<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 22, 1999
REGISTRATION NO. 333-71795
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PLX TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3674 94-3008334
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
390 POTRERO AVENUE
SUNNYVALE, CA 94086
(408) 774-9060
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SCOTT M. GIBSON
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
PLX TECHNOLOGY, INC.
390 POTRERO AVENUE
SUNNYVALE, CA 94086
(408) 774-9060
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
WILLIAM D. SHERMAN, ESQ. JEFFREY D. SAPER, ESQ.
STEPHEN J. SCHRADER, ESQ. J. ROBERT SUFFOLETTA, ESQ.
MORRISON & FOERSTER LLP WILSON SONSINI GOODRICH & ROSATI
755 PAGE MILL ROAD PROFESSIONAL CORPORATION
PALO ALTO, CA 94304 650 PAGE MILL ROAD
(650) 813-5600 PALO ALTO, CA 94304
(650) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON THE DATE THAT THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 22, 1999
PROSPECTUS
3,300,000 SHARES
LOGO
COMMON STOCK
------------------------
This is PLX Technology, Inc.'s initial public offering of common stock.
We expect the public offering price to be between $8.00 and $9.00 per
share. Currently, no public market exists for the shares. After pricing of the
offering, we expect that the common stock will trade on the Nasdaq National
Market under the symbol "PLXT."
INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price................................... $ $
Underwriting Discount................................... $ $
Proceeds, before expenses, to PLX....................... $ $
</TABLE>
The underwriters may also purchase up to an additional 495,000 shares at
the public offering price, less the underwriting discount, within 30 days from
the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The shares of common stock will be ready for delivery in New York, New York
on or about , 1999.
------------------------
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
WIT CAPITAL CORPORATION
------------------------
The date of this prospectus is , 1999.
<PAGE> 3
PLX I/O Silicon and Software Solutions
PLX Technology delivers advanced semiconductor and software solutions that
accelerate data flow in equipment used to build the Internet and worldwide
communications infrastructure. More than 500 customers use PLX products
including 3Com, Cisco Systems, Compaq Computer, Hewlett-Packard, IBM, Lucent
Technologies, Nortel Networks, Siemens and Tektronix.
[Graphic of computer chips, books, CD-ROMs and computer circuitry with printed
computer code.]
GATE-FOLD PAGE ONE
Leaders in networking, telecommunications, imaging, enterprise storage and
industrial automation rely on PLX silicon and software solutions to help them
deliver high performance equipment to market quickly. Demand for these systems
is growing dramatically due to the rapid expansion of the Internet, high speed
networking and multimedia.
Networking & Telecommunications
[vertical text] Industrial
Imaging
[Graphic PLX Technology computer chip and representation of computer network
equipment with the following captions:
- Cellular Base Station
- Digital Telephony
- Cable Modem Router
- Ethernet Switch
- Remote Access Concentrator
- Process Control
- Enterprise Router
- Storage
- Printer]
GATE-FOLD PAGE TWO
[vertical text] Storage
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 4
Forward-Looking Statements.................................. 13
Trademarks.................................................. 13
Information in Prospectus................................... 13
Use of Proceeds............................................. 14
Dividend Policy............................................. 14
Capitalization.............................................. 15
Dilution.................................................... 16
Selected Consolidated Financial Data........................ 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 18
Business.................................................... 26
Management.................................................. 42
Transactions Between PLX and its Officers, Directors or
Significant Stockholders.................................. 50
Principal Stockholders...................................... 52
Description of Capital Stock................................ 54
Shares Eligible for Future Sale............................. 57
Underwriting................................................ 59
Legal Matters............................................... 62
Experts..................................................... 62
Where You Can Find More Information......................... 62
Glossary.................................................... 64
Index to Consolidated Financial Statements.................. F-1
</TABLE>
<PAGE> 5
PROSPECTUS SUMMARY
This summary is not complete and does not contain all of the information
that may be important to you. You should read the entire prospectus carefully,
including the financial data and related notes, before making an investment
decision.
PLX TECHNOLOGY
PLX develops and supplies semiconductor devices and software that
accelerate and manage the transfer of data in networking and telecommunications,
enterprise storage, imaging and industrial equipment. This equipment is
typically controlled by internal computers, commonly referred to as embedded
systems. PLX offers a complete solution consisting of three related types of
products: semiconductor devices, software development kits and hardware design
kits. Our semiconductor devices simplify the development of data transfer
circuits in high-performance embedded systems and are compatible with
microprocessors such as IBM's PowerPC, Motorola's PowerPC, Intel's i960, IDT's
MIPs and Hitachi's SH. Our software development kits and hardware design kits
promote sales of our semiconductor devices by lowering customers' development
costs and by accelerating their ability to bring new products to market.
More than 500 customers are currently shipping products that incorporate
our semiconductor devices, including 3Com, Cisco Systems, Compaq Computer,
Hewlett-Packard, IBM, Lucent Technologies, Nortel Networks, Siemens and
Tektronix.
Demand for networking, telecommunications and other equipment that
transmits, stores and processes information rapidly has dramatically increased
due to the:
- growth of the Internet,
- deployment of high-speed networking, and
- proliferation of multimedia.
Suppliers of this equipment are changing the way they design their products
to reduce product development time and to use their scarce engineering resources
more efficiently. Until recently, these suppliers typically developed their own
system components and the connections between the components. Now, however, they
are increasingly building their equipment based on industry standard connection
methods, and they are purchasing components supplied by other companies that
comply with these standards. By doing so, they reduce the time and resources
required for product development. Consequently, there is a growing demand for
standards-based components that connect systems together, such as our
semiconductor devices. The majority of PLX's products are based on Peripheral
Component Interconnect, or PCI, a standard that is widely used in our markets.
Our objective is to expand our advantages in data transfer technology by:
- focusing on high-growth markets,
- delivering comprehensive solutions, including semiconductor devices,
software development kits and hardware design kits,
- extending our technology advantages by incorporating new functions and
technologies,
- driving industry standards, and
- strengthening and expanding our industry relationships.
1
<PAGE> 6
PLX Technology, Inc. was incorporated in California in May 1986. In March
1999, our state of incorporation was changed to Delaware. Our principal
executive office is located at 390 Potrero Avenue, Sunnyvale, California 94086,
and our telephone number at this address is (408) 774-9060. We maintain a World
Wide Web site address at www.plxtech.com. The reference to this World Wide Web
site address does not constitute incorporation by reference of the information
contained therein.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered.................. 3,300,000 shares
Common stock outstanding after this
offering............................ 21,665,551 shares(1)
Use of proceeds....................... We intend to use the offering proceeds
for working capital and general
corporate purposes.
Risk factors.......................... See page 4 for a discussion of factors
you should carefully consider before
deciding to invest in shares of the
common stock.
Nasdaq National Market symbol......... PLXT
</TABLE>
- -------------------------
(1) Excludes 1,300,000 shares of common stock reserved for issuance under our
1998 Stock Incentive Plan and 1,000,000 shares of common stock reserved for
issuance under our 1999 Stock Incentive Plan. See "Description of Capital
Stock -- Authorized and Outstanding Capital Stock" and Note 5 to
Consolidated Financial Statements.
2
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net revenues................ $ 4,043 $ 9,316 $ 9,813 $17,534 $26,276
Gross profit................ 2,238 3,805 5,287 10,558 16,605
Income from operations...... 49 1,016 893 1,991 3,383
Net income.................. 71 1,049 891 1,924 2,766
Historical basic net income
per share................. $ 0.02 $ 0.36 $ 0.28 $ 0.58 $ 0.77
Pro forma basic net income
per share(1).............. $ 0.16
Historical and pro forma
diluted net income per
share(1).................. $ 0.00 $ 0.06 $ 0.05 $ 0.11 $ 0.15
Shares used to compute
historical basic net
income per share.......... 2,848 2,897 3,137 3,293 3,601
Shares used to compute pro
forma basic net income per
share(1).................. 17,340
Shares used to compute
historical and pro forma
diluted net income per
share(1).................. 16,653 16,768 17,287 17,758 18,405
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------
AS
ACTUAL ADJUSTED(2)
------- --------------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 5,638 $31,025
Working capital........................................... 6,116 31,503
Total assets.............................................. 11,766 37,153
Long-term debt............................................ -- --
Total stockholders' equity................................ 7,760 33,147
</TABLE>
- -------------------------
(1) Pro forma information is based on the conversion of all outstanding shares
of our preferred stock into shares of common stock.
(2) As adjusted to reflect the sale of 3,300,000 shares of our common stock,
based on an initial public offering price of $8.50 per share, the
application of the estimated net proceeds therefrom and the conversion of
all outstanding shares of our preferred stock into shares of common stock
upon the closing of the offering. See "Use of Proceeds."
3
<PAGE> 8
RISK FACTORS
You should carefully consider the following factors as well as other
information contained in this prospectus before deciding to invest in shares of
the common stock.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY DUE TO FACTORS WHICH ARE NOT
WITHIN OUR CONTROL
Our quarterly operating results have fluctuated significantly in the past
and are expected to fluctuate significantly in the future based on a number of
factors, many of which are not in our control. Our operating expenses, which
include product development costs and selling, general and administrative
expenses, are relatively fixed in the short-term. If our revenues are lower than
we expect because we sell fewer semiconductor devices, delay the release of new
products or the announcement of new features, or for other reasons, we may not
be able to quickly reduce our spending in response.
Other circumstances that can affect our operating results include:
- our ability to develop, introduce and market new products and
technologies on a timely basis,
- the timing of significant orders, order cancellations and reschedulings,
- changes in our pricing policies or those of our competitors or suppliers,
including decreases in unit average selling prices of our products,
- introduction of products and technologies by our competitors,
- shifts in our product mix toward lower margin products,
- the availability of production capacity at the fabrication facilities
that manufacture our products,
- purchasing patterns related to the Year 2000, and
- the availability and cost of materials to our suppliers.
These factors are difficult to forecast, and these or other factors could
adversely affect our business. Any shortfall in our revenues would have a direct
impact on our business. In addition, fluctuations in our quarterly results could
adversely affect the market price of our common stock in a manner unrelated to
our long-term operating performance.
OUR LENGTHY SALES CYCLE CAN RESULT IN UNCERTAINTY AND DELAYS WITH REGARD TO OUR
EXPECTED REVENUES
Our customers typically perform numerous tests and extensively evaluate our
products before incorporating them into their systems. The time required for
test, evaluation and design of our products into the customer's equipment can
range from six to twelve months or more. It can take an additional six to twelve
months or more before a customer commences volume shipments of equipment that
incorporates our products. Because of this lengthy sales cycle, we may
experience a delay between the time when we increase expenses for research and
development and sales and marketing efforts and the time when we generate higher
revenues, if any, from such expenditures.
4
<PAGE> 9
In addition, the delays inherent in our lengthy sales cycle raise
additional risks of customer decisions to cancel or change product plans. When
we achieve a design win, there can be no assurance that the customer will
ultimately ship products incorporating our products. Our business could be
materially adversely affected if a significant customer curtails, reduces or
delays orders during our sales cycle or chooses not to release products
incorporating our products.
RAPID TECHNOLOGICAL CHANGE COULD MAKE OUR PRODUCTS OBSOLETE
The semiconductor industry is characterized by rapidly changing technology
and industry standards, along with frequent new product introductions.
Consequently, our future success depends on our ability to identify trends in
our target markets and to offer new semiconductor devices, as well as other
products and services, that address the changing needs of our target customers.
WE MUST MAKE SIGNIFICANT RESEARCH AND DEVELOPMENT EXPENDITURES PRIOR TO
GENERATING REVENUES FROM PRODUCTS
To establish market acceptance of a new semiconductor device, we must
dedicate significant resources to research and development, production and sales
and marketing. We incur substantial costs in developing, manufacturing and
selling a new product, which often significantly precede meaningful revenues
from the sale of such product. Consequently, new products can require
significant time and investment to achieve profitability. Prospective investors
should note that our efforts to introduce new semiconductor devices or other
products or services may not be successful or profitable. In addition, products
or technologies developed by others may render our products or technologies
obsolete or noncompetitive.
We record as expenses the costs related to the development of new
semiconductor devices and other products as these expenses are incurred. As a
result, our profitability from quarter to quarter and from year to year may be
adversely affected by the number and timing of our new product launches in any
period and the level of acceptance gained by such products.
OUR INDEPENDENT MANUFACTURERS MAY NOT BE ABLE TO MEET OUR MANUFACTURING
REQUIREMENTS
We do not manufacture any of our semiconductor devices. Therefore, we are
referred to in the semiconductor industry as a "fabless" producer of
semiconductors. Consequently, we depend upon third party manufacturers to
produce semiconductors that meet our specifications. We currently have third
party manufacturers that can produce semiconductors which meet our needs.
However, as the semiconductor industry continues to progress to smaller
manufacturing and design geometries, the complexities of producing
semiconductors will increase. Decreasing geometries may introduce new problems
and delays that may affect product development and deliveries. Due to the nature
of the semiconductor industry and our status as a "fabless" semiconductor
company, we could encounter fabrication related problems that may affect the
availability of our semiconductor devices, may delay our shipments or may
increase our costs.
5
<PAGE> 10
OUR RELIANCE ON SINGLE SOURCE MANUFACTURERS OF OUR SEMICONDUCTOR DEVICES COULD
DELAY SHIPMENTS AND INCREASE OUR COSTS
None of our semiconductor devices is currently manufactured by more than
one supplier. We place our orders on a purchase order basis and do not have a
long term purchase agreement with any of our existing suppliers. In the event
that the supplier of a semiconductor device was unable or unwilling to continue
to manufacture this product in the required volume, we would have to identify
and qualify a substitute supplier. Introducing new products or transferring
existing products to a new third party manufacturer or process may result in
unforeseen device specification and operating problems. These problems may
affect product shipments and may be costly to correct. Silicon fabrication
capacity may also change, or the costs per silicon wafer may increase.
Manufacturing-related problems may have a material adverse effect on our
business.
INTENSE COMPETITION IN THE MARKETS IN WHICH WE OPERATE MAY REDUCE THE DEMAND FOR
OR PRICES OF OUR PRODUCTS
Competition in the semiconductor industry is intense. If our main target
market, the embedded systems market, continues to grow, the number of
competitors may increase significantly. In addition, new semiconductor
technology may lead to new products that can perform similar functions as our
products. Some of our competitors and other semiconductor companies may develop
and introduce products that integrate into a single semiconductor device the
functions performed by our semiconductor devices. This would eliminate the need
for our products in some applications.
In addition, competition in our markets comes from companies of various
sizes, many of which are significantly larger and have greater financial and
other resources than we do and thus can better withstand adverse economic or
market conditions. Also, as we start to sell our processor products, we will
compete with established embedded microprocessor companies and others. Many of
these indirect competitors and microprocessor companies have significantly
greater financial, technical, marketing and other resources than PLX. Therefore,
we cannot assure you that we will be able to compete successfully in the future
against existing or new competitors, and increased competition may adversely
affect our business. See "Business -- Competition," and " -- Products."
FAILURE TO HAVE OUR PRODUCTS DESIGNED INTO THE PRODUCTS OF ELECTRONIC EQUIPMENT
MANUFACTURERS WILL RESULT IN REDUCED SALES
Our future success depends on electronic equipment manufacturers that
design our semiconductor devices into their systems. We must anticipate market
trends and the price, performance and functionality requirements of current and
potential future electronic equipment manufacturers and must successfully
develop and manufacture products that meet these requirements. In addition, we
must meet the timing requirements of these electronic equipment manufacturers
and must make products available to them in sufficient quantities. These
electronic equipment manufacturers could develop products that provide the same
or similar functionality as one or more of our products and render such products
obsolete in their applications.
We do not have purchase agreements with our customers that contain minimum
purchase requirements. Instead, electronic equipment manufacturers purchase our
products pursuant to short-term purchase orders that may be canceled without
charge. We believe that in order to obtain broad penetration in the markets for
our products, we must
6
<PAGE> 11
maintain and cultivate relationships, directly or through our distributors, with
electronic equipment manufacturers that are leaders in the embedded systems
markets. Accordingly, we will often incur significant expenditures in order to
build relationships with electronic equipment manufacturers prior to volume
sales of new products. If we fail to develop relationships with additional
electronic equipment manufacturers, to have our products designed into new
embedded systems or to develop sufficient new products to replace products that
have become obsolete, our business would be materially adversely affected.
LOWER DEMAND FOR OUR CUSTOMERS' PRODUCTS WILL RESULT IN LOWER DEMAND FOR OUR
PRODUCTS
Demand for our products depends in large part on the development and
expansion of the high-performance embedded systems markets including networking
and telecommunications, enterprise storage, imaging and industrial applications.
The size and rate of growth of these embedded systems markets may in the future
fluctuate significantly based on numerous factors. These factors include the
adoption of alternative technologies, capital spending levels and general
economic conditions. Demand for products that incorporate high-performance
embedded systems may not grow.
DEFECTS IN OUR PRODUCTS COULD INCREASE OUR COSTS AND DELAY OUR PRODUCT SHIPMENTS
Our products are complex. While we test our products, these products may
still have errors, defects or bugs that we find only after commercial production
has begun. We have experienced such errors, defects and bugs in the past in
connection with new products.
Our customers may not purchase our products if the products have
reliability, quality or compatibility problems. This delay in acceptance can
make it more difficult to retain our existing customers and to attract new
customers. Moreover, product errors, defects or bugs can result in additional
development costs, diversion of technical and other resources from our other
development efforts, claims by our customers or others against us, or the loss
of credibility with our current and prospective customers. In the past, the
additional time required to correct defects has caused delays in product
shipments and resulted in lower revenues. We may have to spend significant
amounts of capital and resources to address and fix problems in new products.
We must continuously develop our products using new process technology with
smaller geometries to remain competitive on a cost and performance basis.
Migrating to new technologies is a challenging task requiring new design skills,
methods and tools and is difficult to achieve.
FAILURE TO HIRE ADDITIONAL PERSONNEL AND TO IMPROVE OUR OPERATIONS WILL LIMIT
OUR GROWTH
We have experienced rapid growth which places a significant strain on our
limited personnel and other resources. To manage our expanded operations
effectively, we will need to further improve our operational, financial and
management systems. We will also need to successfully hire, train, motivate and
manage our employees. We may not be able to manage our growth effectively, which
could have a material adverse effect on our business. Also, we are seeking to
hire additional skilled development engineers, who are currently in short
supply. Our business could be adversely affected if we encounter delays in
hiring additional engineers.
7
<PAGE> 12
WE COULD LOSE KEY PERSONNEL DUE TO COMPETITIVE MARKET CONDITIONS AND OTHER
REASONS
Our success depends to a significant extent upon our senior management and
key technical and sales personnel. The loss of one or more of these employees
could have a material adverse effect on our business. We do not have employment
contracts with any of our executive officers.
Our success also depends on our ability to attract and retain qualified
technical, sales and marketing, customer support, financial and accounting, and
managerial personnel. Competition for such personnel in the semiconductor
industry is intense, and we may not be able to retain our key personnel or to
attract, assimilate or retain other highly qualified personnel in the future. We
have experienced, and may continue to experience, difficulty in hiring and
retaining candidates with appropriate qualifications. If we do not succeed in
hiring and retaining candidates with appropriate qualifications, our business
could be materially adversely affected.
A LARGE PORTION OF OUR REVENUES IS DERIVED FROM SALES TO THIRD-PARTY
DISTRIBUTORS WHO MAY TERMINATE THEIR RELATIONSHIPS WITH US AT ANY TIME
We depend on distributors to sell a significant portion of our products. In
1998, net revenues through distributors accounted for approximately 49% of our
net revenues. Some of our distributors also market and sell competing products.
