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As filed with the Securities and Exchange Commission on March 14, 2000
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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NETSILICON, INC.
(Exact Name of Registrant as specified in its charter)
MASSACHUSETTS 04-2826579
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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411 WAVERLEY OAKS ROAD, BLDG. 227
WALTHAM, MA 02454
(781) 647-1234
(Address of Principal Executive Offices) (Zip Code)
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NETSILICON, INC.
AMENDED AND RESTATED 1998 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
AMENDED AND RESTATED 1998 DIRECTOR STOCK OPTION PLAN
(Full title of the plan)
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CORNELIUS PETERSON VIII
PRESIDENT AND CHIEF EXECUTIVE OFFICER
NETSILICON, INC.
411 WAVERLEY OAKS ROAD, BLDG. 227
WALTHAM, MA 02454
(Name and Address of Agent for Service of Process)
(781) 647-1234
(Telephone Number, Including Area Code, of Agent For Service)
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Copy to:
EDWIN L. MILLER, JR., ESQ.
TESTA, HURWITZ & THIBEAULT, LLP
125 HIGH STREET
BOSTON, MASSACHUSETTS 02110
(617) 248-7000
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<PAGE> 2
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Maximum Proposed
Offering Maximum
Title of Securities Amount to be Price Per Aggregate Amount of
to be Registered Registered Share Offering Price Registration Fee(4)
<S> <C> <C> <C> <C>
Amended and Restated 1998 Incentive and 2,957,728 $7.00(1) $20,704,096.00 $5,465.88
Non-qualified Stock Option Plan 3,500 $10.75(1) $37,625.00 $9.93
COMMON STOCK (PAR VALUE $.01 PER SHARE) 3,000 $11.75(1) $35,250.00 $9.31
10,000 $12.44(1) $124,400.00 $32.84
75,000 $12.88(1) $966,000.00 $255.02
16,000 $13.13(1) $210,080.00 $55.46
2,500 $13.25(1) $33,125.00 $8.75
750 $13.81(1) $10,357.50 $2.73
60,000 $15.38(1) $922,800.00 $243.62
13,500 $19.75(1) $266,625.00 $70.39
32,050 $22.13(1) $709,266.50 $187.25
28,000 $22.38(1) $626,640.00 $165.43
500 $22.75(1) $11,375.00 $3.00
18,500 $29.50(1) $545,750.00 $144.08
10,000 $32.06(1) $320,600.00 $84.64
20,000 $34.13(1) $682,600.00 $180.21
2,748,247 $30.75(2) $84,508,595.25 $22,310.27
725 $30.75(3) $22,293.75 $5.89
Amended and Restated 1998 Director Stock Option 125,000 $7.00(1) $875,000.00 $231.00
Plan 675,000 $30.75(2) $20,756,250.00 $5,479.65
COMMON STOCK (PAR VALUE $.01 PER SHARE)
--------- --------------- -------------------
6,800,000 $132,368,729 $34,945.34
</TABLE>
(1) All of these shares are issuable upon exercise of outstanding options with
fixed exercise prices. Pursuant to Rule 457(h), the aggregate offering
price and the fee have been calculated upon the basis of the price at which
such options may be exercised.
(2) These shares are not subject to outstanding options. The price of $30.75
per share, which is the average of the high and low prices reported on the
Nasdaq National Market on March 7, 2000, is set forth solely for purposes
of calculating the filing fee pursuant to Rule 457(c) and (h) and has been
used for shares without a fixed exercise or purchase price.
(3) All of these shares are issued and outstanding and available for resale
hereunder. The price of $30.75 per share, which is the average of the high
and low prices reported on the Nasdaq National Market on March 7, 2000, is
set forth solely for purposes of calculating the filing fee pursuant to
Rule 457(c) and (h).
(4) Calculated pursuant to Section 6(b) of the Securities Act of 1933, as
amended.
<PAGE> 3
PART I
A. INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information required by Part I of Form S-8
will be sent or given to employees, directors or others as specified by Rule
428(b)(1). In accordance with the rules and regulations of the Securities and
Exchange Commission (the "Commission") and the instructions to Form S-8, such
documents are not being filed with the Commission either as part of this
Registration Statement or as prospectuses or prospectus supplements pursuant to
Rule 424.
B. REOFFER PROSPECTUS STATEMENT
The materials that follow, up to but not including the page beginning
Part II of this Registration Statement, constitute a Reoffer Prospectus prepared
in accordance with the requirements of Part I of Form S-3 pursuant to General
Instruction C to Form S-8. The Reoffer Prospectus may be utilized for
reofferings and resales of up to 725 shares of common stock acquired by certain
unnamed non-affiliates pursuant to NETsilicon, Inc.'s Amended and Restated 1998
Incentive and Non-qualified Stock Option Plan.
<PAGE> 4
REOFFER PROSPECTUS
725 SHARES
NETSILICON, INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
-----------------------
This reoffer prospectus relates to 725 shares of the common stock of
NETsilicon, Inc., a Massachusetts corporation ("NETsilicon"), which may be sold
from time to time by certain selling security holders of NETsilicon. These
shares were issued pursuant to our Amended and Restated 1998 Incentive and
Non-qualified Stock Option Plan. The selling security holders may sell the
shares from time to time, subject to certain restrictions. NETsilicon will
receive no proceeds from the sale of the shares.
Our common stock is traded on the Nasdaq National Market under the
symbol "NSIL." On March 10, 2000, the last reported sale price of our common
stock on the Nasdaq National Market was $30.50 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS
HAVE NOT APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. IT IS ILLEGAL FOR ANY PERSON TO TELL YOU
OTHERWISE.
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The date of this Reoffer Prospectus is March 14, 2000.
<PAGE> 5
AVAILABLE INFORMATION
This prospectus is part of the registration statement and does not
contain all of the information included in the registration statement. Whenever
a reference is made in this prospectus to any contract or other document of
ours, the reference may not be complete, and you should refer to the exhibits
that are a part of the registration statement for a copy of the contract or
document.
We have filed a registration statement on Form S-8 with the Securities
and Exchange Commission in connection with this offering. In addition, we file
annual, quarterly and current reports, proxy statements and other information
with the Securities and Exchange Commission. You may read and copy the
registration statement and any other documents we file at the Securities and
Exchange Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, DC 20549. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the Public Reference Room. Our
Securities and Exchange Commission filings are also available to the public at
the Securities and Exchange Commission's Internet site at http://www.sec.gov.
We will provide without charge to each person who is delivered a
prospectus, if requested, a copy of any or all of the documents incorporated by
reference herein (other than exhibits to those documents unless those exhibits
are specifically incorporated by reference into those documents). Requests for
copies should be directed to, NETsilicon, Inc., 411 Waverley Oaks Road, Bldg.
227, Waltham, Massachusetts 02452 (telephone: (800) 243-2333).
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NETSILICON
NETsilicon, based in Waltham, Massachusetts, develops and markets
semiconductor devices and software designed to meet the networking requirements
of embedded systems. Customers incorporate our products into the design of
embedded systems to provide them with the ability to communicate over
standards-based local area networks, wide-area networks and the Internet,
enabling the development of new embedded systems applications. We believe that
we offer the first comprehensive products that, in conjunction with a physical
interface and memory, encompass all of the hardware and software necessary to
allow electronic devices incorporating embedded systems to communicate with
other devices. We design our technology to have broad applicability and it
therefore may add network functionality to many embedded systems. Our products
are currently contained in a broad array of imaging products, including
printers, scanners, fax machines, copiers and multi-function peripherals
manufactured by over 20 manufacturers.
Our principal offices are located at 411 Waverley Oaks Road, Bldg. 227,
Waltham, Massachusetts 02452, and the our telephone number is (781) 647-1234.
RISK FACTORS
You should carefully consider the following risks before investing in
our common stock. These are not the only risks facing our company. Additional
risks may also impair our business operations. If any of the following risks
come to fruition, our business, results of operations or financial condition
could be materially adversely affected. In that case, the trading price of our
common stock could decline, and you may lose all or part of your investment. You
should also refer to the other information set forth in this prospectus, and
incorporated by reference, including our financial statements and the
accompanying notes.
This prospectus contains certain "forward-looking statements"
(statements that are not historical fact) based on our current expectations,
assumptions, estimates and projections about our company and our industry. These
forward-looking statements involve risks and uncertainties. Our actual results
could differ materially from those anticipated in those forward-looking
statements as a result of many factors, as more fully described in this section
and elsewhere in this prospectus.
WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT THAT MAKE FUTURE
OPERATING RESULTS AND PROFITABILITY DIFFICULT TO PREDICT.
We incurred net losses from continuing operations for the fiscal
years ended January 31, 1997, 1998 and 1999. Although we were profitable in
fiscal year 2000, there can be no assurance that we will be able to maintain
profitability on a quarterly or annual basis in the future. In addition, revenue
growth is not necessarily indicative of future operating results and there can
be no assurance that we will be able to sustain revenue growth. We continue to
invest significant financial resources in product development, marketing and
sales, and a failure of such expenditures to result in significant increases in
revenue could have a material adverse effect on us. Due to the limited history
and undetermined market acceptance of our new products, the rapidly evolving
nature of our business and markets, potential changes in product standards that
significantly influence many of the markets for our products, the high level of
competition in the industries in which we operate and the other factors
described elsewhere in Risk Factors, there can be no assurance that our
investment in these areas will result in increases in revenue or that any
revenue growth that is achieved can be sustained. Our history of losses, coupled
with the factors described under the Risk Factor "Potential Fluctuations in
Operating Results," make future operating results difficult to predict. We
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and our future prospects must be considered in light of the risks, costs and
difficulties frequently encountered by emerging companies. As a result, there
can be no assurance that we will be profitable in any future period.
THE UNPREDICTABILITY OF OUR QUARTERLY RESULTS MAY ADVERSELY AFFECT THE TRADING
PRICE OF OUR COMMON STOCK.
