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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10 - Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the quarterly period ended June 30, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 0-19084
PMC-Sierra, Inc.
(Exact name of registrant as specified in its charter)
A Delaware Corporation - I.R.S. NO. 94-2925073
105-8555 BAXTER PLACE
BURNABY, BRITISH COLUMBIA, V5A 4V7
CANADA
(Current Address)
2222 QUME DRIVE
SAN JOSE, CA 95128
(Former Address)
Telephone (604) 415-6000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes ___X___ No _______
Common shares outstanding at June 30, 1997 - 29,305,041
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<PAGE>
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- Consolidated condensed statements of operations 3
- Consolidated condensed balance sheets 4
- Consolidated condensed statements of cash flows 5
- Notes to consolidated condensed financial statements 6
RISK FACTORS 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote by Shareholders 22
Item 6. Exhibits and Reports on Form 8 - K 24
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PMC-Sierra, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except for per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Revenues $ 34,064 $ 53,022 $ 67,638 $ 117,418
Cost of Revenues 9,613 25,357 19,464 59,464
----- ------ ------ ------
Gross profit 24,451 27,665 48,174 57,954
Other costs and expenses:
Research and development 5,308 7,885 11,348 16,291
Marketing, general and administrative 6,614 8,842 12,915 17,507
----- ----- ------ ------
Income from operations 12,529 10,938 23,911 24,156
Interest income, net 232 137 157 497
--- --- --- ---
Income before provision for income taxes 12,761 11,075 24,068 24,653
Provision for income taxes 3,829 3,877 6,656 8,629
----- ----- ----- -----
Net income $ 8,932 $ 7,198 $ 17,412 $ 16,024
========= ========= ========= =========
Net income per share $ 0.28 $ 0.24 $ 0.54 $ 0.52
========= ========= ========= =========
Shares used in calculation of net income per share 32,374 30,578 32,135 30,684
====== ====== ====== ======
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
PMC-Sierra, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
June 30, December 31,
1997 1996
(unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $ 40,844 $ 35,038
Short-term investments 14,123 7,024
Accounts receivable, net 16,955 13,907
Inventories 4,011 9,232
Prepaid expenses and other current assets 4,776 3,104
----- -----
Total current assets 80,709 68,305
Property and equipment, at cost 34,730 42,861
Accumulated depreciation and amortization (18,282) (26,183)
------- -------
16,448 16,678
Goodwill and other intangible assets, net 9,379 10,188
Investments and other assets 10,600 7,623
Deposits for wafer fabrication capacity 27,120 27,120
------ ------
$ 144,256 $ 129,914
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 8,146 $ 9,648
Accrued liabilities 12,617 9,546
Accrued income tax 4,384 4,050
Accrued restructure costs 9,185 16,754
Short-term debt and current portion of obligations
under capital leases and long-term debt 6,798 6,269
Net liabilities of discontinued operations 1,440 1,600
----- -----
Total current liabilities 42,570 47,867
Deferred income taxes 2,677 2,741
Noncurrent obligations under capital leases and
long-term debt 18,129 18,368
Special shares of subsidiary convertible into
PMC-Sierra common stock 10,980 12,494
------ ------
Total Liabilities 74,356 81,470
------ ------
Shareholders' equity:
Common stock, no par value 139,364 135,320
Accumulated deficit (69,464) (86,876)
------- -------
Total shareholders' equity 69,900 48,444
------- -------
$ 144,256 $ 129,914
========== ==========
See notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
PMC-Sierra, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<CAPTION>
Six Months Ended
----------------
June 30, June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 17,412 $ 16,024
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,088 5,621
Changes in assets and liabilities
Accounts receivable (3,048) (885)
Inventories 5,221 (15,574)
Prepaid expenses and other (1,533) (2,494)
Accounts payable and accrued expenses 1,838 (6,802)
Accrued restructuring costs (7,569) -
Net assets/liabilities associated with discontinued operations (160) (1,441)
---- ------
Net cash provided by (used in) operating activities 16,249 (5,551)
------ ------
Cash flows from investing activities:
Proceeds from sales/maturities of short-term investments 12,039 15,984
Purchases of short-term investments (19,138) (13,030)
Investments in other companies (3,000) (3,000)
Proceeds from sale of equipment 2,483 -
Purchases of plant and equipment (3,303) (4,361)
------ ------
Net cash used in investing activities (10,919) (4,407)
------- ------
Cash flows from financing activities:
Proceeds from payments of notes receivable - 31
Proceeds from issuance of long-term debt - 4,113
Repayment of notes payable and long-term debt (1,157) (16,275)
Proceeds from issuance of capital leases 1,107 -
Principal payments under capital lease obligations (2,004) (813)
Proceeds from issuance of common stock 2,530 1,963
----- -----
Net cash provided by (used in) financing activities 476 (10,981)
--- -------
Net increase (decrease) in cash and cash equivalents 5,806 (20,939)
Cash and cash equivalents, beginning of the period 35,038 41,933
------ ------
Cash and cash equivalents, end of the period $ 40,844 $ 20,994
========= =========
See notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
PMC-SIERRA, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules or regulations. The
interim financial statements are unaudited, but reflect all adjustments which
are, in the opinion of management, necessary to present a fair statement of
results for the interim periods presented. These financial statements should be
read in conjunction with the financial statements and the notes thereto in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996. The
results of operations for the three and six months ended June 30, 1997 are not
necessarily indicative of results to be expected in future periods.
2. On September 29, 1996 the Company recorded charges of $69,370,000 in
connection with the Company's decision to exit from the modem chipset business
and the associated restructuring of the Company's non-networking product
operations. The charges were recorded in 1996 in cost of sales as an inventory
write-down and as operating expenses in restructure costs. The remaining
elements of the restructuring reserve as of December 31, 1996 and June 30, 1997
are as follows:
Restructuring Restructuring
Reserve Reserve
June 30, 1997 December 31, 1996
------------- -----------------
(unaudited)
(In thousands)
Employee termination benefits $ 2,147 $4,574
Loss on supplier commitments and
Write-off of prepaid expenses 4,557 8,594
Excess facility costs 2,336 3,003
Severance and closure costs related
to Europe 145 583
--- ---
$ 9,185 $ 16,754
Cash expenditures associated with the restructuring plan were approximately $7.6
million in the first half of 1997. Cash expenditures in the third quarter of
1997 are expected to be approximately $2.9 million. Subsequent cash expenditures
related to the restructuring are expected to be approximately $6.3 million.
<PAGE>
3. The components of inventories are as follows (in thousands):
June 30, 1997 December 31,1996
------------- ----------------
(unaudited)
Work-in-progress $ 2,248 $ 3,335
Finished goods 1,763 5,897
----- -----
$ 4,011 $ 9,232
====== =======
4. Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). The
Company is required to adopt SFAS 128 in the fourth quarter of fiscal 1997 and
will restate at that time earnings per share (EPS) data for prior periods to
conform with SFAS 128. Earlier application is not permitted.
SFAS 128 replaces current EPS reporting requirements and requires a dual
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income available to common shareholders by the weighted
average of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock.
If SFAS 128 had been in effect during the current and prior year periods, basic
EPS would have been $0.29 and $0.25 for the quarters ended June 30, 1997 and
1996, respectively. Diluted EPS under SFAS 128 would not have been significantly
different than primary EPS currently reported for the periods.
In June 1997, the Financial Accounting Standards Board adopted Statements of
Financial Accounting Standards No. 130 (Reporting Comprehensive Income), which
requires that an enterprise report, by major components and as a single total,
the change in its net assets during the period from nonowner sources; and No.
131 (Disclosures about Segments of an Enterprise and Related Information), which
establishes annual and interim reporting standards for an enterprise's business
segments and related disclosures about its products, services, geographic areas,
and major customers. Adoption of these statements will not impact the Company's
consolidated financial position, results of operations or cash flows. Both
statements are effective for fiscal years beginning after December 15, 1997,
with earlier application permitted.
5. Name Change and Delaware Reincorporation
The Company changed its name from Sierra Semiconductor Corporation to
PMC-Sierra, Inc. on June 13, 1997 and reincorporated into Delaware on July 10,
1997.
<PAGE>
RISK FACTORS
THE COMPANY'S BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS ARE
SUBJECT TO A NUMBER OF RISKS, SOME OF WHICH ARE DESCRIBED BELOW. THE FACT THAT
SOME OF THE RISK FACTORS MAY BE THE SAME OR SIMILAR TO THOSE IN THE COMPANY'S
PAST SEC FILINGS MEANS ONLY THAT THE RISKS ARE PRESENT IN MULTIPLE PERIODS. THE
COMPANY BELIEVES THAT MANY OF THE RISKS DETAILED HERE AND IN THE COMPANY'S OTHER
SEC FILINGS ARE PART OF DOING BUSINESS IN THE FABLESS NETWORKING SEMICONDUCTOR
INDUSTRY AND WILL LIKELY BE PRESENT IN ALL PERIODS REPORTED. THE FACT THAT
CERTAIN RISKS ARE ENDEMIC TO THE INDUSTRY DOES NOT LESSEN THE SIGNIFICANCE OF
THE RISK.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Certain statements in this Report constitute "forward-looking statements" within
the meaning of the federal securities laws. The actual results, performance, or
achievements of the Company may be materially different from those expressed or
implied by such forward-looking statements. The forward-looking statements
include projections relating to revenues, gross margin, and future expenditures
on research and development, marketing, general and administrative activities,
and projected tax rates. The Company undertakes no obligation to release
revisions to forward-looking statements to reflect subsequent events.