Distributors may terminate their relationships with us at any time. Our future
performance will depend in part on our ability to attract additional
distributors that will be able to market and support our products effectively,
especially in markets in which we have not previously distributed our products.
We may lose one or more of our current distributors or may not be able to
recruit additional or replacement distributors. The loss of one or more of our
major distributors could have a material adverse effect on our business.
THE DEMAND FOR OUR PRODUCTS DEPENDS UPON OUR ABILITY TO SUPPORT EVOLVING
INDUSTRY STANDARDS
Substantially all of our revenues are derived from sales of products which
rely on the PCI standard. If the embedded systems markets move away from this
standard and begin using new standards, we may not be able to successfully
design and manufacture new products that use such new standards. There is also
the risk that new products we develop in response to new standards may not be
accepted in the market. In addition, the PCI standard is continuously evolving,
and we may not be able to modify our products to address new PCI specifications.
Any of these events would have a material adverse effect on our business.
THE SUCCESSFUL MARKETING AND SALES OF OUR PRODUCTS DEPEND UPON OUR THIRD PARTY
RELATIONSHIPS, WHICH ARE NOT SUPPORTED BY WRITTEN AGREEMENTS
When marketing and selling our semiconductor devices, we believe we enjoy a
competitive advantage based on the availability of development tools offered by
third parties. These development tools are used principally for the design of
other parts of the embedded system but also work with our products. We will lose
this advantage if these third party tool vendors cease to provide these tools
for existing products or do not offer them for our future products. This event
could have a material adverse effect on our
8
<PAGE> 13
business. We generally have no written agreements with these third parties, and
these parties could choose to stop providing these tools at any time.
OUR LIMITED ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
COULD ADVERSELY AFFECT OUR COMPETITIVE POSITION
Our future success and competitive position depend upon our ability to
obtain and maintain proprietary technology used in our principal products.
Currently, we have limited protection of our intellectual property in the form
of patents and rely instead on trade secret protection. Our existing or future
patents may be invalidated, circumvented, challenged or licensed to others. The
rights granted thereunder may not provide competitive advantages to us. In
addition, our future patent applications may not be issued with the scope of the
claims sought by us, if at all. Furthermore, others may develop technologies
that are similar or superior to our technology, duplicate our technology or
design around the patents owned or licensed by us. In addition, effective
patent, trademark, copyright and trade secret protection may be unavailable or
limited in certain foreign countries. We cannot be sure that steps taken by us
to protect our technology will prevent misappropriation of the technology.
We may from time to time receive notifications of claims that we may be
infringing patents or other intellectual property rights owned by other third
parties. While there is currently no intellectual property litigation pending
against us, litigation could result in significant expenses to us, adversely
affect sales of the challenged product or technology. This litigation could also
divert the efforts of our technical and management personnel, whether or not
such litigation is determined in our favor. In addition, we may not be able to
develop or acquire non-infringing technology or procure licenses to the
infringing technology under reasonable terms. This could require expenditures by
us of substantial time and other resources. Any of these developments would have
a material adverse effect on our business. See "Business -- Intellectual
Property."
THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY MAY LEAD TO SIGNIFICANT
VARIANCES IN THE DEMAND FOR OUR PRODUCTS
In the last two years, the semiconductor industry has been characterized by
significant downturns and wide fluctuations in supply and demand. Also, during
this time, the industry has experienced significant fluctuations in anticipation
of changes in general economic conditions, including economic conditions in
Asia. This cyclicality has led to significant variances in product demand and
production capacity. It has also accelerated erosion of average selling prices
per unit. We may experience periodic fluctuations in our future financial
results because of industry-wide conditions.
WE DERIVE SIGNIFICANT REVENUES FROM INTERNATIONAL SALES WHICH EXPOSES US TO
ADDITIONAL RISKS
Sales outside of North America accounted for 21%, 22% and 34% of our
revenues in 1996, 1997 and 1998, respectively. We anticipate that these sales
may increase in future periods and may account for an increasing portion of our
revenues. Our international sales are subject to certain risks, including:
- difficulties in managing distributors,
- difficulties in staffing and managing foreign subsidiary and branch
operations,
9
<PAGE> 14
- political and economic instability,
- foreign currency exchange fluctuations,
- difficulties in accounts receivable collections,
- potentially adverse tax consequences,
- timing and availability of export licenses,
- changes in regulatory requirements, tariffs and other barriers,
- difficulties in obtaining governmental approvals for telecommunications
and other products, and
- the burden of complying with complex foreign laws and treaties.
Although less than 10% of our revenues were attributable to sales in Asia
during 1998, the recent Asian economic instability could adversely affect our
business, particularly to the extent that this instability impacts the sales of
products manufactured by our customers.
Because sales of our products have been denominated to date exclusively in
United States dollars, increases in the value of the United States dollar will
increase the price of our products so that they become relatively more expensive
to customers in the local currency of a particular country, leading to a
reduction in sales and profitability in that country.
WE COULD EXPERIENCE DISRUPTIONS FROM IMPORTANT SUPPLIERS AND CUSTOMERS BECAUSE
THEY ARE NOT YEAR 2000 COMPLIANT
We are highly dependent on our computer software programs and operating
systems in operating our business. We also depend on proper functioning of
computer systems of third parties, such as suppliers and customers. Any computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 instead of the year 2000. We have completed audits of our internal
systems, including our accounting, sales and technical support automation
system, and obtained assurances from our major suppliers and customers that they
have done the same. However, we do not have the resources to verify these
assurances. Thus, there is a risk that some of our customers' and suppliers'
systems will not function adequately. If they do not, the result could be a
system failure or miscalculation causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Year
2000 Readiness Disclosure."
10
<PAGE> 15
OUR POTENTIAL FUTURE ACQUISITIONS MAY NOT BE SUCCESSFUL BECAUSE WE HAVE NOT MADE
ACQUISITIONS IN THE PAST
There have been a significant number of mergers and acquisitions in the
semiconductor industry in the past. As part of our business strategy, we expect
to review acquisition prospects that would complement our existing product
offerings, improve market coverage or enhance our technological capabilities. We
have no current agreements or negotiations underway with respect to any
acquisitions, and we may not be able to locate suitable acquisition
opportunities. Future acquisitions could result in the following:
- potentially dilutive issuances of equity securities,
- large one-time write-offs,
- the incurrence of debt and contingent liabilities or amortization
expenses related to goodwill and other intangible assets,
- difficulties in the assimilation of operations, personnel, technologies,
products and the information systems of the acquired companies,
- diversion of management's attention from other business concerns, and
- risks of entering geographic and business markets in which we have no or
limited prior experience and potential loss of key employees of acquired
organizations.
Since we have not made any acquisitions in the past, we are not certain
that we will be able to successfully integrate any businesses, products,
technologies or personnel that may be acquired in the future. Our failure to do
so could have a material adverse effect on our business.
OUR PRINCIPAL STOCKHOLDERS HAVE SIGNIFICANT VOTING POWER AND MAY TAKE ACTIONS
THAT MAY NOT BE IN THE BEST INTERESTS OF OUR OTHER STOCKHOLDERS
Immediately after the offering, our executive officers, directors and other
principal stockholders will, in the aggregate, beneficially own approximately
45% of our outstanding common stock. Although these stockholders will not have
majority control, they currently have, and likely will continue to have,
significant influence with respect to the election of our directors and approval
or disapproval of our significant corporate actions. This influence over our
affairs might be adverse to the interests of other stockholders. In addition,
the voting power of these stockholders, under some circumstances, could have the
effect of delaying or preventing a change in control of PLX. Commencing at the
first annual meeting of stockholders following the annual meeting of
stockholders when we shall have had at least 800 stockholders, our stockholders
will not be entitled to cumulate their votes in the election of directors, and
the holders of a majority of the common stock present at a meeting of
stockholders will be able to elect all of our directors.
THE ANTI-TAKEOVER PROVISIONS IN OUR CERTIFICATE OF INCORPORATION COULD ADVERSELY
AFFECT THE RIGHTS OF THE HOLDERS OF OUR COMMON STOCK
Anti-takeover provisions of Delaware law and our Certificate of
Incorporation may make a change in control of PLX more difficult, even if a
change in control would be beneficial to the stockholders. These provisions may
allow the Board of Directors to
11
<PAGE> 16
prevent changes in the management and control of PLX. Under Delaware law, our
Board of Directors may adopt additional anti-takeover measures in the future.
One anti-takeover provision that we have is the ability of our Board of
Directors to determine the terms of preferred stock and issue preferred stock
without the approval of the holders of the common stock. Effective upon the
offering, our Certificate of Incorporation allows the issuance of up to
5,000,000 shares of preferred stock. At the time of the offering, there are no
shares of preferred stock outstanding. However, because the rights and
preferences of any series of preferred stock may be set by the Board of
Directors in its sole discretion without approval of the holders of the common
stock, the rights and preferences of this preferred stock may be superior to
those of the common stock. Accordingly, the rights of the holders of common
stock may be adversely affected.
THE SALE OF A SUBSTANTIAL NUMBER OF OUR SHARES OF COMMON STOCK COULD CAUSE THE
MARKET PRICE OF OUR COMMON STOCK TO DECLINE
We will have 21,665,551 shares of our common stock outstanding immediately
after the offering. The shares sold in the offering will be freely transferable.
Additional shares may be sold in the public market to the extent permitted by
Rule 144 or exemptions under the Securities Act. The market price of our common
stock could decline as a result of sales of a large number of shares of our
common stock in the market after the offering, or the perception that these
sales could occur. These factors also could make it more difficult for us to
raise funds through future offerings of common stock. See "Shares Eligible for
Future Sale."
OUR COMMON STOCK HAS NOT BEEN PUBLICLY TRADED AND WE EXPECT THAT THE PRICE OF
OUR STOCK MAY FLUCTUATE SUBSTANTIALLY
Recently, the stock prices of technology companies, like PLX, have been
quite volatile. Moreover, prior to this offering, there has been no public
market for our common stock. The initial public offering price was determined
through negotiations between the underwriters and us. You may not be able to
resell your shares at or above the initial public offering price due to a number
of factors, including:
- actual or anticipated fluctuations in our operating results,
- changes in expectations as to our future financial performance,
- changes in financial estimates of securities analysts,
- technological innovations by others, and
- the operating and stock price performance of other comparable companies.
Due to the above factors, the price of our stock may decline and the value
of your investment would be reduced.
NEW INVESTORS WILL INCUR SUBSTANTIAL AND IMMEDIATE DILUTION
The present owners of our issued and outstanding shares of common stock
have acquired a controlling interest in PLX at a cost substantially less than
the price at which the investors in this offering may purchase their shares.
Therefore, the investors in this offering will bear a substantial portion of the
risk of loss. Investors in this offering will suffer immediate and substantial
dilution. See "Dilution."
12
<PAGE> 17
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about PLX, including:
- Our ability to identify trends in our target markets and to offer new
semiconductor devices that address the changing needs of our target
customers,
- Availability of production capacity at the fabrication facilities that
manufacture our products,
- Changes in our pricing policies and those of our competitors or
suppliers,
- Our ability to compete successfully against direct and indirect
competitors, and
- Growth in demand for embedded systems.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
TRADEMARKS
Each trademark, trade name or service mark appearing in this prospectus
belongs to its respective holder. Among the trademarks that we claim rights to
are PLX, PLXMon, PLXMon 98, I(2)O Manager, I(2)OMon, Data Pipe Architecture and
FlexPORT.
INFORMATION IN PROSPECTUS
Unless otherwise specifically stated, the information in this prospectus
has been adjusted to reflect the automatic conversion of all outstanding shares
of preferred stock into shares of common stock, but does not take into account
the possible sale of additional shares of common stock to the underwriters
pursuant to the underwriters' right to purchase additional shares to cover
over-allotments.
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.
We intend to furnish our stockholders with annual reports containing
financial statements audited by an independent accounting firm and quarterly
reports for the first three quarters of each fiscal year containing interim
unaudited financial information.
13
<PAGE> 18
USE OF PROCEEDS
Based on an assumed initial public offering price of $8.50 per share, our
net proceeds from the sale of the 3,300,000 shares of our common stock will be
approximately $25,386,500. If the underwriters' over-allotment option is
exercised in full, our net proceeds will be approximately $29,299,475.
The principal purposes of this offering are:
- to increase our working capital,
- to create a public market for our common stock,
- to facilitate future access by us to public equity markets, and
- to provide increased visibility and credibility to us.
We intend to use the net proceeds primarily for general corporate purposes,
including working capital. We may, when and if the opportunity arises, use an
unspecified portion of the net proceeds to acquire or invest in complementary
businesses, products and technologies. We have no present understandings,
commitments or agreements with respect to any material acquisition of, or
investment in, third parties. Pending use of the net proceeds for the above
purposes, we intend to invest the funds in interest-bearing, investment-grade
securities.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock, and
currently we do not intend to pay dividends in the foreseeable future. We plan
to retain any earnings for use in the operation of our business and to fund
future growth.
14
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of PLX as of December 31,
1998 (a) on an actual basis, (b) on a pro forma basis to give effect to the
conversion of all outstanding shares of our preferred stock into common stock,
and (c) on a pro forma, as adjusted basis to reflect the application of the
estimated net proceeds from the initial public offering and the conversion of
all outstanding shares of our preferred stock into common stock.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------
PRO FORMA
PRO AS
ACTUAL FORMA ADJUSTED
------ ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Stockholders' equity(1):
Preferred stock, $0.001 par value; 5,000,000 shares
authorized -- pro forma as adjusted, no shares
issued and outstanding -- actual, pro forma and
pro forma as adjusted........................... $ -- $ -- $ --
Redeemable convertible preferred stock, $0.001 par
value; 5,000,000 shares authorized, 4,868,738
shares designated, 4,579,636 shares issued and
outstanding -- actual; no shares issued and
outstanding -- pro forma and pro forma as
adjusted........................................ 5 -- --
Common stock, $0.001 par value; 30,000,000 shares
authorized, 4,626,643 shares issued and
outstanding -- actual; 18,365,551 shares issued
and outstanding -- pro forma; 21,665,551 shares
issued and outstanding -- pro forma as
adjusted(2)..................................... 5 18 22
Additional paid in capital......................... 5,616 5,608 30,991
Retained earnings.................................. 2,580 2,580 2,580
Deferred compensation.............................. (283) (283) (283)
Stockholders' notes receivable..................... (163) (163) (163)
------ ------ -------
Total stockholders' equity......................... 7,760 7,760 33,147
------ ------ -------
Total capitalization....................... $7,760 $7,760 $33,147
====== ====== =======
</TABLE>
- -------------------------
(1) Reflects our reincorporation in Delaware in March 1999.
(2) Excludes 1,300,000 shares of common stock reserved for issuance under our
1998 Stock Incentive Plan and 1,000,000 shares of common stock reserved for
issuance under our 1999 Stock Incentive Plan. See "Description of Capital
Stock -- Authorized and Outstanding Capital Stock" and Note 5 to
Consolidated Financial Statements.
15
<PAGE> 20
DILUTION
The pro forma net tangible book value of PLX at December 31, 1998, after
giving effect to the conversion of all outstanding shares of our preferred stock
into shares of common stock upon completion of this offering, was approximately
$7,759,798, or $0.42 per share. Pro forma net tangible book value per share is
equal to our total tangible assets less our total liabilities, divided by the
total number of shares of our common stock outstanding, after giving effect to
the conversion of all outstanding shares of our preferred stock into shares of
common stock. After giving effect to the sale of 3,300,000 shares of our common
stock offered by PLX hereby at an assumed initial public offering price of $8.50
per share and after deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us, our as adjusted pro forma net
tangible book value at December 31, 1998 would have been approximately
$33,146,298, or $1.53 per share. This represents an immediate increase in net
tangible book value of $1.11 per share to existing stockholders and an immediate
dilution of $6.97 per share to new investors purchasing shares of our common
stock in this offering. The following table illustrates the per share dilution
to the new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $8.50
Pro forma net tangible book value per share at December
31, 1998............................................... $0.42
Increase per share attributable to this offering.......... 1.11
As adjusted pro forma net tangible book value per share
after the offering........................................ 1.53
-----
Dilution per share to new investors in this offering........ $6.97
=====
</TABLE>
The following table summarizes on a pro forma basis, as of December 31,
1998, the total number of shares of our common stock purchased from PLX, the
total consideration paid and the average price per share paid by the existing
stockholders and by the new investors in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing
stockholders....... 18,365,551 84.8% $ 5,264,682 15.8% $0.29
New investors........ 3,300,000 15.2 28,050,000 84.2 8.50
---------- ----- ----------- -----
Total...... 21,665,551 100.0% $33,314,682 100.0%
========== ===== =========== =====
</TABLE>
The foregoing discussion and tables assume no exercise of any stock options
outstanding as of December 31, 1998. As of December 31, 1998, there were options
outstanding to purchase a total of 645,250 shares of common stock at a weighted
average exercise price of $4.91 per share and 154,750 shares reserved for future
grant under our 1998 Stock Option Plan. To the extent that any of these shares
are issued, there will be further dilution to new investors. See
"Capitalization," "Management -- Stock Option Plans" and Note 5 of Notes to
Consolidated Financial Statements.
16
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements of PLX, including the
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this prospectus. The
consolidated statement of operations data for the years ended December 31, 1996,
1997 and 1998 and consolidated balance sheet data at December 31, 1997 and 1998
have been derived from the consolidated financial statements, that have been
audited by Ernst & Young LLP, independent auditors, included elsewhere in this
prospectus. The consolidated statement of operations for the years ended
December 31, 1995 and the consolidated balance sheet data at December 31, 1995
and 1996 were derived from the consolidated financial statements that have been
audited by Ernst & Young LLP, independent auditors, which are not included in
this prospectus. The consolidated statement of operations data for the year
ended December 31, 1994 and the consolidated balance sheet data at December 31,
1994 have been derived from unaudited consolidated financial statements not
included in this prospectus. The unaudited consolidated financial statements
have been prepared by us on a basis consistent with our audited consolidated
financial statements and, in management's opinion, include all adjustments,
necessary for a fair presentation of such information.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996 1997 1998
------ ------ ------ ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Net revenues........................................ $4,043 $9,316 $9,813 $17,534 $26,276
Cost of revenues.................................... 1,805 5,511 4,526 6,976 9,671
------ ------ ------ ------- -------
Gross profit........................................ 2,238 3,805 5,287 10,558 16,605
Operating expenses:
Research and development.......................... 1,281 1,544 1,854 4,156 6,552
Selling, general and administrative............... 908 1,245 2,540 4,411 6,670
------ ------ ------ ------- -------
Total operating expenses.................. 2,189 2,789 4,394 8,567 13,222
------ ------ ------ ------- -------
Income from operations.............................. 49 1,016 893 1,991 3,383
Interest income (expense) and other, net............ 22 49 37 44 75
------ ------ ------ ------- -------
Income before income taxes.......................... 71 1,065 930 2,035 3,458
Provision for income taxes.......................... -- 16 39 111 692
------ ------ ------ ------- -------
Net income.......................................... $ 71 $1,049 $ 891 $ 1,924 $ 2,766
====== ====== ====== ======= =======
Historical basic net income per share............... $ 0.02 $ 0.36 $ 0.28 $ 0.58 $ 0.77
Pro forma basic net income per share(1)............. $ 0.16
Historical and pro forma diluted net income per
share(1).......................................... $ 0.00 $ 0.06 $ 0.05 $ 0.11 $ 0.15
Shares used to compute basic net income per share... 2,848 2,897 3,137 3,293 3,601
Shares used to compute pro forma basic net income
per share(1)...................................... 17,340
Shares used to compute historical and pro forma
diluted net income per share(1)................... 16,653 16,768 17,287 17,758 18,405
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------
1994 1995 1996 1997 1998
------ ------ ------ ------- -------
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents........................... $ 331 $1,444 $1,077 $ 2,701 $ 5,638
Working capital..................................... 763 1,682 2,257 3,591 6,116
Total assets........................................ 1,672 3,149 4,053 8,013 11,766
Long-term debt...................................... -- -- -- -- --
Total stockholders' equity.......................... 919 1,989 2,909 4,889 7,760
</TABLE>
- -------------------------
(1) Calculated on a pro forma basis to give effect to the conversion of all
outstanding shares of our preferred stock into common stock.
