provisions of the laws of the state in which the
Premises is located and the Real Estate Arbitration Rules of the American
Arbitration Association or its successor insofar as said rules do not conflict
with said laws or this section. Within ten (10) days of the expiration of the
aforesaid thirty (30) day period, Sublessor and Sublessee shall select one joint
arbitrator or, if they cannot agree on one joint arbitrator, then each shall
select an arbitrator within fifteen (15) days of the expiration of the aforesaid
thirty (30) day period and notify the other party of its selection. The two
arbitrators selected shall designate the third arbitrator forthwith. Each
arbitrator selected shall be a real estate appraiser with an MAI certification
or a real estate broker, with at least five (5) years of experience appraising
or leasing building space comparable to the Premises in the city and county
where the Premises is located. The arbitrators shall convene in the city or
county in which the Premises are located as soon as practicable and offer
Sublessor and Sublessee the opportunity to present their cases. If any party
fails to appear more than once to participate or produce evidence in an
arbitration proceeding, the arbitrators may make their decision based solely on
the evidence actually presented. The arbitrators shall, by majority vote, make
their determinations of Market Rent based on the factors referenced above; and
such decision shall be binding upon Sublessor and Sublessee and enforceable in a
court of law. Each party shall be responsible for the costs, charges and fees of
its appointee; and the parties shall share equally in the costs, charges and
fees of the third arbitrator. In the event either party fails to appoint an
arbitrator or the two arbitrators fail to select a third arbitrator within the
time required by this section, upon application of either party, the arbitrator
shall be appointed by the American Arbitration Association, or if there is no
American Arbitration Association or it shall refuse to perform this function,
then by the then Presiding Judge of the Superior Court and/or presiding trial
court of the state and county in which the Premises is located.
1.3 RIGHT OF FIRST NEGOTIATION.
1.3.1 RIGHT. If at any time during the initial Term of this Sublease
Sublessor decides to offer any remaining portion of the Premises (the "Available
Space") for sublease, then, prior to leasing such portion of the Premises to a
third party sublessee, Sublessor shall first provide Sublessee with a written
notice ("Sublease Notice") describing the terms, in Sublessor's sole discretion,
on which Sublessor would be willing to sublease the Available Space to
Sublessee. Sublessee shall have five (5) business days from delivery of the
Sublease Notice in which to inform Sublessor in writing (a "Response Notice") of
Sublessee's intention to sublease all, and not a portion, of the Available Space
from Sublessor on the terms described in the Sublease Notice or on other terms
proposed by Sublessee. If Sublessee shall fail to provide such Response Notice
within such five (5) business day period, or shall affirmatively provide
Sublessor with written evidence of Sublessee's intention not to sublease the
Available Space, then Sublessor shall be free to sublease the Available Space on
such terms as Sublessor shall deem appropriate, and Sublessee's rights hereunder
shall forever terminate.
4.
<PAGE>
1.3.2 FIFTEEN DAY NEGOTIATION PERIOD. Is Sublessee shall have
provided Sublessor with a timely Response Notice, then Sublessor and Sublessee
shall have a period of fifteen (15) days from the date on which Sublessee
delivers the Response Notice in which to agree on terms by which Sublessor shall
sublease the Available Space to Sublessee; provided, however, that neither
Sublessor and Sublessee shall be required to agree to terms, and in so
negotiating, each party shall be free to negotiate terms as it deems best, in
its sole discretion. If Sublessor and Sublessee have not agreed in such fifteen
(15) day period on terms whereby Sublessee shall sublease such Available Space
from Sublessor, or if the parties hereto have not executed an amendment to this
Sublease confirming such obligations within thirty (30) days of the date on
which Sublessee delivers the Response Notice, then in either case Sublessor and
Sublessee's rights and obligations with respect to such Available Space shall
terminate with respect to the Available Space that is specified in such Sublease
Notice; provided, however, that nothing herein shall be deemed a waiver of
Sublessee's rights under this Section 1.3 with respect to (i) any other
Available Space in the Premises during the initial Term of this Sublease, or
(ii) the Available Space specified in the Sublease Notice, to the extent it is
offered for lease again during the initial Term of this Sublease.
1.3.3 REMEDIES. In the event that either party hereto fails to
perform its obligations under this Section 1.3, the other party's sole remedy
shall be to obtain the equitable remedies of declaratory relief, specific
performance and injunctive relief.
2. CONDITION OF SUBLET SPACE.
2.1 PHYSICAL CONDITION. As of the Effective Date, Sublessee acknowledges
that Sublessee shall have conducted Sublessee's own investigation of the Sublet
Space and the physical condition thereof, including accessibility and location
of utilities, improvements, which in Sublessee's judgment materially affect or
influence Sublessee's use of the Sublet Space and Sublessee's willingness to
enter this Sublease. Sublessee recognizes that Sublessor would not sublease the
Sublet Space except on an "as is" basis and acknowledges that Sublessor has made
no representations of any kind in connection with improvements or physical
conditions on, or bearing on, the use of the Sublet Space Sublessee shall rely
solely on Sublessee's own inspection and examination of such items and not on
any representations of Sublessor, express or implied. Sublessee further
recognizes and agrees that neither Sublessor nor Landlord shall be required to
perform any work of construction, alteration or maintenance of or to the Sublet
Space, except as provided for in EXHIBIT C; provided, however, Sublessor shall
deliver the Sublet Space to Sublessee in broom clean condition and free of any
tenants or occupants which would affect Sublessee's use thereof.
2.2 FURTHER INSPECTION. Sublessee represents and warrants to Sublessor
that as of the Effective Date Sublessee shall examine and inspect all matters
with respect to permissible uses, the Master Lease, zoning, covenants,
conditions and restrictions and all other matters which in Sublessee's judgment
bear upon the value and suitability of the Sublet Space for Sublessee's
purposes. Sublessee has and will rely solely on Sublessee's own inspection and
examination of such items and not on any representations of Sublessor, express
or implied.
5.
<PAGE>
3. SUBLEASE SUBJECT TO MASTER LEASE.
3.1 INCLUSIONS. It is expressly understood, acknowledged and agreed by
Sublessee that all of the other terms, conditions and covenants of this Sublease
shall be those stated in the Master Lease except as excluded in Section 3.2
herein, modified as appropriate in the circumstances so as to make such
Articles, and any Sections contained therein, applicable only to the subleasing
hereunder by Sublessor of the particular Sublet Space covered hereby. Whenever
the word "Premises" is used in the Master Lease, for purposes of this Sublease,
the word Sublet Space shall be substituted. Sublessee shall be subject to, bound
by and comply with all of said Articles and Sections of the Master Lease with
respect to the Sublet Space and shall satisfy all applicable terms and
conditions of the Master Lease relating to the Sublet Space for the benefit of
both Sublessor and Landlord, it being understood and agreed that wherever in the
Master Lease the word "Tenant" appears, for the purposes of this Sublease, the
word "Sublessee" shall be substituted, and wherever the word "Landlord" appears,
for the purposes of this Sublease, the word "Sublessor" shall be substituted;
and that upon the breach of any of said terms, conditions or covenants of the
Master Lease by Sublessee or upon any Event of Default by Sublessee hereunder,
Sublessor may exercise any and all rights and remedies granted to Landlord by
the Master Lease. In the event of any conflict between this Sublease and the
Master Lease, the terms of this Sublease shall control. It is further understood
and agreed that Sublessor has no duty or obligation to Sublessee under the
aforesaid Articles and Sections of the Master Lease other than to perform the
obligations of Sublessor as lessee under the Master Lease during the Term of
this Sublease. Whenever the provisions of the Master Lease incorporated as
provisions of this Sublease require the written consent of Landlord, said
provisions shall be construed to require the written consent of both Landlord
and Sublessor. Sublessee hereby acknowledges that it has read and is familiar
with all the terms of the Master Lease, and agrees that this Sublease is
subordinate and subject to the Master Lease and that any termination thereof not
due to a default by Sublessor thereunder shall likewise terminate this Sublease.
3.2 EXCLUSIONS. The terms and provisions of the following Sections and
portions of the Master Lease are not incorporated into this Sublease: 1, 2, 3,
4, the first sentence of Section 5, the second paragraph of Section 5, Section
6.B., Section 7.C., the second paragraph of Section 7.D., 8, 9.A, the second
through sixth sentences of Section 10 and the word "exclusive" from the first
sentence of Section 10, the second and third paragraphs of 10, 11, the first
paragraph of Section 12, 13, 15, 16, 21, the addresses in Section 22 shall be
replaced by the addresses given in the Defined Terms, 24, 30, 31, 33 and the
entire First Amendment. Notwithstanding anything to the contrary in the Master
Lease, in no event shall Sublessee be required to spend more than Fifteen
Thousand Dollars ($15,000) per calendar year in order to fulfill Sublessee's
obligations to repair the Sublet Space pursuant to Section 9.B of the Master
Lease, unless such obligations arise from the negligence or willful misconduct
of Sublessee or Sublessee's Parties, Sublessee shall provide Sublessor with
written notice of any repair obligations exceeding Fifteen Thousand Dollars
($15,000) annually, along with evidence satisfactory to Sublessor of the cost of
such work and the aggregate amount of such work performed by Sublessee during
such year, and Sublessor shall reimburse Sublessee for the cost thereof above
the Fifteen Thousand Dollar ($15,000) annual threshold within thirty (30) days
of receipt of evidence therefor.
3.3 TIME FOR NOTICE. The time limits provided for in the provisions of the
Master Lease for the giving of notice, making of demands, performance of any
act, condition or covenant, or the exercise of any right, remedy or option, are
amended for the purposes of this
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Sublease by lengthening or shortening the same in each instance by five (5)
days, as appropriate, so that notices may be given, demands made, or any act,
condition or covenant performed, or any right, remedy or option hereunder
exercised, by Sublessor or Sublessee, as the case may be, within the time limit
relating thereto contained in the Master Lease. If the Master Lease allows only
five (5) days or less for Sublessor to perform any act, or to undertake to
perform such act, or to correct any failure relating to the Premises or this
Sublease, then Sublessee shall nevertheless be allowed three (3) days to perform
such act, undertake such act and/or correct such failure.
4. LANDLORD'S OBLIGATIONS. It shall be the obligation of Landlord to (i)
provide all services to be provided by Landlord under the terms of the Master
Lease and (ii) to satisfy all obligations and covenants of Landlord made in the
Master Lease. Sublessee acknowledges that Sublessor shall be under no obligation
to provide any such services or satisfy any such obligations or covenants;
provided, however, that: Sublessor, upon written notice by Sublessee, shall
diligently attempt to enforce all obligations of Landlord under the Master Lease
(without requiring Sublessor to spend more than a nominal sum, which nominal sum
shall be limited to all costs associated with the preparation of and transmittal
to Landlord of documentation from Sublessor or Sublessee's attorneys determining
the obligations to be performed by Landlord under the Master Lease). If, after
receipt of written request from Sublessee, Sublessor shall fail or refuse to
take action ("Action") or if Sublessor's action is not, in Sublessor and
Sublessee's mutual judgement, adequate for the enforcement of Sublessor's rights
against Landlord with respect to the portion of the Premises then occupied by
Sublessee, Sublessee shall have the right to take such Action or additional
action, including but not limited to litigation, in its own name, and for that
purpose and only to such extent, all of the rights of Sublessor as tenant under
the Master Lease are hereby conferred upon and assigned to Sublessee, and
Sublessee shall be subrogated to such rights to the extent that the same shall
apply to the portion of the Premises then occupied by Sublessee. If any Action
against Landlord in Sublessee's name shall be barred by reason of lack of
privity, nonassignability or otherwise, Sublessee may take such Action in
Sublessor's name; provided that Sublessee has obtained the prior written consent
of Sublessor, which consent shall not be unreasonably withheld; and provided,
further, that Sublessee shall indemnify, protect, defend by counsel reasonably
satisfactory to Sublessor and hold Sublessor harmless from and against any and
all claims, demands, actions, suits, proceedings, liabilities, obligations,
losses, damages, judgments, costs and expenses (including, without limitation,
reasonable attorneys' fees) which Sublessor may incur or suffer by reason of
such Action, except to the extent incurred or suffered by reason of Sublessor's
negligent acts or omissions.