FLUCTUATIONS IN OPERATING RESULTS
The Company's quarterly and annual operating results may vary due to a number of
factors, including, among others, the timing of new product introductions,
decreased demand or average selling prices for products, market acceptance of
products, demand for products of the Company's customers, the introduction of
products or technologies by the Company's competitors, competitive pressure on
product pricing, the Company's and its customers' inventory levels of the
Company's products, product availability from outside foundries, variations in
manufacturing yields for the Company's products, expenditures for new product
and process development, the acquisition of wafer fabrication and other
manufacturing capacity, and the acquisition of businesses, products or
technologies. At various times in the past, the Company's foundry and other
suppliers have experienced lower than anticipated yields that have adversely
affected production and, consequently, the Company's operating results. There
can be no assurance that the Company's existing or future foundry and other
suppliers will not experience irregularities which could have a material adverse
effect on the Company's operating results. The Company from time to time may
order in advance of anticipated customer demand from its suppliers in response
to anticipated long lead times to obtain inventory and materials, which might
result in excess inventory levels if expected orders fail to materialize or
other factors render the Company's product or its customer's products less
marketable. The Company's visibility on sales of networking chips is limited due
to customer uncertainty regarding future demand for end-user networking products
and price competition in the market for networking. Any delay or cancellation of
existing orders, or any decline in projected future orders, by the Company's
customers could have a material adverse effect on the Company's operating
results. Margins will vary depending on product mix. In the longer term, the
<PAGE>
Company may experience declining gross profits as a percentage of total net
revenues if anticipated decreases in average selling prices of existing
networking products are not offset by commensurate reductions in product costs,
or by an offsetting increase in gross profit contribution from new higher gross
margin networking products. The Company's operating results also are affected by
the state and direction of the electronics industry and the economy in the
United States and other markets the Company serves. The Company's operating
results could also be adversely affected if restructuring reserves are
insufficient for the costs of discontinuing operations. The occurrence of any of
the foregoing or other factors could have a material adverse effect on the
Company's operating results. Due to these factors, past results may not be
indicative of future results.
TECHNOLOGICAL CHANGE
The markets for the Company's products are characterized by evolving industry
standards and rapid technological change and product obsolescence. Technological
change may be particularly pronounced in the developing markets for
communications semiconductor devices used in high-speed networks. The Company's
future success will be highly dependent upon the timely completion and
introduction of new products at competitive price and performance levels. The
success of new products depends on a number of factors, including proper
definition of such products, successful and timely completion of product
development and introduction to market, correct judgment with respect to product
demand, market acceptance of the Company's and its customers' products,
fabrication yields by the Company's independent foundries and the continued
ability of the Company to offer innovative new products at competitive prices.
Many of these factors are outside the control of the Company. There can be no
assurance that the Company will be able to identify new product opportunities
successfully, develop and bring to market new products, achieve design wins or
be able to respond effectively to new technological changes or product
announcements by others. A failure in any of these areas would materially and
adversely affect the Company's operating results.
The Company's current strategy is focused on high-speed networking interface
chips. Products for telecommunications and data communications applications are
based on industry standards that are continually evolving. Future transitions in
customer preferences could quickly obsolete the Company's products. The Company
is developing products for the Asynchronous Transfer Mode ("ATM")
telecommunications and networking market, which is in an early stage of
development. The emergence and adoption of new industry standards that compete
with ATM or maintenance by the industry of existing standards in lieu of new
standards could render the Company's ATM products unmarketable or obsolete. The
market for ATM equipment has not developed as rapidly as industry observers have
predicted, and alternative networking technologies such as "fast Ethernet" have
developed to meet consumer requirements. A substantial portion of the Company's
development efforts are focused on ATM and related products. A material portion
of the Company's revenues and a substantial portion of the Company's profits are
derived from sales of ATM, T1/E1, DS3/E3 and SONET/SDH based products. Net
revenues derived from sales of ATM, T1/E1, DS3/E3 and SONET/SDH based products
amounted to 33% and 54% of the Company's total net revenues in 1996 and the
first six months of 1997, respectively. The gross profit derived from those
products amounted to 50% and 60% of the Company's total gross profit in 1996 and
the first six months of 1997, respectively. Further significant reductions in
non-networking products are expected in the near term, which will increase the
Company's dependence on networking products.
<PAGE>
The Company acquired in-process research and development and developed
technology relating to ethernet switching in September 1996. During the second
quarter of 1997, the Company announced a 100 Mbit/s fast ethernet switch on a
chip and an 8-port, 10 Mbit/s ethernet switch chip. Other Ethernet switching
chips remain in development. Ethernet switching is a new product area for the
Company and there can be no assurance that the recently announced products will
have correctly anticipated the needs of the networking industry or that they
will receive sufficient design wins to achieve commercial success.
There can be no assurance that a significant market for the Company's networking
products will emerge or, if it does emerge, that the Company will be able to
develop and market these or other networking products in a timely and
commercially viable manner. The adoption or maintenance by the industry of high
speed transmission standards other than those which the Company currently
addresses, or the inability of the Company to develop and market its
networking-related products, would have a material adverse effect on the
Company's operating results.
Many of the Company's products under development are complex semiconductor
devices that require extensive design and testing before prototypes can be
manufactured. The integration of a number of functions in a single chip or in a
chipset requires the use of advanced semiconductor manufacturing techniques.
This can result in chip redesigns if the initial design does not permit
acceptable manufacturing yields. The Company's telecommunications products are
designed for customers who in many instances have not yet fully defined their
hardware products. Design delays or redesigns by these customers could in turn
delay completion or require redesign of the semiconductor devices needed for the
final hardware product. In this regard, many of the relevant standards and
protocols for products based on high speed networking technologies have not been
widely adopted or ratified by the relevant standard-setting bodies. Redesigns or
design delays often are required for both the hardware manufacturer's products
and the Company's chips as industry and customer standards, protocols or design
specifications are determined. Any resulting delay in the production of the
Company's products could have a material adverse effect on the Company's
operating results.
COMPETITION
The semiconductor industry is intensely competitive and is characterized by
rapid technological change and by price erosion. The industry consists of major
domestic and international semiconductor companies, many of which have
substantially greater financial and other resources than the Company. Emerging
companies also provide significant competition in this segment of the
semiconductor market. The Company believes that its ability to compete
successfully in this market depends on a number of factors, including, among
others, the price, quality and performance of the Company's and its competitors'
products, the timing and success of new product introductions by the Company,
its customers and its competitors, the emergence of new standards, the
development of technical innovations, the ability to obtain adequate
manufacturing capacity and sources of raw materials, the efficiency of
production, the rate at which the Company's customers design the Company's
products into their products, the number and nature of the Company's competitors
in a given market, the assertion of the Company's and its competitors'
intellectual property rights and general market and economic conditions.
<PAGE>
The Company's competitors in this market include, among others, Texas
Instruments, Level One Communications, Lucent Technologies, Dallas Semiconductor
and Transwitch. The number of competitors in this market and the technology
platforms on which their products will compete may change in the future. To date
there have been several competing technologies in the telecommunications and
networking markets and not all standards have been established to date. The
Company's success will depend on the successful development of a market for its
customers' products. It is likely that over the next few years additional
competitors will enter the market with new products. These new competitors may
have substantially greater financial and other resources than the Company.
Competition among manufacturers of semiconductors like the Company's products
typically occurs at the design stage, where the customer evaluates alternative
design approaches that require integrated circuits. Because of shortened product
life cycles and design-in cycles in certain of the Company's customers products,
the Company's competitors have increasingly frequent opportunities to achieve
design wins in next generation systems. Any success by the Company's competitors
in supplanting the Company's products would have a material adverse effect on
the Company's operating results.
ACCESS TO WAFER FABRICATION AND OTHER MANUFACTURING CAPACITY
The Company does not own or operate a wafer fabrication facility, and all of its
semiconductor device requirements are supplied by outside foundries.
Substantially all of the Company's semiconductor products are currently
manufactured by third party foundry suppliers. The Company's foundry suppliers
fabricate products for other companies and produce products of their own design.
The Company's reliance on independent foundries involves a number of risks,
including the absence of adequate capacity, the unavailability of or
interruptions in access to certain process technologies and reduced control over
delivery schedules, manufacturing yields and costs. In the event that these
foundries are unable or unwilling to continue to manufacture the Company's
products in required volumes, the Company will have to identify and qualify
acceptable additional or alternative foundries. This qualification process could
take six months or longer. No assurance can be given that any such source would
become available to the Company or that any such source would be in a position
to satisfy the Company's production requirements in a timely basis, if at all.
Any significant interruption in the supply of semiconductors to the Company
would result in the allocation of products to customers, which in turn could
have a material adverse effect on the Company's operating results.
All of the Company's semiconductor products are assembled by sub-assemblers in
Asia. Shortages of raw materials or disruptions in the provision of services by
the Company's assembly houses or other circumstances that would require the
Company to seek additional or alternative sources of supply or assembly could
lead to supply constraints or delays in the delivery of the Company's products.
Such constraints or delays may result in the loss of customers or other adverse
effects on the Company's operating results. The Company's reliance on
independent assembly houses involves a number of other risks, including reduced
control over delivery schedules, quality assurances and costs and the possible
discontinuance of such contractors' assembly processes. Any supply or other
problems resulting from such risks would have a material adverse effect on the
Company's operating results.
<PAGE>
CUSTOMER CONCENTRATION
The Company has no long-term volume purchase commitments from any of its major
customers. In 1996 two modem and graphic board manufacturers, each, represented
approximately 11% of the Company's net revenues. In 1995 and 1996, sales to
Apple Computer, Inc. represented 24% and 10%, respectively, of net revenues. Due
to the Company's exit from the modem chipset business, and its decision to
discontinue investment in its graphics and other non-networking businesses,
these customers are not expected to be significant customers in the future. The
Company's networking products are sold to networking equipment manufacturers
such as Cisco Systems, Inc. and Lucent Technologies Inc., or their
subcontractors.
The reduction, delay or cancellation of orders from one or more significant
customers could materially and adversely affect the Company's operating results.
Due to the relatively short product life cycles in the telecommunications and
data communications markets, the Company's operating results would be materially
and adversely affected if one or more of its significant customers were to
select devices manufactured by one of the Company's competitors for inclusion in
future product generations. There can be no assurance that the Company's current
customers will continue to place orders with the Company, that orders by
existing customers will continue at the levels of previous periods or that the
Company will be able to obtain orders from new customers. Loss of one or more of
the Company's current customers or a disruption in the Company's sales and
distribution channels could materially and adversely affect the Company's
operating results.