17
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
The following discussion should be read in conjunction with our Consolidated
Financial Statements and related notes thereto included elsewhere in this
prospectus.
OVERVIEW
PLX was founded in 1986, and since 1994 we have focused on development of
I/O interface semiconductors and related software and development tools that are
used in systems incorporating the PCI standard. In 1994 and 1995, a significant
portion of our revenues was from the sale of semiconductor devices that perform
similar functions as our current products, except they were based on a variety
of industry standards. Our revenues since 1996 have been derived predominantly
from the sale of semiconductor devices based on the PCI standard to a large
number of customers in a variety of applications including networking and
telecommunications, enterprise storage, imaging, industrial and other embedded
applications as well as in related adapter cards. We generate a small portion of
our revenues from sales of our software and development tools.
We utilize a "fabless" semiconductor business model whereby we purchase
packaged and tested semiconductor devices from independent manufacturing
foundries. This approach allows us to focus on defining, developing, and
marketing our products and eliminates the need for us to invest large amounts of
capital in manufacturing facilities and work-in-process inventory.
We rely on a combination of direct sales personnel and distributors and
manufacturers' representatives throughout the world to sell a significant
portion of our products. We pay manufacturers' representatives a commission on
sales while we sell products to distributors at a discount from the selling
price. We recognize revenue at the time of product shipment to electronic
equipment manufacturers. Revenues from sales to distributors that are made under
agreements which allow the return of products unsold by the distributor are not
recognized until the distributor ships the product to its customer. See "Risk
Factors -- A Large Portion of Our Revenues Is Derived From Sales to Third-Party
Distributors Who May Terminate Their Relationships with Us at Any Time."
Our gross margins have fluctuated in the past and are expected to fluctuate
in the future due to changes in product mix, the position of our products in
their respective life cycles, and specific product manufacturing costs.
The time period between initial customer evaluation and design completion
can range from six to twelve months or more. Furthermore, there is typically an
additional six to twelve month or greater period after design completion before
a customer commences volume production of equipment incorporating our products.
Due to such lengthy sales cycles, we may experience significant fluctuations in
new orders from month to month. Consequently, if anticipated sales and shipments
in any quarter do not occur when expected, expenses and inventory levels could
be disproportionately high, and our results for that quarter and potentially
future quarters would be materially and adversely affected.
18
<PAGE> 23
Our future success will depend on our ability to introduce new products.
However, due to the lengthy sales cycle and additional time for customers to
commence volume production, significant revenues from our new products typically
occur twelve to twenty-four months after product introduction. As a result,
revenues from newly introduced products have been a small percentage of revenues
in the year the product was introduced. See "Risk Factors -- Our Lengthy Sales
Cycle Can Result in Uncertainty and Delays with Regard to Our Expected
Revenues."
RESULTS OF OPERATIONS
The following table summarizes historical results of operations as a
percentage of net revenues for the periods shown.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
-----------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Net revenues........................................... 100.0% 100.0% 100.0%
Cost of revenues....................................... 46.1 39.8 36.8
----- ----- -----
Gross profit........................................... 53.9 60.2 63.2
Expenses:
Research and development............................. 18.9 23.7 24.9
Selling, general and administrative.................. 25.9 25.2 25.4
----- ----- -----
Total operating expenses..................... 44.8 48.9 50.3
----- ----- -----
Operating income....................................... 9.1 11.3 12.9
Interest income (expense) and other, net............... 0.4 0.3 0.3
----- ----- -----
Income before income taxes............................. 9.5 11.6 13.2
Provision for income taxes............................. 0.4 0.6 2.6
----- ----- -----
Net income............................................. 9.1% 11.0% 10.6%
===== ===== =====
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
Net Revenues. Revenues consist of product revenues generated principally by
sales of our semiconductor devices. Revenues for 1998 were $26.3 million, an
increase of $8.8 million or 50% from 1997. Revenues for 1997 were $17.5 million,
an increase of $7.7 million or 79% from $9.8 million for 1996. In each year the
increase was primarily due to higher volume shipments of PCI products.
Gross Profit. Gross profit represents net revenues less the cost of
revenues. Cost of revenues includes the cost of purchasing packaged
semiconductor devices from our independent foundries, our operating costs
associated with the procurement, storage, and shipment of products, as well as
royalty expenses paid on some of our products. Gross profit for 1998 was $16.6
million, an increase of $6.0 million or 57% from 1997. Gross profit for 1997 was
$10.6 million, an increase of $5.3 million or 100% from $5.3 million for 1996.
Gross profit as a percentage of revenues was 63.2% in 1998, 60.2% in 1997 and
53.9% in 1996. In each year, the increase in absolute dollars was primarily due
to higher revenues. Gross margin as a percentage of revenues increased in 1998
from 1997 and in 1997 from 1996 primarily due to lower product costs.
Research and Development Expenses. Research and development expenses
consist primarily of salaries and related costs of employees engaged in
research, design, and development activities. In addition, expenses for outside
engineering consultants and non-recurring engineering at our independent
foundries are included in research and
19
<PAGE> 24
development expenses. Research and development expenses for 1998 were $6.6
million, an increase of $2.4 million or 57% from 1997. Research and development
expenses for 1997 were $4.2 million, an increase of $2.3 million or 121% from
1996 expenses of $1.9 million. Research and development expenses as a percentage
of revenues were 24.9% in 1998, 23.7% in 1997 and 18.9% in 1996. In each year,
the increase in absolute dollars was primarily due to the addition of personnel
for the development of new products and the enhancement of existing products, as
well as payments to outside consultants where specific resources were needed in
the development process. The increase in research and development expenses as a
percentage of revenues reflects an increase in the number of new semiconductor
products being developed by us as well as an increase in the number of new
development tools and software being developed. We expect that research and
development expenses in absolute dollars will likely increase in future periods.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of employee related expenses,
professional fees, trade show and other promotional expenses, and sales
commissions to manufacturers' representatives. Selling, general and
administrative expenses for 1998 were $6.7 million, an increase of $2.3 million
or 52% from 1997. Selling, general and administrative expenses for 1997 were
$4.4 million, an increase of $1.9 million or 76% from $2.5 million in 1996.
Selling, general and administration expenses as a percentage of revenues were
25.4% in 1998, 25.2% in 1997 and 25.9% in 1996. In each year, the increase in
absolute dollars principally reflected higher personnel related costs resulting
from an increase in sales and marketing personnel as well as increased sales
commissions from higher product revenues. We expect that selling, general and
administrative expenses in absolute dollars will likely increase in future
periods, but will generally remain constant as a percentage of revenues.
Deferred Compensation. In connection with the grant of restricted stock and
options to our employees during 1997 and 1998, we recorded aggregate deferred
compensation of $361,300, representing the difference between the deemed value
of our common stock for accounting purposes and the restricted stock purchase
price or stock option exercise price at the date of grant. The amount of
deferred compensation is presented as a reduction of stockholders' equity and
amortized ratably over the vesting period of the applicable stock grants.
Amortization of deferred compensation recorded in 1998 was $78,681. We currently
expect to record amortization of deferred compensation related to these stock
grants of approximately $20,000 per quarter through December 31, 2001.
Interest Income (Expense) and Other, Net. Interest and other income, net
reflects interest earned on average cash, cash equivalents and short-term
investment balances, less interest on our bank credit line. Interest and other
income, net for 1998 was $75,163. Interest and other income, net for 1997 was
$43,898, an increase of $6,883 or 19% from $37,015 in 1996. In each year, the
increase was primarily due to interest earned on higher levels of short-term
investments and cash balances.
Provision for Income Taxes. Income tax expenses as a percentage of pretax
income were 20%, 5% and 4%, for the years ended December 31, 1998, 1997 and
1996, respectively. Our effective tax rate in 1998 differs from the applicable
statutory rate primarily due to the benefit of research and development tax
credits and the realization of deferred tax assets. Our tax rates in 1997 and
1996 differ from the applicable statutory rate primarily due to the benefit of
net operating loss and research and development tax credit carryforwards. We
expect that the effective tax rate in future periods will increase from
historical rates.
20
<PAGE> 25
The valuation allowance for deferred tax assets decreased by $407,000 and
$639,000 in 1998 and 1997, respectively. Decreases in the valuation allowance
were based upon taxable income earned in 1998 and 1997, as well as management's
expectations of future taxable income. Although realization is not assured, we
believe we will generate future taxable income sufficient to realize the benefit
of the net deferred tax assets recognized.
21
<PAGE> 26
QUARTERLY RESULTS OF OPERATIONS
The following table presents selected quarterly financial information for
each quarter of 1997 and 1998. This information is unaudited but, in the opinion
of our management, reflects all adjustments (consisting only of normal recurring
adjustments) that we consider necessary for a fair presentation of this
information in accordance with generally accepted accounting principles. These
quarterly results are not necessarily indicative of future results of
operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(IN THOUSANDS)
---------------------------------------------------------------------------------
MAR 31, JUNE 30, SEPT 30, DEC 31, MAR 31, JUNE 30, SEPT 30, DEC 31,
1997 1997 1997 1997 1998 1998 1998 1998
------- -------- -------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............................ $3,890 $3,605 $4,805 $5,234 $5,413 $5,626 $7,385 $7,852
Cost of revenues........................ 1,829 1,616 1,639 1,892 2,008 2,108 2,622 2,933
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............................ 2,061 1,989 3,166 3,342 3,405 3,518 4,763 4,919
Expenses:
Research and development.............. 756 841 1,003 1,556 1,798 1,600 1,531 1,623
Selling, general and administrative... 836 983 1,168 1,424 1,448 1,568 1,686 1,968
------ ------ ------ ------ ------ ------ ------ ------
Total operating expenses................ 1,592 1,824 2,171 2,980 3,246 3,168 3,217 3,591
------ ------ ------ ------ ------ ------ ------ ------
Operating income........................ 469 165 995 362 159 350 1,546 1,328
Interest income (expense) and other
net................................... 10 11 9 14 14 14 19 28
------ ------ ------ ------ ------ ------ ------ ------
Income before income taxes.............. 479 176 1,004 376 173 364 1,565 1,356
Provision for (benefit from) income
taxes................................. 71 27 149 (136) 35 73 313 271
------ ------ ------ ------ ------ ------ ------ ------
Net income.............................. $ 408 $ 149 $ 855 $ 512 $ 138 $ 291 $1,252 $1,085
====== ====== ====== ====== ====== ====== ====== ======
Historical basic net income per share... $ 0.13 $ 0.05 $ 0.26 $ 0.15 $ 0.04 $ 0.08 $ 0.34 $ 0.28
Pro forma basic net income per share.... $ 0.01 $ 0.02 $ 0.07 $ 0.06
Historical and pro forma diluted net
income per share...................... $ 0.02 $ 0.01 $ 0.05 $ 0.03 $ 0.01 $ 0.02 $ 0.07 $ 0.06
Shares used in computing historical
basic net income per share............ 3,174 3,283 3,335 3,379 3,441 3,508 3,638 3,819
Shares used in computing pro forma basic
net income per share.................. 17,180 17,247 17,377 17,558
Shares used in computing historical and
pro forma diluted net income per
share................................. 17,385 17,505 17,863 18,280 18,420 18,420 18,405 18,375
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET REVENUES THREE MONTHS ENDED
---------------------------------------------------------------------------------
MAR 31, JUNE 30, SEPT 30, DEC 31, MAR 31, JUNE 30, SEPT 30, DEC 31,
1997 1997 1997 1997 1998 1998 1998 1998
------- -------- -------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues......................... 47.0 44.8 34.1 36.1 37.1 37.5 35.5 37.3
----- ----- ----- ----- ----- ----- ----- -----
Gross profit............................. 53.0 55.2 65.9 63.9 62.9 62.5 64.5 62.7
Expenses:
Research and development............... 19.4 23.3 20.9 29.7 33.2 28.4 20.7 20.7
Selling, general and administrative.... 21.5 27.3 24.4 27.1 26.8 27.9 22.8 25.1
----- ----- ----- ----- ----- ----- ----- -----
Total operating expenses....... 40.9 50.6 45.3 56.8 60.0 56.3 43.5 45.8
----- ----- ----- ----- ----- ----- ----- -----
Operating income......................... 12.1 4.6 20.6 7.1 2.9 6.2 21.0 16.9
Interest income (expense) and other
income, net............................ 0.3 0.3 0.2 0.3 0.3 0.2 0.3 0.4
----- ----- ----- ----- ----- ----- ----- -----
Income before income taxes............... 12.4 4.9 20.8 7.4 3.2 6.4 21.3 17.3
Provision for income taxes............... 1.8 0.7 3.1 (2.6) 0.6 1.3 4.2 3.5
----- ----- ----- ----- ----- ----- ----- -----
Net income............................... 10.6% 4.2% 17.7% 10.0% 2.6% 5.1% 17.1% 13.8%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
22
<PAGE> 27
Net Revenues. Revenues increased each quarter from the second quarter of
1997 through the fourth quarter of 1998 as a result of higher unit shipments of
our PCI products. The decrease in net revenues from $3.9 million in the first
quarter of 1997 to $3.6 in million in the second quarter of 1997 was primarily
due to a reduction of unit shipments.
Gross Profit. Gross profit increases as a percentage of net revenues to
65.9% in the third quarter of 1997 and to 64.5% in the third quarter of 1998
were the result of lower product costs. The gross profit percentage in the
fourth quarter of 1998 declined slightly to 62.7%, due primarily to changes in
product mix.
Research and Development Expenses. Research and development expenses
increased in absolute dollars in each quarter from the first quarter of 1997
through the first quarter of 1998 primarily due to a significant increase in the
number of new product development programs including new software and
development tools. Research and development expenses as a percentage of net
revenues increased in each quarter from the first quarter of 1997 through the
first quarter of 1998, except for the third quarter of 1997 when net revenues
grew faster than research and development expenditures. These increases were due
to the increased number of new product development programs relative to product
shipments. Research and development expenses as a percentage of net revenues
declined each quarter from the second quarter of 1998 through the fourth quarter
of 1998. This reduction was due primarily to reductions in outside consulting
and non-recurring engineering expenses, which related to the timing and
completion of product development projects, and increased product shipments.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased in absolute dollars through the fourth quarter
of 1998 as we expanded our infrastructure to accommodate higher unit shipments
and expanding operations. In addition, commissions to manufacturers'
representatives have increased with revenues and marketing expenses have
increased due to new product introductions.
Fluctuations in Quarterly Results. Our quarterly results of operations have
fluctuated significantly in the past and are expected to fluctuate significantly
in the future based on a number of factors, many of which are not in our
control. We believe period to period comparisons are not necessarily meaningful
and should not be relied upon as indicative of future results. See "Risk
Factors -- Our Operating Results May Fluctuate Significantly Due to Factors
Which Are Not Within Our Control."
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations through a combination of
private sales of equity securities and cash generated by operations. At December
31, 1998, we had $6.1 million in working capital and $5.6 million in cash and
cash equivalents. Our operating activities generated cash of $4.0 million, $2.6
million and $307,688 in 1998, 1997 and 1996, respectively. Cash provided by
operating activities in 1998, 1997, and 1996 was primarily attributable to net
income adjusted for depreciation. In addition, cash provided by operating
activities in 1998 was also due to a decrease in our accounts receivable
balance. The decrease in accounts receivable was primarily due to the fact that,
as compared with the fourth quarter of 1997, there were more shipments of
products earlier in the fourth quarter of 1998, which enabled us to collect more
of our 1998 accounts receivable prior to year end.
23
<PAGE> 28
Our investing activities used cash of $1.1 million in 1998 and $1.0 million
and $602,850 in 1997 and 1996, respectively. These investing activities were
primarily for the purchase of capital equipment. Cash provided by financing
activities was approximately $26,000 in 1998 and $56,000 in 1997. Cash used in
financing activities was approximately $72,000 in 1996. The main source of cash
from financing activities in 1998 was the repayment of notes receivable from
stockholders. In 1996, cash was used to repay outstanding notes payable.
In February 1999, we signed a commitment letter with Comerica Bank for a
$1.5 million line of credit. Currently, this line of credit has not been
finalized and there are no amounts outstanding.
As of December 31, 1998, we had no material commitments outstanding.
We believe that the net proceeds of this offering, together with cash
generated from our operations and funds available under our credit facilities
will be sufficient to meet our capital requirements for at least the next twelve
months. Our future capital requirements will depend on many factors, including
the inventory levels we maintain, the level of investment we make in new
technologies and improvements to existing technologies, the levels of monthly
expenses required to launch new products. To the extent that the funds generated
by this offering, together with existing resources and future earnings, are
insufficient to fund our future activities, we may need to raise additional
funds through public or private financing. Additional funds may not be available
or, if available, we may not be able to obtain them on terms favorable to us and
our stockholders. See "Use of Proceeds."
YEAR 2000 READINESS DISCLOSURE
State of Readiness. We utilize a number of computer software programs and
operating systems across our entire organization, including applications used in
financial business systems and various administrative functions. To the extent
that our software applications contain source code that is unable to
appropriately interpret the upcoming Year 2000 and beyond, some level of
modification or replacement of such applications will be necessary. We believe
that our internal Year 2000 issues are limited to information technology, or IT
systems such as software programs and computer operating systems, and we are
working closely with the suppliers of such systems to ensure that all systems
are Year 2000 compliant. Employing a team made up of internal personnel, we have
completed our identification of IT systems that are not yet Year 2000 compliant
and have commenced modification or replacement of non-compliant systems as
necessary. We have also completed our assessment of the Year 2000 compliance
issues presented by our semiconductor hardware and software products. We
anticipate that modification or replacement and testing of these systems will be
completed by September 30, 1999. None of our hardware or software products has
Year 2000 issues that require product modification or replacement.
We are highly dependent on a few semiconductor foundry companies to produce
the majority of our products. To the extent that Year 2000 issues effect these
suppliers' ability to deliver product, we must review the suppliers plans for
Year 2000 compliance and satisfy ourselves that they have made the necessary
modifications to or replacements of their affected systems. We have requested
these plans and will evaluate them as they are received. We anticipate that this
evaluation will be completed by September 30, 1999. We will rely primarily on
the suppliers' commitments to accomplish this task but have no contractual
commitment from the suppliers regarding Year 2000 issues.
24
<PAGE> 29
Costs of Addressing Year 2000 Issues. Given the information known at this
time about our non-compliant systems, coupled with ongoing, normal
course-of-business efforts to upgrade or replace critical systems, as necessary,
we do not expect Year 2000 compliance costs to have any material adverse impact
on our business. We estimate that total costs for the Year 2000 compliance
assessment and remediation will not exceed $50,000. The costs of this assessment
and remediation will be paid out of general and administrative expenses.
Risks of Year 2000 Issues. In light of our assessment and remediation
efforts to date, and the planned, normal course-of-business upgrades, we believe
that any residual Year 2000 risk is limited to non-critical business
applications and support hardware. No assurance can be given, however, that all
of our systems will be Year 2000 compliant or that compliance will not have a
material adverse effect on our business. We also do not have any assurance that
the manufacturers who supply semiconductors for us will be Year 2000 compliant
with their internal systems; a reduction in the supply of product from these
suppliers could have a material adverse effect on our business.