5. RENT.
5.1 INITIAL RENT. Upon execution hereof, Sublessee shall deliver the first
month's Base Rent to Sublessor, to be applied against Sublessee's first
obligation to pay Base Rent hereunder. Sublessee shall pay to Sublessor the Base
Rent in advance on the first day of each month of the Term, commencing on the
Rent Commencement Date without being invoiced by Sublessor. In the event the
first day of the Term shall not be the first day of a calendar month or the last
day of the Term is not the last day of the calendar month, the Base Rent shall
be appropriately prorated based on a thirty (30) day month. All installments of
Base Rent shall be delivered to Sublessor's address, or at such other place as
may be designated in writing from time to time by Sublessor, in lawful money of
the United States and, except as otherwise provided for herein, without
deduction or offset for any cause whatsoever.
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5.2 GROSS RENTAL. The parties acknowledge that this Sublease is intended
to be a "gross" sublease and that Sublessee shall have no obligation to
reimburse Sublessor for any operating expenses, utilities, janitorial expenses,
landscaping costs, insurance premiums or real property taxes passed through to
Sublessor by Landlord pursuant to the terms of the Master Lease, all of which
costs are a part of the Base Rent.
5.3 LATE PAYMENT CHARGES AND INTEREST. Any payment of Rent or other amount
from Sublessee to Sublessor in this Sublease which is not paid within five (5)
days of the date due shall accrue interest from the date due until the date paid
at an annual rate of ten percent (10%) (the "Interest Rate"). If any installment
of Rent is not paid by the fifth of the month, or otherwise when due, Sublessee
shall pay to Sublessor a late payment charge equal to five percent (5%) of the
amount of such delinquent payment of Rent, in addition to the installment of
Rent then owing; provided, however, that such late charge (but not payment of
the Interest Rate) shall be excused the first time during the Term of the
Sublease that an installment of Rent is paid later than the fifth day of the
month. This Section 5 shall not relieve Sublessee of Sublessee's obligation to
pay any amount owing hereunder at the time and in the manner provided.
6. SECURITY DEPOSIT. Upon execution hereof, Sublessee shall deposit with
Sublessor (i) a cash security deposit (the "Cash Deposit") in the amount of the
Security Deposit described in the Defined Terms, and (ii) the original copy of a
clean, irrevocable and unconditional letter of credit (the "Letter of Credit")
in the amount of One Hundred Thousand Dollars ($100,000) issued by a financial
institution, and subject only to terms, acceptable to Sublessor.
(Notwithstanding the foregoing, Sublessor agrees to review the requirement and
amount required under the Letter of Credit every six (6) months during the Term
of this Sublease. In so doing, Sublessor will review Sublessee's financial
situation, cash position and cash burn rate compared to the remaining financial
obligations of Sublessee for the remainder of the Term in order to determine if
it is appropriate, in Sublessor' sole discretion, to reduce the amount of the
Letter of Credit. To the extent that Sublessor decides to reduce the amount of
the Letter of Credit, Sublessee will renew or extend the Letter of Credit for
the agreed upon amount, and provide Sublessor with written notice thereof within
five (5) business days.) The Letter of Credit shall provide for its payment to
Sublessor upon its presentation of a statement from Sublessor that an Event of
Default by Sublessee exists hereunder. Upon the failure of Sublessee to deliver
a replacement letter of credit (or an extension of the existing Letter of
Credit) on or before thirty (30) days prior to any maturity date of any such
Letter of Credit, Sublessor may draw upon the same and thereafter treat such
cash as a portion of the Security Deposit. (The Cash Deposit and Letter of
Credit are hereinafter collectively referred to as the "Security Deposit.") The
Security Deposit shall secure Sublessee's obligations under this Sublease to pay
Base Rent and other monetary amounts, to maintain the Sublet Space and repair
damages thereto, to surrender the Sublet Space to Sublessor in clean condition
and repair upon termination of this Sublease and to discharge Sublessee's other
obligations hereunder. Sublessor may use and commingle any cash portion of the
Security Deposit with other funds of Sublessor. If Sublessee fails to perform
Sublessee's obligations hereunder, Sublessor may, but without any obligation to
do so, apply all or any portion of the Security Deposit towards fulfillment of
Sublessee's unperformed obligations. If Sublessor does so apply any portion of
the Security Deposit, Sublessee's failure to remit to Sublessor a sufficient
amount in cash to restore the Security Deposit to the original amount or, in the
case of a partial draw by Sublessor under the Letter of Credit, the failure of
Sublessee to replace such Letter of Credit with an new Letter of Credit in the
full original amount within five (5) days after receipt of Sublessor's written
demand to do so shall constitute an Event of Default. Upon termination of
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this Sublease, if Sublessee has then performed all of Sublessee's obligations
hereunder, Sublessor shall return the Security Deposit, or whatever amount
remains of the Security Deposit after Sublessor applied all or a portion of the
Security Deposit to perform Sublessee's obligations hereunder, to Sublessee
without payment of interest.
7. USE. The Sublet Space is to be used for the Permitted Uses, and for no
other purpose or business without the prior written consent of Sublessor. In no
event shall the Sublet Space be used for a purpose or use prohibited by the
Master Lease.
8. ASSIGNMENT AND SUBLETTING. Sublessee shall not sell, assign, encumber,
sublease or otherwise transfer by operation of law or otherwise the Sublet Space
or this Sublease without Sublessor's consent, which consent shall not be
unreasonably withheld. Any such sale, assignment, encumbrance, sublease or other
transfer in violation of the terms of this Sublease shall be void and shall be
of no force or effect. Notwithstanding anything to the contrary contained
herein, Sublessee may assign or Sublease the Sublet Space, in whole or in part,
without Sublessor's consent, but with Landlord's consent if so required under
the Master Lease, to any entity which controls, is controlled by, or is
controlled by, or is under common control with, Sublessee; to any entity which
results from a merger or consolidation with Sublessee, to any entity engaged in
a joint venture with Sublessee; or to any entity which acquires substantially
all the assets or stock of Sublessee as a going concern, with respect to the
business that is being conducted in the Sublet Space (hereinafter, each a
"Permitted Transfer"), provided that in each of the foregoing instances, such
assignee has a net worth equal to or greater than Sublessee's as of the Rent
Commencement Date. In addition, a sale or transfer of the capital stock of
Sublessee shall be deemed a Permitted Transfer if (i) such sale or transfer
occurs in connection with any bona fide financing or capitalization for the
benefit of Sublessee, or (ii) Sublessee becomes a publicly traded corporation.
Sublessor shall have no right to terminate the Sublease in connection with, and
shall have no right to any sums or other economic consideration resulting from,
any Permitted Transfer.
9. ALTERATIONS. Sublessee shall not make or suffer to be made any alterations,
additions or improvements (collectively "Alterations") in, on, or to the Sublet
Space without the prior written consent of Sublessor which consent shall not be
unreasonably withheld. Any Alterations Sublessee is permitted to make shall be
made by Sublessee at Sublessee's sole cost and expense, and Sublessee shall
notify Sublessor at least five (5) business days in advance of the same so that
Sublessor may post appropriate notices of nonresponsibility. Provided that
Sublessee so requests Sublessor in writing at that time, Sublessor shall inform
Sublessee, at time Sublessee seeks Sublessor's consent to an Alteration, whether
or not such Alteration must be removed at the expiration of the Term of this
Sublease. Upon the expiration or sooner termination of this Sublease, Sublessee
shall, upon demand by Sublessor, at Sublessee's sole cost and expense, forthwith
and with all due diligence, remove any Alterations made or paid for by Sublessee
whose removal was required by Sublessor upon Sublessor's granting consent
therefor (or for which Sublessee did not seek Sublessor's removal preference
upon installation) and Sublessee shall forthwith and with all due diligence, at
Sublessee's sole cost and expense, repair and restore the Sublet Space to their
original condition, ordinary wear and tear excepted.
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10. DAMAGE AND DESTRUCTION.
10.1 TERMINATION OF MASTER LEASE. If the Sublet Space is damaged or
destroyed and Landlord or Sublessor exercises any option either may have to
terminate the Master Lease, if any, this Sublease shall terminate as of the date
of the termination of the Master Lease.
10.2 CONTINUATION OF SUBLEASE. If the Master Lease is not terminated
following any damage or destruction as provided above, this Sublease shall
remain in full force and effect and Sublessee shall be entitled to any reduction
or abatement of Base Rent in an amount in proportion to the corresponding
reduction in base rent for the Sublet Space which Sublessor receives under the
Master Lease, if any. Sublessor shall diligently enforce any obligation of
Landlord to rebuild the Sublet Space in accordance with the Master Lease; and
(ii) Sublessor shall make available to Sublessee any insurance proceeds
Sublessor receives as a result of such damage or destruction.
11. EMINENT DOMAIN.
11.1 TOTAL CONDEMNATION. If all of the Premises is condemned by eminent
domain, inversely condemned or sold in lieu of condemnation, for any public or a
quasi-public use or purpose ("Condemned" or "Condemnation"), this Sublease shall
terminate as of the date of title vesting in such proceeding, and Base Rent
shall be adjusted to the date of termination.
11.2 PARTIAL CONDEMNATION. If any portion of the Premises is Condemned,
and Sublessor exercises any option to terminate the Master Lease, this Sublease
shall automatically terminate as of the date of the termination of the Master
Lease. If Sublessor has the option to terminate the Master Lease, Sublessor
shall promptly give Sublessee notice of such option and shall exercise such
option if so directed by Sublessee subject to the relevant provisions of the
Master Lease and further provided that such partial condemnation renders the
Premises unusable for Sublessee's business, as reasonably determined by
Sublessor. If this Sublease is not terminated following any such Condemnation,
this Sublease shall remain in full force and effect and Sublessee shall be
entitled to any reduction or abatement in Base Rent in any amount in proportion
to the corresponding reduction in Base Rent for the Sublet Space which Sublessor
receives under the Master Lease. Sublessor shall diligently enforce any rights
under the Master Lease to require Lessor to rebuild the Premises. Base Rent
shall be equitably adjusted to take into account interference with Sublessee's
ability to conduct its operations on the Premises as a result of the Premises
being Condemned. Sublessee hereby waives the provisions of California Code of
Civil Procedure Section 1265.130 permitting a court of law to terminate this
Sublease.
11.3 SUBLESSEE'S AWARD. Subject to the provisions of the Master Lease,
Sublessee shall have the right to recover from the condemning authority, but not
from Sublessor, such compensation as may be separately awarded to Sublessee in
connection with costs and removing Sublessee's merchandise, furniture, fixtures,
leasehold improvements and equipment to a new location.
12. INSURANCE. All insurance policies required to be carried by Sublessee
pursuant to this Sublease, shall contain a provision whereby Sublessor and
Landlord are each named as additional insureds under such policies.
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13. BROKERAGE COMMISSION. Sublessor shall pay a brokerage commission to
Sublessor's Broker for Sublessee's subletting of the Sublet Space as provided
for in a separate agreement between Sublessor and Broker. Sublessor and
Sublessee warrant to each other that its sole contact with the other or the
Sublet Space in connection with this transaction has been directly with their
respective brokers. Sublessor and Sublessee further warrant for the benefit of
the other that no other broker or finder can properly claim a right to a
commission or a finder's fee based upon contacts between the claimant and the
other party with respect to the other party or the Sublet Space. Sublessor and
Sublessee shall indemnify, defend by counsel acceptable to the indemnified party
and hold the other harmless from and against any loss, cost or expense,
including, but not limited to, attorneys' fees and court costs, resulting from
any claim for a fee or commission by any broker or finder, other than any claims
by Sublessor's broker or Sublessee's Broker, in connection with the Sublet Space
and this Sublease.
14. SUBLESSE'S INDEMNITY. Sublessee shall defend, indemnify and hold harmless
Sublessor, its partners, employees, and agents from and against any and all
claims, liabilities, suits, judgments, awards, damages, losses, fines,
penalties, costs and expenses, including reasonable attorney's fees, that
Sublessor, its partners, employees and agents may suffer, incur or be liable for
by reason of or arising out of or related to the breach by Sublessee of any of
the duties, obligations, liabilities or covenants applicable to sublessee
hereunder, Sublessee's occupancy or use of the Sublet Space, any alterations,
additions or modifications made to the premises by Sublessee or Sublessee's
negligence or willful misconduct. This indemnification shall survive termination
of this Sublease.