INTERNATIONAL OPERATIONS
In fiscal years 1996, 1995 and 1994, international sales accounted for
approximately 53%, 39% and 38% of the Company's net revenues, respectively. The
Company's networking products are designed to accommodate numerous worldwide
communications standards and sales to US based customers are often for products
that they in turn export worldwide. The Company expects that international sales
will continue to represent a significant portion of its net revenues for the
foreseeable future. The majority of the Company's development, test, marketing
and administrative functions occur in Canada. In addition, substantially all of
the Company's products are manufactured, assembled and tested by independent
third parties in Asia. Due to its reliance on international sales and
operations, the Company is subject to the risks of conducting business outside
of the United States. These risks include unexpected changes in, or impositions
of, legislative or regulatory requirements and policy changes affecting the
telecommunications and data communications markets, delays resulting from
difficulty in obtaining export licenses for certain technology, tariffs quotas,
exchange rates and other trade barriers and restrictions, longer payment cycles,
greater difficulty in accounts receivable collection, potentially adverse taxes,
the burdens of complying with a variety of foreign laws and other factors beyond
the Company's control. The Company is also subject to general geopolitical risks
in connection with its international operations, such as political, social and
economic instability, potential hostilities and changes in diplomatic and trade
relationships. Sales of the Company's networking products are denominated in
U.S. dollars as are costs related to the manufacture and assembly of products by
<PAGE>
the Company's Asian suppliers. Costs related to the majority of the Company's
development, test, marketing and administrative functions are denominated in
Canadian dollars. Selling costs are denominated in a variety of currencies. As a
result, the Company is subject to the risks of currency fluctuations. There can
be no assurance that one or more of the foregoing factors will not have a
material adverse effect on the Company's operating results.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the continued
services of its key technical personnel, particularly those highly skilled at
the design and test functions involved in the development of high speed
networking products and related software. The competition for such employees is
intense. The Company has no employment agreements in place with these key
personnel. However, the Company from time to time issues shares of Common Stock
or options to purchase Common Stock of the Company subject to vesting. To the
extent shares purchased from or options granted by the Company have economic
value, these securities could create retention incentives. The loss of the
services of one or more of these key personnel, and any difficulties the Company
may experience in hiring qualified replacements, would materially and adversely
affect the Company's operating results.
PATENTS AND PROPRIETARY RIGHTS
The Company's ability to compete is affected by its ability to protect its
proprietary information. The Company relies on a combination of patents,
trademarks, copyrights, trade secret laws, confidentiality procedures and
licensing arrangements to protect its intellectual property rights. The Company
currently holds several patents in the networking and non-networking areas and
has a number of pending patent applications. There can be no assurance that
patents will issue from any of the Company's pending applications or that any
claims allowed will be of sufficient scope or strength, or be issued in all
countries where the Company's products can be sold, to provide meaningful
protection or any commercial advantage to the Company. In addition, competitors
of the Company may be able to design around the Company's patents. The laws of
certain foreign countries in which the Company's products are or may be
developed, manufactured or sold, including various countries in Asia, may not
protect the Company's products or intellectual property rights to the same
extent as do the laws of the United States and thus make the possibility of
piracy of the Company's technology and products more likely. There can be no
assurance that the steps taken by the Company to protect its proprietary
information will be adequate to prevent misappropriation of its technology or
that the Company's competitors will not independently develop technologies that
are substantially equivalent or superior to the Company's technology.
The semiconductor industry is characterized by vigorous protection and pursuit
of intellectual property rights or positions, which have resulted in significant
and often protracted and expensive litigation. The Company or its customers or
foundries have in the past, and may from time to time in the future, be notified
of claims that the Company may be infringing patents or other intellectual
property rights owned by third parties. If its is necessary or desirable, the
Company may seek licenses under patents or intellectual property rights. There
can be no assurance that licenses will be available or that the terms of any
<PAGE>
offered license will be acceptable to the Company. The failure to obtain a
license from a third party for technology used by the Company could cause the
Company to incur substantial liabilities and to suspend the manufacture of
products or the use by the Companys' foundry suppliers requiring the technology.
In the past, the Company's customers have been required to obtain licenses from
and pay royalties to third parties for the sale of systems incorporating the
Company's semiconductor devices. If this occurs in the future, the customers'
businesses may be materially and adversely affected, which in turn would have a
material adverse effect on the Company's operating results. Customers may also
request indemnity by the Company. Providing indemnification could be expensive,
and denying it could adversely effect customer relations. Furthermore, the
Company may initiate claims or litigation against third parties for infringement
of the Company's proprietary rights or to establish the validity of the
Company's proprietary rights. Litigation by or against the Company could result
in significant expense to the Company and divert the efforts of the Company's
technical and management personnel, whether or not such litigation results in a
favorable determination for the Company. In the event of an adverse result in
any such litigation, the Company could be required to pay substantial damages,
cease the manufacture, use and sale of infringing products, spend significant
resources to develop non-infringing technology, discontinue the use of certain
processes or obtain licenses to the infringing technology. There can be no
assurance that the Company would be successful in such development or that such
licenses would be available on reasonable terms, or at all, and any such
development or license could require expenditures by the Company of substantial
time and other resources. Patent disputes in the semiconductor industry have
often been settled through cross-licensing arrangements. Because the Company
currently does not have a substantial portfolio of patents, the Company may not
be able to settle an alleged patent infringement claim through a cross-licensing
arrangement. Any successful third party claim against the Company or its
customers for patent or intellectual property infringement would have a material
adverse effect on the Company's operating results.
ACQUISITIONS
The Company's strategy may involve, in part, acquisitions of products,
technologies or businesses from third parties. Identifying and negotiating these
acquisitions may divert substantial management time away from the Company's
operations. An acquisition could absorb substantial cash resources, could
require the Company to incur or assume debt obligations, or could involve the
issuance of additional equity securities of the Company. The issuance of
additional equity securities could dilute, and could represent an interest
senior to the rights of, then outstanding common stock. An acquisition which is
accounted for as a purchase, like the acquisition of PMC in 1994 and the
acquisition of certain assets of Bit in September 1996, could involve
significant one-time non-cash write-offs, and could involve the amortization of
goodwill over a number of years, which would adversely affect earnings in those
years. Any acquisition will require attention from the Company's management to
integrate the acquired entity into the Company's operations, may require the
Company to develop expertise outside its existing businesses and may result in
departures of management of the acquired entity. An acquired entity may have
unknown liabilities, and its business may not achieve the results anticipated at
the time of the acquisition.
<PAGE>
FUTURE CAPITAL NEEDS
The Company must continue to make significant investments in research and
development as well as capital equipment and expansion of facilities for
networking products. The Company's future capital requirements will depend on
many factors, including, among others, product development, investments in
working capital, and acquisitions of complementary businesses, products or
technologies. To the extent that existing resources and future earnings are
insufficient to fund the Company's operations, the Company may need to raise
additional funds through public or private debt or equity financings. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of current shareholders will be reduced and such equity
securities may have rights, preferences or privileges senior to those of the
holders of the Company's Common Stock. No assurance can be given that additional
financing will be available or that, if available, it can be obtained on terms
favorable to the Company and its shareholders. If adequate funds are not
available, the Company may be required to delay, limit or eliminate some or all
of its proposed operations.
The Company has available a line of credit with a bank under which the Company
may borrow up to $10 million. The agreement expires on October 5, 1997. Advances
made under the line will be fully secured by cash deposited by the Company. The
agreement requires the Company to maintain, on a quarterly basis, minimum cash
equal to three times the then current outstanding principal balance of the term
loan. The agreement prohibits dividend payments, without the bank's prior
written consent, and other major transactions except that the Company may (i)
acquire other companies, using up to $1 million in cash, (ii) enter into off
balance sheet equipment leases, not to exceed $15 million in the aggregate, and
(iii) issue convertible securities with subordination provisions satisfactory to
the bank.
VOLATILITY OF STOCK PRICE
Factors such as announcements of the introduction of new products by the Company
or its competitors, quarterly fluctuations in the Company's financial results or
the financial results of other semiconductor companies or of companies in the
personal computer industry, general conditions in the semiconductor industry and
conditions in the financial markets have in the past caused the price of the
Common Stock to fluctuate substantially, and may do so in the future. In
addition, the recent increases in the Company's stock price and expansion of its
price-to-earnings multiple may have made it attractive to so-called momentum
investors. Momentum investors are generally thought to shift funds into and out
of stocks rapidly exacerbating price fluctuations in either direction. The price
of the Company's stock may also be impacted by investor sentiment toward
technology stocks, in general, which often is unrelated to the operating
performance of a specific company.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Second Quarters of 1997 and 1996
Net Revenues
- ------------
Second Second
Quarter Quarter
1997 Change 1996
---- ------ ----
Net revenues ($000,000)
Networking products $21.3 33% $16.0
User interface - other $10.9 (47%) $20.6
User interface - modem $ 1.9 (89%) $16.4
------ ----- -----
Total net revenues $34.1 (36%) $53.0
The decrease in the Company's total net revenues was due to a decline in sales
of user interface products, primarily modem chipset products and graphics chips,
in connection with the Company's decision to exit the modem chipset business,
restructure its non-networking business and to focus on its networking
semiconductor business. Partially offsetting these sales reductions was growth
in the sale of the Company's networking-related products. As of June 30, 1997
virtually all of the Company's modem chipset inventory was disposed of and the
Company expects future modem related revenue to drop to insignificant levels. In
the near term, the Company expects an additional significant decline in its
other non-networking revenues because of its previously announced decision to
discontinue investment in non-networking product areas.