Contingency Plans. We believe that, if our suppliers are not Year 2000
compliant, the reasonably likely worst case would be that we would be unable to
receive products from them on a timely basis which would disrupt our shipments
to customers and could materially adversely affect our business. In addition, if
our IT systems are not Year 2000 compliant, we may be unable to process customer
orders, which could also lead to shipment delays. We plan to develop a
contingency plan for all operations to address the most reasonably likely worst
case scenarios regarding Year 2000 compliance. We expect this contingency plan
to be completed by June 30, 1999.
FINANCIAL MARKET RISK
Our principal financial market risk relates to the interest rates
associated with our available-for-sale securities. At December 31, 1998, our
market risk related to these investments was immaterial and all such investments
had original maturities not exceeding 90 days.
25
<PAGE> 30
BUSINESS
The following discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
PLX develops and supplies semiconductor devices and software that
accelerate and manage the transfer of data in high-performance embedded systems.
An embedded system is a computer that performs specific tasks and is
incorporated into another product. Our products are based on widely accepted
industry standards such as the Peripheral Component Interconnect, or PCI,
standard. The PLX solution consists of three related types of products:
semiconductor devices, software development kits and hardware design kits. Our
semiconductor devices simplify the development of data transfer circuits in
embedded systems and are compatible with microprocessors such as IBM's PowerPC,
Motorola's PowerPC, Intel's i960, IDT's MIPs and Hitachi's SH. Our software
development kits and hardware design kits promote sales of our semiconductor
devices by lowering customers' development costs and by accelerating their
ability to bring new products to market.
INDUSTRY BACKGROUND
Embedded systems are found in many common products and offer varying levels
of performance depending on each product's requirements. These products range
from low performance devices such as electronic toys and microwave ovens to very
complex, high-performance electronic equipment such as network routers and
switches. High-performance embedded systems offer increased data processing
capabilities and typically utilize one or more 32-bit or 64-bit microprocessors,
fast memories and peripherals, and sophisticated operating systems or control
code.
Demand for high-performance embedded systems, which are designed to
transmit, store and process information rapidly, has dramatically increased due
to the:
- growth of the Internet,
- deployment of high-speed networking and
- proliferation of multimedia.
Markets for electronic equipment that rely on high-performance embedded
systems include the following:
Networking and Telecommunications. Networking and telecommunications
applications include digital telephony, remote access servers, routers,
network switches and cable modem equipment. This market segment is growing
rapidly due to the rise
26
<PAGE> 31
of the Internet and the proliferation of high bandwidth communication
technologies such as Fast Ethernet, Gigabit Ethernet, Asynchronous Transfer
Mode, or ATM, cable modem, and Digital Subscriber Line, or xDSL.
Enterprise Storage. Enterprise storage applications include disk storage
subsystems, automated tape libraries and file servers. The growing use of
multimedia applications and storage networks is driving corporate demand
for increased data storage capacity.
Imaging. Imaging applications include printers, copiers, medical
instrumentation and video and graphics equipment. The demand for better
image quality and faster performance, as well as connection of these
applications to high-speed networks, have increased their data processing
requirements.
Industrial. Industrial applications include a wide range of process control
computers and factory automation equipment. These products have high data
transfer rate requirements, are used to monitor and control complex
processes in real-time and are being increasingly attached to networks.
Manufacturers of products that rely on high-performance embedded systems
seek to maximize the performance and minimize the cost of their increasingly
complex products. In addition, these manufacturers must develop and bring new
products to market quickly to keep pace with technological advancements.
THE I/O SUBSYSTEM
A typical embedded system can be described in terms of four primary
functions: the host microprocessor, the memory, the peripherals and the
input/output, or I/O, subsystem. The host microprocessor is the primary control
center for the system. The memory acts as a storage area for instructions to be
executed and data to be processed. The peripherals enable connections between
the system and other external devices such as network components, printers and
storage systems. The I/O subsystem is the circuitry and software that connects
these three other functions and allows for the transfer of instructions and data
among these functions. The I/O subsystem includes the system bus which is a
physical connection between these different functions. High-performance
electronic equipment can contain multiple embedded systems, each requiring a
separate I/O subsystem. The following diagram illustrates the major components
of a typical embedded system:
[Diagram illustrating the major components of a typical embedded system.]
27
<PAGE> 32
To enable increased performance and functionality from computer systems,
semiconductor suppliers have historically focused on improving the operation of
peripherals, microprocessors and memories. The I/O subsystem must also improve
to keep pace with these improvements by transferring more information at faster
speeds.
As data transfer requirements for the I/O subsystem have increased, so has
the complexity of its interface components such as processors, logic and related
software. Until recently, most embedded systems used simple I/O subsystems that
contained no processors, limited interface logic and rudimentary software, if
any. Complex I/O subsystem components such as processors, elaborate control
logic and advanced software were costly, and therefore their use was confined to
very high-end equipment such as mainframe computers. Furthermore, the lack of
widely accepted I/O standards impeded the use of complex I/O subsystems in other
than high-end applications. However, advances in semiconductor technology
combined with the widespread adoption of standards in embedded systems have
enabled the development of highly integrated semiconductor devices that can
better manage I/O subsystem performance at lower cost.
PENETRATION OF I/O STANDARDS IN EMBEDDED SYSTEMS
Until recently embedded systems manufacturers relied on a wide variety of
proprietary and a fragmented set of industry standard I/O architectures. For
example, many networking, imaging, storage and industrial applications employed
proprietary architectures to meet their specific performance and cost
requirements. A mix of standard buses such as VMEbus, Multibus and ISA was used
in some industrial, telecommunications and military applications. Embedded
system software was even more fragmented with many proprietary and application
specific software architectures in use. While embedded developers could take
advantage of many standard microprocessor, memory and peripheral components
supplied by external vendors, the lack of acceptable I/O standards forced many
to develop custom I/O subsystems internally, placing a heavy demand on
development resources.
The deployment of the PCI standard was one of the catalysts for the
widespread adoption of I/O standards in embedded systems. In the early 1990s, PC
manufacturers developed PCI, a new standard hardware architecture to connect the
major components of a PC at high speed. It offered up to a one hundred times
improvement in I/O data transfer rates over the previous architectures. By the
mid-1990s, PCI became the most widely used bus architecture in the PC market.
Consequently, most suppliers of peripheral semiconductor components used in PCs
adopted PCI as the standard system interface. PCI is now emerging as the
standard I/O architecture for many high-performance embedded systems because it
allows the use of low cost and state-of-the-art peripheral semiconductor
components developed for the PC market and provides a foundation for embedded
system interoperability. PCI also offers equivalent or superior performance to
the in-house developed standards of many embedded equipment suppliers.
Furthermore, the use of PCI enables faster time to market, lower development
cost and the ability to quickly integrate new I/O components.
Although the PCI standard has resolved many development issues relating to
I/O hardware architectures, software remains a challenge. The lack of standards
for I/O control software and the wide use of proprietary operating systems place
a significant demand on development resources. Consequently, embedded developers
are increasingly adopting standard operating systems with well-defined I/O
structures as opposed to developing their own software internally. Examples
include Windows NT, Windows CE
28
<PAGE> 33
and standard real time operating systems from companies such as Wind River and
Integrated Systems. In a related development, a consortium of industry leaders
approved a new specification, Intelligent I/O, or I(2)O, in 1997 to address
software compatibility and performance issues. I(2)O architecture enables more
efficient use of the PCI bus and can result in higher data transfer rates and
thus increased embedded system performance. Instead of designing proprietary
software, developers can use I(2)O architecture as a standard software
architecture that reduces software development time and costs. Furthermore, by
using I(2)O architecture, embedded system suppliers can more easily integrate
third party system components, thereby reducing development costs and improving
time-to-market.
NEED FOR STANDARD I/O PRODUCTS AND COMPREHENSIVE I/O SOLUTIONS
Even with standard I/O specifications, design teams must still create the
circuitry and related software that implements these specifications. Designers
must also update their I/O subsystems to include frequent improvements in these
specifications.
Instead of developing all the hardware and software technology internally,
embedded systems developers seek to focus their scarce engineering resources on
the proprietary features of their products. By using standard semiconductor
devices in the I/O subsystem instead of using custom-designed devices they are
able to implement the basic framework of the system more easily and thereby
reduce the I/O subsystem design effort, providing faster time-to-market and
lower development cost. Standard products allow the design teams to concentrate
their efforts on differentiating hardware and software features. In addition to
standard semiconductor devices, embedded designers can benefit from several
other design elements, such as data control software, hardware design kits and
third-party development tools to complete their development work in a timely
manner. These additional elements simplify development and improve time to
market. They provide the design team with proven hardware and software design
examples and the tools to adapt these examples to the embedded designers' needs.
Due to the availability and adoption of I/O standards by embedded
developers, there is now a large demand for I/O subsystem components based on
these standards.
THE PLX SOLUTION
PLX develops and supplies semiconductor devices and software that
accelerate and manage the transfer of data in high-performance embedded systems.
Our solution consists of three related products:
- semiconductor devices,
- software development kits which assist in developing systems that
incorporate our semiconductor devices, and
- hardware design kits that allow development of a system using our
semiconductor devices and software development kits.
Development tools provided by third parties support these three related
products. These development tools are used for the design of other parts of the
embedded system but also work with our products.
29
<PAGE> 34
Our products are designed for use in a variety of high-performance embedded
applications including networking and telecommunications, enterprise storage,
imaging and industrial. We focus on I/O accelerators and I/O processors, which
are highly integrated, cost-effective semiconductor devices that optimize the
flow of data and simplify the development of high-performance I/O subsystems.
Our software development kits and hardware design kits promote sales of our
semiconductor devices by lowering customers' development costs and allowing them
to bring new products to market more quickly.
PLX products provide I/O connectivity solutions for PCI and I(2)O and other
industry standards. As new I/O standards evolve, we expect to support them where
appropriate. More than 500 electronic equipment manufacturers use PLX
semiconductor devices in a wide variety of embedded systems applications.
Customers currently shipping systems that incorporate our products include 3Com,
Cisco Systems, Compaq Computer, Hewlett-Packard, IBM, Lucent Technologies,
Nortel Networks, Siemens and Tektronix.
STRATEGY
Our objective is to continue to expand our market position as a developer
and supplier of I/O connectivity solutions for high-performance embedded
systems. Key elements of our strategy include the following:
Focus on High-Growth Markets. We focus on high-growth embedded systems
markets including networking and telecommunications, enterprise storage, imaging
and industrial. Within these markets, there are many highly differentiated
applications with different design criteria such as product function,
performance, cost, power consumption, software, size limitations and design
support. The requirements of many of these differentiated applications are
addressed by our products, and we target those applications where we believe we
can attain a leadership position.
Deliver Comprehensive Solutions. Our products provide embedded systems
developers with a comprehensive, proven development environment to simplify I/O
subsystem design, enhance performance, reduce development costs and accelerate
time-to-market. This solution consists of semiconductor devices, software
development kits and hardware design kits. These design elements are supported
by development tools provided by third parties. For example, our PCI 9080 I/O
accelerator is supported by two software development kits and five hardware
design kits which support microprocessors from Hitachi, IBM, IDT, Intel, and
Motorola.
Extend I/O Subsystem Technology. We offer our customers highly integrated
semiconductor devices and related software that incorporate many of the latest
advances in I/O technology. Our semiconductor devices and software are designed
to enable quick adoption of new I/O technologies and enhancements to existing
I/O standards. We seek to integrate additional I/O-related functions into our
semiconductor devices to provide our customers with increasing functionality at
the same or lower costs. For example, we are developing our IOP 480, a device
that will integrate IBM's PowerPC core with our PCI technology. We employ a team
of engineers with considerable expertise in embedded systems architectures,
product definition, semiconductor and software design and engineering to
maintain our I/O subsystem technology advantages.
Drive I/O Subsystem Standards for Embedded Applications. We believe that
our understanding of I/O technology trends and market requirements allows us to
bring to
30
<PAGE> 35
market more quickly new products that support the latest I/O technologies.
Through our participation in key industry groups responsible for standards such
as the PCI Special Interest Group, the PCI Industrial Computer Manufacturers'
Group and the I(2)O Special Interest Group, we have taken an active role in
defining new I/O standards.
Strengthen and Expand Industry Relationships. We work with industry leaders
in developing software development tools and marketing programs that promote the
use of each company's products. Key microprocessor partners include Hitachi,
IBM, IDT, Intel and Motorola, and key software partners include Integrated
Systems, Microsoft, Synopsys and Wind River. As a result of these relationships,
we enable embedded systems designers to choose the best products for their
particular applications while still employing our product as the core of their
I/O subsystem design.
CUSTOMERS
We supply our products to customers for a wide variety of high-performance
embedded systems applications including networking and telecommunications,
enterprise storage, imaging and industrial. We also have sales in other markets
such as the personal computer, server and consumer markets. The typical product
life cycle of a high performance embedded system is one to two years or more of
product development and initial marketing activity followed by two to five years
or more of volume production, assuming the product is successful in the market.
The embedded system design team typically selects the sole-source hardware and
software components early in the design cycle. Generally, the embedded system
will incorporate these same components throughout its product life because
changes require an expensive re-engineering effort. Therefore, when our products
are designed into an embedded system, they are likely to be used in that system
throughout its two to five year or more production life.
Our products are standard semiconductor devices that may be incorporated
into equipment used in several of our target markets. More than 500 electronic
equipment manufacturers incorporate our semiconductor devices in their products.
The following table
31
<PAGE> 36
lists representative customers that purchased directly or through distributors
more than $100,000 of our products in 1998.
<TABLE>
<CAPTION>
NETWORKING AND
TELECOMMUNICATIONS ENTERPRISE STORAGE
- ----------------------------- -----------------------------
<S> <C>
3Com Compaq Computer
Artesyn Technologies IBM
Ascend Communications Network Appliance
Cabletron Systems IMAGING
Cisco Systems -----------------------------
Dialogic Hewlett-Packard
Digi International Kofax Image Products
Eicon Technology Optibase
Emulex Pinnacle Systems
Fore Systems Scitex
Gilat Satellite Networks Tektronix
IBM INDUSTRIAL
Intel -----------------------------
Interphase Siemens
Lucent Technologies Tektronix
Nortel Networks
Performance Technology
SDL
Shiva
</TABLE>
PRODUCTS
Our products consist of semiconductor devices, software development kits
and hardware design kits. Development tools provided by third parties support
these three design elements. Our semiconductor device products include I/O
accelerators and our announced I/O processor, which are designed to simplify the
development of high-performance I/O subsystems. The sales of these semiconductor
devices account for a substantial majority of our revenues. We generate a small
portion of our revenues from sales of our software and hardware design kits. The
other layers of our solution promote sales of our semiconductor devices by
lowering customers' development costs and allowing them to bring new products to
market more quickly.
I/O Accelerators and I/O Processors. Our I/O accelerators are semiconductor
devices that accelerate movement of data across a PCI bus and between one or
more devices or subsystems that need to communicate across the PCI bus. These
products incorporate the Data Pipe Architecture technology, a set of circuits
and features that enable efficient flow of data within systems with minimal
supervision from the system processor. Our I/O accelerators address a range of
applications and provide flexible interfaces that allow them to connect to a
wide variety of semiconductor devices, including processors such as IBM's and
Motorola's PowerPC, Intel's i960, Hitachi's SH, IDT's MIPs, and Motorola's 68K
series. Customers also use these semiconductor devices in connection with
digital signal processors, or DSPs, which are specialized microprocessors, from
Texas Instruments, Analog Devices and others. The I/O accelerators can be
connected with a wide range of peripheral devices, including LAN, WAN, disk
control and graphics.
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<PAGE> 37
We have announced, but are not yet shipping, the IOP 480, our first I/O
processor, which combines the features of our I/O accelerator devices with a
microprocessor core and memory controller that can connect to a variety of
memory types and sizes. An I/O processor is a microprocessor designed to manage
I/O tasks and move data efficiently. The I/O processor will enhance overall
system performance by maximizing data flow and off-loading more I/O tasks from
the host processor, compared with an I/O accelerator. It will integrate, in one
cost and space-saving device, many of the circuit elements required for I/O
management. By combining several functions into one semiconductor device, the
IOP 480 will enable a more compact, power-efficient design, compared with
designs that use several semiconductor devices to achieve these functions.
Software Development Kits. Our software development kits are designed to
simplify and accelerate the development of systems that incorporate our
semiconductor devices. For PCI technology we offer PCI SDK software, which
shortens the time needed to develop the software used to transfer data through a
PCI bus. It includes a programming interface that enables developers to execute
complex transactions with simple commands. This programming interface allows
customers to migrate their designs, with the same software interface, from our
existing 32 bit I/O accelerators to our 64 bit I/O accelerators and I/O
processor products. This common interface allows customers to preserve their
software investment even as their designs evolve in complexity and as new I/O
architectures are deployed. The PCI SDK is applicable to both proprietary and
standard operating systems. Our software development kit for I(2)O Architecture
simplifies the development of software for I(2)O architecture-based technology.
Hardware Design Kits. We offer hardware design kits that support the
development of systems incorporating PLX semiconductor devices. We call our
hardware design kits "reference design kits." Designers use the hardware design
kits to evaluate our semiconductor devices and to simplify and accelerate
product development. Each hardware design kit includes a development circuit
board that designers can use to evaluate the PLX products and also design their
own system. These hardware design kits also include technical drawings,
documentation and other design assistance tools. Current hardware design kits
support IBM's PowerPC processors, Motorola's PowerQuicc processors, Intel's i960
processors, IDT's MIPs processors and Hitachi's SH processors.
To offer additional design support, we work with third party companies that
provide development tools for our customers. Although we receive no revenues
from these development tools, they promote sales of our semiconductor devices
because these tools often make it easier to develop embedded systems
incorporating our products. Examples include software development tools from
Diab Data, IBM, Integrated Systems, Microsoft, Netware, and Wind River and
software modeling tools from Synopsys.
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<PAGE> 38
Our principal product offerings and functions include the following:
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------
CATEGORY PRODUCT DESCRIPTION
- -----------------------------------------------------------------------------
SEMICONDUCTOR DEVICES
- -----------------------------------------------------------------------------
32-bit Target I/O PCI 9050 - Enables connection of 8-,
Accelerators PCI 9052 16- and 32-bit peripherals and
personal computer adapters
to PCI.
- -----------------------------------------------------------------------------
32-bit Master I/O PCI 9060 - Provides the flexibility to
Accelerators PCI 9060ES connect with a wide range of
PCI 9060SD processors, peripherals and
PCI 9080 memory including Motorola
PCI 9054 PowerQuicc, Intel i960, IBM
PowerPC, Hitachi SH, IDT
MIPs and Texas Instruments
DSPs.
- -----------------------------------------------------------------------------
32-bit I/O IOP 480 - Incorporates PowerPC
Processors microprocessor and memory
(Announced, in controller in addition to a
development) 32- bit master I/O
accelerator.
- -----------------------------------------------------------------------------
64-bit/66 MHz I/O PCI 9610 - Provides the flexibility to
Accelerators connect with a wide range of
(Announced, in microprocessors, peripherals
development) and memory including
Motorola PowerQuicc,
PowerQuiccII, Intel i960,
IBM PowerPC, Hitachi SH, IDT
MIPs and Texas Instruments
DSPs.
- -----------------------------------------------------------------------------
SOFTWARE DEVELOPMENT KITS
- -----------------------------------------------------------------------------
PCI Software PCI SDK - Provides API library for
accelerating design of data
transport software.
- Includes development and
debugging utilities, sample
firmware and drivers.
- -----------------------------------------------------------------------------
I(2)O Software SDK for I(2)O - Enables rapid development of
Architecture I(2)O software.
- -----------------------------------------------------------------------------
HARDWARE DESIGN KITS
- -----------------------------------------------------------------------------
Reference Design Eight kits supporting a - Include evaluation boards,
Kits range of products PCI SDK software,
documentation and schematics
to assist system
development.