15. RIGHT TO CURE SUBLESSEE'S DEFAULTS. If Sublessee shall at any time fail to
make any payment or perform any other obligation of Sublessee hereunder, then
Sublessor shall have the right, but not the obligation, after the lesser of five
(5) days' notice to sublessee or the time within which Landlord may act on
Sublessor's behalf under the Master Lease, or without notice to Sublessee in the
case of any emergency, and without waiving or releasing sublessee from any
obligations of Sublessee hereunder, to make such payment or perform such other
obligation of Sublessee in such manner and to such extent as Sublessor shall
deem necessary, and in exercising any such right, to pay any incidental costs
and expenses, employ attorneys and other professionals, and incur and pay
attorneys' fees and other costs reasonably required in connection therewith.
Sublessee shall pay to sublessor upon demand all sums so paid by Sublessor and
all incidental costs and expenses of Sublessor in connection therewith, together
with interest thereon at the Interest Rate.
16. HAZARDOUS MATERIALS.
16.1 DEFINITIONS.
16.1.1 "HAZARDOUS MATERIALS." As used herein, "Hazardous Materials"
means any chemical, substance, material, controlled substance, object,
condition, waste, living organism or combination thereof which is or may be
hazardous to human health or safety or to the environment due to its
radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity,
carcinogenicity, mutagenicity, phytotoxicity, infectiousness or other harmful or
potentially harmful properties or effects, including, without limitation,
petroleum and petroleum products, asbestos, radon, polychlorinated biphenyls
(PCBs) and all of those chemicals, substances, materials, controlled substances,
objects, conditions, wastes, living organisms or combinations
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thereof which are now or become in the future listed, defined or regulated in
any manner by any Environmental Law based upon, directly or indirectly, such
properties or effects.
16.1.2 ENVIRONMENTAL LAWS. As used herein, "Environmental Laws"
means any and all federal, state or local environmental, health and/or safety-
related laws, regulations, standards, decisions of courts, ordinances, rules,
codes, orders, decrees, directives, guidelines, permits or permit conditions,
currently existing and as amended, enacted, issued or adopted in the future
which are or become applicable to Sublessee or the Premises.
16.2 SUBLESSEE'S COVENANT. Sublessee shall not cause, or allow any of
Sublessee's employees, agents, customers, visitors, invitees, licensees,
contractors, assignees or subtenants (collectively, "Sublessee's Parties") to
cause or permit, any Hazardous Materials to be brought upon, stored,
manufactured, generated, blended, handled, recycled, treated, disposed or used
on, under or about the Premises, except for routine office and janitorial
supplies in usual and customary quantities stored, used and disposed of in
accordance with all applicable Environmental Laws. Sublessee and Sublessee's
Parties shall comply with all Environmental Laws and promptly notify Sublessor
of the presence of any Hazardous Materials, other than office and janitorial
supplies as permitted above, on the Premises or any violation of any
Environmental Law. Sublessor shall have the right to inspect the Premises and to
conduct tests and investigations to determine whether Sublessee is in compliance
with the foregoing provisions provided that in each instance: (i) Sublessor
gives Sublessee prior written notice of such inspection at least seventy-two
(72) hours in advance, (except in cases of emergency, in which case no emergency
shall be necessary) and (ii) Sublessor and Sublessor's agents, contractors and
representatives conduct such investigation in a manner designated to cause the
least possible interference to Sublessee and Sublessee's use of the Premises. If
such tests indicate the presence of any environmental condition caused by
Sublessee or its agents, employees, contractors or invitees, Sublessee shall
reimburse Sublessor for the cost of conducting such tests. The phrase
"environmental condition" shall mean any adverse condition relating to any
Hazardous Materials or the environment, including surface water, groundwater,
drinking water supply, land, surface or subsurface strata or the ambient air and
includes air, land and water pollutants, noise, vibration, light and odors. In
the event that Sublessee or its agents, employee's, contractors or invitees have
caused Hazardous Materials to be released, stored, disposed of or introduced to
the Premises in a manner or in amounts in violation of Environmental Laws,
Sublessee shall promptly take any and all steps necessary to rectify the same as
required by either the Landlord pursuant to the terms of the Master Lease or any
federal, state or local government agency or political subdivision on account
thereof or shall, at Sublessee's election, reimburse Sublessor, upon demand, for
the cost to Sublessor of performing rectifying work. The reimbursement shall be
paid to Sublessor in advance of Sublessor's performing such work, based upon
Sublessor's reasonable estimate of the cost thereof; and upon completion of such
work by Sublessor, Sublessee shall pay to Sublessor any shortfall promptly after
Sublessor bills Sublessee therefore or Sublessor shall promptly refund to
Sublessee any excess deposit, as the case may be. In the event that Sublessee
shall elect to rectify such violation of Environmental Law but fail to commence
to do so within the time periods required by relevant governmental authorities
or within a time period specified by Sublessor, in Sublessor's reasonable
discretion, Sublessor shall have the right to perform such rectifying work, and
Sublessee shall reimburse Sublessor for the cost thereof upon demand therefor.
Nothing in this Section 16.2 shall be deemed to create a liability for or an
obligation of Sublessee to remediate Hazardous Materials released or stored on
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the Premises prior to the Commencement Date by parties other than Sublessee or
Sublessee's agents, employees, contractors or invitees.
16.3 SUBLESSEE'S INDEMNIFICATION. Sublessee shall indemnify, protect,
defend (by counsel reasonably acceptable to Sublessor) and hold harmless
Sublessor and its partners, directors, officers, employees, shareholders,
lenders, agents, contractors and each of their respective successors and assigns
(individually and collectively, "Indemnities") from and against any and all
claims, judgments, causes of action, damages, penalties, fines, taxes, costs,
liabilities, losses and expenses arising at any time during or after the Term as
a result (directly or indirectly) of or in connection with (a) Sublessee and/or
Sublessee's Parties' breach of any prohibition or provision of the preceding
section, or (b) the release, storage, use or discharge of Hazardous Materials on
the Sublet Space after the Early Occupancy Date, except to the extent caused by
Sublessor or Sublessor's Parties during the period between the Early Occupancy
Date and the Rent Commencement Date. This indemnity shall include the cost of
any required or necessary repair, cleanup or detoxification, and the preparation
of any closure or other required plans, whether such action is required or
necessary prior to or following the termination of this Sublease. Neither the
written consent by Sublessor to the presence of Hazardous Materials on, under or
about the Premises nor the strict compliance by Sublessee with all Environmental
Laws shall excuse Sublessee from Sublessee's obligation of indemnification
pursuant hereto. Sublessee's obligations pursuant to the foregoing indemnity
shall survive the termination of this Sublease.
16.4 SUBLESSOR'S INDEMNIFICATION. Sublessor shall indemnify, protect,
defend (by counsel reasonably acceptable to Sublessee) and hold harmless
Sublessee and its partners, directors, officers, employees, shareholders,
lenders, agents, contractors and each of their respective successors and assigns
(individually and collectively, "Indemnities") from and against any and all
claims, judgments, causes of action, damages, penalties, fines, taxes, costs,
liabilities, losses and expenses arising at any time during or after the Term as
a result (directly or indirectly) of or in connection with the release, storage,
disposal, use or discharge of Hazardous Materials on, under or about the
Premises prior to the Early Occupancy Date but subsequent to the commencement of
the term of the Master Lease. This indemnity shall include the cost of any
required or necessary repair, cleanup or detoxification, and the preparation of
any closure or other required plans, whether such action is required or
necessary prior to or following the termination of this Sublease. The strict
compliance by Sublessor with all Environmental Laws shall not excuse Sublessor
from Sublessor's obligation of indemnification pursuant hereto. Sublessor's
obligations pursuant to the foregoing indemnity shall survive the termination of
this Sublease.
16.5 SUBLESSOR'S REPRESENTATION AND WARRANTY. Sublessor represents and
warrants to Sublessee that, to Sublessor's current actual knowledge, as of the
date of this Sublease, Sublessor has not received any written notice from any
governmental agency that Hazardous Materials are present on the Premises in
violation of any Environmental Law. For the purposes of this Section 16.5, the
term "to Sublessor's current actual knowledge" shall mean the actual (and not
imputed) knowledge of Jonathan Anderson and Guy Van Auken as of the date of this
Sublease, without the obligation to perform any due diligence, analysis and
investigation of any kind whatsoever.
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17. MISCELLANEOUS.
17.1 ENTIRE AGREEMENT. This Sublease contains all of the covenants,
conditions and agreements between the parties concerning the Sublet Space, and
shall supersede all prior correspondence, agreements and understandings
concerning the Sublet Space, both oral and written. No addition or modification
of any term or provision of this Sublease shall be effective unless set forth in
writing and signed by both Sublessor and Sublessee.
17.2 CAPTIONS. All captions and headings in this Sublease are for the
purposes of reference and convenience and shall not limit or expand the
provisions of this Sublease.
17.3 LANDLORD'S CONSENT. This Sublease is conditioned upon Landlord's
written approval of this Sublease. If Landlord refuses to consent to this
Sublease on or before March 1, 1995 this Sublease shall terminate and neither
party shall have any continuing obligation to the other with respect to the
Sublet Space; provided Sublessor shall return the Deposit, if previously
delivered to Sublessor, to Sublessee.
17.4 AUTHORITY. Each person executing this Sublease on behalf of a party
hereto represents and warrants that he or she is authorized and empowered to do
so and to thereby bind the party on whose behalf he or she is signing.
17.5 ATTORNEYS' FEES. In the event either party shall bring any action or
proceeding for damages or for an alleged breach of any provision of this
Sublease to recover rents, or to enforce, protect or establish any right or
remedy hereunder, the prevailing party shall be entitled to recover reasonable
attorneys' fees and court costs as part of such action or proceeding
17.6 PARKING. Sublessee is allocated and shall have the non-exclusive
right to use not more than one hundred thirteen (113) of the parking spaces
appurtenant to the Premises for its use and the use of Sublessee's Parties, the
location of which may be designated from time to time by Sublessor. Sublessee
shall not at any time use more parking spaces than the number so allocated to
Sublessee or park its vehicles or the vehicles of others in any portion of the
Premises not designated by Sublessor as a non-exclusive parking area. Neither
Sublessee nor Sublessee's Parties shall have the exclusive right to use any
specific parking space. Nothing contained in this Sublease shall be deemed to
create liability upon Sublessor for any damage to motor vehicles of visitors or
employees, for any loss of property from within those motor vehicles, or for any
injury to Sublessee or Sublessee's Parties, unless ultimately determined to be
caused by the sole act of negligence or willful misconduct of Sublessor or
Sublessor's Parties. Sublessee shall have no right to install any fixtures,
equipment or personal property in parking areas.
17.7 HOLDOVER. This Sublease shall terminate without further notice at the
expiration of the Sublease Term. If Sublessee holds over at the Sublet Space or
any part thereof after the expiration or earlier termination of the Term, such
holding over shall constitute a month-to-month tenancy, at a rent equal to one
hundred seventy-five percent (175%) of the Base Rent due hereunder. Nothing in
the foregoing sentence shall be deemed Sublessor's permission for Sublessee to
hold over, and acceptance of Base Rent by Sublessor following expiration of
termination of the Sublease shall not constitute a renewal of this Sublease. In
addition to the foregoing, Sublessee shall indemnify, defend by counsel
satisfactory to Sublessor, protect and hold Sublessor harmless from any and all
liabilities, claims, causes of action, damages, costs or
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expenses (including reasonable attorney's fees) directly or indirectly resulting
from Sublessee's holding over at the Sublet Space beyond the expiration or
termination of the Term.
17.8 ACCESS. Sublessor reserves the right to enter the Sublet Space upon
reasonable notice to Sublessee (except that in case of emergency no notice shall
be necessary) in order to inspect the Sublet Space and/or the performance by
Sublessee of the terms of this Sublease.
17.9 TENANT IMPROVEMENTS. Sublessor, at Sublessor's sole cost and expense,
shall perform certain improvements to the Sublet Space, as more particularly
described in EXHIBIT C attached hereto.