Our net sales and operating results have in the past and may in the
future fluctuate substantially from quarter to quarter and from year to year.
These results have varied significantly due to a number of factors, including:
- market acceptance of and demand for our products and those of our
customers;
- unanticipated delays or problems in the introduction of our
products;
- the timing of large customer orders;
- the timing and success of our customers' development cycles;
- our ability to introduce new products in accordance with customer
design requirements and design cycles;
- new product announcements or product introductions by us and our
competitors;
- availability and cost of manufacturing sources for our products;
- the volume of orders that are received and can be filled in a
quarter;
- the rescheduling or cancellation of orders by customers;
- changes in product mix;
- timing of "design wins" with our customers and related revenue;
and
- changes in currency exchange rates.
Our operating results could also be harmed by:
- the growth rate of markets into which we sell our products;
- changes in the mix of sales to customers and sales
representatives;
- costs associated with protecting our intellectual property; and
- changes in product costs and pricing by us and our competitors.
We budget expenses based in part on future revenue projections. We may
be unable to adjust spending in a timely manner in response to any unanticipated
declines in revenues.
Delays or lost sales have been and could be caused by other factors
beyond our control, including late deliveries by vendors of components. In the
three months ended October 31, 1998, we experienced delays in the delivery of
our product from Atmel Corporation.
As a result of these and other factors, investors should not rely
solely upon period-to-period comparisons of our operating results as an
indication of future performance. It is likely that in some future period our
operating results or business outlook will be below the expectations of
securities analysts or
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investors, which would likely result in a significant reduction in the market
price of the shares of common stock.
OUR FAILURE TO INCREASE SALES TO EMBEDDED SYSTEMS MANUFACTURERS WILL ADVERSELY
AFFECT OUR FINANCIAL RESULTS.
Our financial performance and future growth is dependent upon our
ability to sell our products to embedded systems developers in various markets,
including markets in which networking solutions for embedded systems have not
historically been sold, such as the industrial automation equipment, data
acquisition and test equipment, Internet devices and security equipment markets.
A substantial portion of our recent development efforts have been directed
toward the development of new products for markets that are new and rapidly
evolving. There can be no assurance that
- the additional embedded systems markets targeted by us for our
products and services will develop;
- developers within each market targeted by us will choose our
products and services to meet their needs;
- we will successfully develop products to meet the industry-specific
requirements of developers in our targeted markets or that design
wins will result in significant sales; or
- developers in our targeted markets will gain market acceptance for
their devices which incorporate our products.
We have limited experience in designing our products to meet the
requirements of developers in these industries. Moreover, our products and
services have, to date, achieved limited acceptance in these industries.
WE ARE DEPENDENT ON THE IMAGING MARKET FOR A LARGE PORTION OF OUR REVENUES.
The imaging market has historically accounted for substantially all of
our revenues. In the fiscal years ended January 31, 1998 and 1999, 100% and 95%,
respectively, of our revenues were generated from customers in the imaging
market. Our success has been and continues to be dependent on the continued
growth and success of the imaging market. Many of our customers face competition
from larger, more established companies which may exert competitive or other
pressures on them. Any decline in sales to the imaging market would have a
material adverse effect on our business, results of operations and financial
condition.
The imaging market is characterized by declining prices of existing
products. Therefore, continual improvements in manufacturing efficiencies and
the introduction of new products and enhancements to existing products are
required for us to maintain our gross margins. In response to customer demands
or competitive pressures, or to pursue new product or market opportunities, we
may take certain pricing or marketing actions, such as price reductions or
volume discounts. These actions could have a material adverse effect on us.
A significant amount of our customers in the imaging market are
headquartered in Japan. Our customers are subject to declines in their local
economies, which have affected them from time to time in the past and may affect
them in the future. The success of our customers affects their purchases from
us.
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OUR HIGHLY CONCENTRATED CUSTOMER BASE INCREASES THE POTENTIAL ADVERSE EFFECT ON
US FROM THE LOSS OF ONE OR MORE CUSTOMERS.
Our products have historically been sold into the imaging markets for
use in products such as printers, scanners, fax machines, copiers and
multi-function peripherals. This market is highly concentrated. Accordingly, our
sales are derived from a limited number of customers, with the top five OEM
customers accounting for 78% and 52% of total revenues for the six months ended
July 31, 1999, and the fiscal year ended 1999, respectively. In particular,
sales to Ricoh, Dimatech and Minolta each accounted for 39%, 15% and 11% of
total revenues, respectively, for the six months ended July 31, 1999. Sales to
Minolta and Kyocera accounted for 12% and 12% of total revenues, respectively,
for the fiscal year ended January 31, 1999. We expect that a small number of
customers will continue to account for a substantial portion of our total
revenues for the foreseeable future. All of our sales are made on the basis of
purchase orders rather than under long-term agreements, and therefore, any
customer could cease purchasing our products at any time without penalty. The
decision of any key customer to cease using our products or a material decline
in the number of units purchased by a significant customer would have a material
adverse effect on us.
THE LONG AND VARIABLE SALES CYCLE FOR OUR PRODUCTS MAKE IT MORE DIFFICULT FOR US
TO PREDICT OUR OPERATING RESULTS AND MANAGE OUR BUSINESS.
The sale of our products typically involves a significant technical
evaluation and commitment of capital and other resources by potential customers,
as well as delays frequently associated with customers' internal procedures to
deploy new technologies within their products and to test and accept new
technologies. For these and other reasons, the sales cycle associated with our
products is typically lengthy, lasting nine months or longer, and is subject to
a number of significant risks, including customers' internal acceptance reviews,
that are beyond our control. Because of the lengthy sales cycle and the large
size of customer orders, if orders forecasted for a specific customer for a
particular quarter are not realized in that quarter, our operating results for
that quarter could be materially adversely affected.
OUR RELATIVELY LOW LEVEL OF BACKLOG INCREASES THE POTENTIAL VARIABILITY OF OUR
QUARTERLY OPERATING RESULTS.
Our backlog at the beginning of each quarter typically is not
sufficient to achieve expected sales for the quarter. To achieve our sales
objectives, we are dependent upon obtaining orders during each quarter for
shipment during that quarter. Furthermore, our agreements with our customers
typically permit them to change delivery schedules. Non-imaging customers may
cancel orders within specified time frames (typically 30 days or more prior to
the scheduled shipment date under our policies) without significant penalty. Our
customers have in the past built, and may in the future build, significant
inventory in order to facilitate more rapid deployment of anticipated major
products or for other reasons. Decisions by such customers to reduce their
inventory levels have led and could lead to reductions in their purchases from
us. These reductions, in turn, have caused and could cause adverse fluctuations
in our operating results.
OUR DEPENDENCE ON NEW PRODUCT DEVELOPMENT AND THE RAPID TECHNOLOGICAL CHANGE
THAT CHARACTERIZES OUR INDUSTRY MAKE US SUSCEPTIBLE TO LOSS OF MARKET SHARE
RESULTING FROM COMPETITORS' PRODUCT INTRODUCTIONS AND SIMILAR RISKS.
The semiconductor and networking industries are characterized by
rapidly changing technologies, evolving industry standards, frequent new product
introductions, short product life cycles and rapidly changing customer
requirements. The introduction of products embodying new technologies and the
emergence of new industry standards can render existing products obsolete and
unmarketable. Our future success will depend on our ability to enhance our
existing products, to introduce new products to meet
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changing customer requirements and emerging technologies, and to demonstrate the
performance advantages and cost-effectiveness of our products over competing
products. Any failure by us to modify our products to support new local-area
network , or LAN, wide-area network, or WAN, and Internet technologies, or
alternative technologies, or any failure to achieve widespread customer
acceptance of such modified products could have a material adverse effect on us.
We have been developing products based on the Linux operating system and on the
Java programming language, and the failure of these products to achieve
widespread acceptance could have a material adverse effect on us.
We have in the past and may in the future experience delays in
developing and marketing product enhancements or new products that respond to
technological change, evolving industry standards and changing customer
requirements. There can be no assurance that we will not experience difficulties
that could delay or prevent the successful development, introduction and
marketing of these products or product enhancements, or that our new products
and product enhancements will adequately meet the requirements of the
marketplace and achieve any significant or sustainable degree of market
acceptance in existing or additional markets. Failure by us, for technological
or other reasons, to develop and introduce new products and product enhancements
in a timely and cost-effective manner would have a material adverse effect on
us. In addition, the future introductions or announcements of products by us or
one of our competitors embodying new technologies or changes in industry
standards or customer requirements could render our then-existing products
obsolete or unmarketable. There can be no assurance that the introduction or
announcement of new product offerings by us or one or more of our competitors
will not cause customers to defer the purchase of existing Company products.
Such deferment of purchases could have a material adverse effect on us.
OUR FAILURE TO EFFECTIVELY MANAGE PRODUCT TRANSITIONS COULD HAVE A MATERIAL
ADVERSE EFFECT ON US.
From time to time, we or our competitors may announce new products,
capabilities or technologies that may replace or shorten the life cycles of our
existing products. Announcements of currently planned or other new products may
cause customers to defer or stop purchasing our products until new products
become available. Furthermore, the introduction of new or enhanced products
requires us to manage the transition from older product inventories and ensure
that adequate supplies of new products can be delivered to meet customer demand.
Our failure to effectively manage transitions from older products could have a
material adverse effect on our business, results of operations and financial
condition.
OUR FAILURE TO COMPETE SUCCESSFULLY IN OUR HIGHLY COMPETITIVE MARKET COULD
RESULT IN REDUCED PRICES AND LOSS OF MARKET SHARE.
The markets in which we operate are intensely competitive and
characterized by rapidly changing technology, evolving industry standards,
declining average selling prices and frequent new product introductions. A
number of companies offer products that compete with one or more elements of our
products. We believe that the competitive factors affecting the market for our
products include product performance, price and quality, product functionality
and features, the availability of products for existing and future platforms,
the ease of integration with other hardware and software components of the
customer's products, and the quality of support services, product documentation
and training. The relative importance of each of these factors depends upon the
specific customer involved. There can be no assurance that we will be able to
compete successfully against current and future competitors, or that competitive
factors faced by us will not have a material adverse effect on us.