- -----------------------------------------------------------------------------
</TABLE>
34
<PAGE> 39
TECHNOLOGY
We believe that supplying high-performance I/O connectivity solutions for
I/O subsystems requires expertise in four areas:
- semiconductor design,
- software technology,
- system design, and
- industry standards.
Semiconductor Design. Our engineers have substantial expertise in
semiconductor design and have developed a comprehensive library of complex
functional blocks for use in semiconductor devices for I/O connectivity. As a
result of this expertise, we offer both innovative architectures and high levels
of functionality. For example, our proprietary Data Pipe Architecture technology
allows the system developer a high degree of control over the PCI bus in order
to address specific design needs. In high-performance systems, the Data Pipe
Architecture technology enables data throughput that is several times faster
than typical approaches. In addition, our semiconductor devices and software are
designed in a reusable manner that allows us to quickly revise our products to
incorporate new I/O technologies and enhancements to existing I/O standards. We
continue to integrate more functionality in our semiconductor devices to reduce
cost, improve performance, reduce size and simplify the customer's design
effort.
Software Technology. We devote substantial engineering resources to the
development of software technology used to assist the system developer in
debugging hardware and creating data control software. The quality and
availability of these tools are key differentiating factors between PLX and
competing alternatives. We are now shipping, as part of our software development
kits, our third generation PCI debugger, PLXMon 98. We continue to enhance and
expand our software development kits, which contain a set of programming
interfaces that simplify the development of software. Our software development
kit for I(2)O Architecture was the first commercially available private platform
I(2)O software development kit. As an example of our software advantages, we
licensed our I(2)O software technology to Integrated Systems, a leading supplier
of embedded operating systems, for use in Integrated System's I(2)O products.
Our software expertise provides us with valuable insights into our customers'
software development issues, which aids the definition and development of future
semiconductor devices.
System Design. We employ a team of system level design engineers that are
dedicated to the development of hardware design kits. These kits are
high-performance adapters and embedded systems that customers can use to assist
development of their products. Each of these hardware design kits is a system or
adapter similar in complexity to those built by our customers. The system design
experience provides us valuable insights which we can use to improve future
semiconductor device and software products.
Industry Standards. Through our participation in the key industry groups
responsible for standards such as the PCI Special Interest Group, the I(2)O
Special Interest Group and the PCI Industrial Computer Manufacturers' Group, we
take an active role in defining new I/O standards. In addition, we are closely
monitoring new I/O technologies to determine their applicability to our embedded
market customer base.
35
<PAGE> 40
The following diagram displays a typical embedded system incorporating PLX
I/O Accelerators, I/O Processors and Data Control Software. The I/O subsystem
depicted below includes buses, semiconductor devices and software for moving
data through the system. The example shows a host connected to three types of
peripherals which have different performance levels and functions. The host
software and three sets of peripheral software shown on the right run on the
corresponding hardware on the left.
[Diagram showing a typical embedded system incorporating PLX I/O accelerators,
I/O processors and data control software.]
COMPETITION
Competition in the semiconductor industry is intense. If our main target
market, the embedded systems market, continues to grow, the number of
competitors may increase significantly. In addition, new semiconductor
technology may lead to new products that can perform similar functions as our
products.
Competition in the various markets served by us comes from companies of
various sizes, many of which are significantly larger and have greater financial
and other resources than we do and thus can better withstand adverse economic or
market conditions than we. Our principal products compete with standard products
from companies such as Anchor Chips, Applied Micro Circuits, Galileo Technology,
Tundra Semiconductor, and V3 Semiconductor.
In addition, two alternative devices can perform some or all of the
functions of our semiconductor devices. The first is the Application Specific
Integrated Circuit, or ASIC. With the ASIC approach, a customer creates a custom
semiconductor device for a particular application. Because the customer buys the
ASIC directly from the semiconductor foundry, this approach may lead to lower
unit production costs. However, this approach entails a large initial investment
in developing the custom device. The second alternative device is the Field
Programmable Gate Array, or FPGA. The FPGA is a semiconductor device whose logic
function can be programmed by the system manufacturer. This requires less design
effort than the ASIC approach. However, because of the additional circuitry
required to enable the device to be programmed, this approach entails higher
unit production costs which can be
36
<PAGE> 41
prohibitive compared to ASICs or standard semiconductor devices. Accordingly, we
also experience indirect competition from leading ASIC suppliers, including IBM,
LSI Logic, NEC, and Toshiba as well as from FPGA suppliers, including Altera,
Atmel, Lucent Technologies, Quicklogic, Vantis, and Xilinx. As we start to sell
our I/O processor products, we will compete with established embedded
microprocessor companies including Hitachi, IBM, IDT, Intel, Motorola and
others. Many of these indirect competitors and processor companies are large
companies that have significantly greater financial, technical, marketing and
other resources than PLX.
We believe that the principal factors of competition in our business
include functionality, product performance, price, product innovation,
availability of development tools, customer service and reliability. We believe
that we compete favorably with respect to each of these factors. We
differentiate our products from those of our competitors by incorporating
innovative features that allow our customers to build systems based on industry
standards that are more efficient and higher in performance. Furthermore, in
general, our software and hardware development tools are more comprehensive than
competing solutions. However, we cannot assure you that we will be able to
compete successfully in the future against existing or new competitors, and
increased competition may adversely affect our business.
SALES, MARKETING AND TECHNICAL SUPPORT
Our sales and marketing strategy is to achieve design wins at leading
embedded systems companies in high-growth market segments. We market and sell
our products in the United States through a combination of direct regional sales
managers, a national distributor, and a network of independent manufacturers'
representatives. We maintain United States direct sales offices in Baltimore,
Boston, Chicago, Los Angeles, Raleigh and Sunnyvale.
Outside the United States, we have engaged a team of manufacturers'
representatives, stocking representatives and distributors to sell and market
our products. Our international network includes representatives in Australia,
Belgium, Canada, Denmark, France, Germany, Hong Kong, Israel, Japan, Korea,
Norway, Singapore, South Africa, Sweden, Taiwan, The Netherlands, and the United
Kingdom. We maintain a direct sales office in the United Kingdom to service
customers in Europe and the Middle East.
As of December 31, 1998, we employed 21 individuals in sales and marketing
and 9 in field and factory applications support. Sales in North America
represented 66%, 78% and 79% of product revenues for 1998, 1997 and 1996,
respectively. All sales to date have been denominated in U.S. dollars.
In 1998, sales to our exclusive United States distributor Unique
Technologies accounted for 22% of our revenues, and sales to a European
distributor, A2M, accounted for 11% of our revenues. Revenues related to sales
through distributors are expected to continue to account for a significant
portion of our total revenues. See "Risk Factors -- A Large Portion of Our
Revenues Is Derived from Sales to Third-Party Distributors Who May Terminate
Their Relationships with Us at Any Time."
Net revenues through distributors accounted for approximately 49%, 56% and
41% of our net revenues for 1998, 1997 and 1996, respectively. Sales to IBM
directly or through distributors accounted for 13% of our revenues. In 1997,
sales to no single customer accounted for 10% or more of our total revenues.
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<PAGE> 42
Technical support to customers is provided through field and factory
applications engineers, technical marketing personnel and, if necessary, product
design engineers. Local field support is provided in person or by telephone. We
also use our World Wide Web site to provide product documentation and technical
support information. We believe that providing customers with comprehensive
product support is critical to remaining competitive in the markets we serve. In
addition, our close contact with customer design engineers provides valuable
input into existing product enhancements and next generation product
specifications.
RESEARCH AND DEVELOPMENT
Our future success will depend to a large extent on our ability to rapidly
develop and introduce new products and enhancements to our existing products
that meet emerging industry standards and satisfy changing customer
requirements. We have made and expect to continue to make substantial
investments in research and development and to participate in the development of
new and existing industry standards.
Our research and development has been focused in three main areas: PCI I/O
accelerators and I/O processors, hardware design kits and software development
kits. The majority of our engineers are involved in semiconductor device design
and verification, with the remaining engineers working on software and reference
design hardware. Before development of a new product commences, our marketing
managers work closely with research and development engineers and customers to
develop a comprehensive requirements specification. In addition, our marketing
managers and engineers review the applicable industry standards and incorporate
desired changes into the new product specification. After the product is
designed and commercially available, our engineers continue to work with various
customers on specific design issues to understand emerging requirements that may
be incorporated into future product generations or product upgrades.
Our research and development expenditures totaled $6.6 million in 1998 and
$4.2 million in 1997. Research and development expenses consist primarily of
salaries and related costs of employees engaged in research, design, and
development activities. In addition, expenses for outside engineering
consultants and non-recurring engineering at our independent foundries are
included in research and development expenses. As of December 31, 1998, there
were 31 employees engaged in research and development. We perform our research
and development activities at our headquarters in Sunnyvale, California. We are
seeking to hire additional skilled development engineers, who are currently in
short supply. Our business could be adversely affected if we encounter delays in
hiring additional engineers. See "Risk Factors -- Our Potential Future
Acquisitions May Not be Successful Because We Have Not Made Acquisitions in the
Past."
Our future performance depends on a number of factors, including our
ability to identify emerging technology trends in our target markets, define and
develop competitive new products in a timely manner, enhance existing products
to differentiate them from those of competitors and bring products to market at
competitive prices. The technical innovations and product development required
for us to remain competitive are inherently complex and require long development
cycles. We typically must incur substantial research and development costs
before the technical feasibility and commercial viability of a product can be
ascertained. We must also continue to make significant investments in research
and development in order to continually enhance the performance and
functionality of our products to keep pace with competitive products and
customer demands for improved performance. Revenues from future products or
product enhancements may not be sufficient to recover the development costs
38
<PAGE> 43
associated with these products or enhancements. The failure to successfully
develop new products on a timely basis could have a material adverse effect on
our business. See "Risk Factors -- Rapid Technological Change Could Make Our
Products Obsolete."
MANUFACTURING
We have adopted a "fabless" semiconductor manufacturing model and outsource
all of our semiconductor manufacturing, assembly and testing. This approach
allows us to focus our resources on the design, development and marketing of
products and significantly reduces our capital requirements. We subcontract
substantially all of our semiconductor manufacturing to Seiko-Epson
Semiconductor in Japan and Taiwan Semiconductor Manufacturing Corporation in
Taiwan. In the second quarter of 1999, IBM will become an additional
manufacturing subcontractor for one of our principal new products. None of our
products is currently manufactured by more than one supplier, and all of our
products are expected to be single-source manufactured for the foreseeable
future. We must place orders two to four months in advance of expected delivery.
We maintain inventory levels based on current lead times from foundries plus
safety stock to account for anticipated fluctuations in demand. Our inventory
comprises a major portion of our working capital. As a result, we have limited
ability to react to fluctuations in demand for our products, which could cause
us to have an excess or a shortage of inventory of a particular product and
reduced product revenues.
In the event of a loss of, or a decision by us to change, a key supplier or
foundry, qualifying a new supplier or foundry and commencing volume production
would likely involve delay and expenses, resulting in lost revenues, reduced
operating margins and possible detriment to customer relationships. Since we
place our orders on a purchase order basis and do not have a long term volume
purchase agreement with any of our existing suppliers, any of these suppliers
may allocate capacity to the production of other products while reducing
deliveries to us on short notice. While we believe we currently have good
relationships with our foundries and adequate capacity to support our current
sales levels, there can be no assurance that adequate foundry capacity will be
available in the future on acceptable terms, if at all. See "Risk Factors -- We
May Experience Shipment Delays and Increased Cost Due to Our Dependence on
Independent Manufacturers."
Our PCI devices are currently fabricated using a range of semiconductor
manufacturing processes. We must continuously develop our devices using more
advanced processes to remain competitive on a cost and performance basis.
Migrating to new technologies is a challenging task requiring new design skills,
methods and tools. We believe that the transition of our products to smaller
geometries will be important for us to remain competitive. Our business could be
materially adversely affected if any transition to new processes is delayed or
inefficiently implemented. See "Risk Factors -- Defects in Our Products Could
Increase Our Costs and Delay Our Product Shipments."
INTELLECTUAL PROPERTY
Our future success and competitive position depend upon our ability to
obtain and maintain certain proprietary technology used in our principal
products. Most of our current products include implementations of the PCI and
I(2)O industry standards, which are available to other companies. We currently
have no patents on any of our PCI or I(2)O products and rely instead on trade
secret protection. We have two patents on certain technology in our other
products that expire in September 2007 and September 2014. In the future, we
plan to seek patent protection when we feel it is necessary.
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<PAGE> 44
Our existing or future patents may be invalidated, circumvented, challenged
or licensed to others. The rights granted thereunder may not provide competitive
advantages to us. In addition, our future patent applications may not be issued
with the scope of the claims sought by us, if at all. Furthermore, others may
develop technologies that are similar or superior to our technology, duplicate
our technology or design around the patents owned or licensed by us. In
addition, effective patent, trademark, copyright and trade secret protection may
be unavailable or limited in certain foreign countries. We cannot be sure that
steps taken by us to protect our technology will prevent misappropriation of
such technology.
The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions. This often results in
significant and often protracted and expensive litigation. There is no
intellectual property litigation currently pending against us. However, we may
from time to time receive notifications of claims that we may be infringing
patents or other intellectual property rights owned by other third parties. If
it is necessary or desirable, we may seek licenses under these third party
patents or intellectual property rights. However, we cannot be sure that
licenses will be offered or that the terms of any offered licenses will be
acceptable to us.
The failure to obtain a license from a third party for technology used by
us could cause us to incur substantial liabilities and to suspend the
manufacture or shipment of products or our use of processes requiring the
technology. Litigation could result in significant expenses to us, adversely
affect sales of the challenged product or technology and divert the efforts of
our technical and management personnel, whether or not the litigation is
determined in our favor. In the event of an adverse result in any litigation, we
could be required to pay substantial damages, cease the manufacture, use, sale
or importation of infringing products, expend significant resources to develop
or acquire non-infringing technology, and discontinue the use of certain
processes or obtain licenses to the infringing technology. We may not be
successful in the development or acquisition, or the necessary licenses may not
be available under reasonable terms, and any development, acquisition or license
could require expenditures by us of substantial time and other resources. Any of
these developments would have a material adverse effect on our business. See
"Risk Factors -- Our Limited Ability to Protect Our Intellectual Property and
Proprietary Rights Could Adversely Affect Our Competitive Position."
FACILITIES
We lease two adjacent facilities in Sunnyvale, California, which have
approximately 20,000 square feet and 15,000 square feet pursuant to two leases
which expire in February 2001 and November 2004, respectively. These two
facilities comprise our headquarters and include our research and development,
sales and marketing and administration departments. We believe that our current
facilities will be adequate through 1999.
EMPLOYEES
As of December 31, 1998, we employed a total of 71 full-time employees,
including 31 engaged in research and development, 30 engaged in sales and
marketing, 4 engaged in manufacturing operations and 6 engaged in general
administration activities. We also from time to time employ part-time employees
and hire contractors. Our employees are not represented by any collective
bargaining agreement, and we have never experienced a work stoppage. We believe
that our employee relations are good.
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<PAGE> 45
BACKLOG
PLX's backlog at any particular date is not necessarily indicative of
actual sales for any succeeding period. This results from expected changes in
product delivery schedules and cancellation of product orders. In addition,
PLX's sales will often reflect orders shipped in the same quarter that they are
received.
LEGAL PROCEEDINGS
We may from time to time be a party to various litigation matters
incidental to the conduct of our business. As of the date of this prospectus,
there is no pending or threatened legal proceeding to which we are a party.
41
<PAGE> 46
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors, their ages and their positions as of
December 31, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael J. Salameh........... 44 President and Director
Kenyon Mei, Ph.D............. 53 Vice President, Engineering
Scott M. Gibson.............. 40 Vice President, Finance, Chief Financial
Officer and Secretary
Mark R. Easley............... 43 Vice President, Marketing
Michael A. Hopwood........... 36 Vice President, Worldwide Sales
William E. Hart.............. 46 Vice President, Operations
D. James Guzy, Sr.(1)(2)..... 62 Chairman of the Board of Directors
Eugene Flath(2).............. 61 Director
Timothy Draper(1)............ 40 Director
Young K. Sohn(3)............. 42 Nominee Director
John H. Hart(4).............. 53 Nominee Director
</TABLE>
- -------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Mr. Sohn has agreed to be nominated as director and is expected to be
elected to the Board of Directors immediately after the closing of the
offering.
(4) Mr. Hart has agreed to be nominated as director and is expected to be
elected to the Board of Directors immediately after the closing of the
offering.
Michael J. Salameh co-founded PLX and has served as our President and as a
member of the Board of Directors since PLX's inception in May 1986. From 1980
through 1986, Mr. Salameh was employed in various marketing management positions
with Hewlett-Packard Company. Mr. Salameh received a B.S. in Engineering and
Applied Science from Yale University and an M.B.A. from Harvard Business School.
Kenyon Mei, Ph.D., has served as our Vice President of Engineering since
joining us in August 1997. From 1985 through August 1997, Dr. Mei held various
senior level executive positions with Cirrus Logic, Inc., a semiconductor
company, including General Manager of the Personal Systems Division from 1992
through July 1997 and Senior Vice President of Engineering from 1985 through
1991. Dr. Mei received a B.S. and an M.S. in Electrical Engineering from the
University of California, Davis and a Ph.D. in Electrical Engineering from
Stanford University.
Scott M. Gibson has served as our Vice President of Finance and Chief
Financial Officer since joining us in October 1997. Mr. Gibson was employed by
YieldUP International Corporation, a semiconductor equipment manufacturer, as
Vice President and Chief Financial Officer from September 1995 through March
1997. Mr. Gibson served as Vice President of Customer Service for Tencor
Instruments, a semiconductor equipment manufacturer, from April 1994 through
June 1995. Mr. Gibson was employed by Prometrix Corporation, a semiconductor
equipment manufacturer, as Vice President and Chief Financial Officer from April
1992 until its merger with Tencor Instruments in
42
<PAGE> 47
February 1994. Mr. Gibson received a B.S. in Industrial Engineering from Iowa
State University and an M.B.A. from the University of Michigan Business School.
Mark R. Easley has served as our Vice President of Marketing since March
1996. From October 1993 through March 1996, he owned Mission Research
Enterprises Technical Sales, a manufacturers' representative company. From March
1986 through October 1993, Mr. Easley held various positions at Adaptec, Inc., a
semiconductor company including Director of Sales for Asia-Pacific and Japan
from July 1988 through October 1993 and Strategic Marketing Manager from March
1986 through June 1988. Mr. Easley is also a director of Sebring Systems, Inc.
Mr. Easley received a B.S. in Computer Science from Purdue University.
Michael A. Hopwood has served as our Vice President of Worldwide Sales
since 1995. From 1989 to 1995, he held a variety of other sales management
positions with our Company. From 1984 until 1989, Mr. Hopwood held various sales
positions at Intel Corporation, a semiconductor manufacturer. Mr. Hopwood
received a B.S. in Physics Engineering from Pacific Lutheran University.
William E. Hart has served as our Vice President of Operations since
January 1996. Between July 1993 and January 1996, he served as our Operations
Manager and Controller. From January 1992 to June 1993, Mr. Hart was employed by
Euphonix Inc., a digital audio equipment company, as its production manager.
From November 1982 through December 1991, Mr. Hart was employed as a
manufacturing manager for NTX Communications, a computer company. Mr. Hart
received a B.A. from St. Mary's College and a Masters degree in Public
Administration from California State University, Hayward.