The Company believes that during 1996 certain of its customers reduced their
inventory levels of the Company's networking products in response to the
shortened lead times from the Company's foundry suppliers and conditions in the
customer's end markets. The Company's supplier lead times have lengthened in
1997 for chips not sold from inventory. The Company's second quarter networking
revenues grew 37% over the first quarter of 1997 and the Company believes that
part of that growth was due to a refilling of customer channel inventory needs
to accommodate the return to more normal lead times. The Company does not expect
the revenue growth rate achieved in the second quarter to be sustainable in the
near term. In the longer term, the Company expects the growth of its networking
products revenue will be most strongly influenced by demand for its customers
networking products and acceptance of the Company's own new product offerings by
its customers, both of which now appear positive. Because the Company is a
supplier to a dynamic and changing industry the Company expects to see future
variations, when viewed from a quarterly results perspective, around its long
term growth rate similar to the variations it has experienced in the past year.
<PAGE>
Gross Profit
Second Second
Quarter Quarter
1997 Change 1996
---- ------ ----
Gross profit ($000,000)
Networking products $16.9 45% $11.7
Percentage of networking net revenues 79% 73%
User interface products $7.5 (53%) $16.0
Percentage of user interface net revenues 59% 43%
Total gross profit $24.5 (12%) $27.7
Percentage of net revenues 72% 52%
Total gross profit decreased as a result of lower revenue during this period.
Gross profit as a percentage of net revenues increased as the mix of higher
gross margin networking products increased as a percentage of total net
revenues, and as the costs of wafers were reduced over the same quarter a year
ago. Gross profits on user interface products, which include the gross profits
for modem sales, as well as the gross profits on sales from other non-networking
products, were higher than in the comparable quarter of last year due to the
sales and cost of sales of modem inventories. In establishing its reserve for
the write down of its modem inventories, the Company took into account both the
costs of completion and disposal in revaluing the inventory to the lower of cost
or market. The higher amount of gross profit recognized in the second quarter of
1997 represents the amount necessary to cover the relatively higher period
expenses incurred relating to the disposal effort. There was no operating profit
recognized from the sale of modem products.
In the near term, the Company expects a significant decline in its revenues and
gross profit from non-networking products. In the longer term, the Company may
experience declining gross profits as a percentage of net revenues if
anticipated decreases in average selling prices of existing networking products
are not offset by commensurate reductions in production costs, or by an
offsetting increase in gross profit contribution from new higher gross margin
networking products.
Operating Expenses and Charges ($000,000)
Second Second
Quarter Quarter
1997 Change 1996
---- ------ ----
Research and development $5.3 (33%) $7.9
Percentage of net revenues 16% 15%
Marketing, general & administrative $6.6 (25%) $8.8
Percentage of net revenues 19% 17%
Research and development expenses decreased primarily due to decreases in
research and development personnel in user interface products as a result of the
third quarter 1996 restructuring of the Company's non-networking operations,
offset partially by increases in research and development spending and personnel
in the Company's networking product lines. The Company expects research and
development spending on its networking products to increase in absolute dollars.
<PAGE>
Marketing, general and administrative expenses also declined primarily due to
the reduction in expenses and personnel resulting from the third quarter 1996
restructuring. In the near term, the Company expects marketing, general and
administrative spending to remain relatively stable in absolute dollars, but
these expenses are expected to increase in fiscal 1998.
Interest Income (Expense), Net ($000,000)
Second Second
Quarter Quarter
1997 Change 1996
---- ------ ----
Interest income (expense), net $0.2 69% $0.1
Percentage of net revenues 0.7% 0.3%
Net interest income increased primarily due to higher cash balances available to
invest and earn interest. Interest expense, which increased slightly, currently
relates primarily to the Company's financing arrangements for working capital
financing, leases, and financing of previously established foundry commitments.
Provision for Income Taxes
The provision for income taxes consists primarily of estimated taxes on foreign
operations. U.S. taxes in the second quarter were reduced by the utilization of
the current portion of net operating losses associated with the third quarter
1996 restructure charge.
First Six Months of 1997 and 1996
Net Revenues
First First
Six Months Six Months
1997 Change 1996
---- ------ ----
Net revenues ($000,000)
Networking products $36.8 9% $33.7
User interface - other $25.0 (34%) $38.0
User interface - modem $5.8 (87%) $45.6
---- ----- -----
Total net revenues $67.6 (42%) $117.4
The decrease in the Company's total net revenues was due to a decline in sales
of user interface products, primarily modem chipset products and graphics chips,
in connection with the Company's decision to exit the modem chipset business,
restructure its non-networking business and to focus on its networking
semiconductor business. Partially offsetting these sales reductions was growth
in the sale of the Company's networking-related products.
<PAGE>
Gross Profit
First First
Six Months Six Months
1997 Change 1996
Gross profit ($000,000)
Networking products $28.9 16% $25.0
Percentage of networking net revenues 79% 74%
User interface products $19.3 (42%) $32.9
Percentage of user interface net revenues 62% 43%
Total gross profit $48.2 (17%) $58.0
Percentage of net revenues 71% 49%
Total gross profit decreased as a result of lower revenue during this period.
Gross profit as a percentage of net revenues increased as the mix of higher
gross margin networking products increased as a percentage of total net
revenues, and as the costs of wafers were reduced in the first half of 1997
compared to the same period in the prior year. Gross profits on user interface
products, which includes the gross profits for modem sales, as well as the gross
profits on sales from other non-networking products, were higher than historical
levels due to the sales and cost of sales of modem inventories. In establishing
its reserve for the write down of its modem inventories, the Company took into
account both the costs of completion and disposal in revaluing the inventory to
the lower of cost or market. The higher amount of gross profit recognized in the
first half of 1997 represents the amount necessary to cover the relatively
higher period expenses incurred relating to the disposal effort. There was no
operating profit recognized from the sale of modem products.
Operating Expenses and Charges ($000,000)
First First
Six Months Six Months
1997 Change 1996
---- ------ ----
Research and development $11.3 (30%) $16.3
Percentage of net revenues 16.8% 13.9%
Marketing, general & administrative $12.9 (26%) $17.5
Percentage of net revenues 19.1% 14.9%
Research and development expenses decreased primarily due to decreases in
research and development personnel in user interface products as a result of the
third quarter 1996 restructuring of the Company's non-networking operations,
offset partially by increases in research and development spending and personnel
in the Company's networking product lines.
Marketing, general and administrative expenses also declined primarily due to
the reduction in expenses and personnel resulting from the third quarter 1996
restructuring, offset partially by increases in expenses related to the
Company's networking product lines.
<PAGE>
Interest Income (Expense), Net ($000,000)
First First
Six Months Six Months
1997 Change 1996
---- ------ ----
Interest income (expense), net $0.2 (68%) $0.5
Percentage of net revenues 0.2% 0.4%
Net interest income is comprised primarily of interest income and interest
expense. Interest income increased for the first six months compared to the same
six months for the prior year due to higher cash and cash equivalent balances.
The increase in interest expense resulted in lower net interest income for the
same six months in the prior year. Interest expense primarily reflects interest
expense incurred by the Company to finance capital leases of equipment entered
into in 1996 as part of an operating agreement with a foundry to secure capacity
and equipment lease financing at the Company's Canadian subsidiary.
Provision for Income Taxes
The provision for income taxes consists primarily of estimated taxes on foreign
operations. U.S. taxes in the first half of 1997 were reduced by the utilization
of the current portion of net operating losses associated with the third quarter
1996 restructure charge. The actual results will be dependent upon the revenue
and profits of the various legal entities and product lines.
Liquidity and Capital Resources
The Company's cash and cash equivalents and short term investments increased
from $42.1 million on December 31, 1996 to $55.0 million on June 30, 1997. The
increase was primarily attributable to net income of $17.4 million in the first
six months of 1997. Sources of cash from operating activities other than net
income were a $5.2 million decrease in inventories, and $4.1 million of non-cash
depreciation. Other non-operating sources of cash were $2.5 million of proceeds
from issuance of common stock (principally under the Company's stock option and
purchase plans), $1.1 million from sales/leaseback transactions and $2.5 million
from the sale of excess non-networking fixed assets. Uses of cash for operations
were $7.6 million of cash used for restructuring costs and a $3.0 million
increase in accounts receivable. The Company also used $3.0 million in cash to
invest in another company, $3.3 million in purchases of fixed assets for use in
its networking operations, and $3.2 million in cash to pay capital lease
obligations, notes payable, and long term debt.
As of June 30, 1997, the Company's principal sources of liquidity included cash
and cash equivalents and short term investments of $55 million, and
approximately $10 million available under its bank line of credit. The current
line of credit agreement expires on October 5, 1997. The Company believes that
existing sources of liquidity and anticipated funds from operations will satisfy
the Company's projected working capital expenditure requirements through fiscal
1997.
<PAGE>
The Company has wafer supply agreements with two independent foundries which
include deposits made to secure access to wafer fabrication capacity. At
June 30, 1997, the Company was in compliance with its foundary agreements.
Substantially all of the Company's products were produced by these foundries in
the first half of 1997. The Company expects that all of its production needs for
the balance of 1997 will be met under these agreements with no additional
deposits required and no impairment of existing deposits.
The Company's future capital requirements will depend on many factors,
including, among others, product development and acquisitions of complementary
businesses, products or technologies. To the extent that existing resources and
the funds generated by future earnings are insufficient to fund the Company's
operations, the Company may need to raise additional funds through public or
private debt or equity financings. If additional funds are raised through the
issuance of equity securities, the percentage ownership of current shareholders
will be reduced and such equity securities may have rights, preferences or
privileges senior to those of the holders of the Company's Common Stock. No
assurance can be given that additional financing will be available or that, if
available, it can be obtained on terms favorable to the Company and its
shareholders. If adequate funds are not available, the Company may be required
to delay, limit or eliminate some or all of its proposed operations.