We primarily compete with the internal development departments of
large manufacturing companies that have developed their own networking
solutions, as well as established developers of embedded systems software and
chips such as Axis Communications, Echelon, Emulex, Hitachi, Integrated
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Systems, Intel, Milan Technology, a division of Digi International, Motorola,
Peerless Systems, Samsung and Wind River. In addition, we are aware of certain
companies which have recently introduced products that address the markets
targeted by us. We have experienced and expect to continue to experience
increased competition from current and potential competitors, many of which have
substantially greater financial, technical, sales, marketing and other
resources, as well as greater name recognition and larger customer bases than
us. In particular, established companies in the networking or semiconductor
industries may seek to expand their product offerings by designing and selling
products using competitive technology that could render our products obsolete or
have a material adverse effect on our sales. Increased competition may result in
further price reductions, reduced gross margins and loss of market share.
WE DEPEND ON THIRD-PARTY SOFTWARE THAT WE USE UNDER LICENSES THAT MAY EXPIRE.
We rely on certain software that we license from third parties,
including software that is integrated with internally developed software and
used in our products to perform key functions. Our material software license
agreements are with Integrated Systems, which terminates only if we default
under the agreement; with Novell, which is renewable annually at the option of
both parties, and with Peerless Systems, which expires in 2004 and is subject to
year-to-year renewals thereafter at the option of both parties. These
third-party software licenses may not continue to be available to us on
commercially reasonable terms, and the related software may not continue to be
appropriately supported, maintained or enhanced by the licensors. The loss of
licenses to use, or the inability of licensors to support, maintain, and enhance
any of such software, could result in increased costs, delays or reductions in
product shipments until equivalent software is developed or licensed, if at all,
and integrated.
WE DEPEND ON MANUFACTURING, ASSEMBLING AND PRODUCT TESTING RELATIONSHIPS AND ON
LIMITED SOURCE SUPPLIERS, AND ANY DISRUPTIONS IN THESE RELATIONSHIPS MAY CAUSE
DAMAGE TO OUR CUSTOMER RELATIONSHIPS.
We do not have our own semiconductor fabrication assembly or testing
operations or contract manufacturing capabilities. Instead, we rely upon
independent contractors to manufacture our components, subassemblies, systems
and products. Currently, all of our semiconductor devices are being
manufactured, assembled and tested by Atmel Corporation in the United States,
and we expect that we will continue to rely upon Atmel to manufacture, assemble
and test a significant portion of our semiconductor devices in the future. We
experienced delays in the receipt of semiconductor devices from Atmel which
adversely affected our operating results in the three months ended October 31,
1998. In addition, we recently experienced a delay in the introduction of one of
our products due to a problem with Atmel's design tools. While we are in the
process of qualifying other suppliers, any qualification and pre-production
periods could be lengthy and may cause delays in providing products to customers
in the event that the sole source supplier of the semiconductor devices fails to
meet our requirements. For example, Atmel uses its manufacturing facilities for
its own products as well as those it manufactures on a contract basis. There is
no assurance that Atmel will have adequate capacity to meet the needs of its
contract manufacturing customers. In addition, semiconductor manufacturers
generally experience periodic constraints on their manufacturing capacity.
We also rely upon limited-source suppliers for a number of other
components used in our products. There can be no assurance that these
independent contractors and suppliers will be able to meet our future
requirements for manufactured products, components and subassemblies in a timely
fashion. We generally purchase limited-source components under purchase orders
and have no guaranteed supply arrangements with these suppliers. In addition,
the availability of many of these components to us is dependent in part on our
ability to provide our suppliers with accurate forecasts of our future
requirements. Any extended interruption in the supply of any of the key
components currently obtained from limited sources would
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disrupt our operations and have a material adverse effect on our business,
results of operations and financial condition.
Delays or lost sales have been and could be caused by other factors
beyond our control, including late deliveries by vendors of components, changes
in implementation priorities or slower than anticipated growth in the market for
networking solutions for embedded systems. During the three months ended October
31, 1998, we experienced delays in the delivery of our product from Atmel
Corporation. Such delays affected our ability to fill our orders to customers,
negatively impacting our third quarter financial results. Operating results in
the past have also been adversely affected by delays in receipt of significant
purchase orders from customers. In addition, we have experienced delays as a
result of the need to modify our products to comply with unique customer
specifications. In general, the timing and magnitude of our revenues are highly
dependent upon our achievement of design wins, the timing and success of our
customers' development cycles, and our customers' product sales. Any of these
factors could have a material adverse effect on our business, results of
operations and financial condition.
THE CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY MAY RESULT IN SUBSTANTIAL
PERIOD-TO-PERIOD FLUCTUATIONS.
Our semiconductor devices provide networking capabilities for embedded
systems. The semiconductor industry is highly cyclical and subject to rapid
technological change and has been subject to significant economic downturns at
various times, characterized by diminished product demand, accelerated erosion
of average selling prices and production overcapacity. The semiconductor
industry also periodically experiences increased demand and production capacity
constraints. As a result, we may experience substantial period-to-period
fluctuations in future operating results due to general semiconductor industry
conditions, overall economic conditions or other factors.
OUR ABILITY TO COMPETE COULD BE JEOPARDIZED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS.
Our ability to compete depends in part on our proprietary rights and
technology. We have no patents and rely primarily on a combination of copyright
and trademark laws, trade secrets, confidentiality procedures and contract
provisions to protect our proprietary rights. We generally enter into
confidentiality agreements with our employees, and sometimes with our customers
and potential customers and limit access to the distribution of our software,
hardware designs, documentation and other proprietary information. There can be
no assurance that the steps taken by us in this regard will be adequate to
prevent the misappropriation of our technology. While we have filed one patent
application and plan to file various additional applications, such applications
may be denied. Any patents, once issued, may be circumvented by our competitors.
Furthermore, there can be no assurance that others will not develop technologies
that are superior to ours. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy aspects of our products or to
obtain and use information that we regard as proprietary. In addition, the laws
of some foreign countries do not protect our proprietary rights as fully as do
the laws of the United States. There can be no assurance that our means of
protecting our proprietary rights in the United States or abroad will be
adequate or that competing companies will not independently develop similar
technology. Our failure to adequately protect our proprietary rights could have
a material adverse effect on our business, results of operations and financial
condition.
We exclusively license the right to use the NET+ARM trademark from ARM
Limited according to a royalty-free agreement expiring in 2008. We depend on ARM
to enforce its rights to the trademark against third-party infringement. There
can be no assurance that ARM will promptly and adequately enforce these rights
which could have a material adverse effect on our business, results of
operations and financial condition.
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WE COULD BECOME SUBJECT TO CLAIMS AND LITIGATION REGARDING INTELLECTUAL PROPERTY
RIGHTS, WHICH COULD SERIOUSLY HARM US AND REQUIRE US TO INCUR SIGNIFICANT COSTS.
The semiconductor industry is characterized by frequent litigation
regarding patent and other intellectual property rights. Although we have not
been notified that our products infringe any third-party intellectual property
rights, there can be no assurance that we will not receive such notification in
the future. Any litigation to determine the validity of third-party infringement
claims, whether or not determined in our favor or settled by us, would at a
minimum be costly and divert the efforts and attention of our management and
technical personnel from productive tasks, which could have a material adverse
effect on our business, results of operations and financial condition. There can
be no assurance that any infringement claims by third parties or any claims for
indemnification by customers or end users of our products resulting from
infringement claims will not be asserted in the future or that such assertions,
if proven to have merit, will not materially adversely affect our business,
results of operations or financial condition. In the event of an adverse ruling
in any such matter, we would be required to pay substantial damages, cease the
manufacture, use and sale of infringing products, discontinue the use of certain
processes or be required to obtain a license under the intellectual property
rights of the third party claiming infringement. There can be no assurance that
a license would be available on reasonable terms or at all. Any limitations on
our ability to market our products, or delays and costs associated with
redesigning our products or payments of license fees to third parties, or any
failure by us to develop or license a substitute technology on commercially
reasonable terms could have a material adverse effect on our business, results
of operations and financial condition.
WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS AND EXPANSION THAT
COULD IMPAIR OUR ABILITY TO GROW OUR REVENUES ABROAD.
In the fiscal years ended January 31, 1998 and 1999, international
sales constituted approximately 30% and 51% of our net sales, respectively, and
approximately 31% and 46% of our domestic sales, respectively, were to customers
headquartered in Asia. We believe that our future growth is dependent in part
upon our ability to increase sales in international markets, and particularly to
manufacturers located in Japan, which sell their products worldwide. These sales
are subject to a variety of risks, including fluctuations in currency exchange
rates, tariffs, import restrictions and other trade barriers, unexpected changes
in regulatory requirements, longer accounts receivable payment cycles and
potentially adverse tax consequences and export license requirements. In
addition, we are subject to the risks inherent in conducting business
internationally, including political and economic instability and unexpected
changes in diplomatic and trade relationships. In particular, the economies of
certain countries in the Asia-Pacific region are experiencing considerable
economic instability and downturns. Because our sales to date have been
denominated in United States dollars, increases in the value of the United
States dollar could increase the price in local currencies of our products in
non-US markets and make our products more expensive than competitors' products
denominated in local currencies. In addition, an integral part of our business
strategy is to form strategic alliances for the manufacture and distribution of
our products with third parties, including foreign corporations. There can be no
assurance that one or more of the factors described above will not have a
material adverse effect on our business, results of operations and financial
condition.