IN WITNESS WHEREOF, the parties hereto have executed one (1) or more copies
of this Sublease, dated as of the Effective Date.
"SUBLESSOR"
AMDAHL CORPORATION, a Delaware corporation
By: _________________________________
Its: ______________________________
"SUBLESSEE"
By: NVidia Corporation
By: _________________________________
Its: ______________________________
ACCEPTED AND AGREED TO:
"LANDLORD"
OAKMEAD INVESTMENTS,
a general partnership
By ______________________________
Its _________________________
By ______________________________
Its _________________________
15.
<PAGE>
CONSENT OF LANDLORD
Landlord, as landlord under the Master Lease, hereby consents to the
execution and delivery of the Sublease by and between Sublessor and Sublessee
and the subletting of the Premises in accordance with the terms of the Sublease.
"Landlord"
By: ___________________________________
Its: ________________________________
<PAGE>
EXHIBIT A
MASTER LEASE
[To Be Attached]
<PAGE>
FIRST AMENDMENT TO LEASE
This FIRST AMENDMENT TO LEASE ("Amendment") is made as of April 1, 1992
("Effective Date"), between OAKMEAD INVESTMENTS, a general partnership
("Landlord"), and AMDAHL CORPORATION, a Delaware corporation ("Tenant").
A. Landlord and Tenant are parties to that certain Net Lease Agreement
("Lease"), dated November 7, 1983, wherein Landlord leased to Tenant
approximately Fifty-Nine Thousand Eight Hundred Eighty-Five (59,885) square feet
of space ("Premises") in that certain building ("Building") located at 432
Lakeside Drive in Sunnyvale, California.
B. Landlord and Tenant desire to modify the Lease as hereinafter provided.
Capitalized terms used herein shall have the same meanings given them in the
Lease unless defined herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises of
the parties, the parties hereto agree as follows:
1. EXTENSION OF TERM. The Term of the Lease is hereby extended until March 31,
2002 ("Expiration Date").
2. RENT. As of the Effective Date, the amount of Rent due under the lease
shall be modified in accordance with the rental table attached hereto as EXHIBIT
B. Rent shall be paid in the manner and at the times described in Section 4 of
the Lease.
3. OPTIONS TO EXTEND.
3.1 TERMS OF OPTIONS. Provided that Tenant is not in default beyond any
applicable cure periods under the terms of the Lease, Tenant shall have the
right, at its option, to extend the Term of the Lease for two (2) periods of
five (5) years each (collectively, the "Extension Terms"). The first extension
term ("First Extension Term") shall commence on the Expiration Date and extend
to the date ("First Extension Term Expiration Date") of expiration of the First
Extension Term. The second extension term ("Second Extension Term") shall
commence on the First Extension Term Expiration Date.
3.2 EXERCISE NOTICE. If Tenant elects to extend the Lease for the First
Extension Term, Tenant shall give written notice thereof to Landlord not less
than one hundred eight (180) days prior to the Expiration Date. If Tenant elects
to extend the Lease for the Second Extension Term, Tenant shall give written
notice thereof to Landlord not less than one hundred eighty (180) days prior to
the First Extension Term Expiration Date.
3.3 APPLICABLE TERMS AND CONDITIONS. The terms, covenants and conditions
applicable to both Extension Terms shall be the same terms, covenants and
conditions of the Lease, as amended by this Amendment, except that upon Tenant's
exercise of its option for the First Extension Term, Tenant shall have the right
to extend the Term of the Lease for the Second Extension Term only. Upon
Tenant's exercise of its option for the Second Extension Term, Tenant shall have
no further right to extend the Term of the Lease.
<PAGE>
3.4 AMENDMENT. If Tenant shall exercise an Extension Option, Landlord and
Tenant shall execute an amendment to this Lease, in form and content mutually
acceptable to Landlord and Tenant, on or before the Expiration Date (or, in the
case of the Second Extension Term, the First Extension Term Expiration Date)
whereby Landlord and Tenant acknowledge the resulting extension of the Term of
the Lease.
4. FULL FORCE AND EFFECT. Except as herein amended and supplemented, the Lease
shall continue in full force and effect as written.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.
"LANDLORD"
Oakmead Investments, a
general partnership
By: ________________________________
Its: ___________________________
"TENANT"
Amdahl Corporation, a
Delaware corporation
By: ________________________________
Its: ___________________________
2.
<PAGE>
EXHIBIT "B" - RENT SCHEDULE
BUILDING 15
432 Lakeside Drive - 59,885 sq. ft.
1. Commencing April 1, 1992, the monthly base rent shall be $50,000.00.
2. Commencing January 1, 1995, the monthly base rent shall be $53,800.00.
3. Commencing July 1, 1997, the monthly base rental shall be $58,000.00.
4. Commencing January 1, 2000, the monthly base rent shall be $62,500.00.
5. In the event Tenant elects to exercise its first option to extend the term
of this Lease:
(A) Commencing April 1, 2002, the monthly base rent shall be equal to the
then monthly rental paid for like improved space in the immediate area of the
Premises, but in no event less than $68,000.00.
(B) Commencing October 1, 2004, the monthly base rent shall be whatever it
was for September, 2004, multiplied by 1.09.
6. In the event Tenant elects to exercise its second option to extend the term
of the Lease:
(A) Commencing April 1, 2007, the monthly base rent shall be equal to the
then monthly rental paid for like improved space in the immediate area of the
Premises, but in no event less than whatever it was for March, 2007, multiplied
by 1.09.
(B) Commencing October 1, 2009, the monthly base rent shall be whatever it
was for September, 2009, multiplied by 1.09.
7. In the event Landlord and Tenant are unable to agree on the rent for either
Extension Term within a period of thirty (30) days following receipt by Landlord
of Tenant's written Exercise Notice per Paragraph 3.2 of this amendment, within
five (5) days after the expiration of the said thirty (30) day period, each
party, at its cost and by giving notice to the other party, shall appoint an
M.A.I. real estate appraiser with at least five (5) years full-time commercial
appraisal experience in the area in Santa Clara County to appraise and set the
fair market rental value of the Premises. If a party does not appoint an
appraiser within five (5) days after the other party has given notice to the
name of its appraiser, the single appraiser appointed shall be the sole
appraiser and shall set the fair market rental value. The cost of such sole
appraiser shall be borne equally by the parties. If two appraisers are
appointed by the parties as provided in this paragraph, the two appraisers shall
meet promptly and attempt to set the fair market rental value. If they are
unable to agree within twenty (20) days after the last appraiser has been
appointed, then the two appraisers shall select a third appraiser meeting the
qualifications stated above within ten (10) days after the last day the two
appraisers are given to set the fair market rental value. If they are unable to
agree on the third appraiser, either of the parties to this Lease, by giving ten
(10) days notice to the other party, may apply to the presiding judge of the
Superior Court of Santa Clara County for the selection of a third appraiser who
meets the qualifications
1.
<PAGE>
stated above. Each of the parties shall bear one-half (1/2) of the cost of
appointing the third appraiser and of paying the third appraiser's fee. The
third appraiser, however selected, shall be a person who has not previously
acted in any capacity for either party. Within twenty (20) days after the
selection of the third appraiser, the majority of the appraisers shall set the
fair market rental value. If the majority of the appraisers are unable to agree
on the fair market rental value within said twenty (20) day period, the three
appraisals shall be added together and the total divided by three; the resulting
quotient shall be the fair market rental value. The foregoing notwithstanding,
if any appraisal differs from the median appraisal by an amount equal to more
than ten percent (10%) of such median appraisal, that appraisal shall be
disregarded, and the average of the remaining appraisals (or the remaining
appraisal) shall be the fair market rental value. In establishing the fair
market rental value, the appraiser or the highest and best use for the Premises
in its existing configuration (including, but not limited to, rental rates for
comparable space with comparable tenant improvements in the immediate area of
the Premises, and any adjustments to rent based upon direct costs (operating
expenses) and taxes, load factors, and/or cost of living or other rental
adjustments; and the size of the space); without regard to the existence of this
Lease but taking into consideration the absolute nature of this Lease.
2.
<PAGE>
NET LEASE AGREEMENT
1. PARTIES. This Lease is made by and between OAKMEAD INVESTMENTS, a general
partnership of which Terrence J. Rose, Thomas A. Lynch, Jr. and Raymond J.
Rosendin are all of the partners ("Landlord") and AMDAHL CORPORATION, a Delaware
corporation ("Tenant").
2. PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, upon the terms and conditions herein set forth, those certain Premises
("Premises") situated in the City of Sunnyvale, County of Santa Clara, State of
California, commonly described as 432 Lakeside Drive, Sunnyvale, California, and
described more particularly in EXHIBIT A hereto, incorporated herein by this
reference. The Premises include a building ("Building") of approximately 59,885
square feet.
3. TERM. The term of this Lease shall be for ten (10) years, commencing on
September 15, 1984 ("Commencement Date") and ending on September 30, 1994
("Expiration Date") unless sooner terminated pursuant to any provision hereof or
unless extended pursuant to the option provision hereof. If for any reason
Landlord cannot deliver possession of the Premises to Tenant on said date,
Tenant shall not be obligated to pay rent until possession of the Premises is
tendered to Tenant and the Commencement Date and Expiration Date of this Lease
shall be revised to conform to the date of Landlord's delivery of possession. If
possession of the Premises is not tendered to Tenant on or before September 15,
1984, Tenant shall have the right to terminate this Lease and shall have no
further obligations or liabilities hereunder. If Tenant so terminates this
Lease, Landlord shall return to Tenant all amounts paid by Tenant to Landlord in
respect of this Lease. In the event that Landlord shall permit Tenant to occupy
the Premises prior to the Commencement Date of the term, such occupancy shall be
subject to all of the provisions of this Lease, including the obligation to pay
rent at the same monthly rate as that prescribed for the first month of the
Lease term.
4. RENT. Tenant shall pay to Landlord rent for the Premises, without deduction
or offset, prior notice or demand, in advance, on the first day of each calendar
month of the term hereof, in installments in accordance with the following
table:
<TABLE>
<CAPTION>
Monthly rental Total
per square foot Monthly
Commencing of the Building Rent
<S> <C> <C>
October 1, 1984 $ 0.80 $47,908.00
May 1, 1985 0.90 53,896.50
May 1, 1986 1.00 59,885.00
May 1, 1987 1.10 65,873.50
May 1, 1989 1.28 76,652.80
May 1, 1991 1.48 88,629.80
May 1, 1993 1.60 95,916.00
</TABLE>
Rent for any period during the term hereof which is for less than one (1)
full month shall be a pro rata portion of the monthly installment. Rent shall be
payable in lawful money of the United States of America to Landlord at 3375
Scott Boulevard, #308, Santa Clara, CA 95051 or to such other persons or such
other places as Landlord may designate in writing.
1.
<PAGE>
5. USE OF PREMISES. Tenant shall use the Premises only in conformance with
applicable governmental laws, regulations, rules and ordinances for the purposes
of offices, research and development, and assembly, storage and distribution of
electronic components and for no other purpose. Tenant shall indemnify, defend,
and hold Landlord harmless against any loss, expense, damage, attorneys' fees or
liability arising out of failure of Tenant to comply with any applicable law.
Tenant shall not commit or suffer to be committed any waste upon the Premises,
or any nuisance, or other acts or things which may disturb the quiet enjoyment
of any other tenant in or around the Building or allow any sale by auction upon
the Premises, or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, or place any loads upon the floor, walls or
ceiling which endanger the structure, or place any harmful liquids in the
drainage system of the Building. No waste materials or refuse shall be dumped
upon or permitted to remain upon any part of the Premises outside of the
Building except in trash containers placed inside exterior enclosures designated
for that purpose by Landlord or inside of the Building where designated by
Landlord. No materials, supplies, equipment finished products or semi-finished
products, raw materials or articles of any nature shall be stored upon or
permitted to remain on any portion of the Premises outside the Building. Tenant
shall comply with any covenant, condition or restriction ("C.C.&R.'s") affecting
the Premises.