<PAGE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE BY SHAREHOLDERS
The Annual Meeting of Shareholders of PMC-Sierra, Inc. was held on June
5, 1997 and July 9, 1997 for the purposes of electing directors of the Company,
approving a change in the Company's state of incorporation from California to
Delaware, changing the Company's name to PMC-Sierra, Inc., approving the
elimination of cumulative voting in the election of directors as part of the
reincorporation into Delaware, approving the elimination of the ability of
shareholders to act by written consent as part of the reincorporation into
Delaware, approving an amendment to the Company's 1994 Incentive Stock Plan to
increase the number of shares reserved for issuance by 500,000 shares, approving
the 1996 Stock Option Plan of PMC-Sierra, Inc. (Portland), including a reserve
of 450,000 shares of the Company's Common Stock for issuance upon exercise of
options under the plan, and confirming the appointment of Deloitte & Touche as
the Company's independent auditors for the 1997 fiscal year.
All nominees for directors were elected, the changing of the Company's state of
incorporation was approved, the changing of the Company's name to PMC-Sierra,
Inc. was approved, the elimination of cumulative voting in the election of
directors as part of the reincorporation into Delaware was not approved, the
elimination of the ability of shareholders to act by written consent as part of
the reincorporation into Delaware was not approved, an amendment to increase the
number of shares reserved for issuance under the Company's 1994 Incentive Stock
Plan was approved, the 1996 Stock Option Plan of PMC-Sierra, Inc. (Portland) was
approved, and the appointment of Deloitte & Touche was confirmed. The voting on
each matter is set forth below:
(A) Election of Directors:
Nominee: For Withheld
-------- --- --------
Robert L. Bailey 25,711,517 630,378
Alexandre Balkanski 23,286,625 3,055,270
Colin Beaumont 25,711,517 630,378
James V. Diller 25,709,367 632,528
Michael L. Dionne 25,710,667 631,228
Frank L. Marshall 25,709,117 632,778
(B) Proposal to approve a change in the Company's state of incorporation
from California to Delaware
For Against Abstain Broker non-votes
--- ------- ------- ----------------
14,775,791 4,742,175 69,747 6,799,671
<PAGE>
(C) Proposal to change the Company's name to PMC-Sierra, Inc.
For Against Abstain Broker non-votes
--- ------- ------- ----------------
25,709,117 961,574 54,950 -
(D) Proposal to approve the elimination of cumulative voting in the
election of directors as part of the reincorporation into Delaware.
For Against Abstain Broker non-votes
--- ------- ------- ----------------
12,083,498 6,639,988 864,227 6,799,671
(E) Proposal to approve the elimination of the ability of shareholders to
act by written consent as part of the reincorporation into Delaware.
For Against Abstain Broker non-votes
--- ------- ------- ----------------
11,053,417 8,398,405 135,891 6,799,671
(F) Proposal to approve an amendment to the Company's 1994 Incentive Stock
Plan to increase the number of shares reserved for issuance by 500,000
shares.
For Against Abstain Broker non-votes
--- ------- ------- ----------------
17,595,654 8,565,551 95,433 85,257
(G) Proposal to approve the 1996 Stock Option Plan of PMC-Sierra, Inc.
(Portland), including a reserve of 450,000 shares of the Company's
Common Stock for issuance upon exercise of options under the plan.
For Against Abstain Broker non-votes
--- ------- ------- ----------------
23,827,378 2,314,994 114,266 85,257
(H) Proposal to confirm the appointment of Deloitte & Touche as the
Company's independent auditors for the 1997 fiscal year.
For Against Abstain Broker non-votes
--- ------- ------- ----------------
26,223,497 63,191 55,207 -
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
2.4 Agreement and Plan of Merger between Delaware
PMC Sierra, Inc., a Delaware Corporation and
PMC-Sierra, Inc., a California Corporation.*
3.1 Certificate of Incorporation
3.3 Bylaws
10.21 Indemnification Agreement between the Company
and its directors and officers
11.1 Calculation of earnings per share
(b) Reports on Form 8-K -
A Current Report on Form 8-K was filed on April 18,
1997 to disclose the Company's change in independent
auditors.
A Current Report on Form 8-K was filed on August 8,
1997 to disclose the Company's change of name and of
legal domicile.
* Incorporated by reference to Exhibit 2.1 of the Registrant's Form 8-K filed
with the Securities and Exchange Commission on August 8, 1997.
CERTIFICATE OF INCORPORATION
OF
PMC-SIERRA, INC.
ARTICLE I
The name of this corporation is PMC-Sierra, Inc. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The Corporation
is authorized to issue a total of 55,000,00H:\HOME\CJM\4808\ARTICLES.WPD 0
shares. 50,000,000 shares shall be Common Stock, par value $0.001, and 5,000,000
shares shall be Preferred Stock, par value $0.001.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock; and to fix the number of shares of any
series of Preferred Stock; and to increase, or to decrease (within the limits
and restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any series of
Preferred Stock, but not below the number of shares of any such series then
outstanding) the number of shares of any such series subsequent to the issue of
shares of that series. In case the number of shares of any series of Preferred
Stock shall be so decreased, the shares constituting the decrease shall resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
The authority of the Board of Directors with respect to each such class
or series shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and the
number of shares to constitute such class or series;
<PAGE>
(b) the rate at which dividends on the shares of such class or
series shall be declared and paid, or set aside for payment, whether dividends
at the rate so determined shall be cumulative or accruing, and whether the
shares of such class or series shall be entitled to any participating or other
dividends in addition to dividends at the rate so determined, and if so, on what
terms;
(c) the right or obligation, if any, of the Corporation to
redeem shares of the particular class or series of Preferred Stock and, if
redeemable, the price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any,and
the amount or amounts per share, which the shares of such class or series of
Preferred Stock shall be entitled to receive upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(e) the terms and conditions, if any, upon which shares of such
class or series shall be convertible into, or exchangeable for, shares of
capital stock of any other class or series, including the price or prices or the
rate or rates of conversion or exchange and the terms of adjustment, if any;
(f) the obligation, if any, of the Corporation to retire,
redeem or purchase shares of such class or series pursuant to a sinking fund or
fund of a similar nature or otherwise, and the terms and conditions of such
obligation;
(g) voting rights, if any, on the issuance of additional shares
of such class or series or any shares of any other class or series of Preferred
Stock;
(h) limitations, if any, on the issuance of additional shares
of such class or series or any shares of any other class or series of Preferred
Stock; and
(i) such other preferences, powers, qualifications, special or
relative rights and privileges thereof as the Board of Directors of the
Corporation, acting in accordance with this Certificate of Incorporation, may
deem advisable and are not inconsistent with law and the provisions of this
Restated Certificate of Incorporation.
ARTICLE V
The Corporation reserves the right to amend, alter, change, or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this right.
ARTICLE VI
The Corporation is to have perpetual existence.
<PAGE>
ARTICLE VII
1. Limitation of Liability. To the fullest extent permitted by
the General Corporation Law of the State of Delaware as the same exists or as
may hereafter be amended, a director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
2. Indemnification. The Corporation may indemnify to the fullest
extent permitted by law any person made or threatened to be made a party to an
action or proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the Corporation, or any predecessor of
the Corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the Corporation or any predecessor to the
Corporation.
3. Amendments. Neither any amendment nor repeal of this Article
VII, nor the adoption of any provision of the Corporation's Certificate of
Incorporation inconsistent with this Article VII, shall eliminate or reduce the
effect of this Article VII, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VII, would accrue
or arise, prior to such amendment, repeal, or adoption of an inconsistent
provision.
ARTICLE VIII
In the event any shares of Preferred Stock shall be redeemed or
converted pursuant to the terms hereof, the shares so converted or redeemed
shall not revert to the status of authorized but unissued shares, but instead
shall be canceled and shall not be re-issuable by the Corporation.
ARTICLE IX
Holders of stock of any class or series of this Corporation shall be
entitled to cumulate their votes for the election of directors pursuant to
Section 214 of the Delaware General Corporation Law.
ARTICLE X
1. Number of Directors. The number of directors which constitutes
the whole Board of Directors of the Corporation shall be designated in the
Bylaws of the Corporation.
2. Election of Directors. Elections of directors need not be by
written ballot unless demanded by any stockholder at the meeting and before the
voting has begun or the Bylaws of the Corporation shall so provide.
<PAGE>
ARTICLE XI
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
ARTICLE XII
No action shall be taken by the stockholders of the Corporation except
at an annual or special meeting of the stockholders called in accordance with
the Bylaws of the Corporation or by written consent.
ARTICLE XIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE XIV
The name and mailing address of the incorporator are:
Noga D. Spira, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
<PAGE>
* * *
The undersigned incorporator hereby acknowledges that the above
Certificate of Incorporation of PMC-Sierra, Inc. is her act and deed and that
the facts stated therein are true.
Dated: May 2, 1997 /s/ Noga D. Spira
----------- --------------------------
Noga D. Spira
BYLAWS
OF
PMC-SIERRA, INC.
(a Delaware Corporation)
<PAGE>
BYLAWS OF
PMC-SIERRA, INC.