We intend to expand our presence in Europe to address new markets. One
change resulting from the formation of a European Economic and Monetary Union
("EMU") required EMU member states to irrevocably fix their respective
currencies to a new currency, the euro, as of January 1, 1999. During the next
three years, business in the EMU member states will be conducted in both the
existing national currency such as the French franc or the Deutsche mark, and
the euro. As a result, companies operating or conducting business in EMU member
states will need to ensure that their financial and other software
10
<PAGE> 14
systems are capable of processing transactions and properly handling these
currencies, including the euro. There can be no assurance that the conversion to
the euro will not have a material adverse effect on our business, results of
operations and financial condition.
IF WE LOSE KEY PERSONNEL IT COULD PREVENT US FROM EXECUTING OUR BUSINESS
STRATEGY.
Our business and prospects depend to a significant degree upon the
continuing contributions of our executive officers and our key technical
personnel. We do not have employment contracts with any of our key personnel,
with the exception of our Vice President, Industrial Automation, Embedded
Markets Europe and do not maintain any key-man life insurance policies.
Competition for such personnel is intense, and there can be no assurance that we
will be successful in attracting and retaining qualified personnel. Failure to
attract and retain key personnel could result in our failure to execute our
business strategy and have a material adverse effect on us.
ANY FAILURE TO COMPLY WITH SIGNIFICANT REGULATIONS AND EVOLVING INDUSTRY
STANDARDS COULD DELAY INTRODUCTION OF OUR PRODUCTS, WHICH COULD HURT OUR
BUSINESS.
The market for our products is subject to a significant number of
communications regulations and industry standards, some of which are evolving as
new technologies are deployed. In the United States, our products must comply
with various regulations defined by the Federal Communications Commission and
standards established by Underwriters' Laboratories. Some of our products may
not comply with current industry standards, and this noncompliance must be
addressed in the design of those products. Standards for networking are still
evolving. As the standards evolve, we may be required to modify our products or
develop and support new versions of our products. The failure of our products to
comply or delays in compliance, with the various existing and evolving industry
standards could delay introduction of our products, which could have a material
adverse effect on our business, results of operations and financial condition.
ANY MATERIAL PRODUCT DEFECTS COULD RESULT IN LOSS OF MARKET SHARE, DELAY OF
MARKET ACCEPTANCE OR PRODUCT LIABILITY CLAIMS OR LOSSES.
Complex products such as those offered by us may contain undetected or
unresolved defects when first introduced or as new versions are released. The
occurrence of material errors in the future could, and the failure or inability
to correct such errors would, result in the loss of market share, the delay or
loss of market acceptance of our products, material warranty expense, diversion
of engineering and other resources from our product development efforts, the
loss of credibility with our customers or product recall. The use of our
products for applications in devices that interact directly with the general
public, where the failure of the embedded system could cause property damage or
personal injury, could expose us to significant product liability claims.
Although we have not experienced any product liability or economic loss claims
to date, the sale and support of our products may entail the risk of such
claims. Any of such occurrences could have a material adverse effect upon our
business, results of operations and financial condition.
IF WE DO NOT SUCCESSFULLY MANAGE OUR GROWTH, IT COULD HAVE A MATERIAL ADVERSE
EFFECT ON US.
We have limited internal infrastructure and any significant growth
would place a substantial strain on our financial and management personnel and
information systems and controls. Such growth would require us to implement new
and enhance existing financial and management information systems and controls
and add and train personnel to operate such systems effectively. Our intention
to continue to pursue our growth strategy through efforts to increase sales of
existing products and new products can be expected to place even greater
pressure on our existing personnel and compound the need for increased
personnel,
11
<PAGE> 15
expanded information systems, and additional financial and administrative
control procedures. There can be no assurance that we will be able to
successfully manage expanding operations. Our inability to manage our expanded
operations effectively could have a material adverse effect on our business,
results of operations and financial condition.
A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK COULD BE SOLD INTO THE PUBLIC
MARKET, WHICH COULD DEPRESS OUR STOCK PRICE.
Sales of a substantial number of shares of common stock in the public
market could adversely affect the market price for our common stock and reported
earnings per share and could make it more difficult for us to raise funds
through equity offerings in the future.
Subject to applicable federal and securities laws and the restrictions
set forth below, after completion of the offering, Osicom may sell any and all
of the shares of common stock beneficially owned by it or distribute any or all
such shares of common stock to its stockholders. Sales or distributions by
Osicom of substantial amounts of common stock in the public market or to its
stockholders, or the perception that such sales or distribution could occur,
could adversely affect the prevailing market prices for the common stock. Osicom
is not subject to any obligation to retain its shares in NETsilicon, except that
in connection with our initial public offering, Osicom agreed not to sell or
otherwise dispose of any shares of common stock for a period of 365 days after
September 15, 1999, without the prior written consent of CIBC World Markets
Corp. As a result, there can be no assurance concerning the period of time
during which Osicom will maintain its beneficial ownership of common stock owned
by it following the offering. Moreover, there can be no assurance that, in any
transfer by Osicom of a controlling interest in us, any holders of common stock
will be able to participate in such transaction or will realize any premium with
respect to their shares of common stock.
Upon the completion of this offering, we will have outstanding
13,537,500 shares of common stock, based on the number of shares of common stock
outstanding as of January 31, 2000 and no exercise of outstanding options or
warrants.
No other significant shares of common stock are outstanding. At
January 31, 2000, we had granted options to purchase an aggregate of 3,320,778
shares of common stock to over 136 persons. Of these options, 378,516 were
exercisable as of January 31, 2000, with additional vesting to occur from time
to time.
ANY ACQUISITIONS WE MAKE COULD DISRUPT OUR BUSINESS AND SERIOUSLY HARM OUR
FINANCIAL CONDITION.
We intend to consider investments in complementary companies, products
or technologies. While we have no current agreements to do so, we may buy
businesses, products or technologies in the future. In the event of any future
purchases, we could:
- issue stock that would dilute our current stockholders' percentage
ownership;
- incur debt;
- assume liabilities;
- incur amortization expenses related to goodwill and other
intangible assets; or
- incur large and immediate write-offs.
Our operation of any acquired business will also involve numerous risks,
including:
12
<PAGE> 16
- problems combining the purchased operations, technologies or
products;
- unanticipated costs;
- diversion of management's attention from our core business;
- adverse effects on existing business relationships with suppliers
and customers;
- risks associated with entering markets in which we have no or
limited prior experience; and
- potential loss of key employees, particularly those of the
purchased organizations.
We cannot assure you that we will be able to successfully integrate
any businesses, products, technologies or personnel that we might acquire in the
future and any failure to do so could disrupt our business and seriously harm
our financial condition.
BECAUSE THE NASDAQ NATIONAL MARKET IS LIKELY TO EXPERIENCE EXTREME PRICE AND
VOLUME FLUCTUATIONS, THE PRICE OF OUR COMMON STOCK MAY DECLINE.
The market price of our shares is likely to be highly volatile and
could be subject to wide fluctuations in response to numerous factors, including
the following:
- actual or anticipated variations in our quarterly operating results
or those of our competitors;
- announcements by us or our competitors of new products or
technological innovations;
- introduction and adoption of new industry standards;
- changes in financial estimates or recommendations by securities
analysts;
- changes in the market valuations of our competitors;
- announcements by us or our competitors of significant acquisitions
or partnerships; and
- sales of our common stock.
Many of these factors are beyond our control and may negatively impact
the market price of our common stock, regardless of our performance. In
addition, the stock market in general, and the market for technology companies
in particular, has been highly volatile. Our common stock may not trade at the
same levels of shares as that of other technology companies and shares of
technology companies, in general, may not sustain their current market prices.
In the past, securities class action litigation has often been brought against a
company following periods of volatility in the market price of its securities.
We may be the target of similar litigation in the future. Securities litigation
could result in substantial costs and divert management's attention and
resources, which could seriously harm our business and operating results.
PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD
PREVENT A CHANGE OF CONTROL.
Provisions of our amended and restated certificate of incorporation
and bylaws could make it more difficult for a third party to acquire us, even if
doing so would be beneficial to our stockholders.
13
<PAGE> 17
USE OF PROCEEDS
NETsilicon will not receive any proceeds from the sale of shares by
the selling security holders. See "Selling Security Holders" and "Plan of
Distribution."
SELLING SECURITY HOLDERS
This prospectus relates to 725 shares of our common stock issued in
the aggregate to certain unnamed security holders under our Amended and Restated
1998 Incentive and Non-qualified Stock Option Plan. These selling security
holders each own less than 1,000 shares of common stock and are not affiliates
of NETsilicon. Since the selling security holders may sell all, some or none of
their shares pursuant to this prospectus, we cannot estimate the actual number
of shares of common stock that they might sell or the aggregate number or
percentage of shares of our common stock that they will own upon completion of
this offering. See "Plan of Distribution."
PLAN OF DISTRIBUTION
The shares of our common stock offered hereby may be sold from time to
time by the selling security holders for each of their own account, subject to
certain restrictions. NETsilicon will receive no proceeds from this offering.
The selling security holders will pay or assume brokerage commissions or other
charges and expenses incurred in the sale of the shares.
The selling security holders' sale of their shares is not currently
subject to any underwriting agreement. The shares covered by this prospectus may
be sold by the selling security holders or by pledgees, donees, transferees,
distributees or other successors in interest of the selling security holders
from time to time. The selling security holders may sell their shares from time
to time at fixed prices that may be changed, at market prices prevailing at the
time of sale, at prices related to prevailing market prices or at negotiated
prices. Sales may be effected in the over-the-counter market, on the National
Association of Securities Dealers Automated Quotation System, on the Nasdaq
National Market, or on any exchange on which the shares may then be listed. The
selling security holders may sell the shares by one or more of the following:
(a) in one or more block trades in which a broker or dealer so engaged will
attempt to sell all or a portion of the shares held by the selling security
holders as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) through purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
prospectus; (c) in ordinary brokerage transactions and transactions in which the
broker solicits purchasers; (d) in negotiated transactions; and (e) through
other means.