Notwithstanding anything in this section to the contrary, (i) Landlord
warrants that Tenant's use of the Premises as provided in this section is in
accordance with applicable governmental laws, regulations, rules and ordinances
and any applicable C.C.&R's affecting the Premises, (ii) Tenant's indemnities
and warranties in this section are dependent upon Landlord's warranty herein and
(iii) Tenant shall not be required to pay any capital expenditure or other
governmental charge, provided, however, that Landlord shall determine the life
of any improvements constructed as a result of said expenditures and charges and
those expenditures and charges shall be divided by the number of years which
Landlord reasonably determines, and said annual amounts shall be paid by Tenant
during the applicable year provided that Tenant shall not be required to pay any
said amounts except during the term hereof and said annual amount shall be
prorated for portions of any year during which Tenant is a lessee pursuant to
this Lease.
6. TAXES AND ASSESSMENTS.
(A) TENANT'S PROPERTY. Tenant shall pay before delinquency any and all
taxes, assessments, license fees and public charges levied, assessed or imposed
upon or against Tenant's fixtures, equipment, furnishings, furniture, appliances
and personal property installed or located on or within the Premises.
(B) MONTHLY PAYMENT. All property taxes levied or assessed against the
Premises and Building which become due or accrue during the term of this Lease,
shall be a Common Area Charge and Tenant shall pay each month 1/12th of its
annual share of such property taxes pursuant to Section 11 below. Tenant's
liability hereunder shall be prorated to reflect the Commencement Date and
Expiration Date of this Lease and any extension of the Lease term pursuant to
the provisions of this Lease.
For the purpose of this Lease, the term "property taxes" means and includes
all taxes, assessments, taxes based on vehicles utilizing parking areas, taxes
based on rental income (exclusive of income taxes imposed by federal, state,
local or other governmental entities),
2.
<PAGE>
Environmental Protection Agency charges, and any other governmental charges,
general or special, ordinary and extraordinary, of any kind and nature
whatsoever, applicable to the Premises or the Building, including, but not
limited to, assessments for public improvements or benefits which heretofore or
shall during the term of this Lease, or any extension thereof, be assessed,
levied, imposed upon or become due and payable and a lien upon the Premises or
the Building, or any part thereof, but excluding franchise, estate, inheritance,
succession, capital levy, transfer or excess profits tax imposed upon Landlord
and income taxes imposed by federal, state, local or other governmental entities
upon Landlord.
Any charges provided for in this section, including, but not limited to,
assessments for public improvements or benefits, shall be paid over the longest
possible time allowed, with Tenant liable for payments only during the portion
of the payment period which is also part of the term of this Lease pursuant to
Section 3 above.
7. INSURANCE.
(A) INDEMNITY. Tenant agrees to indemnify and defend Landlord against and
hold Landlord harmless from any and all claims, causes of action, judgments,
obligations or liabilities, and all reasonable expenses incurred in
investigating or resisting the same (including reasonable attorney's fees), on
account of, or arising out of, Tenant's acts or omissions on the Premises, not
including any negligence or willful misconduct of Landlord, and not including
any claims, causes of action, judgments, obligations or liabilities, and
expenses and attorneys' fees connected therewith, which are covered by insurance
provided pursuant to this Lease. This Lease is made on the express condition
that Landlord shall not be liable except as provided in Section 9, or suffer
loss by reason of injury to person or property, from whatever cause except
Landlord's negligence or willful misconduct, in any way connected with the
condition, use or occupancy of the Premises, specifically including, without
limitation, any liability for injury to the person or property of Tenant, its
agents, officers, employees, licensees and invitees.
(B) LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and
keep in force during the term of this Lease a policy of comprehensive public
liability insurance insuring Landlord and Tenant against any liability arising
out of the condition, use, or occupancy of the Premises and all areas
appurtenant thereto, including parking areas. Such insurance shall be in an
amount of not less than $1,000,000 for bodily injury or death as a result of any
one occurrence and $500,000 for damage to property as a result of any one
occurrence. The insurance shall be with companies approved by Landlord, which
approval Landlord agrees not to unreasonably withhold. Tenant shall deliver to
Landlord, prior to possession, a certificate of insurance evidencing the
existence of the policy required hereunder and such certificate shall certify
that the policy (1) names Landlord as an additional insured, (2) shall not be
canceled or altered without thirty (30) days' prior written notice to Landlord,
(3) insures performance of the indemnity set forth in Subsection 7(a) above, and
(4) the coverage is primary and any coverage by Landlord is in excess thereto.
Landlord specifically approves "Employer's Insurance of Wausau" as an insurance
company which Tenant may use to obtain liability insurance as provided in this
Subsection 7(b).
(C) PROPERTY INSURANCE. Landlord shall obtain and keep in force during
the term of this Lease a policy or policies of insurance covering loss or damage
to the Premises, in the amount of the full replacement value thereof, providing
protection against those perils included
3.
<PAGE>
within the classification of "all risk" insurance and flood insurance plus a
policy of rental income insurance in the amount of 100% of 12 months rent
(including sums paid as additional rent). The cost of such insurance shall be a
Common Area Charge and Tenant shall pay to Landlord its share of said cost as
provided in Section 11 below. If such insurance is increased due to Tenant's use
of the Premises, Tenant agrees to pay to Landlord the full cost of such
increase. Tenant shall have no interest in or any right to the proceeds of any
insurance procured by Landlord on the Premises or the Building.
(D) RELEASE OF LANDLORD AND TENANT. Tenant hereby releases Landlord and
its partners, officers, agents, employees and servants from any and all claims,
demands, liens, losses, expenses or injuries to the Premises or to the
furnishings, fixtures, equipment, inventory or other property of Tenant in,
about, or upon the Premises, which is caused by or results from perils, events
or happenings which are covered by insurance carried by Tenant and in force at
the time of such loss.
Landlord hereby releases Tenant and its officers, agents, employees and
servants from any and all claims, demands, liens, losses, expenses or injuries
to the Premises or to the furnishings, fixtures, equipment, inventory or other
property of Landlord in, about or upon the Premises, which is caused by or
results from perils, events or happenings which are covered by insurance carried
by Landlord or Tenant and in force at the time of such loss.
8. UTILITIES. Tenant shall pay for all water, gas, light, heat, power,
electricity, telephone, trash pick-up, sewer charges, and all other services
supplied to or consumed on the Premises.
9. REPAIRS AND MAINTENANCE.
(A) Subject to provisions of Section 15, Landlord shall keep and maintain
the roof, structural elements and exterior walls of the Building in good order
and repair. The "structural elements" of the Building shall include the
electrical, plumbing and lighting systems other than those items of such systems
which are fixtures in the interior of the Premises. Tenant shall be responsible
for maintenance and repair of the heating and air conditioning systems unless
repairs are the result of defective installation or materials, in which event
Landlord shall repair the same at its own expense. However, Landlord may elect,
at its option, to keep and maintain the heating and air conditioning systems of
the Premises. The cost of the repairs and maintenance which Landlord elects to
perform pursuant to the preceding sentence shall be a Common Area Charge and
Tenant shall pay its share of such costs to Landlord as provided in Section 11
below. Other repairs and maintenance done pursuant to this Subsection 9(a) shall
be at the sole expense of Landlord. However, if any repairs or maintenance are
required because of an act or omission of Tenant, its agents, employees or
invitees, Tenant shall pay to Landlord, upon demand, on hundred percent (100%)
of the costs of such repair or maintenance unless such repair or maintenance is
covered by insurance provided pursuant to this Lease, in which case Tenant shall
pay the deductible amount of such insurance, such deductible not to exceed One
Thousand Dollars ($ 1,000.00).
(B) Except as expressly provided in Subsection 9(a) above, Tenant shall,
at its sole cost, keep and maintain the entire Premises and every part thereof,
including, without limitation, the windows, window frames, plate glass, glazing,
truck doors, doors and all door hardware, the interior walls and partitions, and
the electrical, plumbing, lighting, heating and air conditioning
4.
<PAGE>
systems (unless Landlord has elected to keep and maintain the heating and air
conditioning systems pursuant to Subsection 9(a) above) in good order, condition
and repair, except that, notwithstanding anything to the contrary in this
Subsection 9(b), Tenant's obligations relating to electrical, plumbing and
lighting systems shall be limited to the fixtures of those systems on the
interior of the Premises.
Should Tenant fail to make repairs required of Tenant hereunder forthwith
upon notice from Landlord, Landlord, in addition to all other remedies available
hereunder or by law and without waiving any alternative remedies, may make the
same, and in that event, Tenant shall reimburse Landlord as additional rent for
the cost of such maintenance or repairs within five (5) days of written demand
by Landlord.
Tenant hereby expressly waives the provisions of subsection 1 of Section
1932 and Sections 1941 and 1942 of the Civil Code of California and all rights
to make repairs at the expense of Landlord as provided in Section 1942 of said
Civil Code.
10. COMMON AREA. Subject to the terms and conditions of this Lease and such
rules and regulations as Landlord may from time to time prescribe, Tenant and
Tenant's employees, invitees and customers shall have the exclusive right to use
the access roads, parking areas, and facilities provided and designated by
Landlord for the general use and convenience of the Premises, which areas and
facilities are referred to herein as "Common Area." This right shall terminate
upon the termination of this Lease. Landlord reserves the right from time to
time to make changes in the shape, size, location, amount and extent of Common
Area. Landlord further reserves the right to promulgate such reasonable rules
and regulations relating to the use of the Common Area, and any part or parts
thereof, as Landlord may deem appropriate for the best interests of the
occupants of the Building. The rules and regulations shall be binding upon
Tenant upon delivery of a copy of them to Tenant, and Tenant shall abide by them
and cooperate in their observance. Such rules and regulations may be amended by
Landlord from time to time, with or without advance notice, and all amendments
shall be effective upon delivery of a copy to Tenant. Notwithstanding anything
to the contrary herein, the rules and regulations relating to the Common Area
and any other area of the Premises shall not interfere with Tenant's use of the
Premises and, to the extent such rules and regulations do interfere with
Tenant's use of the Premises, such rules and regulations shall be void.
Tenant shall have the exclusive use of the total number of parking spaces
in the Common Area. Tenant shall not at any time park or permit the parking of
Tenant's trucks or other vehicles, or the trucks or other vehicles of others,
adjacent to loading areas so as to interfere in any way with the use of such
areas, nor shall Tenant at any time park or permit the parking of Tenant's
vehicles or trucks, or the vehicles or trucks of Tenant's suppliers or others,
in any portion of the Common Area not designated by Landlord for such use by
Tenant. Tenant shall not park or permit to be parked any inoperative vehicles or
equipment on any portion of the Common Area.
Landlord shall operate, manage and maintain the Common Area in the same
fashion as a common area maintained in a first class industrial park. The cost
of such maintenance, operation and management, including landscaping and repair
of paving and sidewalks, shall be a Common Area Charge and Tenant shall pay to
Landlord its share of such costs as provided in Section 11 below.
5.
<PAGE>
11. COMMON AREA CHARGES. Tenant shall pay to Landlord, as additional rent,
upon demand but not more often than once each calendar month, an amount equal to
one hundred percent (100%) of the Common Area Charges as defined in this Lease.
12. ALTERATIONS.
(A) Tenant may, without the prior consent of the Landlord, make any
alterations, improvements or additions in, on, about or to the Premises or any
part thereof that do not impair the structural soundness of the Building. Tenant
shall have the right to remove at any time any alteration, improvement,
addition, trade fixture, personal property, fixtures, equipment or other items
which Tenant uses in or affixes to the Premises, subject to the obligation to
repair any damage caused by such removal. Prior to the Commencement Date of the
Lease, Tenant shall provide Landlord with a list of the alterations,
improvements and additions that Tenant proposes to make in, on, about and to the
Premises, designating which additions, improvements and additions Tenant does
not intend to remove at the termination or expiration of the Lease.
Notwithstanding anything to the contrary above, Tenant shall not have the right
to remove such alterations, improvements and additions at the termination or
expiration of the Lease.
(B) If, during the term hereof, any alteration, addition or change of any
sort through all or any portion of the Premises is required by law, regulation,
ordinance or order of any public agency, Tenant, at its sole cost and expense,
shall promptly make the same. If, during the term hereof, any alteration,
addition or change to the Common Area or to the Building is required by law,
regulation, ordinance, or order of any public agency, the cost of such
alteration, addition, or change shall be a Common Area Charge and Tenant shall
pay its share of said costs to Landlord as provided in Section 11 above.