(a Delaware Corporation)
TABLE OF CONTENTS
Page
ARTICLE I
CORPORATE OFFICES ............................................... -1-
1.1 REGISTERED OFFICE ...................................... -1-
1.2 OTHER OFFICES .......................................... -1-
ARTICLE II
MEETINGS OF STOCKHOLDERS ........................................ -1-
2.1 PLACE OF MEETINGS ...................................... -1-
2.2 ANNUAL MEETING ......................................... -1-
2.3 SPECIAL MEETING ........................................ -2-
2.4 NOTICE OF STOCKHOLDERS' MEETINGS ....................... -2-
2.5 NOTIFICATIONS OF NOMINATIONS AND PROPOSED BUSINESS ..... -2-
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE ........... -3-
2.7 QUORUM ................................................. -4-
2.8 ADJOURNED MEETING; NOTICE .............................. -4-
2.9 VOTING ................................................. -4-
2.10 WAIVER OF NOTICE ....................................... -5-
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING ............. -5-
2.12 PROXIES ................................................ -6-
2.13 ORGANIZATION ........................................... -6-
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE .................. -6-
ARTICLE III
DIRECTORS ....................................................... -7-
3.1 POWERS ................................................. -7-
3.2 NUMBER OF DIRECTORS .................................... -7-
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS ............... -7-
3.4 RESIGNATION AND VACANCIES .............................. -7-
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ............... -8-
3.6 REGULAR MEETINGS ....................................... -9-
3.7 SPECIAL MEETINGS; NOTICE ............................... -9-
<PAGE>
3.8 QUORUM ................................................. -9-
3.9 WAIVER OF NOTICE ....................................... -9-
3.10 ADJOURNMENT ........................................... -10-
3.11 NOTICE OF ADJOURNMENT ................................. -10-
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING ..... -10-
3.13 FEES AND COMPENSATION OF DIRECTORS .................... -10-
3.14 APPROVAL OF LOANS TO OFFICERS ......................... -10-
ARTICLE IV
COMMITTEES ..................................................... -11-
4.1 COMMITTEES OF DIRECTORS ............................... -11-
4.2 MEETINGS AND ACTION OF COMMITTEES ..................... -11-
4.3 COMMITTEE MINUTES ..................................... -12-
ARTICLE V
OFFICERS ....................................................... -12-
5.1 OFFICERS .............................................. -12-
5.2 ELECTION OF OFFICERS .................................. -12-
5.3 SUBORDINATE OFFICERS .................................. -12-
5.4 REMOVAL AND RESIGNATION OF OFFICERS ................... -13-
5.5 VACANCIES IN OFFICES .................................. -13-
5.6 CHAIRMAN OF THE BOARD ................................. -13-
5.7 PRESIDENT ............................................. -13-
5.8 VICE PRESIDENTS ....................................... -13-
5.9 SECRETARY ............................................. -14-
5.10 CHIEF FINANCIAL OFFICER ............................... -14-
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS ............................................... -15-
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS ............. -15-
6.2 INDEMNIFICATION OF OTHERS ............................. -16-
6.3 INSURANCE ............................................. -16-
ARTICLE VII
RECORDS AND REPORTS ............................................ -16-
7.1 MAINTENANCE AND INSPECTION OF RECORDS ................. -16-
7.2 INSPECTION BY DIRECTORS ............................... -17-
7.3 ANNUAL STATEMENT TO STOCKHOLDERS ...................... -17-
<PAGE>
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ........ -17-
7.5 CERTIFICATION AND INSPECTION OF BYLAWS ................ -17-
ARTICLE VIII
GENERAL MATTERS ................................................ -17-
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING . -17-
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS ............. -18-
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED .... -18-
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES ...... -18-
8.5 SPECIAL DESIGNATION ON CERTIFICATES ................... -19-
8.6 LOST CERTIFICATES ..................................... -19-
8.7 TRANSFER AGENTS AND REGISTRARS ........................ -20-
8.8 CONSTRUCTION; DEFINITIONS ............................. -20-
ARTICLE IX
AMENDMENTS ..................................................... -20-
<PAGE>
BYLAWS
------
OF
--
PMC-SIERRA, INC.
----------------
(a Delaware Corporation)
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
The registered office of the Corporation shall be fixed in the
Certificate of Incorporation of the Corporation.
1.2 OTHER OFFICES
The Board of Directors may at any time establish branch or
subordinate offices at any place or places where the Corporation is qualified to
do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the Board of Directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the Corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the Board of Directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Tuesday of May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
<PAGE>
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by
the Board of Directors, or by the Chairman of the Board, or by the President, or
by one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than
the Board of Directors or the President or the Chairman of the Board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board, the President, any vice president or
the Secretary of the Corporation. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of stockholders called by action of the Board of Directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise
given in accordance with Section 2.6 of these bylaws not less than ten (10) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the Board of Directors, at
the time of giving the notice, intends to present for action by the stockholders
(but any proper matter may be presented at the meeting for such action). The
notice of any meeting at which directors are to be elected shall include the
name of any nominee or nominees who, at the time of the notice, the Board
intends to present for election.
2.5 NOTIFICATIONS OF NOMINATIONS AND PROPOSED BUSINESS.
Subject to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
(a) nominations for the election of directors, and
(b) business proposed to be brought before any stockholder
meeting
may be made by the Board of Directors or proxy committee appointed by the Board
of Directors or by any stockholder entitled to vote in the election of directors
generally if such nomination or business proposed is otherwise proper business
before such meeting.
<PAGE>
However, any such stockholder may nominate one or more persons for election as
directors at a meeting or propose business to be brought before a meeting, or
both, only if such stockholder has given timely notice in proper written form of
his intent to make such nomination or nominations or to propose such business.
To be timely, such stockholder's notice must be delivered to or mailed and
received by the Secretary of the Corporation not less than thirty-five (35) days
nor more than sixty (60) days prior to the meeting; provided, however, that in
the event that less than forty-five (45) days notice or prior public disclosure
of the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. To be in proper form,
a stockholder's notice to the Secretary shall set forth:
(i) the name and address of the stockholder who
intends to make the nominations or propose the business
and, as the case may be, of the person or persons to be
nominated or of the business to be proposed;
(ii) a representation that the stockholder is a
holder of record of stock of the Corporation entitled
to vote at such meeting and, if applicable, intends to
appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice;
(iii) if applicable, a description of all
arrangements or understandings between the stockholder
and each nominee and any other person or persons
(naming such person or persons) pursuant to which the
nomination or nominations are to be made by the
stockholder;
(iv) such other information regarding each
nominee or each matter of business to be proposed by
such stockholder as would be required to be included in
a proxy statement filed pursuant to the proxy rules of
the Securities and Exchange Commission had the nominee
been nominated, or intended to be nominated, or the
matter been proposed, or intended to be proposed by the
Board of Directors; and
(v) if applicable, the consent of each nominee
to serve as director of the Corporation if so elected.
The Chairman of the meeting shall refuse to acknowledge the
nomination of any person or the proposal of any business not made in compliance
with the foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication.
<PAGE>
Notices not personally delivered shall be sent charges prepaid and
shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the Corporation or given by the stockholder to the
Corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of
any stockholders' meeting, executed by the Secretary, assistant secretary or any
transfer agent of the Corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting in accordance
with Section 2.8 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the Certificate of Incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time and place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the Corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders
shall be determined in accordance with the provisions of Section 2.11 of these
bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners, and to voting trusts and other voting agreements).
<PAGE>
Except as may be otherwise provided in the Certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or the Certificate of Incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the Certificate of Incorporation or these bylaws.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of
any meeting or to vote thereat, the Board of Directors may fix, in advance, a
record date, which shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors and which shall not be more
than sixty (60) days nor less than ten (10) days before the date of any such
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the Corporation after the record date.
If the Board of Directors does not so fix a record date, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section
8.1 of these bylaws.
<PAGE>
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the Secretary
of the Corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.
2.13 ORGANIZATION
The President, or in the absence of the President, the Chairman of
the Board, or, in the absence of the President and the Chairman of the Board,
one of the Corporation's vice presidents, shall call the meeting of the
stockholders to order, and shall act as chairman of the meeting. In the absence
of the President, the Chairman of the Board, and all of the vice presidents, the
stockholders shall appoint a chairman for such meeting. The chairman of any
meeting of stockholders shall determine the order of business and the procedures
at the meeting, including such matters as the regulation of the manner of voting
and the conduct of business. The Secretary of the Corporation shall act as
secretary of all meetings of the stockholders, but in the absence of the
Secretary at any meeting of the stockholders, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
<PAGE>
ARTICLE III
DIRECTORS
---------
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the Certificate of Incorporation and these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the Corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
Board of directors.
3.2 NUMBER OF DIRECTORS
The Board of Directors shall be six until changed by an amendment to
this bylaw, duly adopted by the Board of Directors or by the stockholders, or by
a duly adopted amendment to the Certificate of Incorporation.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Each director, including a director elected or appointed to fill
a vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
Chairman of the Board, the President, the Secretary or the Board of Directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
Board of Directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the Board of Directors may be filled by a majority of
the remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.
<PAGE>
Unless otherwise provided in the Certificate of Incorporation or
these bylaws:
(i) Vacancies and newly created directorships resulting
from any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more directors by the provisions
of the Certificate of Incorporation, vacancies and newly created directorships
of such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the Board of Directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the Board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the Corporation.
Special meetings of the Board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the Corporation.
Any meeting, regular or special, may be held by conference telephone
or similar communication equipment, so long as all directors participating in
the meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
<PAGE>
3.6 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice
if the times of such meetings are fixed by the Board of Directors. If any
regular meeting day shall fall on a legal holiday, then the meeting shall be
held next succeeding full business day.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the Chairman of the Board, the President,
any vice president, the Secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the Corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
Corporation.
3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.10 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the Board of Directors, subject to the provisions of the
Certificate of Incorporation and other applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the Board of Directors.
<PAGE>
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given unless the meeting is adjourned for more than twenty-four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting, provided that all members of the Board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
Board of Directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the Board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the Board of Directors. This Section 3.13 shall not
be construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 APPROVAL OF LOANS TO OFFICERS
The Corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or any of its
subsidiaries, including any officer or employee who is a director of the
Corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the Corporation at
common law or under any statute.
<PAGE>
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
The Board of Directors may, by resolution adopted by a majority of
the authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the Board. The
Board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the Board, shall have and may exercise all
the powers and authority of the Board, but no such committee shall have the
power of authority to:
(a) amend the Certificate of Incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
the designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation);
(b) adopt an agreement of merger or consolidation under
Sections 251 or 252 of the General Corporation Law of Delaware;
(c) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets;
(d) recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution; or
(e) amend the bylaws of the Corporation; and, unless the
Board resolution establishing the committee, the bylaws or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
<PAGE>
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the Board of
Directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the Board of Directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the Board of Directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
4.3 COMMITTEE MINUTES.
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
ARTICLE V
OFFICERS
--------
5.1 OFFICERS
The officers of the Corporation shall be a president, a secretary,
and a chief financial officer. The Corporation may also have, at the discretion
of the Board of Directors, a chairman of the Board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the Corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the Board, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The Board of Directors may appoint, or may empower the President to
appoint, such other officers as the business of the Corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the Board of Directors may
from time to time determine.