The selling security holders may effect these transactions by selling
shares to or through broker-dealers, and those broker-dealers may receive
compensation in the form of underwriting discounts, concessions, commissions, or
fees from the selling security holders and/or purchasers of the shares for whom
such broker-dealers may act as agent or to whom they may sell as principal, or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). These broker-dealers and the selling security holders
may be deemed to be "underwriters" within the meaning of the Securities Act, in
connection with those sales, and any commissions received by them and any profit
on the resale of shares placed by them might be deemed to be underwriting
compensation.
Any shares of our common stock covered by this Prospectus that qualify
for sale pursuant to Rule 144 under the Securities Act may be sold under Rule
144 rather than pursuant to this Prospectus. The selling security holders are
not restricted as to the price or prices at which they may sell their shares.
Sales of shares of common stock at less than the market prices may depress the
market price of our
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<PAGE> 18
common stock. The selling security holders are restricted as to the number of
shares which may be sold at any one time. In addition, the selling security
holders may decide not to sell all, none or a portion of their shares.
We have informed the selling security holders that the
anti-manipulation rules under the Exchange Act (including, without limitation,
Rule 10b-5 and Regulation M - Rule 102) may apply to sales in the market and we
will furnish the selling security holders upon request with a copy of these
Rules. We will also inform the selling security holders of the need for delivery
of copies of this prospectus.
American Stock Transfer and Trust Company, 40 Wall Street, New York,
New York, 10005, is the transfer agent for our common stock.
LEGAL MATTERS
Certain legal matters with respect to the issuance of the shares of
common stock offered hereby will be passed upon for NETsilicon by Testa, Hurwitz
& Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The financial statements incorporated by reference in this prospectus
have been audited by BDO Seidman, LLP, independent certified public accountants,
to the extent and for the periods set forth in their report incorporated by
reference herein, and are incorporated herein in reliance upon such report,
given upon the authority of said firm as an expert in accounting and auditing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by us with the Commission pursuant to
the Exchange Act are incorporated in this prospectus by reference (File No.
000-26761):
1. NETsilicon's Prospectus filed September 15, 1999 pursuant to
Rule 424(b)(1) of the Securities Act of 1933, as amended (the
"Securities Act").
2. NETsilicon's Quarterly Report on Form 10-Q for the Period
ended October 31, 1999.
3. The description of NETsilicon's Common Stock, $.01 par value
per share, contained in the section entitled "Description of
Capital Stock" contained in NETsilicon's Registration
Statement on Form S-1 (File No. 333-62231), including any
amendment or report filed for the purpose of updating that
description.
All documents subsequently filed by NETsilicon pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the end of the offering
of the shares, shall be deemed incorporated by reference in this prospectus and
made a part hereof from the date of filing of those documents. Any statement
contained in a document incorporated or deemed incorporated by reference in this
prospectus shall be deemed modified or superseded for purposes of this
prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed incorporated by reference
herein or in any prospectus supplement modifies or supersedes that statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus.
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<PAGE> 19
================================================================================
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The selling security holders are offering to sell,
and seeking offers to buy, shares of Common Stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the Common Stock. In this
prospectus, references to "NETsilicon," "we," "our" and "us" refer to
NETsilicon, Inc.
--------------------
TABLE OF CONTENTS
Page
----
Available Information ...................... 2
NETsilicon.................................. 3
Risk Factors ............................... 3
Use of Proceeds ............................ 14
Selling Security Holder..................... 14
Plan of Distribution ....................... 14
Legal Matters .............................. 15
Experts .................................... 15
Incorporation of Certain Information
by Reference.............................. 15
================================================================================
725 SHARES
[NETSILICON GRAPHIC]
NETSILICON, INC.
725 SHARES
COMMON STOCK
---------------
REOFFER
PROSPECTUS
---------------
March 14, 2000
================================================================================
<PAGE> 20
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Commission are incorporated by
reference in this Registration Statement:
(a) Registrant's Prospectus dated September 15, 1999, as filed with the
Commission pursuant to Rule 424(b)(1) of the Securities Act of 1933, as
amended (the "Securities Act"), on September 15, 1999;
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") since the end of
the fiscal year covered by the registrant document referred to in (a)
above.
(c) The section entitled "Description of Registrant's Securities to be
Registered" contained in the Registrant's Registration Statement on
Form 8-A (File No. 000-26761) filed on July 20, 1999 pursuant to
Section 12(g) of the Exchange Act.
All documents subsequently filed with the Commission by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered herein have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Registration
Statement and to be a part thereof from the date of filing of such documents.
Item 4. DESCRIPTION OF SECURITIES.
Not applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Articles of Organization and the Amended and Restated
By-Laws of the Company provide for indemnification of the Company's directors
and officers unless such indemnification is prohibited by the Massachusetts
Business Corporation Law. The Massachusetts Business Corporation Law generally
permits indemnification of the Company's directors and officers for liabilities
and expenses that they may incur in such capacities, except with respect to any
matter that the indemnified person shall have been adjudicated in any proceeding
not to have acted in good faith in the reasonable belief that his or her action
was in the best interest of the Company. Reference is made to the Registrant's
Restated Articles of Organization filed as Exhibit 3.1 to the Registrant's
Registration Statement on Form S-1 (File No. 333-62231) and the Registrant's
Amended and Restated By-Laws filed as Exhibit 3.3 to the Registrant's
Registration Statement on Form S-1 (File No. 333-62231).
II-1
<PAGE> 21
The underwriting agreement, dated September 15, 1999, by and between
the Registrant and the underwriters listed therein provides that the
underwriters are obligated, under certain circumstances, to indemnify directors,
officers and controlling persons of the Registrant against certain liabilities,
including liabilities under the Securities Act. Reference is made to the Form of
Underwriting Agreement filed as Exhibit 1.1 to the Registrant's Registration
Statement on Form S-1 (File No. 333-62231).
The Registrant has in effect a directors' and officers' insurance
policy.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED.
NETsilicon issued an aggregate of 725 shares of common stock to certain
unnamed nonaffiliated security holders under the Amended and Restated 1998
Incentive and Non-qualified Stock Option Plan. These issuances were exempt from
registration under Section 4(2) of the Securities Act.
Item 8. EXHIBITS.
Exhibit No. Description of Exhibit
- ----------- ----------------------
4.1 Restated Articles of Organization (filed as Exhibit 3.1 to the
Registrant's Registration Statement on Form S-1 (File No.
333-62231) and incorporated herein by reference)
4.2 Amended and Restated By-Laws of the Registrant (filed as Exhibit
3.3 to the Registration Statement on Form S-1 (File No. 333-62231)
and incorporated herein by reference)
4.3 NETsilicon, Inc. Amended and Restated 1998 Incentive and
Non-qualified Stock Option Plan
4.4 NETsilicon, Inc. Amended and Restated 1998 Director Stock Option
Plan
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP
23.1 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit
5.1)
23.2 Consent of BDO Seidman, LLP
24.1 Power of Attorney (included as part of the signature page of this
Registration Statement)
Item 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
II-2
<PAGE> 22
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered
(if the total dollar value of securities offered
would not exceed that which was registered) and any
deviation from the low or high end of the estimated
maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required
to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(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.
(4) If the registrant is a foreign private issuer, to
file a post-effective amendment to the registration statement
to include any financial statements required by Rule 3-19 of
this chapter at the start of any delayed offering or
throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act
need not be furnished, provided, that the registrant includes
in the prospectus, by means of a post-effective amendment,
financial statements required pursuant to this paragraph
(a)(4) and other information necessary to ensure that all
other information in the prospectus is at least as current as
the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form
F-3, a post-effective amendment need not be filed to include
financial statements and information required by Section
10(a)(3) of the Act or Rule 3-19 of this chapter if such
financial statements and information are contained in periodic
reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in the Form F-3.
II-3
<PAGE> 23
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, 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.
II-4
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Waltham in the State of Massachusetts, on this 13th
day of March, 2000.
NETsilicon, Inc.
By: /s/ Cornelius Peterson VIII
---------------------------
Cornelius Peterson VIII
President and Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of NETsilicon, Inc., hereby
severally constitute and appoint Cornelius Peterson VIII and Daniel J. Sullivan,
and each of them singly, our true and lawful attorneys, with full power to them
and each of them singly, to sign for us in our names in the capacities indicated
below, any amendments to this Registration Statement on Form S-8 (including
post-effective amendments), and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, and generally to do all things in our names and on our behalf in our
capacities as officers and directors to enable NETsilicon, Inc., to comply with
the provisions of the Securities Act of 1933, as amended, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any of
them, to said Registration Statement and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Cornelius Peterson VIII President, Chief Executive Officer and March 13, 2000
- ------------------------------------- Director (Principal Executive Officer)
Cornelius Peterson VIII
/s/ Daniel J. Sullivan Chief Financial Officer March 13, 2000
- ------------------------------------- (Principal Financial and Accounting Officer)
Daniel J. Sullivan
/s/ Michael K. Ballard Director March 13, 2000
- -------------------------------------
Michael K. Ballard
/s/ Francis E. Girard Director March 13, 2000
- -------------------------------------
Francis E. Girard
/s/ William Johnson Director March 13, 2000
- -------------------------------------
William Johnson
/s/ Edward B. Roberts Director March 13, 2000
- -------------------------------------
Edward B. Roberts
/s/ F. Grant Saviers Director March 13, 2000
- -------------------------------------
F. Grant Saviers
</TABLE>
II-5
<PAGE> 25
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
4.1 Restated Articles of Organization (filed as Exhibit 3.1 to
the Registrant's Registration
Statement on Form S-1 (File No. 333-62231) and incorporated
herein by reference)
4.2 Amended and Restated By-Laws of the Registrant (filed as
Exhibit 3.3 to the Registration Statement on Form S-1 (File
No. 333-62231) and incorporated herein by reference)
4.3 NETsilicon, Inc. Amended and Restated 1998 Incentive and
Non-qualified Stock Option Plan
4.4 NETsilicon, Inc. Amended and Restated 1998 Director Stock
Option Plan
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP
23.1 Consent of Testa, Hurwitz & Thibeault, LLP (included in
Exhibit 5.1)
23.2 Consent of BDO Seidman, LLP
24.1 Power of Attorney (included as part of the signature page of
this Registration Statement)
<PAGE> 1
EXHIBIT 4.3
NETSILICON, INC.