D. James Guzy, Sr. has been a director of PLX since 1986. Mr. Guzy is the
Chairman, President and CEO of SRC Computer Corporation, a developer of super-
computer systems. Since 1969, he has also served as the President of the Arbor
Company, a limited partnership involved in the electronics and computer
industry. Mr. Guzy is also a director of Cirrus Logic, Inc., Intel Corporation,
Micro Component Technology, Inc., Novellus Systems, Inc., Davis Selected Group
of Mutual Funds and Alliance Capital Management Technology Fund, and a member of
the board of directors of several private technology companies, including
Sebring Systems. Mr. Guzy received a B.S. from the University of Minnesota and
an M.S. from Stanford University.
Eugene Flath has been a director of PLX since May 1989. Mr. Flath has been
a General Partner of Associated Venture Investors since February 1988 and a
Special General Partner of Applied Technology Investors since July 1994. Mr.
Flath also serves on the board of directors of several private companies. Mr.
Flath received a B.S. in Electrical Engineering and a B.S. in Naval Science from
the University of Wisconsin and an M.S. in Electrical Engineering from the
University of New Hampshire.
Timothy Draper has been a director of PLX since 1986. Mr. Draper has been a
Managing Director of Draper Fisher Jurvetson, an investment company since 1992.
Mr. Draper managed Draper Associates LP from 1986 to 1992. Mr. Draper received a
B.S. in Electrical Engineering from Stanford University and an M.B.A. from
Harvard Business School.
Young K. Sohn will become a member of our Board of Directors immediately
after completion of the offering. Mr. Sohn is currently serving as CEO of Oak
Technology, a semiconductor manufacturer. From 1992 until March 1999, Mr. Sohn
held various executive management positions at Quantum Corporation, a disk drive
manufacturer,
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<PAGE> 48
including President of the Hard Disk Drive Business. Prior to joining Quantum,
Mr. Sohn was employed for nine years at Intel as a Marketing and Sales Executive
and Director of Worldwide Channel Marketing in Intel's Reseller Channel
organization. Mr. Sohn received a B.S. in Electrical Engineering from the
University of Pennsylvania and an M.B.A. from MIT's Sloan School of Management.
John H. Hart will become a member of our Board of Directors immediately
after completion of the offering. Mr. Hart has been Senior Vice President and
Chief Technical Officer of 3Com Corporation since August 1996. From the time Mr.
Hart joined 3Com in September 1990 until July 1996, he was Vice President and
Chief Technical Officer. Prior to joining 3Com, Mr. Hart worked for Vitalink
Communications Corporation for seven years, where his most recent position was
Vice President of Network Products.
Officers are appointed by the Board of Directors. Our Bylaws provide that
the Board of Directors shall consist of five members. Directors are elected at
our annual general meeting of stockholders by a vote of the holders of a
majority of the voting power represented at the meeting. A director may be
re-elected for subsequent terms.
BOARD COMMITTEES
The Compensation Committee of the Board of Directors reviews and makes
recommendations to the Board regarding our compensation policies and all forms
of compensation to be provided to our executive officers and directors,
including annual salaries and bonuses and stock option and other incentive
compensation arrangements. In addition, the Compensation Committee reviews bonus
and stock compensation arrangements for all our other employees. The
Compensation Committee also administers our 1998 Stock Incentive Plan and 1999
Stock Incentive Plan. The current members of the Compensation Committee are
Messrs. Flath and Guzy.
The Audit Committee of the Board of Directors reviews and monitors our
corporate financial reporting and external audits, including our internal
control functions, the results and scope of the annual audit and other services
provided by our independent auditors and our compliance with legal matters that
have a significant impact on our financial reports. The Audit Committee also
consults with our management and our independent auditors prior to the
presentation of financial statements to stockholders and, as appropriate,
initiates inquiries into aspects of our financial affairs. In addition, the
Audit Committee has the responsibility to consider and recommend the appointment
of, and to review fee arrangements with, our independent auditors. The current
members of our Audit Committee are Messrs. Draper and Guzy.
DIRECTOR COMPENSATION AND OTHER ARRANGEMENTS
Non-employee directors of PLX receive for their service as directors cash
compensation in the amount of $4,000 upon election at the annual stockholders
meeting and $2,000 for each Board meeting that they attend. In addition, each
new non-employee director will receive an option to purchase 15,000 shares of
our common stock upon joining the Board of Directors. Each incumbent
non-employee director who has served on the Board for at least eleven months
will be granted an option to purchase an additional 5,000 shares of our common
stock after each annual stockholders' meeting. All options are immediately
exercisable upon grant. See "Stock Option Plans -- 1999 Stock Incentive Plan."
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<PAGE> 49
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors established a Compensation Committee in July 1990.
The Compensation Committee is currently comprised of Messrs. Flath and Guzy.
Neither of these individuals were at any time since the formation of PLX an
executive officer or employee of PLX. Prior to the establishment of the
Compensation Committee, all decisions relating to executive compensation were
made by the Board. For a description of the transactions between PLX and members
of the Compensation Committee and entities affiliated with the Compensation
Committee members, see "Transactions Between PLX and its Officers, Directors or
Significant Stockholders." None of our executive officers serves as a member of
the board of directors or compensation committee of any entity which has one or
more executive officers serving as a member of our Board of Directors or
Compensation Committee.
NO EMPLOYMENT CONTRACTS
None of our executive officers has an employment agreement with PLX.
EXECUTIVE COMPENSATION
The following table provides summary information concerning the
compensation earned by our chief executive officer and certain of our other
executive officers whose salary and bonus exceeded $100,000 for services
rendered in all capacities to PLX and our subsidiary during the fiscal year
ended December 31, 1998. This includes bonus amounts in the fiscal year earned,
rather than in the fiscal year in which each such bonus amount was paid. All
stock options were granted pursuant to the 1998 Stock Incentive Plan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- -----------------
SHARES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
--------------------------- -------- -------- -----------------
<S> <C> <C> <C>
Michael J. Salameh
President............................... $144,000 $101,258 150,000
Kenyon Mei, Ph.D.
Vice President, Engineering............. 210,000 87,202 0
Mark R. Easley
Vice President, Marketing............... 138,000 109,407 65,000
Michael A. Hopwood
Vice President, Worldwide Sales......... 124,000 96,953 25,000
Scott M. Gibson
Vice President, Finance................. 120,000 48,923 30,000
</TABLE>
45
<PAGE> 50
The following table sets forth certain information concerning grants of
options to purchase shares of our common stock to each of the following officers
during fiscal 1998. In each case, the options vest pursuant to a four-year
schedule. Under this schedule, on the first anniversary of the date of grant,
25% of the total options granted vest. Thereafter, 2.083% of the total options
granted vest each month.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES IN EXERCISE TERM(4)
OPTIONS FISCAL YEAR PRICE PER EXPIRATION ---------------------------
NAME GRANTED 1998(1) SHARE(2) DATE(3) 5% 10%
---- ---------- ------------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Salameh.... 150,000 22.79% $5.00 01/20/08 $471,671 $1,195,307
Kenyon Mei, Ph.D. .... -- -- -- -- -- --
Mark R. Easley........ 65,000 9.87 5.00 01/20/08 204,391 517,966
Michael A. Hopwood.... 25,000 3.80 5.00 01/20/08 78,612 199,218
Scott M. Gibson....... 30,000 4.56 5.00 01/20/08 94,334 239,061
</TABLE>
- -------------------------
(1) In fiscal year 1998, we granted options to employees to purchase an
aggregate of 658,250 shares.
(2) Each of these options was granted pursuant to our 1998 Plan and is subject
to the terms of such plan as described below. These options were granted at
an exercise price equal to the fair market value of our common stock as
determined by our Board of Directors on the date of the grant. The Board of
Directors based this determination on our operating results and financial
condition and the valuations of comparable public companies in the
semiconductor industry.
(3) Options may terminate before their expiration dates if the optionee's status
as an employee or consultant is terminated or upon the optionee's death or
disability.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our future common stock prices.
STOCK OPTION PLANS
1986 RESTRICTED STOCK PURCHASE PROGRAM
On May 7, 1986, our Board of Directors approved a form of Restricted Stock
Purchase Agreement to be used to sell restricted shares of our common stock to
our employees, officers and consultants. There was no formal, written plan. From
time to time, the Board of Directors reserved shares of our common stock for
grant under the program. From May 7, 1986 until December 31, 1997, a total of
4,402,060 restricted shares were issued pursuant to the program. The shares were
issued at fair market value as determined by the Board of Directors. The
repurchase price of the restricted shares is the original sales price. The
shares are subject to a repurchase option in favor of PLX that expires over a
period of four years from the date of issuance. On the first anniversary of the
date of issuance, the number of shares subject to the repurchase option is
reduced by 25%; and each month thereafter, the number of shares subject to the
repurchase option is reduced by 2.083% of the total restricted shares issued.
46
<PAGE> 51
As consideration for the issuance of these restricted shares, each of the
purchasers has paid 20% of the aggregate purchase price of the restricted shares
issued to him in cash and has executed a promissory note for the remaining 80%
of the aggregate purchase price. These notes bear interest at a rate of 6% per
annum and become due and payable upon the earlier of four years from the date of
issuance or the effectiveness of a registration statement pursuant to which the
subject securities may be offered and sold by such purchasers; provided,
however, that in the event the officers are restricted by the terms of market
stand-off agreements relating to the securities, amounts that would become due
under the notes upon such registration are reduced to the amount that would be
covered by sale of shares allowed to be sold. Each of the directors and officers
that has purchased restricted shares has executed a market stand-off agreement,
which prevents such officers and directors from selling our securities for a
period of at least 150 days following our issuance of securities pursuant to an
underwritten offering. Thus, they will not be required to pay the notes until at
least 150 days after the offering. The due dates of the loans did not extend
past the repurchase option of PLX. The notes are full recourse and, in addition,
each of the purchasers has pledged the restricted shares as collateral to secure
the obligations under his note. The program was terminated upon adoption of our
1998 Incentive Stock Plan on January 15, 1998.
1998 STOCK INCENTIVE PLAN
Our 1998 Stock Incentive Plan was approved by the Board of Directors on
January 15, 1998 and by our stockholders on June 22, 1998. The 1998 Plan
provides for the grant of options intended to qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code of 1986, as amended, and
nonqualified stock options. As of January 31, 1999, a total of 1,300,000 shares
of our common stock have been reserved for issuance under the 1998 Plan. As of
December 31, 1998, no shares of our common stock had been issued upon exercise
of options granted under the 1998 Plan, options to purchase 645,250 shares were
outstanding, and 154,750 shares remained available for future grant. In January
1999, our Board of Directors approved the grant of options to purchase an
aggregate amount of 639,750 shares, to be effective as of the offering. The
Board of Directors or a committee designated by the Board has the power, subject
to the limitations contained in the 1998 Plan, to prescribe the terms and
conditions of any option granted under the 1998 Plan, including the total number
of shares to be offered to each optionee. The maximum term of any stock option
granted under the 1998 Plan is ten years, except that with respect to incentive
stock options granted to a person possessing more than 10% of the combined
voting power of PLX, the term of these stock options shall be for no more than
five years. The exercise price of incentive stock options granted under the 1998
Plan must be at least 100% of the fair market value of our common stock on the
grant date except that the exercise price of incentive stock options granted to
a 10% stockholder must be at least 110% of the fair market value on the date of
grant. The aggregate fair market value on the date of grant of our common stock
for which incentive stock options are exercisable for the first time by an
employee during any calendar year may not exceed $100,000. In the event of a
change of control of PLX, all of the options granted under the 1998 Plan will
terminate unless assumed or substituted or except as provided otherwise in an
individual option agreement. The Board of Directors may amend the 1998 Plan at
any time, except that certain amendments require stockholder approval. The 1998
Plan will terminate in January 2008, unless terminated earlier by the Board of
Directors.
47
<PAGE> 52
1999 STOCK INCENTIVE PLAN
Our 1999 Stock Incentive Plan was approved by the Board of Directors on
January 15, 1999 and by our stockholders in March 1999, effective as of the
effective date of the offering. The 1999 Plan permits the grant of securities of
PLX, including options intended to qualify as "incentive stock options" under
Section 422 of the Code, and nonqualified stock options to employees, officers,
directors, independent contractors and consultants; provided, however that
incentive stock options may be granted only to our employees. Initially
1,000,000 shares of common stock were reserved for issuance in connection with
the grant of options under the 1999 Plan. As of January 31, 1999 no options had
been awarded under the 1999 Plan.
The Board of Directors or a committee designated by the Board is authorized
to administer the 1999 Plan, including the selection of persons to whom options
may be granted and the interpretation and implementation of the 1999 Plan.
Options granted under the 1999 Plan will vest and become exercisable as
determined by the Board or the committee at the time of the option grant. The
term of each option will be as determined by the Board or the committee;
provided, however, that the maximum term of an option granted under the 1999
Plan is ten years or five years in the case of an incentive stock option granted
to a 10% stockholder. The aggregate fair market value, on the date of grant, of
our common stock for which incentive stock options are exercisable for the first
time by an employee during any calendar year may not exceed $100,000. The
exercise price of each option granted under the 1999 Plan shall not be less than
the fair market value of our common stock on the date of grant or not less than
110% of fair market value in the case of an incentive stock option granted to a
10% stockholder. In the event there is a change of control of PLX under the 1999
Plan, all of the options granted under the 1999 Plan will terminate unless
assumed or substituted or except as provided otherwise in an individual option
agreement. The 1999 Plan may be amended at any time by the Board of Directors,
although certain amendments require stockholder approval. The 1999 Plan will
terminate in January 2009, unless earlier terminated by the Board.
Pursuant to the authority granted by the 1999 Plan, the Administrator has
adopted, concurrently with the approval of the 1999 Plan, the 1999 Non-Employee
Director Option Program. Shares issued under the Non-Employee Director Plan will
come from the 1,000,000 shares of common stock reserved for issuance pursuant to
the 1999 Plan. The Non-Employee Director Program provides for the grant of
non-qualified stock options to non-employee directors upon election or
appointment to the Board of Directors and for annual non-qualified stock option
grants thereafter. See "Management -- Director Compensation and Other
Arrangements."
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our Certificate of Incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that a director
of a corporation will not be personally liable for monetary damages for breach
of the director's fiduciary duties as a director except for liability
- for any breach of the director's duty of loyalty to PLX or to its
stockholders,
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
48
<PAGE> 53
- for unlawful payments of dividends or unlawful stock repurchases as
provided in Section 174 of the Delaware General Corporation Law or
- for any transaction from which a director derives an improper personal
benefit.
Our Bylaws provide that PLX shall indemnify its directors and executive
officers and may indemnify its officers, employees and other agents to the full
extent permitted by law. We believe that indemnification under our Bylaws covers
at least negligence and gross negligence on the part of an indemnified party.
Our Bylaws also permit us to advance expenses incurred by an indemnified party
in connection with the defenses of any action or proceeding arising out of the
indemnified party's status or service as a director, officer or employee or
other agent of PLX upon an undertaking by the indemnified party to repay the
advances if it is ultimately determined that the indemnified party is not
entitled to indemnification.
We have entered into separate indemnification agreements with each of our
directors and officers. These agreements require us, among other things, to
indemnify the director or officer, against expenses, judgments, fines and
settlements paid by the individual in connection with any action, suit or
proceeding arising out of the individual's status or service as a director or
officer of PLX, other than Liabilities arising from willful misconduct or
conduct that is knowingly fraudulent or deliberately dishonest. These agreements
also require us to advance expenses incurred by the individual in connection
with any proceeding against the individual with respect to which the individual
may be entitled to indemnification by PLX. We believe that our Certificate of
Incorporation and Bylaw provisions and indemnification agreements are necessary
to attract and retain qualified persons as directors and officers. We also
maintain directors' and officers' liability insurance.
At present we are not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of PLX in which
indemnification will be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for
indemnification.
49
<PAGE> 54
TRANSACTIONS BETWEEN PLX AND ITS OFFICERS, DIRECTORS, OR SIGNIFICANT
STOCKHOLDERS
SALE OF RESTRICTED STOCK TO EXECUTIVE OFFICERS
We have entered into Employee Stock Purchase Agreements with each of the
executive officers listed below which provide for the sale of shares of
restricted PLX common stock to these executive officers subject to a repurchase
option on behalf of PLX. The repurchase price of the restricted stock is the
original sales price. Except as noted below, the number of shares subject to
each repurchase option is reduced according to our standard vesting schedule. As
consideration for the issuance of this restricted stock, each of the officers
has paid 20% of the aggregate purchase price of the restricted stock issued to
him in cash and has executed a promissory note for the remaining 80% of the
aggregate purchase price. The notes contain the standard terms for all notes
issued in connection with the issuance of Restricted Stock.
<TABLE>
<CAPTION>
PRINCIPAL
PURCHASE NUMBER OF PRICE PER AMOUNT OF
NAME DATE SHARES SHARE NOTE NOTE DUE
---- ---------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Kenyon Mei................ 08/01/1997 350,000 $0.15 $42,000 08/01/2001
Michael A. Hopwood........ 03/15/1996 46,000(1) $0.15 $ 5,520 03/15/2000
08/01/1997 35,000 $0.15 $ 4,200 08/01/2001
Scott M. Gibson........... 11/01/1997 110,000 $0.30 $26,400 10/14/2001
William E. Hart........... 03/15/1996 43,000(2) $0.15 $ 5,160 03/15/2000
08/01/1997 25,000(2) $0.15 $ 3,000 08/01/2001
Mark R. Easley............ 03/11/1996 75,000 $0.15 $ 9,000 03/11/2000
03/31/1997 70,000 $0.15 $ 8,400 06/01/2000
08/01/1997 40,000(3) $0.15 $ 4,800 08/01/2001
</TABLE>
- -------------------------
(1) These shares vest as follows: (a) on March 15, 1997, the number of shares
subject to a repurchase option was reduced by 9,000 shares; (b) each month
thereafter until March 15, 1998, the number of shares subject to the
repurchase option was reduced by 750 shares; and (c) each month thereafter
until March 15, 2000, the number of shares subject to the repurchase option
is reduced by 1,166.67 shares.
(2) These shares vest as follows: (a) on March 15, 1997, the number of shares
subject to a repurchase option was reduced by 8,000 shares; (b) on March 15,
1998, the number of shares subject to the repurchase option was reduced by
750 shares, and (c) each month thereafter until March 15, 2000, the number
of shares subject to the repurchase option is reduced by 1,083.33 shares.
The 25,000 shares are restricted and were issued to Mr. Hart on August 1,
1997 vest as follows: (a) on each of August 1, 1998, 1999 and 2000, the
number of shares subject to the repurchase option is reduced by 5,000
shares; and (b) on August 1, 2001, the number of shares subject to the
repurchase option is reduced by 10,000 shares.
(3) These shares vest as follows: (a) on August 1, 1998, the number of shares
subject to a repurchase option is reduced by 6,000 shares; and (b)
thereafter, the number of shares subject to the repurchase option is reduced
monthly in the aggregate annual amounts of 6,000 shares in each of the next
two years and 22,000 shares in the remaining year of vesting.
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<PAGE> 55
GRANT OF STOCK OPTIONS TO EXECUTIVE OFFICERS
Options to purchase the following amounts of shares were granted to our
executive officers in 1998 under the 1998 Plan:
- Michael J. Salameh, 150,000 shares,
- Mark R. Easley, 65,000 shares,
- Michael A. Hopwood, 25,000 shares,
- Scott Gibson, 30,000 shares, and
- William E. Hart, 15,000 shares.
All of these options were issued with an exercise price equal to $5.00 per
share and vest, in the case of Michael J. Salameh, over a period of forty-eight
(48) months and, in the case of the other executive officers, over a period of
thirty-six (36) months, from the date of grant.