<PAGE>
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
Board of Directors at any regular or special meeting of the Board or, except in
case of an officer chosen by the Board of Directors, by any officer upon whom
such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The Chairman of the Board, if such an officer be elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
Board of Directors or as may be prescribed by these bylaws. If there is no
President, then the Chairman of the Board shall also be the chief executive
officer of the Corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the Chairman of the Board, if there be such an officer,
the President shall be the chief executive officer of the Corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction, and control of the business and the officers of the Corporation. The
President shall preside at all meetings of the stockholders and, in the absence
or nonexistence of a chairman of the Board, at all meetings of the Board of
Directors. The President shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and duties as may be prescribed by the Board of Directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the President, the vice presidents,
if any, in order of their rank as fixed by the Board of Directors or, if not
ranked, a vice president designated by the Board of Directors, shall perform all
the duties of the President and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the President. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board of Directors, these bylaws,
the President or the Chairman of the Board.
<PAGE>
5.9 SECRETARY
The Secretary shall keep or cause to be kept, at the principal
executive office of the Corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and stockholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal
executive office of the Corporation or at the office of the Corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required to be given
by law or by these bylaws. The Secretary shall keep the seal of the Corporation,
if one be adopted, in safe custody and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by these
bylaws.
5.10 CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The Chief Financial Officer shall deposit all money and other
valuables in the name and to the credit of the Corporation with such
depositaries as may be designated by the Board of Directors. Chief Financial
Officer shall disburse the funds of the Corporation as may be ordered by the
Board of Directors, shall render to the President and directors, whenever they
request it, an account of all of his or her transactions as Chief Financial
Officer and of the financial condition of the Corporation, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or these bylaws.
<PAGE>
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
--------------------------------------------------
AND OTHER AGENTS
----------------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware as the same now exists or
may hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit, or proceeding in which such person was or is a party or is
threatened to be made a party by reason of the fact that such person is or was a
director or officer of the Corporation. For purposes of this Section 6.1, a
"director" or "officer" of the Corporation shall mean any person (i) who is or
was a director or officer of the Corporation, (ii) who is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
Corporation or of another enterprise at the request of such predecessor
corporation.
The Corporation shall be required to indemnify a director or officer
in connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
Board of Directors of the Corporation.
The Corporation shall pay the expenses (including attorney's fees)
incurred by a director or officer of the Corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the Corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director of officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Corporation's Certificate of Incorporation,
these bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this
Article shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
<PAGE>
6.2 INDEMNIFICATION OF OTHERS
The Corporation shall have the power, to the maximum extent and in
the manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the Corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the Corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the Corporation, (ii) who is or was serving at
the request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
Corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The Corporation shall, either at its principal executive office or at
such place or places as designated by the Board of Directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
Corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal place of
business.
<PAGE>
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine (and to make copies of)
the Corporation's stock ledger, a list of its stockholders and its other books
and records for a purpose reasonably related to his or her position as a
director.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The Board of Directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The Chairman of the Board, if any, the President, any vice president,
the Chief Financial Officer, the Secretary or any assistant secretary of this
Corporation, or any other person authorized by the Board of Directors or the
President or a vice president, is authorized to vote, represent and exercise on
behalf of this Corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
Corporation. The authority herein granted may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
7.5 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise
altered to date, certified by the Secretary, shall be kept at the Corporation's
principal executive office and shall be open to inspection by the stockholders
of the Corporation, at all reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) days before any such action. In that case, only
<PAGE>
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the Corporation after the record date so fixed, except as
otherwise provided in the General Corporation Law of Delaware.
If the Board of Directors does not so fix a record date, then the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board adopts the applicable
resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the Corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The Board of Directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors of the Corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the Corporation by, the Chairman or vice-chairman
of the Board of Directors, or the President or vice-president, and by the
treasurer or an assistant treasurer, or the Secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the Board
of Directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
<PAGE>
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such facts.
Upon surrender to the Secretary or transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The Corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, or upon the books and records of the
Corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
Corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the Corporation is authorized to issue more than one class of
stock or more than one series of any class, then the powers, the designations,
the preferences and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate that the
Corporation shall issue to represent such class or series of stock; provided,
however, that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements there may be
set forth on the face or back of the certificate that the Corporation shall
issue to represent such class or series of stock a statement that the
Corporation will furnish without charge to each stockholder who so requests the
powers, the designations, the preferences and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for
shares shall be issued to replace a previously issued certificate unless the
latter is surrendered to the Corporation and canceled at the same time. The
Board of Directors may, in case any share certificate or certificate for any
other security is lost, stolen or destroyed, authorize the issuance of
replacement certificates on such terms and conditions as the Board may require;
the Board may require indemnification of the Corporation secured by a bond or
other adequate security sufficient to protect the Corporation against any claim
that may be made against it, including any expense or liability, on account of
the alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
<PAGE>
8.7 TRANSFER AGENTS AND REGISTRARS
The Board of Directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company -- either domestic or foreign, who shall be
appointed at such times and places as the requirements of the Corporation may
necessitate and the Board of Directors may designate.
8.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the General Corporation Law of Delaware
shall govern the construction of these bylaws. Without limiting the generality
of this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the Corporation may be adopted,
amended or repealed by the stockholders entitled to vote or by the Board of
Directors of the Corporation. The fact that such power has been so conferred
upon the directors shall not divest the stockholders of the power, nor limit
their power to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in
the book of bylaws with the original bylaws, in the appropriate place. If any
bylaw is repealed, the fact of repeal with the date of the meeting at which the
repeal was enacted or the filing of the operative written consent(s) shall be
stated in said book.
PMC-SIERRA, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of
______________ by and between PMC-Sierra, Inc., a Delaware corporation (the
"Company"), and ______________ ("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and its
related entities, and has reincorporated into Delaware;
WHEREAS, in order to induce Indemnitee to continue to provide services
to the Company, the Company wishes to provide for the indemnification of, and
the advancement of expenses to, Indemnitee to the maximum extent permitted by
law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty
in obtaining liability insurance for the Company's directors, officers,
employees, agents and fiduciaries, the significant increases in the cost of such
insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, the Company and Indemnitee desire to have in place the
additional protection provided by an indemnification agreement to provide
indemnification and advancement of expenses to the Indemnitee to the maximum
extent permitted by Delaware law;
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified and advanced expenses by the
Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. Certain Definitions.
(a) "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended) or group acting in concert, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company acting in such
capacity or a corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their ownership of stock of
the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of the Company representing more
than 50% of the total voting power represented by the Company's then outstanding
Voting Securities, (ii) during any period of two consecutive years, individuals
<PAGE>
who at the beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
related transactions) all or substantially all of the Company's assets.
(b) "Claim" shall mean with respect to a Covered Event: any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other.
(c) References to the "Company" shall include, in addition to
PMC-Sierra, Inc., any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger to which PMC-Sierra, Inc. (or
any of its wholly owned subsidiaries) is a party which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees, agents or fiduciaries, so that if Indemnitee is
or was a director, officer, employee, agent or fiduciary of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(d) "Covered Event" shall mean any event or occurrence related
to the fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or any subsidiary of the Company, or is or was serving
at the request of the Company as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action or inaction on the part of Indemnitee
while serving in such capacity.
(e) "Expenses" shall mean any and all expenses (including
attorneys' fees and all other costs, expenses and obligations incurred in
connection with investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, to be a witness in or to
participate in, any action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines, penalties and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) of any Claim and any
federal, state, local or foreign taxes imposed on the Indemnitee as a result of
the actual or deemed receipt of any payments under this Agreement.
<PAGE>
(f) "Expense Advance" shall mean a payment to Indemnitee
pursuant to Section 3 of Expenses in advance of the settlement of or final
judgement in any action, suit, proceeding or alternative dispute resolution
mechanism, hearing, inquiry or investigation which constitutes a Claim.
(g) "Independent Legal Counsel" shall mean an attorney or firm
of attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other Indemnitees under similar
indemnity agreements).
(h) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
(i) "Reviewing Party" shall mean, subject to the provisions of
Section 2(d), any person or body appointed by the Board of Directors in
accordance with applicable law to review the Company's obligations hereunder and
under applicable law, which may include a member or members of the Company's
Board of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking indemnification.
(j) "Section" refers to a section of this Agreement unless
otherwise indicated.
(k) "Voting Securities" shall mean any securities of the Company
that vote generally in the election of directors.
2. Indemnification.
(a) Indemnification of Expenses. Subject to the provisions of
Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the
fullest extent permitted by law if Indemnitee was or is or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, any Claim (whether by reason of or arising in
part out of a Covered Event), including all interest, assessments and other
charges paid or payable in connection with or in respect of such Expenses.
<PAGE>
(b) Review of Indemnification Obligations. Notwithstanding the
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal Counsel is the Reviewing Party)
that Indemnitee is not entitled to be indemnified hereunder under applicable
law, (i) the Company shall have no further obligation under Section 2(a) to make
any payments to Indemnitee not made prior to such determination by such
Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all Expenses
theretofore paid to Indemnitee to which Indemnitee is not entitled hereunder
under applicable law; provided, however, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee is entitled to be indemnified hereunder
under applicable law, any determination made by any Reviewing Party that
Indemnitee is not entitled to be indemnified hereunder under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expenses theretofore paid in indemnifying Indemnitee until a
final judicial determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed). Indemnitee's
obligation to reimburse the Company for any Expenses shall be unsecured and no
interest shall be charged thereon.
(c) Indemnitee Rights on Unfavorable Determination; Binding
Effect. If any Reviewing Party determines that Indemnitee substantively is not
entitled to be indemnified hereunder in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation seeking an initial
determination by the court or challenging any such determination by such
Reviewing Party or any aspect thereof, including the legal or factual bases
therefor, and, subject to the provisions of Section 15, the Company hereby
consents to service of process and to appear in any such proceeding. Absent such
litigation, any determination by any Reviewing Party shall be conclusive and
binding on the Company and Indemnitee.