AMENDED AND RESTATED
1998 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
1. PURPOSES OF PLAN. The purposes of the NETsilicon, Inc. 1998 Amended and
Restated Incentive and Non-Qualified Stock Option Plan (hereinafter referred to
as the "Plan") are to provide to employees and consultants of NETsilicon, Inc.
(hereinafter referred to as the "Corporation"), as well as employees subsidiary
or parent corporations which may currently exist or be formed or acquired in the
future, an opportunity for investment in the Corporation's common stock
(hereinafter referred to as the "Shares"), as an inducement for such individuals
to remain with the Corporation, and to encourage them to increase their efforts
to make the Corporation's business more successful.
2. EFFECTIVE DATE AND TERMINATION OF PLAN. The effective date of the Plan is
August 24, 1998, the date on which the Plan was adopted by the Board of
Directors of the Corporation. The Plan shall terminate on, and no option shall
be granted hereunder, after August 24, 2008; provided, however, that the Board
of Directors may at any time prior to that date terminate the Plan; and provided
further that any option granted hereunder prior to the termination of the Plan
shall remain exercisable in accordance with its terms as then in effect.
3. ADMINISTRATION OF PLAN. The Plan shall be administered by the Board of
Directors of the Corporation. The Board of Directors may, however, to the extent
permissible under the Corporation's Articles of Organization, By-laws and
applicable law, delegate any of its functions under this Plan to a committee of
the Board of Directors or any other committee. Wherever in this Plan the term
"Board of Directors" is used it shall be construed to mean such committee to the
extent that the Board of Directors may have delegated any of its functions to
said committee and only to the extent of any such delegation. The acts of a
majority of the members present at any meeting of the Board of Directors at
which a quorum is present, or acts approved in writing by a majority of the
entire Board, shall be the acts of the Board of Directors for purposes of the
Plan.
4. ELIGIBILITY AND GRANT OF OPTIONS. Subject to the provisions of the Plan,
the Board of Directors shall (i) authorize the granting of incentive stock
options, non-qualified stock options or a combination of incentive stock options
and non-qualified stock options (hereinafter collectively referred to as
"options" unless otherwise stated); (ii) determine and designate from time to
time those employees (from the group consisting of all employees of the Company)
and consultants to whom options are to be granted and the number of Shares to be
optioned to each employee and consultant; (iii) determine the number of Shares
subject to each option; and (iv) determine the time or times when and the manner
in which each option shall be exercisable and the duration of the exercise
period. In determining the eligibility of an individual to receive an option, as
well as in determining the number of Shares to be optioned to any individual,
the Board of Directors shall consider the position and responsibilities of the
employee or consultant, the nature and value to the Corporation, parent or
subsidiary of his services and accomplishments, his present and potential
contribution to the success of the Corporation, parent or subsidiary, and such
other factors as the Board may deem relevant. To be eligible to receive an
incentive stock option or non-qualified stock option an individual must be an
employee of the Corporation, parent
<PAGE> 2
or subsidiary. A Director shall abstain from voting on the grant of any options
to himself, his spouse, his children, grandchildren and parents. The grant of
each option shall be confirmed by a Stock Option Agreement (in the form
prescribed by the Board of Directors) which shall be executed by the Corporation
and the optionee as promptly as practicable after such grant. More than one
option may be granted to an individual.
(a) Incentive stock options shall be those options which satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986, as
amended and which the Board of Directors has specifically identified as
incentive stock options in the Stock Option Agreement executed by the
Corporation and the optionee. In the case of incentive stock options, the
aggregate fair market value, determined at the time incentive stock options
are granted, of the stock with respect to which the incentive stock options
are exercisable for the first time by such individual during any calendar
year (under all such plans the Corporation may adopt) shall not exceed one
hundred thousand dollars ($100,000.00). In the event that an incentive
stock option granted pursuant to the terms of this Plan is granted to an
employee who, prior to the grant, holds more than ten percent (10%) of the
total combined voting power of all classes of stock of the Corporation, its
parent or a subsidiary ("10% shareholder") the option price under such
grant shall be at least one hundred ten percent (110%) of the fair market
value, and such option, by its terms, shall not be exercisable more than
five (5) years from the date of grant.
(b) Nothing in the Plan or in any option granted pursuant to the Plan shall
confer on any individual any right to continue in the employ of the
Corporation or any parent or subsidiary or interfere in any way with the
right of the Corporation to terminate his employment at any time.
5. NUMBER OF SHARES SUBJECT TO OPTIONS. The Board of Directors, prior to the
time options under the Plan become exercisable, shall reserve for the purposes
of the Plan a total of six million (6,000,000) Shares, which Shares may be
either authorized and unissued Shares, or previously issued Shares held in the
treasury of the Corporation, or both. Shares as to which an option granted under
the Plan shall remain unexercised at the expiration or termination thereof, and
Shares subject to options which are cancelled, may be the subject of the grant
of further options. Shares reserved pursuant to this paragraph may be adjusted
to reflect changes in the Corporation's capital structure as discussed in
paragraph 19 hereof.
6. OPTION PRICE. The option price per Share shall be determined in each case
by the Board of Directors and shall not be less than one hundred percent (100%)
(one hundred ten percent (110%) in the case of an incentive stock option granted
to a ten percent (10%) Shareholder) of the fair market value thereof as
determined by the Board by any reasonable method using market quotations on the
date the option is granted.
<PAGE> 3
7. PERIOD OF OPTION AND WHEN EXERCISABLE. No option may be granted under this
Plan whose exercise date is later than ten (10) years after the date of grant or
five (5) years after the date of grant in the case of an incentive stock option
granted to a ten percent (10%) Shareholder. Generally, an option may be
exercised only by the optionee and subject to the rules set forth below only if,
at all times during the period beginning on the date of the granting of such
option and ending with the date of exercise of such option, the optionee is an
employee or consultant of the Corporation, its parent or a subsidiary.
(a) Except as otherwise provided herein, in the case of an employee who
terminates employment, incentive stock options which are vested but
unexercised as of the date of termination of employment must be exercised
within three (3) months of termination. In the case of an employee who is
discharged for cause, as determined in the sole discretion of the Board of
Directors, all previously vested but unexercised options shall be forfeited
immediately.
(b) In the case of an employee who dies during the three (3) month period
discussed in (a) above, options which are vested but unexercised as of the
date of termination of employment must be exercised within twelve (12)
months of death.
(c) Options which are vested but unexercised as of the date of termination
of employment due to death, must be exercised within twelve (12) months
after the death of an optionee.
(d) In the event that the employee becomes disabled as defined in Section
22(e) (3) of the Internal Revenue code of 1986, as amended, options which
are vested but unexercised as of the date of termination of employment due
to disability must be exercised within twelve (12) months following the
date of termination of the optionee's said employment.
(e) In the event an optionee's employment is terminated for any reason
(including but not limited to, voluntary or involuntary termination or
termination resulting from the death or disability of the optionee), all
unvested options shall be immediately forfeited.
Notwithstanding the foregoing, options may not be exercised after the
original five (5) or ten (10) year term, Options may be exercised on behalf of
the estate of a former employee by the person or persons entitled to do so under
the optionee's will or, if the optionee shall have failed to make testamentary
disposition of such option or shall have died in testate, by the optionee's
legal representative or representatives. Such person, persons, representative,
or representatives are hereinafter referred to as the "Successors of an
Optionee."
<PAGE> 4
8. VESTING. Options granted to a participant shall be exercisable in
accordance with the following schedule unless the Board of Directors otherwise
specifies at the time of grant:
Cumulative Percentage of Aggregate
Number of Shares of Stock Covered
Exercise Period by an Option Which may be Exercised
- --------------- -----------------------------------
Beginning on the one year anniversary
date from date of grant 25%
Beginning on the second anniversary
date from date of grant 50%*
Beginning on the third anniversary
date from date of grant 75%*
Beginning on the fourth anniversary
date from date of grant 100%*
* less the number of Shares, if any, previously purchased under the option.
Non-vested options shall be immediately forfeited upon the termination of
employment for any reason. Vested options shall be forfeited upon the
termination of employment as provided in paragraph 7 hereof.
Notwithstanding the foregoing, the Board of Directors or its designees shall
have the right to grant any options with any vesting schedules including those
which are immediately exercisable under the Plan.
9. EXERCISE OF OPTIONS. Subject to Plan restrictions and vesting, an option
may be exercised, and payment in full of the option price made, by an optionee
only by written notice (in the form prescribed by the Board of Directors) to the
Corporation specifying the number of Shares to be so purchased. Such notice
shall state that the option price will be paid in full in cash (which in the
discretion of the Board of Directors may be obtained through a loan from the
Corporation or from a third party and guaranteed by the Corporation) or other
property, in the discretion of the Corporation. If the Corporation accepts a
request to pay in stock of the Corporation in satisfaction of the exercise
price, the fair market value of said stock shall at least equal the option
price, and, in the case of incentive stock options, prior to such acceptance the
Corporation must be furnished with evidence that the acquisition of said stock
and its transfer in payment of the option price satisfies the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended and other
applicable law. As soon as practicable after receipt by the Corporation of such
notice and of payment in full of the option price of all the Shares with respect
to which an option has been exercised, a certificate or certificates
representing such Shares shall be registered (subject to the provisions of
paragraph 16 hereof) in the name of the optionee or the Successors of an
Optionee as defined under this Plan and delivered to the optionee or to the
Successors of an Optionee.