Tenant's obligations under this Subsection 12(b) are limited to the extent that
such costs shall be paid over the life of such improvements as provided in
Section 5 above.
13. CONDITION OF THE PREMISES. Landlord hereby warrants to Tenant that the
Premises have been constructed in accordance with all applicable governmental
rules, laws, ordinances and regulations and that the Premises are free from
defects in workmanship, design and materials. Any agreements, warranties or
representations not expressly contained herein shall in no way bind either
Landlord or Tenant, and Landlord and Tenant expressly waive all claims for
damages by reason of any statement, representation, warranty, promise or
agreement, if any, not contained in this Lease.
14. DEFAULT.
(A) EVENTS OF DEFAULT. A breach of this Lease shall exist if any of the
following events (hereinafter referred to as "Event of Default") shall
occur:
(1) Default in the payment when due of any installment of rent or
other payment required to be made by Tenant hereunder and such failure shall
have continued for ten (10) days after written notice of such failure is given
to Tenant;
(2) Tenant's failure to perform any other term, covenant or condition
contained in this Lease and such failure shall have continued for thirty (30)
days after written notice of such failure is given to Tenant;
6.
<PAGE>
(3) Tenant's vacating or abandonment of Premises;
(4) Tenant's assignment of its assets for the benefit of its
creditors;
(5) The sequestration of, attachment of, or execution on, any
substantial part of the property of Tenant or on any property essential to the
conduct of Tenant's business, shall have occurred and Tenant shall have failed
to obtain a return or release of such property within ninety (90) days
thereafter, or prior to sale pursuant to such sequestration, attachment or levy,
whichever is earlier; or
(6) A court having jurisdiction shall have made or entered any
decree or order (a) adjudging Tenant to be bankrupt or insolvent, (b) approving
as properly filed a petition seeking reorganization of Tenant or seeking an
arrangement under the bankruptcy laws or any other applicable debtors' relief
law or statute of the United States or any State thereof, (c) appointing a
receiver, trustee or assignee of Tenant in bankruptcy or insolvency for its
property, or (d) directing the winding up or liquidation of Tenant; and such
decree or order shall have continued for a period of ninety (90) days; or Tenant
shall have voluntarily submitted to or filed a petition seeking any such decree
or order.
(B) REMEDIES. Upon any Event of Default, Landlord shall have the
following remedies, in addition to all other rights and remedies provided by
law, to which Landlord may resort cumulatively, or in the alternative:
(1) RE-ENTRY WITHOUT TERMINATION. Landlord may re-enter the
Premises and, without terminating this Lease, at any time relet the Premises or
any part or parts of them, for the account and in the name of Tenant or
otherwise. Landlord may, at Landlord's election, eject Tenant or any of Tenant's
subtenants, assignees or other person or persons claiming any right under or
through this Lease, and remove to storage Tenant's fixtures, equipment,
furnishings, furniture, appliances and personal property installed or located on
or without the Premises. Tenant shall nevertheless pay the Landlord on the due
date specified in this Lease all sums required of Tenant under this Lease, plus
Landlord's expenses, less the proceeds of any sublease or reletting. The
expenses allowed Landlord shall include, without limitation: cost paid to retake
possession (including attorneys' fees), cost of removal to storage, cost of
storage, cost to place the Premises in good condition and alter them for
reletting, costs to secure new tenants (including real estate broker's
commissions) and costs to fulfill all of Tenant's covenants and conditions to
the end of the term. No act by or on behalf of landlord under this provision
shall constitute a termination of this Lease unless Landlord gives written
notice of termination.
(2) RECOVERY OF RENT. Landlord shall be entitled to keep this
Lease in full force and effect (whether or not Tenant shall have abandoned the
Premises) and to enforce all of its rights and remedies under this Lease,
including the right to recover rent and other sums as they become due, plus
interest at the rate of ten percent (10%) per annum from the due date of each
installment of rent or other sum until paid.
(3) TERMINATION. Landlord may terminate this Lease by giving
Tenant written notice of termination. On the giving of the notice all Tenant's
rights in the Premises and the Building shall terminate. Upon the giving of the
notice of termination, Tenant shall surrender and vacate the Premises in the
condition required by Section 32, and Landlord
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may re-enter and take possession of the Premises and all the remaining
improvements or property and eject Tenant or any of Tenant's sub-tenants,
assignees or other person or persons claiming any right under or through Tenant
or eject some and not others or eject none. This Lease may also be terminated by
a judgment specifically providing for termination. Any termination under this
Subsection 14(b)(3) shall not release Tenant from the payment of any sum then
due Landlord or from any claim for damages or rent previously accrued or then
accruing against Tenant. In no event shall any one or more of the following
actions by Landlord constitute a termination of this Lease:
A. maintenance and preservation of the Premises;
B. efforts to relet the Premises;
C. appointment of a receiver in order to protect Landlord's
interest hereunder;
D. consent to any subletting of the Premises or assignment
of this Lease by Tenant, whether pursuant to provisions hereof concerning
subletting and assignment or otherwise; or
E. any other action by Landlord or Landlord's agents
intended to mitigate the adverse effects from any breach of this Lease by
Tenant.
(4) DAMAGES. In the event this Lease is terminated pursuant to
Subsection 14(b)(3) above, Landlord shall be entitled to damages in the
following sums:
A. the worth at the time of award of the unpaid rent which
has been earned at the time of termination; plus
B. the worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
C. the worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; and
D. any other amount necessary to compensate Landlord for
all detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which in the ordinary course of things would be
likely to result therefrom including, without limitation, the following: (i)
expenses for cleaning, repairing or restoring the Premises; (ii) expenses for
altering, remodeling or otherwise improving the Premises for the purpose of
reletting, including installation of leasehold improvements (whether such
installation be funded by a reduction of rent, direct payment or allowance to
Tenant or otherwise); (iii) real estate broker's fees, advertising costs and
other expenses of reletting the Premises; (iv) costs of carrying the Premises
such as taxes and insurance premiums thereon, utilities and security
precautions; (v) expenses in retaking possession of the Premises; (vi)
attorney's fees and court
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costs; and (vii) any unamortized real estate brokerage commission paid in
connection with this Lease.
E. The "worth at the time of award" of the amounts referred
to in Subsections 14(b)(4)a and 14(b)(4)b is computed by allowing interest at
the rate of ten percent (10%) per annum. The "worth at the time of award" of the
amounts referred to in Subsection 14(b)(4)c is computed by discounting such
amount at the discount rate of the Federal Reserve Board of San Francisco at the
time of award plus one percent (1%). The term "rent" as used in this paragraph
shall include all sums required to be paid by Tenant to Landlord pursuant to the
terms of this Lease.
15. DESTRUCTION.
(A) DESTRUCTION OF LESS THAN THIRTY PERCENT. In the event that the
Premises are damaged or destroyed to the extent that the estimated cost of
repairing and restoring the Premises is less than thirty percent (30%) of the
appraised value of the Premises immediately prior to such damage or destruction,
Landlord shall, at its expense, promptly rebuild and restore the Premises to
their condition immediately prior to the damage or destruction.
If Landlord does not complete the rebuilding or restoration within one
hundred eighty (180) days following the date of damage or destruction (such
period of time to be extended for delays caused by the fault or neglect of
Tenant or because of acts of God, acts of public agencies, labor disputes,
strikes, fires, freight embargoes, rainy or stormy weather, inability to obtain
materials, supplies or fuels, acts of contractors or subcontractors, or delay of
the contractors or subcontractors due to such causes or other contingencies
beyond the control of Landlord), then Tenant shall have the right to terminate
this Lease by giving fifteen (15) days' prior written notice to Landlord.
Landlord's obligation to rebuild or restore shall not include restoration of
Tenant's trade fixtures, equipment, merchandise, or any improvements,
alterations or additions made by Tenant to the Premises.
(B) DESTRUCTION OF THIRTY PERCENT OR MORE. In the event that the Premises
are damaged or destroyed to the extent that the estimated cost of repairing and
restoring the Premises is thirty percent (30%) or more of the appraised value of
the Premises immediately prior to such damage or destruction, Landlord may, at
its option, (a) rebuild or restore the Premises to their condition prior to the
damage or destruction, or (b) terminate this Lease.
If Landlord does not give Tenant notice in writing within thirty (30) days
from the damage or destruction of the Premises of its election to either rebuild
and restore the Premises, or to terminate this Lease, Landlord shall be deemed
to have elected to rebuild or restore the Premises, in which event Landlord
agrees, at its expense, promptly to rebuild or restore the Premises to their
condition prior to the damage or destruction. If Landlord does not complete the
rebuilding or restoration within one hundred eighty (180) days following the
date of damage or destruction (such period of time to be extended for delays
caused by the fault or neglect of Tenant or because of acts of God, acts of
public agencies, labor disputes, strikes, fires, freight embargoes, rainy or
stormy weather, inability to obtain materials, supplies or fuels, acts of
contractors or subcontractors, or delay of the contractors or subcontractors due
to such causes or other contingencies beyond the control of Landlord), then
Tenant shall have the right to terminate this Lease by giving fifteen (15) days'
prior written notice to Landlord. Landlord's
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obligation to rebuild or restore shall not include restoration of Tenant's trade
fixtures, equipment, merchandise, or any improvements, alterations or additions
made by Tenant to the Premises.
(C) TENANT'S RIGHTS. Notwithstanding anything to the contrary in this
Section 15, Tenant shall have the right to terminate this Lease by giving
fifteen (15) days' prior written notice to Landlord in the event the Premises
are damaged or destroyed to the extent that such damage or destruction
materially interferes with Tenant's use of the Premises.
(D) NO TERMINATION. Unless this Lease is terminated pursuant to the
foregoing provisions, this Lease shall remain in full force and effect. Tenant
hereby expressly waives the provisions of Section 1932, Subdivision 2, and
Section 1933, Subdivision 4 of the California Civil Code.
16. CONDEMNATION.
(A) DEFINITION OF TERMS. For the purposes of this Lease, the term (1)
"Taking" means a taking of the Premises or damage to the Premises related to the
exercise of the power of eminent domain and includes a voluntary conveyance, in
lieu of court proceedings, to any agency, authority, public utility, person or
corporate entity empowered to condemn property; (2) "Total Taking" means the
Taking of the entire Premises or so much of the Premises as, in the sole
discretion of Tenant, prevents or substantially impairs the use thereof by
Tenant for the uses herein specified; (3) "Partial Taking" means the Taking of
only a portion of the Premises which does not constitute a Total Taking; (4)
"Date of Taking" means the date upon which the title to the Premises, or a
portion thereof, passes to and vests in the condemnor or the effective date of
any-order for possession if issued prior to the date title vests in the
condemnor; (5) "Award" means the amount of any award made, consideration paid,
or damages ordered as a result of a Taking.
(B) RIGHTS. The parties agree that in the event of a Taking all rights
between them or in and to an Award shall be as set forth herein and Tenant shall
have no right to any Award except as set forth herein.
(C) TOTAL TAKING. In the event of a Total Taking during the term hereof
(1) the rights of Tenant under the Lease and the leasehold estate of Tenant in
and to the Premises shall cease and terminate as of the date of Taking; (2)
Landlord shall refund to Tenant any prepaid rent; (3) Tenant shall pay the
Landlord any rent or charges due Landlord under the Lease, each prorated as of
the date of Taking; (4) Tenant shall receive from the Landlord those portions of
the Award attributable to trade fixtures of Tenant and for moving expenses of
Tenant; (5) the remainder of the Award shall be paid to and be the property of
Landlord.
(D) PARTIAL TAKING. In the event of a Partial Taking during the term
hereof (1) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the portion of the Premises taken shall cease and terminate as
of the Date of Taking; (2) from and after the Date of Taking the monthly
installment of rent shall be an amount equal to the product obtained by
multiplying the monthly installment of rent immediately prior to the Taking by
the quotient obtained by dividing the fair market value of the Premises after
the Taking by the fair market value of the Premises prior to the Taking; and (3)
Tenant shall receive from the Award the portions of the Award attributable to
trade fixtures of Tenant; and (4) the remainder of the Award shall be paid to
and be the property of Landlord.