(d) Selection of Reviewing Party; Change in Control. If there
has not been a Change in Control, any Reviewing Party shall be selected by the
Board of Directors, and if there has been such a Change in Control (other than a
Change in Control which has been approved by a majority of the Company's Board
of Directors who were directors immediately prior to such Change in Control),
any Reviewing Party with respect to all matters thereafter arising concerning
the rights of Indemnitee to indemnification of Expenses under this Agreement or
any other agreement or under the Company's Certificate of Incorporation or
Bylaws as now or hereafter in effect, or under any other applicable law, if
desired by Indemnitee, shall be Independent Legal Counsel selected by Indemnitee
and approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
<PAGE>
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the employment of separate counsel by one or more
Indemnitees has been previously authorized by the Company in writing, or (ii) an
Indemnitee shall have provided to the Company a written statement that such
Indemnitee has reasonably concluded that there may be a conflict of interest
between such Indemnitee and the other Indemnitees with respect to the matters
arising under this Agreement.
(e) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. Expense Advances.
(a) Obligation to Make Expense Advances. Upon receipt of a
written undertaking by or on behalf of the Indemnitee to repay such amounts if
it shall ultimately be determined that the Indemnitee is not entitled to be
indemnified therefore by the Company hereunder under applicable law, the Company
shall make Expense Advances to Indemnitee.
(b) Form of Undertaking. Any obligation to repay any Expense
Advances hereunder pursuant to a written undertaking by the Indemnitee shall be
unsecured and no interest shall be charged thereon.
(c) Determination of Reasonable Expense Advances. The parties
agree that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable, shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
(a) Timing of Payments. All payments of Expenses (including
without limitation Expense Advances) by the Company to the Indemnitee pursuant
to this Agreement shall be made to the fullest extent permitted by law as soon
as practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than 30 business days after such written demand
by Indemnitee is presented to the Company, except in the case of Expense
Advances, which shall be made no later than 10 business days after such written
demand by Indemnitee is presented to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company notice
in writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
<PAGE>
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by this
Agreement or applicable law. In addition, neither the failure of any Reviewing
Party to have made a determination as to whether Indemnitee has met any
particular standard of conduct or had any particular belief, nor an actual
determination by any Reviewing Party that Indemnitee has not met such standard
of conduct or did not have such belief, prior to the commencement of legal
proceedings by Indemnitee to secure a judicial determination that Indemnitee
should be indemnified under this Agreement under applicable law, shall be a
defense to Indemnitee's claim or create a presumption that Indemnitee has not
met any particular standard of conduct or did not have any particular belief. In
connection with any determination by any Reviewing Party or otherwise as to
whether the Indemnitee is entitled to be indemnified hereunder under applicable
law, the burden of proof shall be on the Company to establish that Indemnitee is
not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to provide indemnification for or make any Expense Advances
with respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently retained by
or on behalf of Indemnitee with respect to the same Claim; provided that, (i)
Indemnitee shall have the right to employ Indemnitee's separate counsel in any
such Claim at Indemnitee's expense and (ii) if (A) the employment of separate
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.
<PAGE>
5. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify the Indemnitee
to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's Certificate of Incorporation, the Company's Bylaws or
by statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or rule which
narrows the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder except as set forth in Section 10(a) hereof.
(b) Nonexclusivity. The indemnification and the payment of
Expense Advances provided by this Agreement shall be in addition to any rights
to which Indemnitee may be entitled under the Company's Certificate of
Incorporation, its Bylaws, any other agreement, any vote of stockholders or
disinterested directors, the General Corporation Law of the State of Delaware,
or otherwise. The indemnification and the payment of Expense Advances provided
under this Agreement shall continue as to Indemnitee for any action taken or not
taken while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable
under this Agreement to make any payment in connection with any Claim made
against Indemnitee to the extent Indemnitee has otherwise actually received
payment (under any insurance policy, provision of the Company's Certificate of
Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee
acknowledge that in certain instances, federal law or applicable public policy
may prohibit the Company from indemnifying its directors, officers, employees,
agents or fiduciaries under this Agreement or otherwise. Indemnitee understands
and acknowledges that the Company has undertaken or may be required in the
future to undertake with the Securities and Exchange Commission to submit the
question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
9. Liability Insurance. To the extent the Company maintains
liability insurance applicable to directors, officers, employees, agents or
fiduciaries, Indemnitee shall be covered by such policies in such a manner as to
provide Indemnitee the same rights and benefits as are provided to the most
favorably insured of the Company's directors, if Indemnitee is a director; or of
the Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
<PAGE>
10. Exceptions. Notwithstanding any other provision of this
Agreement, the Company shall not be obligated pursuant to the terms of this
Agreement:
(a) Excluded Action or Omissions. To indemnify or make Expense
Advances to Indemnitee with respect to Claims arising out of acts, omissions or
transactions for which Indemnitee is prohibited from receiving indemnification
under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or make
Expense Advances to Indemnitee with respect to Claims initiated or brought
voluntarily by Indemnitee and not by way of defense, counterclaim or crossclaim,
except (i) with respect to actions or proceedings brought to establish or
enforce a right to indemnification under this Agreement or any other agreement
or insurance policy or under the Company's Certificate of Incorporation or
Bylaws now or hereafter in effect relating to Claims for Covered Events, (ii) in
specific cases if the Board of Directors has approved the initiation or bringing
of such Claim, or (iii) as otherwise required under Section 145 of the Delaware
General Corporation Law, regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification, Expense Advances, or
insurance recovery, as the case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for
Expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
<PAGE>
13. Expenses Incurred in Action Relating to Enforcement or
Interpretation. In the event that any action is instituted by Indemnitee under
this Agreement or under any liability insurance policies maintained by the
Company to enforce or interpret any of the terms hereof or thereof, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee with
respect to such action (including without limitation attorneys' fees),
regardless of whether Indemnitee is ultimately successful in such action, unless
as a part of such action a court having jurisdiction over such action makes a
final judicial determination (as to which all rights of appeal therefrom have
been exhausted or lapsed) that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous; provided, however, that until such final judicial determination is
made, Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee in defense of such action
(including without limitation costs and expenses incurred with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action a court having jurisdiction over such action makes a final
judicial determination (as to which all rights of appeal therefrom have been
exhausted or lapsed) that each of the material defenses asserted by Indemnitee
in such action was made in bad faith or was frivolous; provided, however, that
until such final judicial determination is made, Indemnitee shall be entitled
under Section 3 to receive payment of Expense Advances hereunder with respect to
such action.
14. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
15. Notice. All notices and other communications under this Agreement
shall be in writing and shall be deemed duly given (i) if delivered by hand and
signed for by the party addressed, on the date of such delivery, or (ii) if
mailed by domestic certified or registered mail with postage prepaid, on the
third business day after the date postmarked. Addresses for notice to either
party are as shown on the signature page of this Agreement, or as subsequently
modified by written notice.
16. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
<PAGE>
17. Severability. The provisions of this Agreement shall be
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and the
remaining provisions shall remain enforceable to the fullest extent permitted by
law. Furthermore, to the fullest extent possible, the provisions of this
Agreement (including without limitation each portion of this Agreement
containing any provision held to be invalid, void or otherwise unenforceable,
that is not itself invalid, void or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
18. Choice of Law. This Agreement, and all rights, remedies,
liabilities, powers and duties of the parties to this Agreement, shall be
governed by and construed in accordance with the laws of the State of Delaware
as applied to contracts between Delaware residents entered into and to be
performed entirely in the State of Delaware without regard to principles of
conflicts of laws.
19. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
20. Amendment and Waiver. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver.
21. Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.
22. No Construction as Employment Agreement. Nothing contained in
this Agreement shall be construed as giving Indemnitee any right to be retained
in the employment of the Company or any of its subsidiaries or affiliated
entities.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
PMC-SIERRA, INC.
By: _________________________________
Title: _________________________________
Address: 8555 Baxter Place, Suite 105
Burnaby, British Columbia V5A 4V7
Canada
AGREED TO AND ACCEPTED:
INDEMNITEE:
____________________________
____________________________
____________________________
(address)
PMC-Sierra, Inc.
CALCULATION OF EARNINGS PER SHARE
(In thousands, except for per share amounts)
Three Months Three Months
Ended Ended
June 30, June 30,
1997 1996
(unaudited) (unaudited)
Net Income $ 8,932 $ 7,198
========= =========
Weighted average common shares outstanding 30,918 29,356
Common stock equivalents 1,456 1,222
----- -----
Shares used in calculation of net income per share 32,374 30,578
====== ======
Net income per share $ 0.28 $ 0.24
========= =========
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PMC-SIERRA, INC.
(Registrant)
Date: August 13, 1997 /s/ Robert L. Bailey
--------------- -------------------------------------
Robert L. Bailey
Chief Executive Officer and President
Date: August 13, 1997 /s/ John Sullivan
--------------- -----------------
John Sullivan
Vice President, Finance
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 40,844
<SECURITIES> 14,123
<RECEIVABLES> 16,955
<ALLOWANCES> 0
<INVENTORY> 4,011
<CURRENT-ASSETS> 80,709
<PP&E> 34,730
<DEPRECIATION> (18,282)
<TOTAL-ASSETS> 144,256
<CURRENT-LIABILITIES> 42,570
<BONDS> 0
0
0
<COMMON> 139,364
<OTHER-SE> (69,464)
<TOTAL-LIABILITY-AND-EQUITY> 144,256
<SALES> 34,064
<TOTAL-REVENUES> 34,064
<CGS> 9,613
<TOTAL-COSTS> 9,613
<OTHER-EXPENSES> 11,922
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (232)
<INCOME-PRETAX> 12,761
<INCOME-TAX> 3,829
<INCOME-CONTINUING> 8,932
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,932
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.28
</TABLE>