<PAGE> 5
10. MERGER OR ASSET SALE. In the event of a merger of the Company with or into
another corporation or the sale of substantially all of the assets of the
Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or Subsidiary thereof (the
"Successor Corporation"). If an Option is assumed or substituted for, the Option
or equivalent option shall continue to be exercisable as provided in Section 7
hereof for so long as the Optionee serves as an employee of the Successor
Corporation. Following such assumption or substitution, if the Optionee's status
as an employee is terminated other than upon a voluntary resignation by the
Optionee, the Option shall become fully vested and exercisable in accordance
with Section 7 above.
(a) If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully
vested and exercisable, including as to Shares for which it would not
otherwise be exercisable. In such event the Board shall notify the Optionee
that the Option shall be fully exercisable for a period of thirty (30) days
from the date of such notice, and upon the expiration of such period the
Option shall terminate.
(b) For the purposes of this Section 10, an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the
right to purchase or receive, for each Share of Optioned Stock subject to
the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for
each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by
the holders of a majority of the outstanding Shares). If such consideration
received in the merger or sale of assets is not solely common stock of the
successor corporation or its Parent, the Board may, with the consent of the
successor corporation, provide for the consideration to be received upon
the exercise of the Option, for each Share of Optioned Stock subject to the
Option, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received
by holders of Common Stock in the merger or sale of assets.
11. EMPLOYER WITHHOLDING. In the case of non-qualified stock options, the
Corporation shall be required to withhold additional income taxes attributable
to that amount which is considered compensation includible in the optionee's
gross income by reason of the exercise of such options. The Corporation in its
discretion shall determine the method and amount of withholding.
<PAGE> 6
12. EXERCISE BY SUCCESSORS AND PAYMENT IN FULL. An option may be exercised, and
payment in full of the option price made, by the Successors of an Optionee only
by written notice (in the form prescribed by the Board of Directors) to the
Corporation specifying the number of Shares to be purchased. Such notice shall
state that the option price will be paid in full in cash (which in the
discretion of the Board of Directors may be obtained through a loan from the
Corporation or from a third party and guaranteed by the Corporation), property
or stock of the Corporation in conformance with paragraph 9 hereof. As soon as
practicable after receipt by the Corporation of such notice and of payment in
full of the option price of all the Shares with respect to which an option has
been exercised, a certificate or certificates representing such Shares shall be
registered (subject to the provisions of paragraph 16 hereof) in the name or
names of such Successors of an Optionee and shall be delivered to him.
13. NON-TRANSFERABILITY OF OPTION. Each option granted under the Plan shall by
its terms be nontransferable by the optionee except by will or the laws of
descent and distribution of the state wherein the optionee is domiciled at the
time of his death. If the Administrator makes an Option transferable, such
Option shall contain such additional terms and conditions, as the Administrator
deems appropriate.
14. OTHER TERMS OF OPTION. Options granted pursuant to the Plan shall contain
such terms, provisions, and conditions not inconsistent herewith as shall be
determined by the Board of Directors.
15. REGISTRATION OF CERTIFICATES. Certificates representing Shares may be
registered either in the name of the Optionee or in the name or names of the
Successors of an Optionee. Designation of the appropriate form of registration
of certificates shall be made in the written notice given to the Corporation
upon exercise of an option.
16. LISTING AND REGISTRATION OF SHARES. If at any time the Board of Directors
of the Corporation shall determine, in its discretion, that the listing,
registration, or qualification of any of the Shares subject to options under the
Plan upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of or in connection with the granting of options or the
purchase or issue of Shares thereunder, no further options may be granted and
outstanding options may not be exercised in whole or in part unless and until
such listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board of
Directors. The Board of Directors shall have the authority to cause the
Corporation at its expense to take any action related to the Plan which may be
required in connection with such listing, registration, qualification, consent,
or approval. The Board of Directors may require that any person exercising an
option hereunder shall make such representations and agreements and furnish such
information as it deems appropriate to assure compliance with the foregoing or
any other applicable legal requirement.
<PAGE> 7
17. INTERPRETATION AND AMENDMENTS. The Board of Directors may make such rules
and regulations and establish such procedure for the administration of the Plan
as it deems appropriate. In the event of any dispute or disagreements as to the
interpretation of this Plan or of any rule, regulation, or procedure, or as to
any question, right or obligation arising from or related to the Plan, the
decision of the Board of Directors shall be final and binding upon all persons.
The Board of Directors may amend this Plan as it shall deem advisable. However,
in no event shall any such amendment adversely affect the rights of an optionee
under any existing stock option agreement without the consent of such optionee.
In addition, no amendment may, without further approval of the shareholders of
the Company within twelve months before or after the date on which such
amendment was adopted, (a) increase the total number of shares which may be made
subject of options granted under the Plan, (b) change the manner of determining
the option price, (c) change the criteria of determining which employees are
eligible to receive options, (d) extend the period during which options may be
granted or exercised, or (e) withdraw the administration of the Plan from the
Board of Directors.
18. INDEMNIFICATION AND EXCULPATION.
(a) Each person who is or shall have been a member of the Board of
Directors shall be indemnified and held harmless by the Corporation against
and from any and all loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by him in connection with or resulting from any
claim, action, suit, or proceeding to which he may be or become a party or
in which he may be or become involved by reason of any action taken or
failure to act under the Plan and against and from any and all amounts paid
by him in settlement thereof (with the Corporation's written approval) or
paid by him in satisfaction of a judgment in any such action, suit, or
proceeding, except a judgment in favor of the Corporation based upon a
finding of his lack of good faith; subject, however, to the condition that
upon the institution of any claim, action, suit, or proceeding against him,
he shall in writing give the Corporation an opportunity, at its own
expense, to handle and defend the same before he undertakes to handle and
defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive of any other right to which such person may be entitled as
a matter of law or otherwise, or any power that the Corporation may have to
indemnify him or hold him harmless.
(b) Each member of the Board of Directors, and each officer and employee of
the Corporation shall be fully justified in relying or acting in good faith
upon any information furnished in connection with the administration of the
Plan by any appropriate person or persons other than himself. In no event
shall any person who is or shall have been a member of the Board of
Directors, or an officer or employee of the Corporation be held liable for
any determination made or other action taken or any omission to act in
reliance upon any such information, or for any action (including the
furnishing of information) taken or any failure to act, if in good faith.
<PAGE> 8
19. CHANGES IN CAPITAL STRUCTURE. In the event that a dividend shall be
declared upon the Shares payable in Shares, the number of shares then subject to
any option outstanding under the Plan and the number of Shares reserved for the
grant of options pursuant to the Plan but not yet subject to option shall be
adjusted by adding to each such Share the number of Shares which would be
distributable in respect thereof if such Shares had been outstanding on the date
fixed for determining the shareholders of the Corporation entitled to receive
such Share dividend. In the event that the outstanding Shares shall be changed
into or exchanged for a different number of Shares or other securities of the
Corporation or of another corporation, whether through reorganization,
recapitalization, split-up, combination of shares, merger, or consolidation,
then there shall be substituted for each Share subject to any such option and
for each Share reserved for the grant of options pursuant to the Plan but not
yet subject to option the number and kind of Shares or other securities into
which each outstanding Share shall have been so changed or for which each such
share shall have been exchanged. In the event there shall be any change, other
than as specified above in this paragraph, in the number or kind of outstanding
Shares or of any shares or other securities into which such Shares shall have
been changed or for which they shall have been exchanged, then if the Board of
Directors shall in its sole discretion determine that such change equitably
requires an adjustment in the number or kind of Shares theretofore reserved for
the grant of options pursuant to the Plan but not yet subject to option and of
the Shares then subject to an option or options. Such adjustments shall be made
by the Board of Directors and shall be effective and binding for all purposes of
the Plan and of each option outstanding thereunder. In the case of any such
substitution or adjustment as provided for in this paragraph, the aggregate
option exercise price set forth for all outstanding options for all Shares
covered thereby prior to such substitution or adjustment will be the option
exercise price for all shares or other securities which shall have been adjusted
pursuant to this paragraph. No adjustment or substitution provided for in this
paragraph shall require the Corporation to sell a fractional Share, and the
total substitution or adjustment with respect to each outstanding option shall
be limited accordingly. Upon any adjustment made pursuant to this paragraph, the
Corporation will, upon request, deliver to the optionee or to his successors a
certificate setting forth the option price thereafter in effect and the number
and kind of shares or other securities thereafter purchasable on the exercise of
the option.
20. NOTICES. All notices under the Plan shall be in writing, and if to the
Corporation, shall be delivered to the Treasurer of the Corporation or mailed to
its principal office, addressed to the attention of the Treasurer; and if to the
optionee, shall be delivered personally or mailed to the optionee at the address
appearing in the payroll records of the Corporation. Such addresses may be
changed at any time by written notice to the other party.
21. CORPORATION'S OPTION. As of the date of the adoption of the Plan, the
Corporation intends to commence an initial public offering of shares of its
Common Stock. Until such time as such offering is completed, the Corporation
shall have the right to purchase from any optionee (or his or her successor,
assignee or transferee) shares of common stock issued upon the exercise of
options granted hereunder for a price per share equal to the exercise price per
share paid for such shares.
<PAGE> 1
EXHIBIT 4.4
NETSILICON, INC.