10.
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(E) TENANT'S RIGHTS. Notwithstanding anything to the contrary in this
Section 16, Tenant shall have the right to terminate this Lease if any material
Taking interferes with Tenant's use of the Premises.
17. MECHANICS' LIEN. Tenant shall (1) pay for all labor and services performed
for, materials used by or furnished to, Tenant or any contractor employed by
Tenant with respect to the Premises, and (2) indemnify, defend and hold Landlord
and the Premises harmless and free from any liens, claims, demands,
encumbrances, or judgments created or suffered by reason of any labor or
services performed for, materials used by or furnished to, Tenant or any
contractor employed by Tenant with respect to the Premises, and (3) give notice
to Landlord in writing five (5) days prior to employing any laborer or
contractor to perform services related to, or receiving materials for use upon
the Premises, and (4) permit Landlord to post a notice of nonresponsibility in
accordance with the statutory requirements of California Civil Code Section 3094
or any amendment thereof. In the event Tenant is required to post an improvement
bond with a public agency in connection with the above, Tenant agrees to include
Landlord as an additional obligee.
18. INSPECTION OF THE PREMISES. Tenant shall permit Landlord and its agents to
enter the Premises at any reasonable time for the purpose of inspecting the
same, performing Landlord's maintenance and repair responsibilities, posting a
notice of nonresponsibility for alterations, additions or repairs, and at any
time within ninety (90) days prior to expiration of this Lease, to place upon
the Premises ordinary "For Lease" or "For Sale" signs. Notwithstanding the
foregoing, such entry, maintenance and repair shall not interfere with Tenant's
use of the Premises.
19. COMPLIANCE WITH LAWS. Tenant shall, at its own cost, comply with all of
the requirements of all municipal, county, state and federal authority now in
force, or which may hereafter be in force, pertaining to the use and occupancy
of the Premises, and shall faithfully observe all municipal, county, state and
federal statutes or ordinances now in force or which may hereafter be in force.
The judgment of any court of competent jurisdiction or the admission of Tenant
in any action or proceeding against Tenant, whether Landlord be a party thereto
or not, that Tenant has violated any such ordinance or statute in the use and
occupancy of the Premises shall be conclusive of the fact that such violation by
Tenant has occurred. The provisions of this Section 19 shall be subject to
Landlord's warranties found in Section 13 above and Landlord's obligations to
spread the expense of any capital improvement over the life of such improvement
as found in Section 5 above.
20. SUBORDINATION.
(A) RIGHTS. At the option of the Landlord, the rights of Tenant under this
Lease shall be subject and subordinate to any mortgage or deed of trust which
are or may hereafter be placed upon the Premises, or any part thereof, by
Landlord.
(B) DOCUMENTS. Tenant shall, upon Landlord's request, promptly execute any
instrument (including an amendment to this Lease) or instruments of
subordination necessary to subordinate this Lease to any mortgage or deed of
trust to be placed upon the Premises, or any part thereof, by Landlord in
accordance with Subsection 20(a) above. Tenant agrees to recognize any mortgagee
or beneficiary of the deed of trust subsequently encumbering the Premises and
11.
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any party acquiring title to the Premises, by judicial foreclosure or a
trustee's sale, as a successor to Landlord hereunder.
(C) QUIET ENJOYMENT. Notwithstanding anything to the contrary in this
Section, Tenant's quiet enjoyment of the Premises shall not be disturbed by any
mortgagee or beneficiary under a deed of trust or by anyone else as long as
Tenant is not in default under this Lease.
21. HOLDING OVER. This Lease shall terminate without further notice at the
expiration of the Lease Term. Any holding over by Tenant after expiration shall
not constitute a renewal or extension or give Tenant any rights in or to the
Premises except as expressly provided in this Lease. Any holding over after the
expiration with the consent of Landlord shall be construed to be a tenancy from
month to month, at 150% of the monthly rent for the last month of the Lease
term, and shall otherwise be on the terms and conditions herein specified
insofar as applicable.
22. NOTICES. Any notice required or desired to be given under this Lease shall
be in writing with copies directed as indicated below and shall be personally
served or given by mail. Any notice given by mail shall be deemed to have been
given when forty-eight (48) hours have elapsed from the time which such notice
was deposited in the United States mails, certified and postage prepaid,
addressed to the party to be served with a copy as indicated herein at the last
address given by that party to the other party under the provisions of this
section. At the date of execution of this Lease, the address of Landlord is:
Oakmead Investments
3375 Scott Boulevard, #308
Santa Clara, CA 95051
Attn: Mr. Terrence J. Rose
and the address of Tenant is:
Amdahl `Corporation
P.O. Box 470
Mail Stop 110
1250 East Arques Avenue
Sunnyvale, CA 94086
Attn: Mr. Gary Alfson
Manager of Real Estate
23. ATTORNEYS' FEES. In the event either party shall bring any action or legal
proceeding for damages for an alleged breach of any provision of this Lease, to
recover rent, to terminate the tenancy of the Premises, or to enforce, protect
or establish any term or covenant of this Lease or right or remedy of either
party, the prevailing party shall be entitled to recover as a part of such
action or proceeding reasonable attorneys' fees and court costs, including
attorneys' fees and costs for appeal, as may be fixed by the court or jury.
24. NONASSIGNMENT. Tenant's interest in this Lease is not assignable, by
operation of law or otherwise, nor shall Tenant have the right to sublet the
Premises, transfer any interest of Tenant's therein or permit any use of the
Premises by another party, without the prior written consent of Landlord to such
assignment, subletting, transfer or use, which consent Landlord agrees not to
unreasonably withhold. A consent to one assignment, subletting, occupancy or use
by another
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party shall not be deemed to be a consent to any subsequent assignment,
subletting, occupancy or use by another party. Any assignment or subletting
without such consent shall be void and shall, at the option of Landlord,
terminate this Lease.
Landlord's waiver or consent to any assignment or subletting hereunder
shall not relieve Tenant from any obligation under this Lease unless the waiver
or consent shall so provide.
25. SUCCESSORS. The covenants and agreements contained in this Lease shall be
binding on the parties hereto and on their respective heirs, successors and
assigns (to the extent the Lease is assignable).
26. LANDLORD LOAN OR SALE. Tenant agrees promptly following request by
Landlord to execute and deliver to Landlord any documents, including estoppel
certificates, presented to Tenant by Landlord, (i) certifying that, to Tenant's
knowledge, this Lease is unmodified and in full force and effect or specifying
any modifications made, and specifying the date to which the rent and other
charges are paid in advance, if any, and (ii) acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder or
specifying any such defaults, and (iii) evidencing the status of the Lease, to
Tenant's knowledge, as may be required either by a lender making a loan to
Landlord to be secured by deed of trust or mortgage covering the Premises or a
purchaser of the Premises from Landlord.
27. SURRENDER OF LEASE NOT MERGER. The voluntary or other surrender of this
Lease by Tenant, or a mutual cancellation thereof, shall not work a merger and
shall, at the option of Landlord, terminate all or any existing subleases or
subtenants, or operate as an assignment to Landlord of any or all such subleases
or subtenants.
28. WAIVER. The waiver by Landlord or Tenant of any breach of any term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the same or any
other term, covenant or condition herein contained.
29. GENERAL.
(A) The captions and paragraph headings used in this Lease are for the
purposes of convenience only. They shall not be construed to limit or extend the
meaning of any part of this Lease.
(B) The term "Landlord" as used in this Lease, so far as the covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner at the time in question of the fee title of the Premises,
and in the event of any transfer or transfers of the title of such fee, the
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall after the date of such transfer or conveyance be
automatically freed and relieved of all liability with respect to performance of
any covenants or obligations on the part of Landlord contained in this Lease,
thereafter to be performed; provided, that any funds in the hands of Landlord or
the then grantor at the time of such transfer, in which Tenant has an interest,
shall be turned over to the grantee. It being intended that the covenants and
obligations contained in this Lease on the part of Landlord shall, subject as
aforesaid, be binding upon each Landlord, its heirs, personal representatives,
successors and assigns only during its respective period of ownership.
13.
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(C) Any executed copy of this Agreement shall be deemed an original for
all purposes.
(D) Time is of the essence for the performance of each term, covenant and
condition of this Lease.
(E) In case any one or more of the provisions contained herein, except for
the payment of rent, shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Lease, but this Lease shall be
construed as if such invalid, illegal or unenforceable provisions had not been
contained herein. This Lease shall be construed and enforced in accordance with
the laws of the State of California.
(F) If Tenant is more than one person or entity, each such person or
entity shall be jointly and severally liable for the obligations of Tenant
hereunder.
(G) This Lease constitutes the entire understanding between the parties
hereto and no addition to, or modification of, any term and provision of this
Lease shall be effective until set forth in writing signed by both Landlord and
Tenant.
30. SIGN. Tenant shall not place or permit to be placed any sign or decoration
on the Premises or the exterior of the Building without the prior written
consent of Landlord, which consent shall not be unreasonably with held. Tenant,
upon written notice by Landlord, shall immediately remove any sign or decoration
that Tenant has placed or permitted to be placed on the land or the exterior of
the Building without the prior written consent of Landlord, and if Tenant fails
to so remove such sign or decoration within five (5) days after Landlord's
written notice, Landlord may enter upon the Premises and remove said sign or
decoration and Tenant agrees to pay Landlord, as additional rent upon demand,
the cost of such removal. At the termination of this Lease, Tenant shall remove
any sign which it has placed on the Premises or Building, and shall repair any
damage caused by the installation or removal of such sign.
31. INTEREST ON PAST DUE OBLIGATIONS. Any amount due to Landlord not paid when
due shall bear interest at the rate of ten percent (10%) per annum from the due
date. Payment of such interest shall not excuse or cure any default by Tenant
under this Lease.
32. SURRENDER OF THE PREMISES. On the last day of the term hereof, or on
sooner termination of this Lease, Tenant shall surrender the Premises to
Landlord in condition sufficient to be leased for general office purposes,
excepting reasonable wear and tear and any damages or destruction caused by
casualty or acts of God, with all painted interior walls washed, or repainted if
marked or damaged, and other interior walls cleaned, and repaired or replaced,
all carpets shampooed and cleaned, the air conditioning and heating equipment
serviced and repaired by a reputable and licensed service firm (unless Landlord
has elected to maintain heating and air conditioning pursuant to Section 9A
above), all floors cleaned and waxed, all to the reasonable satisfaction of
Landlord. Tenant shall remove all Tenant's personal property and trade fixtures
from the Premises, and all property not so removed shall be deemed abandoned by
Tenant. If the Premises are not so surrendered at the termination of this Lease,
Tenant shall indemnify Landlord against loss or liability resulting from delay
by Tenant in so surrendering the Premises including, without limitation, any
claims made by any succeeding tenant or losses to Landlord due to lost
opportunities to lease to succeeding tenants.
14.
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33. OPTION TO EXTEND.
(A) PERIOD. Provided that Tenant is not in default under this Lease at the
end of the original term of this Lease, Tenant shall have the option to extend
the term of the Lease for two (2) successive five (5) year periods on all of the
same terms and conditions set forth in this Lease, except for the rental
adjustment as provided in this Section 33. The option to extend for the first
five (5) year period shall be exercisable only by Tenant giving Landlord written
notice not less than one hundred twenty (120) days prior to the Expiration Date.
The option to extend for the second five (5) year period shall be exercisable
only by Tenant giving Landlord written notice not less than one hundred twenty
(120) days prior to the expiration of the first option period.
(B) RENT FOR FIRST THIRTY MONTHS.
(1) Sixty (60) days prior to the expiration of the original term
of the Lease, Landlord and Tenant shall enter into negotiations with respect to
the rent for the first thirty (30) months of the first five (5) year option.