Additionally, in January 1999, the Board of Directors approved options to
purchase the following amounts of shares to our executive officers under the
1998 Plan with an exercise price per share equal to the initial public offering
price:
- Michael J. Salameh, 163,000 shares,
- Mark R. Easley, 100,000 shares,
- Michael A. Hopwood, 80,000 shares,
- Scott Gibson, 40,000 shares, and
- William E. Hart, 40,000 shares.
All of these options were approved by the Board of Directors effective upon
the offering. All options are immediately exercisable. Exercised shares are
subject to vesting at the rate of 25% of the shares granted on the first
anniversary of the grant and monthly thereafter.
INVESTMENT IN SEBRING SYSTEMS
On June 18, 1997, we purchased a total of 892,857 shares of Series A
Preferred Stock of Sebring Systems, Inc., a New York corporation, for an
aggregate purchase price of $100,000. Immediately following the investment, PLX
held approximately 3.9% of the outstanding shares of Sebring. Also, three
related parties purchased a total of 22.06% of the then outstanding shares of
Sebring for an aggregate purchase price of $560,000. The related parties are:
- Arbor Company, a PLX stockholder, of which D. James Guzy, Sr., a director
of PLX, is a general partner,
- Draper Associates, L.P., a PLX stockholder, of which Timothy Draper, a
director of PLX, is a general partner, and
- Eugene J. Flath, a director of PLX.
Pursuant to the terms of the purchase and sale documents relating to the above
investment, D. James Guzy, Sr. was elected as a director and Chairman of the
Board of Directors of Sebring.
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<PAGE> 56
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of December 31, 1998, and as adjusted to
reflect the sale of shares in this offering. It shows ownership by each person
(or group of affiliated persons) who is known by us to own beneficially more
than five percent of the outstanding shares of our common stock, certain of our
executive officers, each of our directors, and all current officers and
directors as a group.
In the table below, the amounts set forth in the column entitled "Number of
Shares Beneficially Owned" include shares set forth in the column titled "Number
of Shares Beneficially Owned as a Result of Options Exercisable Within 60 days
of the Date of this Prospectus." Percentage of beneficial ownership is based
upon 18,365,551 shares of common stock outstanding prior to this offering and
21,665,551 shares of our common stock outstanding after this offering, as of
December 31, 1998 and assuming no exercise of the underwriters' overallotment
option.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY OWNED
AS A RESULT OF PERCENTAGE OF
OPTIONS EXERCISABLE SHARES OUTSTANDING
5% BENEFICIAL OWNERS, DIRECTORS, WITHIN 60 DAYS OF ----------------------
NOMINEES FOR DIRECTOR, NAMED NUMBER OF SHARES THE DATE OF BEFORE THE AFTER THE
OFFICERS BENEFICIALLY OWNED THIS PROSPECTUS OFFERING OFFERING
- -------------------------------- ------------------ ------------------- ---------- ---------
<S> <C> <C> <C> <C>
Eugene Flath(1).............. 2,579,826 -- 14.1% 11.9%
AVI II....................... 2,313,978 -- 12.6 10.7
1 First Street #2
Los Altos, CA 94022
Timothy Draper(2)............ 2,084,460 -- 11.4 9.6
Arbor Company................ 1,955,436 -- 10.7 9.0
P.O. Box 128
Glenbrook, NV 89413
D. James Guzy, Sr.(3)........ 1,955,436 -- 10.7 9.0
Draper Associates............ 1,656,294 -- 9.0 7.7
400 Seaport Court, Suite 250
Redwood City, CA 94063
Wei-Ti Liu................... 966,021 -- 5.3 4.5
Michael J. Salameh........... 961,483 313,000(4) 5.2 4.4
Kenyon Mei, Ph.D............. 350,000 -- 1.9 1.6
Mark R. Easley............... 350,000 165,000(5) 1.9 1.6
Michael S. Hopwood........... 240,000 105,000(6) 1.3 1.1
Scott M. Gibson.............. 180,000 70,000(7) 1.0 *
Young K. Sohn................ 15,000 15,000(8) * *
John H. Hart................. 15,000 15,000(8) * *
All directors, nominees for
director and executive
officers as a group (10
persons)................... 8,911,205 738,000 48.5% 41.1%
</TABLE>
* Less than one percent.
(1) Includes (a) 2,313,978 shares held by AVI II and 39,423 shares held by AVI
PGF which are investments managed by AVI Management Partners II of which Mr.
Flath is a General Partner; and (b) 75,027 shares held by AVI Partners II NV
and
52
<PAGE> 57
151,398 shares held by AVI Partners NV which are investments managed by AVI
Management Partners of which Mr. Flath is a special limited partner. Mr.
Flath disclaims beneficial ownership of such shares except for his
proportional interest therein.
(2) Includes 1,656,294 shares held by Draper Associates L.P. of which Draper
Associates, Inc. is the General Partner. Mr. Draper is the President of
Draper Associates, Inc. Also includes 85,326 shares held by JABE LLC of
which Mr. Draper is a member and 342,840 shares held in trust for Mr.
Draper's minor children.
(3) Includes 1,955,436 shares held by Arbor Company of which Mr. Guzy, Sr. is
President.
(4) Includes an option to purchase 163,000 shares which will be effective as of
the date of this offering. The option will be immediately exercisable, but
the shares will be subject to four-year vesting.
(5) Includes an option to purchase 100,000 shares which will be effective as of
the date of this offering. The option will be immediately exercisable, but
the shares will be subject to four-year vesting.
(6) Includes an option to purchase 80,000 shares which will be effective as of
the date of this offering. The option will be immediately exercisable, but
the shares will be subject to four-year vesting.
(7) Includes an option to purchase 40,000 shares which will be effective as of
the date of this offering. The option will be immediately exercisable, but
the shares will be subject to four-year vesting.
(8) Includes an option to purchase 15,000 shares which will be effective as of
the date of this offering. The option will be immediately exercisable, but
the shares will be subject to four-year vesting.
53
<PAGE> 58
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Our authorized capital stock consists of 30,000,000 shares of common stock,
par value $0.001 per share, and 5,000,000 shares of preferred stock, par value
$0.001 per share. Upon consummation of this offering, no shares of preferred
stock and 21,665,551 shares of common stock, or 22,160,551 shares if the
underwriters' over-allotment option is exercised in full, will be outstanding.
The following summary is qualified in its entirety by reference to our
Certificate of Incorporation and Bylaws, copies of which are filed as exhibits
to the Registration Statement of which this prospectus is a part.
Under our 1998 Stock Incentive Plan, 1,300,000 shares of common stock have
been reserved for issuance and options to purchase 645,250 shares were
outstanding as of December 31, 1998. In January 1999, our Board of Directors
approved the grant of options to purchase 639,750 shares at the initial public
offering price under our 1998 Stock Incentive Plan, to be effective as of the
offering. Further, 1,000,000 shares of our common stock have been reserved for
issuance under our 1999 Stock Incentive Plan, under which no options were
outstanding as of December 31, 1998.
COMMON STOCK
As of December 31, 1998, there were 18,365,551 shares of our common stock
outstanding held of record by approximately 123 stockholders, including
13,738,908 shares that will be issued upon the automatic conversion of the
outstanding shares of our preferred stock into common stock upon the closing of
the offering. As of December 31, 1998, 800,000 shares of our common stock were
reserved for issuance pursuant to our Stock Option Plans. In January 1999, the
Board of Directors approved an increase to 1,300,000 shares. In January 1999,
the Board of Directors approved the 1999 Plan under which 1,000,000 shares of
our common stock are reserved for issuance. Upon completion of the offering,
there will be 21,665,551 shares of common stock outstanding.
Pursuant to our Certificate of Incorporation, the holders of our common
stock are entitled to one vote per share on all matters to be voted upon by the
stockholders. However, until, but not including the first annual meeting of
stockholders following the annual meeting of stockholders when PLX shall have
had at least 800 stockholders, the stockholders will have cumulative voting
rights in the election of directors. If any stockholder has properly requested
cumulative voting, each stockholder may cumulate his, her or its votes and give
one candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the stockholder's shares are normally
entitled. The stockholder may also distribute the votes on the same principle
among as many candidates as the stockholder thinks fit. Thereafter, holders of
more than 50% of the shares voting will be able to elect all of the directors.
Subject to preferences that may be applicable to any of our outstanding
preferred stock, the holders of our common stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. See "Dividend Policy."
In the event of liquidation, dissolution or winding up of PLX, the holders
of our common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior distribution rights of preferred stock,
if any, then outstanding.
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<PAGE> 59
Our common stock has no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to our
common stock. All outstanding shares of our common stock are fully paid and
nonassessable, and the shares of our common stock to be issued upon completion
of this offering will be fully paid and nonassessable.
PREFERRED STOCK
As of the closing of this offering, no shares of our preferred stock will
be outstanding. Effective at the closing of this offering and pursuant to our
Certificate of Incorporation, the Board of Directors will have the authority,
without further action by the stockholders, to issue the preferred stock in one
or more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of any series,
without further vote or action by the stockholders. The issuance of preferred
stock may have the effect of delaying, deferring or preventing a change in
control of PLX without further action by the stockholders and may adversely
affect the voting and other rights of the holders of our common stock. The
issuance of preferred stock with voting and conversion rights may have the
effect of decreasing the market price of our common stock, and may adversely
affect the voting power of the holders of our common stock, including the loss
of voting control to others. At present, we have no plans to issue any shares of
preferred stock.
REGISTRATION RIGHTS
PLX has entered into registration rights agreements with those individuals
who own 13,738,908 shares of our common stock which will be issued upon the
automatic conversion of their preferred stock into common stock in connection
with this offering. Under the registration rights agreements, the holders or
their transferees are entitled to rights with respect to the registration of
these shares under the Securities Act. If we propose to register any of our
securities under the Securities Act, either for our own account or the account
of other security holders, the holders are entitled to notice of the
registration and, subject to conditions and limitations, are entitled to include
their shares in the registration. In addition, at any time, the holders of at
least 50% of these shares of common stock may require us, on not more than two
occasions, to file a registration statement under the Securities Act with
respect to at least 20% of all of the outstanding registrable securities, or a
lesser percentage if the gross offering price would exceed $5.0 million. We are
required to use our best efforts to effect the required registration, subject to
certain conditions and limitations. Further, the holders of these shares of
common stock may require us to file additional registration statements on Form
S-3 when the form becomes available to us, subject to conditions and
limitations. The expenses incurred in connection with all of these registrations
will be borne by us.
ANTI-TAKEOVER, LIMITED LIABILITY AND INDEMNIFICATION PROVISIONS;
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We are subject to Section 203 of the Delaware General Corporation Law, as
amended ("Section 203"), which, subject to exceptions, prohibits a Delaware
corporation from
55
<PAGE> 60
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless:
- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder,
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (a) by persons who are
directors and also officers and (b) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer, or
- on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines business combinations to include:
- any merger or consolidation involving the corporation or any
majority-owned subsidiary of the corporation and any other person or
entity,
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation or any majority-owned subsidiary of the
corporation involving the interested stockholder,
- any transaction that results in the issuance or transfer by the
corporation or any majority-owned subsidiary of the corporation of any
stock of the corporation to the interested stockholder,
- any transaction involving the corporation or any majority-owned
subsidiary of the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the
corporation or any majority-owned subsidiary of the corporation
beneficially owned by the interested stockholder, or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation or any majority-owned subsidiary of the
corporation. In general, Section 203 defines an interested stockholder as
any entity or person beneficially owning 15% or more or the outstanding
voting stock of the corporation and any entity or person affiliated with
or controlling or controlled by such entity or person.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is BankBoston, N.A.
The Transfer Agent's address is 150 Royall Street, Canton, Massachusetts and its
telephone number is (781) 575-2000.
56
<PAGE> 61
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, there will be 21,665,551 shares of our
common stock outstanding. This assumes conversion of all outstanding shares of
our preferred stock, no exercise of the underwriters' over-allotment option and
no exercise of outstanding options under our Option Plans. Of such shares, the
3,300,000 shares sold in this offering will be freely transferable without
restriction or further registration under the Securities Act, except for any
shares held by an existing "affiliate" of PLX, as that term is defined by the
Securities Act, which shares will be subject to the resale limitations of Rule
144 adopted under the Securities Act.
As of the date of this prospectus, 18,365,551 "restricted shares" as
defined in Rule 144 will be outstanding. None of these shares will be eligible
for sale in the public market as of the effective date of this registration
statement. Upon the expiration of agreements not to sell entered into with us,
150 days after the effective date approximately 3,904,708 shares will become
eligible for sale subject to compliance with Rule 144 and Rule 701. Beginning
180 days after the effective date approximately 14,460,843 additional shares
will become eligible for sale subject to compliance with Rule 144 and Rule 701
upon the expiration of agreements not to sell such shares. Restrictions pursuant
to such agreements not to sell may be waived by Merrill Lynch, Pierce, Fenner &
Smith Incorporated. See "Underwriting."
<TABLE>
<CAPTION>
SHARES FIRST
DAYS AFTER DATE OF THIS PROSPECTUS ELIGIBLE FOR SALE COMMENT
- ---------------------------------- ----------------- -------
<S> <C> <C>
Upon Effectiveness............... 3,300,000 Freely tradeable shares sold in
offering.
150 days......................... 3,904,708 PLX lockup released; shares
saleable under Rules 144 and
701.
180 days......................... 14,460,843 Underwriter lockup released;
shares saleable under Rules 144
and 701.
</TABLE>
In general, under Rule 144 as currently in effect, beginning 90 days after
the offering, a person, or persons whose shares are aggregated, who owns shares
that were purchased from us, or any affiliate at least one year previously,
including a person who may be deemed an affiliate of PLX, is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of (a) 1% of the then outstanding shares of our common stock or (b) the
average weekly trading volume of our common stock on the Nasdaq National Market
during the four calendar weeks preceding the date on which notice of the sale is
filed with the Securities and Exchange Commission. Sales under Rule 144 are also
subject to manner of sale provisions, notice requirements and the availability
of current public information about us. Any person, or persons whose shares are
aggregated, who is not deemed to have been an affiliate of PLX at any time
during the 90 days preceding a sale, and who owns shares within the definition
of "restricted securities" under Rule 144 under the Securities Act that were
purchased from us or any affiliate of PLX at least two years previously, would
be entitled to sell such shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements.
Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 may be relied upon with respect to the resale of
securities originally
57
<PAGE> 62
purchased from us by our employees, directors, officers, consultants or advisers
prior to the date the issuer becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended, pursuant to written
compensatory benefit plans or written contracts relating to the compensation of
such persons. In addition, the Commission has indicated that Rule 701 will apply
to typical stock options granted by an issuer before it becomes subject to the
reporting requirements of the Exchange Act, along with the shares acquired upon
exercise of such options, including exercises after the date of this prospectus.
Securities issued in reliance on Rule 701 are restricted securities and, subject
to the contractual restrictions described above, beginning 90 days after the
date of this prospectus, may be sold (a) by persons other than affiliates,
subject only to the manner of sale provisions of Rule 144, and (b) by affiliates
under Rule 144 without compliance with its one-year holding period requirement.
We have agreed not to offer, sell or otherwise dispose of any shares of our
common stock or any securities convertible into or exercisable or exchangeable
for our common stock or any rights to acquire our common stock for a period of
180 days after the date of this prospectus, without the prior written consent of
the representatives of the underwriters, subject to limited exceptions. See
"Underwriting."
After the offering, the holders of 13,738,908 shares of our common stock or
their respective transferees, will be entitled to rights with respect to the
registration of the shares under the Securities Act. See "Description of Capital
Stock -- Registration Rights." Registration of the shares under the Securities
Act would result in such shares becoming freely tradable without restriction
under the Securities Act, except for shares purchased by affiliates, immediately
upon the effectiveness of such registration.
We intend to file a registration statement under the Securities Act
covering 2,300,000 shares of our common stock reserved for issuance under the
option plans. See "Management -- Stock Option Plans." This registration
statement is expected to be filed within 90 days after the date of this
prospectus and will automatically become effective upon filing. Following such
filing, shares registered under the registration statement will, subject to the
lockup agreements, Rule 144 volume limitations applicable to affiliates and the
lapsing of our repurchase rights, be available for sale in the open market upon
the exercise of vested options 90 days after the effective date of this
prospectus. At December 31, 1998, options to purchase 645,250 shares were issued
and outstanding under the Option Plans. In January 1999, the Board of Directors
approved the grant of options to purchase 639,750 shares at the initial public
offering price, to be effective at the offering.
58
<PAGE> 63
UNDERWRITING
GENERAL
We intend to offer our common stock in the United States and Canada through
a number of underwriters. Merrill Lynch, Pierce, Fenner & Smith Incorporated,
NationsBanc Montgomery Securities LLC and Wit Capital Corporation are acting as
representatives of each of the underwriters named below. Subject to the terms
and conditions set forth in a purchase agreement between us and the
underwriters, we have agreed to sell to the underwriters, and each of the
underwriters severally and not jointly has agreed to purchase from us, the
number of shares of our common stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERWRITERS ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................
NationsBanc Montgomery Securities LLC.......................
Wit Capital Corporation.....................................
---------
Total......................................... 3,300,000
=========
</TABLE>
In the purchase agreement, the several underwriters have agreed, subject to
the terms and conditions set forth in that agreement, to purchase all of the
shares of our common stock being sold under the terms of the agreement if any of
the shares of common stock are purchased. Under the purchase agreement, the
commitments of non-defaulting underwriters may be increased.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or to contribute to payments the underwriters may be required to
make in respect of those liabilities.
The expenses of this offering, exclusive of the underwriting discount, are
estimated at $700,000 and are payable by us.
The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of legal matters by counsel for the underwriters and other
conditions. The underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part.
A prospectus in electronic format is being made available on an Internet
Web site maintained by Wit Capital. In addition, all dealers purchasing shares
from Wit Capital in this offering have agreed to make a prospectus in electronic
format available on Web sites maintained by each of these dealers.
Wit Capital, a member of the National Association of Securities Dealers,
Inc., will participate in this offering as one of the underwriters. The National
Association of Securities Dealers, Inc. approved the membership of Wit Capital
on September 4, 1997.
59
<PAGE> 64
Since that time, Wit Capital has acted as an underwriter, e-Manager or selected
dealer in over 50 public offerings.
COMMISSIONS AND DISCOUNTS
The representatives have advised us that the underwriters propose initially
to offer the shares of our common stock to the public at the initial public
offering price set forth on the cover page of this prospectus, and to dealers at
such price less a concession not in excess of $ per share of common stock.
The underwriters may allow, and such dealers may reallow, a discount not in
excess of $ per share of common stock to other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us. This information is presented assuming either no exercise
or full exercise by the underwriters of their over-allotment options.
<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTION OPTION
--------- ------- ------
<S> <C> <C> <C>
Public offering price................................. $ $ $
Underwriting discount................................. $ $ $
Proceeds, before expenses, to PLX..................... $ $ $
</TABLE>
OVER-ALLOTMENT OPTION
We have granted an option to the underwriters, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of an
additional 495,000 shares of our common stock at the initial public offering
price set forth on the cover of this prospectus, less the underwriting discount.
The underwriters may exercise this option solely to cover over-allotments, if
any, made on the sale of our common stock offered hereby. To the extent that the
underwriters exercise this option, each underwriter will be obligated to
purchase a number of additional shares of our common stock proportionate to such
underwriter's initial amount reflected in the foregoing table.
RESERVED SHARES
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to 100,000 of the shares offered hereby to be sold to
some of our employees, directors and other persons with relationships with PLX.
The number of shares of our common stock available for sale to the general
public will be reduced to the extent that those persons purchase the reserved
shares. Any reserved shares which are not orally confirmed for purchase within
one day of the pricing of the offering will be offered by the underwriters to
the general public on the same terms as the other shares offered by this
prospectus.