1998 DIRECTOR STOCK OPTION PLAN
AS AMENDED AND RESTATED
MARCH 10, 1999
1. PURPOSES OF THE PLAN. The purposes of this 1998 Director Stock Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
a. "BOARD" means the Board of Directors of the Company.
b. "CODE" means the Internal Revenue Code of 1986, as amended.
c. "COMMON STOCK" means the Common Stock of the Company.
d. "COMPANY" means NETsilicon, Inc., a Massachusetts corporation.
e. "DIRECTOR" means a member of the Board.
f. "EMPLOYEE" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient
in and of itself to constitute "employment" by the Company.
g. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
h. "FAIR MARKET VALUE" means, as of any date, the value of 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 or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last
market trading day prior to the time of determination, as
reported in The Wall Street Journal or such other source as the
Administrator deems reliable;
<PAGE> 2
ii) If the Common Stock 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 high bid and low asked prices for the Common Stock on the
date of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable, or;
iii) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by
the Board.
i. "INSIDE DIRECTOR" means a Director who is an Employee.
j. "OPTION" means a stock option granted pursuant to the Plan.
k. "OPTIONED STOCK" means the Common Stock subject to an Option.
l. "OPTIONEE" means a Director who holds an Option.
m. "OUTSIDE DIRECTOR" means a Director who is not an Employee.
n. "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
o. "PLAN" means this 1998 Director Stock Option Plan.
p. "SHARE" means a share of the Common Stock, as adjusted in accordance
with Section 10 of the Plan.
q. "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal
Revenue Code of 1986.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10 of the
Plan, the maximum aggregate number of Shares which may be optionized and sold
under the Plan is 800,000 Shares of Common Stock (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exercised in
full, the unpurchased Shares which were subject thereto shall become available
for future grant or sale under the Plan (unless the Plan has terminated). Shares
that have actually been issued under the Plan shall not be returned to the Plan
and shall not become available for future distribution under the Plan.
4. ADMINISTRATION AND GRANTS OF OPTIONS UNDER THE PLAN.
a. PROCEDURE FOR GRANTS. All grants of Options to Outside Directors under
this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
Page 2 of 8
<PAGE> 3
i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.
ii) Each Outside Director shall be automatically granted an Option to
purchase 25,000 Shares on the effective date of the Initial
Public Offering of the Company's common stock or the date on
which such person first becomes an Outside Director, whether
through election by the shareholders of the Company or
appointment by the Board to fill a vacancy; provided, however,
that an Inside Director who ceases to be an Inside Director but
who remains a Director shall not receive a First Option.
iii) Each Outside Director shall be automatically granted an Option to
purchase 25,000 Shares on the day following the date of the
Company's annual stock holder's meeting each year, provided he or
she is then an Outside Director.
iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, any exercise of an Option granted before the Company has
obtained stockholder approval of the Plan in accordance with
Section 16 hereof shall be conditioned upon obtaining such
stockholder approval of the Plan in accordance with Section 16
hereof.
v) The terms of each Option granted hereunder shall be as follows:
(a) the term of the Option shall be ten (10) years.
(b) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Option.
In the event that the date of grant of the Option is not a
trading day, the exercise price per Share shall be the Fair
Market Value on the next trading day immediately following
the date of grant of the Option.
(c) subject to Section 10 hereof, the Option shall be six (6)
months from the date of grant exercisable as to 50% of the
Shares subject thereto and shall become exercisable as to
the balance of the Shares subject thereto twelve (12) months
from the date of grant, provided that the Optionee continues
to serve as a Director on such dates.
vi) In the event that any Option granted under the Plan would cause
the number of Shares subject to outstanding Options plus the
number of Shares previously purchased under Options to exceed the
Pool, then the remaining Shares available for Option grant shall
be granted under Options to the Outside Directors on a pro rata
basis. No further grants shall be made until such time, if any,
as additional Shares become available for grant under the Plan
through action of the Board or the stockholders to increase the
number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted
hereunder.
Page 3 of 8
<PAGE> 4
5. ELIGIBILITY. Options may be granted only to Outside Directors. All Options
shall be automatically granted in accordance with the terms set forth in Section
4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to occur of
its adoption by the Board or its approval by the stockholders of the Company as
described in Section 16 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 11 of the Plan.
7. FORM OF CONSIDERATION. The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
8. EXERCISE OF OPTION.
a. PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted
hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be
exercisable until stockholder approval of the Plan in accordance with
Section 16 hereof has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised
has been received by the Company. Full payment may consist of any
consideration and method of payment allowable under Section 7 of the
Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the
Company) of the stock certificate evidencing such Shares, no right to
vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise
of the Option. A share certificate for the number of Shares so
acquired shall be issued to the Optionee as soon as practicable after
exercise of the Option. No adjustment shall be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 10 of the Plan.
Page 4 of 8
<PAGE> 5
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes
of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
b. TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. Subject to Section 10
hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or total and permanent
disability (as defined in Section 22(e)(3) Of the Code)), the Optionee
may thereafter exercise his or her Option, but only to the extent that
the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent
that the Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option
shall terminate.
c. DISABILITY OF OPTIONEE. In the event Optionee's status as a Director
terminates as a result of total and permanent disability (as defined
in Section 22(e)(3) of the Code), the Optionee may thereafter exercise
his or her Option, but only to the extent that the Optionee was
entitled to exercise it on the date of such termination (but in no
event later than the expiration of its ten (10) year term). To the
extent that the Optionee was not entitled to exercise an Option on the
date of termination, or if he or she does not exercise such Option (to
the extent otherwise so entitled) within the time specified herein,
the Option shall terminate.
d. DEATH OF OPTIONEE. In the event of an Optionee's death, the Optionee's
estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only to the extent
that the Optionee was entitled to exercise it on the date of death
(but in no event later than the expiration of its ten (10) year term).
To the extent that the Optionee was not entitled to exercise an Option
on the date of death, and to the extent that the Optionee's estate or
a person who acquired the right to exercise such Option does not
exercise such Option (to the extent otherwise to entitled) within the
time specified herein, the Option shall terminate.
9. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
Page 5 of 8
<PAGE> 6
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET
SALE.
a. CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each
Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per Share covered by each such
outstanding Option, and the number of Shares issuable pursuant to the
automatic grant provisions of Section 4 hereof shall be
proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued Shares effected
without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration."
Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of Shares subject
to an Option.
b. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
c. MERGER OR ASSET SALE. In the event of a merger of the Company with or
into another corporation or the sale of substantially all of the
assets of the Company, outstanding Options may be assumed or
equivalent options may be substituted by the successor corporation or
a Parent or Subsidiary thereof (the "Successor Corporation"). If an
Option is assumed or substituted for, the Option or equivalent option
shall continue to be exercisable as provided in Section 4 hereof for
so long as the Optionee serves as a Director or a director of the
Successor Corporation. Following such assumption or substitution, if
the Optionee's status as a Director or director of the Successor
Corporation, as applicable, is terminated other than upon a voluntary
resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise
be exercisable. Thereafter, the Option or option shall remain
exercisable in accordance with Section 8(c) through (d) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully
vested and exercisable, including as to Shares for which it would not
otherwise be exercisable. In such event the Board shall notify the
Optionee that the Option shall be fully exercisable for a period of
thirty (30) days from the date of such notice, and upon the expiration
of such period the Option shall terminate.
Page 6 of 8
<PAGE> 7
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers
the right to purchase or receive, for each Share of Optioned Stock
subject to the Option immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the
outstanding Shares). If such consideration received in the merger or
sale of assets is not solely common stock of the successor corporation
or its Parent, the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Optioned Stock subject to
the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration
received by holders of Common Stock in the merger or sale of assets.
11. AMENDMENT AND TERMINATION OF THE PLAN.
a. AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the
rights of any Optionee under any grant theretofore made, without his
or her consent. In addition, to the extent necessary and desirable to
comply with any applicable law, regulation or stock exchange rule, the
Company shall obtain stockholder approval of any Plan amendment in
such a manner and to such a degree as required.
b. EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or termination
of the Plan shall not affect Options already granted and such Options
shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date determined in accordance with Section 4 hereof.
13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares, if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
Page 7 of 8
<PAGE> 8
Inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
14. RESERVATION OF SHARES. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. OPTION AGREEMENT. Options shall be evidenced by written option agreements
in such form as the Board shall approve.
16. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to approval
by the stockholders of the Company at or prior to the first annual meeting of
stockholders held subsequent to the granting of an Option hereunder. Such
stockholder approval shall be obtained in the degree and manner required under
applicable state and federal law and any stock exchange rules.
Page 8 of 8
<PAGE> 1
EXHIBIT 5.1
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
March 13, 2000
NETsilicon Inc.
411 Waverley Oaks Road, Bldg. 227
Waltham, MA 02454
Re: REGISTRATION STATEMENT ON FORM S-8 (INCLUDING REOFFER
PROSPECTUS ON FORM S-3)
Ladies and Gentlemen:
We are acting as counsel for NETsilicon, Inc., a Massachusetts
corporation (the "Company"), in connection with the registration on a
Registration Statement on Form S-8 (including the Reoffer Prospectus on Form
S-3) (the "Registration Statement") under the Securities Act of 1933, as
amended, of the offer and sale of up to 6,000,000 shares of common stock, par
value $.01 per share (the "Common Stock"), of the Company under the Amended and
Restated 1998 Incentive and Non-qualified Stock Option Plan ("Employee Option
Plan") and the offer and sale of up to 800,000 shares of Common Stock under the
Amended and Restated 1998 Director Stock Option Plan ("Director Option Plan")
(together with the shares of Common Stock offered under the Employee Option
Plan, the "Shares").
In rendering our opinion, we have examined, and are familiar with, and
have relied as to factual matters solely upon originals or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
or other instruments as we have deemed necessary or appropriate for the purposes
of the opinion set forth herein, including, without limitation, the Company's
(a) Employee Option Plan and Director Option Plan (b) Restated Articles of
Organization, (c) Amended and Restated By-Laws, (d) minute books and (e) and
stock records of the Company.
Based upon and subject to the foregoing, we are of the opinion that the
Shares are duly authorized and, when issued and delivered pursuant to the terms
of the Employee Option Plan and Director Option Plan and the terms of any
agreement relating to any of the options granted thereunder, will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement.
Very truly yours,
/s/ Testa, Hurwitz & Thibeault, LLP
TESTA, HURWITZ & THIBEAULT, LLP
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
NETsilicon, Inc.
Waltham, MA
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated February
26, 1999, except for notes I(ii) and (iii) which are as of June 30, 1999,
relating to the financial statements appearing in the Company's Registration
Statement on Form S-1 for the year ended January 31, 1999. We also consent to
the reference to us under the caption "Experts" in the Prospectus
/s/ BDO Seidman, LLP
Boston, Massachusetts
March 13, 2000