(2) In the event such agreement cannot be made within ninety
(90) days prior to the expiration of the original term of the lease, the
Landlord and Tenant shall each appoint an independent third party real estate
professional who must have at least five (5) years experience in commercial
industrial real estate brokerage in Santa Clara County and be a member of the
Association of South Bay Brokers. In the event one party fails to appoint said
real estate professional within fifteen (15) days following receipt of written
notice in which the other party has named its professional, the other party may
request the President of the Association of South Bay Brokers to appoint the
second professional for the failing party. The two professionals shall
independently submit written statements of what each determines to be the Fair
Market Rent for like space, similarly improved, in the area. If the difference
as determined is 10% or less, the rent during the first thirty (30) months of
the renewal term shall be the average of the two. If the difference is greater
than 10%, a third professional shall be chosen jointly by the first two
professionals and the three Fair Market Rent amounts shall be averaged to
determine such rent.
(C) RENT AFTER FIRST THIRTY MONTHS.
(1) After the first thirty (30) months of the first five (5)
year option period, the rent shall be increased by twenty percent (20%)
("Adjusted Rent").
(2) Effective at the commencement of the second five (5) year
period, the rent shall be as determined by using the same process stated in
33(b), above, for the first five (5) year option period ("Second Adjusted
Rent").
(3) Effective thirty (30) months after the commencement of the
second five (5) year option period, the rent shall be the Second Adjusted Rent
increased by twenty percent (20%).
(D) RENT NOT LESS THAN PREVIOUS PERIOD. In no event shall the monthly rent
during either option period be less than the monthly rent during the last month
of the previous term or option period, as applicable.
15.
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34. AUTHORITY. The undersigned parties hereby warrant that they have proper
authority and are empowered to execute this Lease on behalf of the Landlord and
Tenant, respectively.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
set forth below.
LANDLORD: TENANT:
OAKMEAD INVESTMENTS, AMDAHL CORPORATION,
a Delaware corporation a Delaware corporation
By: __________________________________ By: ________________________________
TERRENCE J. ROSE E.S. HARTFORD
Partner Director of Facilities
Date _________________________________ Date _______________________________
16.
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EXHIBIT B
SUBLET SPACE - FLOOR PLAN
[To Be Attached]
<PAGE>
[Exhibit B Diagram]
<PAGE>
EXHIBIT C
TENANT IMPROVEMENTS
Sublessor, at Sublessor's sole cost and expense, shall provide space
planning services to define tenant improvements yet shall improve the premises
substantially as follows:
A. Install a uni-sex prefabricated shower stall, no tile.
B. Provide one (1) monument sign, subject to Landlord approval.
C. Repair any missing base board.
D. Demise premises by building walls at locations specified in Exhibit B.
E. Divide the large center room marked "C" into two conference rooms.
F. Create three (3) lab areas totaling 1,750 square feet with 15 (20 amp)
electrical drops and tile floor covering.
G. Provide allowance up to seven thousand five hundred dollars ($7,500) for
miscellaneous tenant improvements to be performed by Amdahl at current
billing rates, including necessary rezoning of HVAC only to areas affected
by tenant improvement work except that Amdahl will balance HVAC in areas
"C" and office 708 at no cost. Sublessee shall install, at its sole cost,
any security and telecommunication systems. Amdahl will assist in such
coordination if required - by consultation.
H. Divide office 708 into two offices and replace door hardware on second
door.
I. Remove hallway door located between offices 708 and 254.
J. Complete wall between offices 727 and 731.
K. Restore (build) wall between offices 811 and 813 to match the drawing.
L. Install hallway door between offices 784 and 779, if required by code.
<PAGE>
FIRST AMENDMENT TO SUBLEASE
RE: That certain Sublease dated February 16, 1995 by and between Amdahl
Corporation as Sublessor and NVidia as Sublessee as pertains to the
Property identified as 432 Lakeside Drive, Sunnyvale, California
PARAGRAPH 6: The Letter of Credit will be in the amount of $125,000 for the
first six (6) months of the Sublease, after which, if Sublessee has made its
rental payments on time as agreed, Sublessor will require it to be no greater
than $100,000.
Sublessor and Sublessee agree that the attached form of Landlord consent is
acceptable in lieu of the form attached to the original Sublease.
AMDAHL CORPORATION NVIDIA
By:/s/ Edward S. Hartford By:[SIGNATURE ILLEGIBLE]
---------------------------- -------------------------------
Edward S. Hartford
Its: Vice President, Facilities Its: Vice President of Operations
Date: March 1, 1995 Date: February 28, 1995
------------------------ ---------------------------
attachment
<PAGE>
CONSENT OF LANDLORD
AS TO THE AMDAHL TO NVIDIA SUBLEASE
AT 432 LAKESIDE DRIVE, SUNNYVALE, CA
Landlord grants its consent to the Subleasing of a portion of the Premises
without modifying any term, condition or covenant of the Master Lease as between
Landlord and Sublessor.
"LANDLORD"
By: [SIGNATURE ILLEGIBLE]
-------------------------
Its: PARTNER
------------------------
<PAGE>
AMENDMENT NO. 2 TO SUBLEASE
This AMENDMENT NO. 2 TO SUBLEASE ("Amendment") is made effective as of
September 1, 1995 (the "Effective Date") between AMDAHL CORPORATION, a Delaware
corporation ("Sublessor"), and NVIDIA CORPORATION.
The parties enter into this Amendment based upon the following facts,
understandings and intentions:
A. Sublessor currently leases approximately 59,885 rentable square feet of
space (the "Premises") at 432 Lakeside Drive, Sunnyvale, California pursuant to
that certain Lease Agreement dated November 7, 1983 between Oakmead Investments,
as landlord, and Sublessor, as tenant.
B. Sublessor and Sublessee are now parties to that certain Sublease
Agreement, dated February 2, 1995, for the use of approximately 29,100 rentable
square feet, but by agreement, charged as 27,875 rentable square feet of space
("Existing Sublet Space") in the Premises.
C. Sublessor desires to sublease additional space to Sublessee and
Sublessee desires to sublease additional space from Sublessor on all of the
terms, covenants and conditions hereinafter set forth.
D. The parties hereto desire to modify the Sublease as hereinafter
provided. Capitalized terms used herein shall have the same meaning given them
in the Sublease unless otherwise defined herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises of
the parties, the parties hereto agree as follows:
1. EXPANSION OF EXISTING PREMISES. As of the Effective Date, the Existing
Sublet Space shall be increased to an aggregate size of approximately 34,251
rentable square feet of space, but by agreement, charged as 33,026 rentable
square feet consisting of: (i) the approximately 29,100 rentable square feet of
space (but by agreement, charged as 27,875 rentable square feet) comprising the
Existing Sublet Space, and (ii) approximately 5,151 rentable square feet of
space ("Additional Space") located in the Premises and more particularly shown
on EXHIBIT A attached to this Amendment. Sublessee hereby accepts the
Additional Space in an "as-is, where-is" condition, as exists as of the
Effective Date, with all defects, whether or not disclosed to Sublessee by
Sublessor, and subject to all applicable laws, ordinances and regulations and
any covenants or restrictions of record relating to the Additional Space.
However, Sublessor will be responsible for demising the Additional Space,
including relocating doors for offices 1166, 1172, 1174, 1184, and 1186. The
cost of relocating doors for these offices will be amortized over the remaining
initial sublease term and added to the rent. Sublessor makes no representations
or warranties, express or implied, as to the physical condition of the
Additional Space, its current compliance with law or its fitness for Sublessee's
intended use, or the condition of the structural and nonstructural portions of
the Additional Space or whether any repairs are necessary to correct preexisting
conditions.
1.
<PAGE>
2. RENT. The monthly Base Rent due hereunder the Sublease shall be
Thirty-Three Thousand Nine Hundred Ninety-Five Dollars and Fifty-Four Cents
($33,995.54).
3. PARKING. The number of parking spaces allotted under Section 17.6 of
the Sublease are amended to one hundred thirty (133).
4. FULL FORCE AND EFFECT. Except as herein amended and supplemented, the
Sublease shall continue in full force and effect as written.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment with
duplicate counterparts as of the day and year first above written.
SUBLESSOR
Amdahl Corporation,
a Delaware corporation
By: /s/ Edward S. Hartford
-------------------------------
Edward S. Hartford
Title: Vice President, Facilities
SUBLESSEE
NVidia Corporation
By: [SIGNATURE ILLEGIBLE]
-------------------------------
Title: Vice President of Operation
----------------------------
2.
<PAGE>
AMENDMENT NO. 3 TO SUBLEASE
This AMENDMENT NO. 3 TO SUBLEASE ("Amendment") is made as of September 4,
1997 between AMDAHL CORPORATION, a Delaware corporation, and NVIDIA CORPORATION,
a Delaware corporation ("Sublessee").
The parties enter into this Amendment based upon the following facts,
understanding and intentions:
A. Sublessor currently leases approximately 59,885 rentable square feet of
space (the "Premises") at 432 Lakeside Drive, Sunnyvale, California pursuant to
that certain Lease Agreement dated November 7, 1983 between Oakmead Investments,
as landlord, and Sublessor, as tenant.
B. Sublessor and Sublessee are now parties to that certain Sublease
Agreement, dated February 2, 1995 as amended by an Amendment No. 1 to Sublease
dated March 1, 1995 and an Amendment No. 2 to Sublease effective as of September
1, 1995 (as amended, the "Sublease") for the use of approximately 34,251
rentable square feet of space, but by agreement, charged as 33,026 rentable
square feet of space (the "Sublet Space") in the Premises.
C. Sublessor and Sublessee desire to extend the Term of the Sublease.
D. The parties hereto desire to modify the Sublease as hereinafter
provided. Capitalized terms used herein shall have the same meaning given them
in the Sublease, unless otherwise defined herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises of
the parties, the parties hereto agree as follows:
1. EXTENSION OF TERM. Effective as of September 1, 1997, the Term of the
Sublease shall be extended for an additional period of one (1) year, such that
the Term of the Sublease shall expire on August 31, 1998. The gross rent due
from Sublease during such extension period shall be Sixty-Two Thousand Four
Hundred Nineteen and 14/100 Dollars ($62,419.14) per month.
2. ELIMINATION OF OPTIONS TO EXTEND. Sublessee shall have no option or
ability whatsoever to extend the Term of the Sublease beyond August 31, 1998. In
connection therewith, Section 1.2 of the Sublease is hereby deleted in its
entirety.
3. ELIMINATION OF RIGHT OF FIRST NEGOTIATION. The right of first
negotiation granted Sublessee in Section 1.3 of the Sublease is hereby
eliminated.
4. LETTER OF CREDIT. Notwithstanding anything to the contrary in Section 6
of the Sublease, the amount of the Letter of Credit to be deposited with
Sublessor upon execution of this Amendment shall be One Hundred Fifty Thousand
Dollars ($150,000). The amount of the Letter of Credit shall be reviewed by
Sublessor at that time in the sole discretion of Sublessor.
1.
<PAGE>
5. FULL FORCE AND EFFECT. Except as herein amended and supplemented, the
Sublease shall continue in full force and effect as written.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment with
duplicate counterparts as of the day and year first above written.
"SUBLESSOR"
Amdahl Corporation,
a Delaware corporation
By: /s/ Jonathan C. Anderson
------------------------------------
Name: Jonathan C. Anderson
Title: Director, Corporate Real Estate
"SUBLESSEE"
NVidia Corporation,
A Delaware corporation
By: /s/ Richard Whitaire
------------------------------------
Name: Richard Whitaire
----------------------------------
Title: VP of Corporate Engineering
---------------------------------
2.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
NVIDIA Corporation:
We consent to the use of our form of report included herein and to the
reference of our firm under the headings "Selected Financial Data" and
"Experts" in the prospectus.
KPMG Peat Marwick LLP
Mountain View, California
March 6, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 6,551
<SECURITIES> 0
<RECEIVABLES> 12,587
<ALLOWANCES> (100)
<INVENTORY> 24
<CURRENT-ASSETS> 19,341
<PP&E> 8,379
<DEPRECIATION> (2,843)
<TOTAL-ASSETS> 25,038
<CURRENT-LIABILITIES> 16,251
<BONDS> 0
9
0
<COMMON> 14
<OTHER-SE> 6,873
<TOTAL-LIABILITY-AND-EQUITY> 25,038
<SALES> 27,280
<TOTAL-REVENUES> 29,071
<CGS> 21,226
<TOTAL-COSTS> 21,226
<OTHER-EXPENSES> 10,405
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (266)
<INCOME-PRETAX> (2,691)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,691)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,691)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