NO SALES OF SIMILAR SECURITIES
We and our executive officers and directors have agreed not to directly or
indirectly
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of, lend
60
<PAGE> 65
or otherwise dispose of or transfer any shares of our common stock or
securities convertible into or exchangeable or exercisable for or
repayable with our common stock, whether now owned or later acquired by
the person executing the agreement or with respect to which the person
executing the agreement later acquires the power of disposition, or file
any registration statement under the Securities Act relating to any
shares of our common stock or
- enter into any swap or other agreement or any other agreement that
transfers, in whole or in part, the economic consequence of ownership of
our common stock whether any such swap or transaction is to be settled by
delivery of our common stock or other securities, in cash or otherwise,
without the prior written consent of Merrill Lynch on behalf of the
underwriters for a period of 180 days after the date of the prospectus.
See "Shares Eligible for Future Sale."
NASDAQ NATIONAL MARKET LISTING
Before this offering, there has been no market for our common stock. The
initial public offering price will be determined through negotiations between us
and the representatives of the underwriters. The factors to be considered in
determining the initial public offering price, in addition to prevailing market
conditions, include the valuation multiples of publicly traded companies that
the representatives believe to be comparable to us, some of our financial
information, the history of, and the prospects for, us and the industry in which
we compete, and an assessment of our management, its past and present
operations, the prospects for, and timing of, future revenues of PLX, the
present state of our development, the percentage interest of PLX being sold as
compared to the valuation for PLX and the above factors in relation to market
values and various valuation measures of other companies engaged in activities
similar to ours. There can be no assurance that an active trading market will
develop for our common stock or that our common stock will trade in the public
market subsequent to the offering at or above the initial public offering price.
We expect our common stock to be approved for listing on the Nasdaq
National Market, subject to notice of issuance, under the symbol "PLXT."
The underwriters do not expect sales of our common stock to any accounts
over which they exercise discretionary authority to exceed 5% of the number of
shares being offered under the prospectus.
PRICE STABILIZATION AND SHORT POSITIONS
Until the distribution of our common stock is completed, rules of the
Commission may limit the ability of the underwriters and selling group members
to bid for and purchase our common stock. As an exception to these rules, the
underwriters are permitted to engage in transactions that stabilize the price of
our common stock. Such transactions consist of bids or purchases for the purpose
of pegging, fixing or maintaining the price of our common stock.
If the underwriters create a short position in our common stock in
connection with the offering, i.e., if they sell more shares of our common stock
than are set forth on the cover page of this prospectus, the underwriters may
reduce that short position by purchasing our common stock in the open market.
The underwriters may also elect to reduce any short position by exercising all
or part of the over-allotment option described above.
61
<PAGE> 66
PENALTY BIDS
The underwriters may also impose a penalty bid on other underwriters and
selling group members. This means that if the underwriters purchase shares of
our common stock in the open market to reduce the their short position or to
stabilize the price of our common stock, they may reclaim the amount of the
selling concession from the underwriters and selling group members who sold
those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
LEGAL MATTERS
The validity of our common stock offered hereby will be passed upon for us
by Morrison & Foerster LLP, Palo Alto, California. Certain legal matters in
connection with the offering will be passed upon for the underwriters by Wilson
Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1997 and 1998, and for each of the three
years in the period ended December 31, 1998, included in this prospectus and
registration statement, as set forth in their report, which is included in this
prospectus and registration statement. The consolidated financial statements are
included in reliance on their report given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission, Washington, D.C. 20549, a Registration
Statement on Form S-1 under the Securities Act with respect to our common stock
offered hereby. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits and schedules to the
registration statement. Prior to filing the Registration Statement on Form S-1,
we have not filed any reports with the Commission. For further information with
respect to PLX and our common stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement. Statements contained in this prospectus concerning the
contents of any contract or any other document are not necessarily complete;
reference is made in each instance to the copy of such contract or any other
document filed as an exhibit to the registration statement. Each such statement
is qualified in all respects by such reference to such exhibit. The registration
statement, including exhibits and schedules thereto, may be inspected without
charge at the Commission's
62
<PAGE> 67
principal office in Washington, D.C., and copies of all or any part thereof may
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and at 7 World Trade Center, 13th Floor, New York, New York 10048
after payment of fees prescribed by the Commission. You may obtain information
on the operation of the Public Reference Room by calling 1-800-SEC-0330. The
Commission also maintains a World Wide Web site which provides online access to
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission at the address
http://www.sec.gov.
63
<PAGE> 68
GLOSSARY
<TABLE>
<S> <C>
Architecture A particular methodology for bringing together and
utilizing selected computer hardware, systems software
and applications software to achieve an overall
objective.
Application Specific A broad term that refers to integrated circuits that are
Integrated Circuit custom, semi-custom or user-programmable.
(ASIC)
Bus A common pathway, or channel, between multiple devices.
Central Processing Unit The main processor of the computer.
(CPU)
Direct Memory Access Device which moves data between specified system memory
(DMA) Controller locations.
Embedded system A computer that performs a dedicated task or set of
tasks that is embedded in another product.
Field Programmable Gate A semiconductor device whose logic function can be
Array (FPGA) programmed by the system manufacturer.
Integrated circuit (IC) Microelectronic semiconductor device consisting of many
interconnected transistors and other components.
Intelligent I/O (I(2)O) This standard was developed by the I(2)O Special
Interest Group to provide a common software messaging
standard for high-performance computers.
I/O accelerators Semiconductor devices that incorporate high-level
functions to enable efficient movement of data in
systems.
I/O processors Processors specifically designed to manage I/O tasks
efficiently.
I/O subsystem The circuitry and software that connects the
microprocessor, the memory and peripherals and allows
for the transfer of instructions and data among these
functions.
Mbps Megabits per second (1,000,000 bps).
Peripheral Component This standard was developed by the PCI-SIG (Special
Interconnect (PCI) Interest Group) to provide a high performance, reliable
and cost-effective method of connecting high speed
devices together.
</TABLE>
64
<PAGE> 69
PLX TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Income........................... F-4
Consolidated Statements of Stockholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 70
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
PLX Technology, Inc.
We have audited the accompanying consolidated balance sheets of PLX
Technology, Inc. as of December 31, 1997 and 1998, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
PLX Technology, Inc. at December 31, 1997 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
San Jose, California
January 14, 1999,
except for Note 11,
as to which the date is
March , 1999
------------------------
The following report is in the form that will be signed upon the approval
of the Certificate of Incorporation in the State of Delaware as discussed in
Note 11 to the Consolidated Financial Statements.
/s/ ERNST & YOUNG LLP
San Jose, California
January 14, 1999,
except for Note 11,
as to which the date is
January 25, 1999
F-2
<PAGE> 71
PLX TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY
------------------------ DECEMBER 31,
1997 1998 1998
---------- ----------- -------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents..................... $2,701,131 $ 5,638,369
Accounts receivable, net of allowance for
doubtful accounts of $158,648 in 1997 and
$173,284 in 1998........................... 2,558,751 2,072,760
Inventories................................... 1,213,413 1,344,346
Deferred tax assets........................... 191,000 735,000
Other current assets.......................... 51,099 332,270
---------- -----------
Total current assets............................ 6,715,394 10,122,745
Property and equipment, net..................... 1,162,642 1,514,693
Deposits and licenses........................... 135,453 129,039
---------- -----------
Total assets.................................... $8,013,489 $11,766,477
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $1,838,729 $ 1,600,931
Accrued compensation and benefits............. 389,407 724,273
Accrued commissions........................... 177,535 100,023
Deferred revenues............................. 292,343 592,470
Other accrued expenses........................ 315,142 546,618
Income tax payable............................ 111,000 442,364
---------- -----------
Total current liabilities....................... 3,124,156 4,006,679
Commitments
Stockholders' equity
Preferred stock, $0.001 par value:
Authorized shares -- 5,000,000 pro forma
Issued and outstanding shares -- none in
1997 and 1998 and pro forma.............. -- -- $ --
Redeemable convertible preferred stock, $0.001
par value:
Authorized shares -- 5,000,000 in 1997 and
1998 and none pro forma
Designated shares -- 4,868,738 in 1997
and 1998
Issued and outstanding shares -- 4,579,636
in 1997 and 1998 and none pro forma
Liquidation preference of $4,946,027 at
December 31, 1998........................ 4,580 4,580 --
Common stock, $0.001 par value:
Authorized shares -- 30,000,000 in 1997 and
1998.....................................
Issued and outstanding shares -- 4,674,416
in 1997 and 4,626,643 in 1998 and
18,365,551 pro forma..................... 4,675 4,627 18,366
Additional paid in capital.................... 5,500,352 5,616,775 5,607,616
Deferred compensation......................... (234,850) (282,619) (282,619)
Notes receivable for employee stock
purchases.................................. (199,014) (163,314) (163,314)
Retained earnings (accumulated deficit)....... (186,410) 2,579,749 2,579,749
---------- ----------- ----------
Total stockholders' equity...................... 4,889,333 7,759,798 $7,759,798
---------- ----------- ==========
Total liabilities and stockholders' equity...... $8,013,489 $11,766,477
========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 72
PLX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues.............................. $ 9,813,499 $17,533,631 $26,276,201
Cost of revenues.......................... 4,526,402 6,975,659 9,671,384
----------- ----------- -----------
Gross margin.............................. 5,287,097 10,557,972 16,604,817
Operating expenses:
Research and development................ 1,854,213 4,155,809 6,552,187
Selling, general and administrative..... 2,540,056 4,411,312 6,669,634
----------- ----------- -----------
Total operating expenses.................. 4,394,269 8,567,121 13,221,821
----------- ----------- -----------
Income from operations.................... 892,828 1,990,851 3,382,996
Interest income and other, net............ 39,133 43,910 75,197
Interest expense.......................... (2,118) (12) (34)
----------- ----------- -----------
Income before income taxes................ 929,843 2,034,749 3,458,159
Provision for income taxes................ 38,514 110,355 692,000
----------- ----------- -----------
Net income................................ $ 891,329 $ 1,924,394 $ 2,766,159
=========== =========== ===========
Historical basic net income per share..... $ 0.28 $ 0.58 $ 0.77
=========== =========== ===========
Share used to compute historical basic per
share amounts........................... 3,137,446 3,292,560 3,601,250
----------- ----------- -----------
Historical diluted net income per share... $ 0.05 $ 0.11 $ 0.15
=========== =========== ===========
Shares used to compute historical diluted
per share amounts....................... 17,287,153 17,758,122 18,405,143
=========== =========== ===========
Pro forma basic net income per share...... $ 0.16
===========
Shares used to compute pro forma basic net
income per share........................ 17,340,158
===========
Pro forma diluted net income per share.... $ 0.15
===========
Shares used to compute pro forma diluted
net income per share.................... 18,405,143
===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 73
PLX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTES
REDEEMABLE RECEIVABLE
CONVERTIBLE FOR RETAINED
PREFERRED STOCK COMMON STOCK ADDITIONAL EMPLOYEE EARNINGS
------------------ ------------------ PAID IN DEFERRED STOCK (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION PURCHASES DEFICIT)
--------- ------ --------- ------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996...... 4,579,636 $4,580 3,039,216 $3,039 $4,991,717 $ -- $ (7,848) $(3,002,133)
Sales of common stock......... -- -- 413,000 413 61,537 -- (38,960) --
Repurchase of common stock.... -- -- (60,883) (61) (6,698) -- -- --
Warrants exercised related to
the guarantee of line of
credit...................... -- -- 224,583 225 10,068 -- -- --
Reduction of stockholder notes
receivable.................. -- -- -- -- -- -- 1,680 --
Net income.................... -- -- -- -- -- -- -- 891,329
--------- ------ --------- ------ ---------- --------- --------- -----------
Balance at December 31, 1996.... 4,579,636 4,580 3,615,916 3,616 5,056,624 -- (45,128) (2,110,804)
Sales of common stock......... -- -- 1,058,500 1,059 208,878 -- (153,886) --
Unearned compensation related
to stock options............ -- -- -- -- 234,850 (234,850) -- --
Net income.................... -- -- -- -- -- -- -- 1,924,394
--------- ------ --------- ------ ---------- --------- --------- -----------
Balance at December 31, 1997.... 4,579,636 4,580 4,674,416 4,675 5,500,352 (234,850) (199,014) (186,410)
Repurchase of common stock.... -- -- (47,773) (48) (10,027) -- -- --
Unearned compensation related
to stock options............ -- -- -- -- 126,450 (126,450) -- --
Amortization of unearned
compensation................ -- -- -- -- -- 78,681 -- --
Reduction of stockholder notes
receivable.................. -- -- -- -- -- -- 35,700 --
Net income.................... -- -- -- -- -- -- -- 2,766,159
--------- ------ --------- ------ ---------- --------- --------- -----------
Balance at December 31, 1998.... 4,579,636 $4,580 4,626,643 $4,627 $5,616,775 $(282,619) $(163,314) $ 2,579,749
========= ====== ========= ====== ========== ========= ========= ===========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance at January 1, 1996...... $1,989,355
Sales of common stock......... 22,990
Repurchase of common stock.... (6,759)
Warrants exercised related to
the guarantee of line of
credit...................... 10,293
Reduction of stockholder notes
receivable.................. 1,680
Net income.................... 891,329
----------
Balance at December 31, 1996.... 2,908,888
Sales of common stock......... 56,051
Unearned compensation related
to stock options............ --
Net income.................... 1,924,394
----------
Balance at December 31, 1997.... 4,889,333
Repurchase of common stock.... (10,075)
Unearned compensation related
to stock options............ --
Amortization of unearned
compensation................ 78,681
Reduction of stockholder notes
receivable.................. 35,700
Net income.................... 2,766,159
----------
Balance at December 31, 1998.... $7,759,798
==========
</TABLE>
See accompanying notes.
F-5
<PAGE> 74
PLX TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1997 1998
----------- ---------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................. $ 891,329 $1,924,394 $ 2,766,159
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation......................... 248,832 455,449 736,628
Amortization of unearned
compensation...................... -- -- 78,681
Changes in operating assets and
liabilities:
Accounts receivable............... (1,066,080) (805,674) 485,991
Inventories....................... 158,068 (700,397) (130,933)
Deferred tax assets............... -- (191,000) (544,000)
Other current assets.............. (18,752) 7,110 (281,171)
Deposits and licenses............. 9,598 (117,743) 6,414
Accounts payable.................. (72,078) 1,244,161 (237,798)
Accrued compensation and
benefits........................ 99,723 274,779 334,866
Accrued commissions............... -- 94,116 (77,512)
Deferred revenues................. 16,908 239,163 300,127
Other accrued expenses............ 40,140 17,070 231,476
Income tax payable................ -- 111,000 331,364
----------- ---------- -----------
Net cash provided by operating
activities........................... 307,688 2,552,428 4,000,292
INVESTING ACTIVITIES
Purchase of property and equipment..... (602,850) (984,274) (1,088,679)
----------- ---------- -----------
Net cash used in investing
activities........................... (602,850) (984,274) (1,088,679)
FINANCING ACTIVITIES
Repayment of note payable.............. (100,000) -- --
Proceeds from sales of common stock.... 33,283 56,051 --
Repurchase of common stock............. (6,759) (10,075)
Repayment of stockholder notes
receivable........................... 1,680 -- 35,700
----------- ---------- -----------
Net cash provided by (used in)
financing activities................. (71,796) 56,051 25,625
----------- ---------- -----------
Increase (decrease) in cash and cash
equivalents.......................... (366,958) 1,624,205 2,937,238
Cash and cash equivalents at beginning
of year.............................. 1,443,884 1,076,926 2,701,131
----------- ---------- -----------
Cash and cash equivalents at end of
year................................. $ 1,076,926 $2,701,131 $ 5,638,369
=========== ========== ===========
SCHEDULE OF NONCASH ACTIVITIES
Common stock issued for notes
receivable........................... $ 38,960 $ 153,886 $ --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest................. $ 2,118 $ 12 $ 34
Cash paid for income taxes............. $ 26,000 $ 190,000 $ 905,000
</TABLE>
See accompanying notes.
F-6
<PAGE> 75
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
PLX Technology, Inc. (the Company) develops and markets I/O
interconnectivity solutions that speed the transfer of data in high-performance
embedded systems. The Company's principal products are high performance
semiconductor devices, as well as related software development kits and hardware
design kits. Semiconductor devices account for a significant portion of the
Company's net revenues.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its subsidiary. All intercompany transactions and balances have been
eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
The Company accounts for its investments in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (FAS 115). Under FAS 115, management determines the
appropriate classification of debt securities at the time of purchase and
reevaluates such designation as of each balance sheet date. At December 31,
1998, all debt securities are designated as available-for-sale.
Available-for-sale securities are carried at fair value with unrealized gains
and losses reported in a separate component of stockholders' equity. The
amortized cost of debt securities in this category is adjusted for the
amortization of premiums and the accretion of discounts to maturity. Such
amortization, as well as any interest earned on the securities, is included in
interest income, net. Realized gains and losses and declines in value judged to
be other-than-temporary on available-for-sale securities are included in
interest income and other, net. The cost of securities sold is based on the
specific identification method.
As of December 31, 1997 and 1998, the Company's available-for-sale
securities consisted of $1,394,119 and $3,817 of money market funds, $150,000
and $0 of treasury notes, and $0 and $3,980,195 of commercial paper,
respectively. There were no unrealized gains or unrealized losses as of December
31, 1997 or 1998. All such securities are included in cash and cash equivalents.
F-7
<PAGE> 76
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market (net realizable value). Inventories were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Raw materials................................. $ 48,337 $ --
Finished goods................................ 1,165,076 1,344,346
---------- ----------
Total............................... $1,213,413 $1,344,346
========== ==========
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of three to five years. Leasehold improvements are amortized using
the straight-line method over the shorter of the useful lives of the assets or
the terms of the leases.
The recoverability of the carrying amount of property and equipment is
assessed based on estimated future undiscounted cash flows and if impairment
exists the charge to operations is measured as the excess of the carrying amount
over the fair value of the assets. Based upon this method of assessing
recoverability, no asset impairment occurred in any of the years presented.
Property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1998
---------- -----------
<S> <C> <C>
Equipment and furniture...................... $1,216,898 $ 1,872,407
Purchased software........................... 731,257 1,164,427
---------- -----------
1,948,155 3,036,834
Accumulated depreciation..................... (785,513) (1,522,141)
---------- -----------
Net property and equipment................... $1,162,642 $ 1,514,693
========== ===========
</TABLE>
STOCK-BASED COMPENSATION
The Company accounts for its stock option and stock grant plans in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB Opinion No. 25), and has elected to follow the
disclosure-only alternative permitted by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (FAS 123).
REVENUE RECOGNITION
Sales to original equipment manufacturers are recognized at the time of
product shipment provided there are no significant remaining obligations and
collectibility is probable. Recognition of sales to distributors, including
international distributors, is
F-8
<PAGE> 77
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
deferred until the product is resold by the distributors to end users, provided
there are no significant remaining obligations and collectibility is probable.
Net revenues from the sale of software development kits is insignificant for all
years presented.
ADVERTISING EXPENSES
The Company accounts for advertising costs as expenses in the period in
which they are incurred. Advertising expenses for 1996, 1997, and 1998 were
$23,158, $28,508, and $70,311, respectively.
SOFTWARE DEVELOPMENT COSTS
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed," the Company capitalizes eligible computer software costs upon
achievement of technological feasibility subject to net realizable value
considerations. The Company has defined technological feasibility as completion
of a working model. The period between the achievement of technological
feasibility and release of the Company's software products has been of short
duration. As of December 31, 1998, such capitalizable costs were insignificant.
Accordingly the Company has charged all such costs to research and development
expenses in the accompanying consolidated statements of income.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates and such
differences may be material to the financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (FAS 130). FAS 130 requires that all items
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company's comprehensive
net income was the same as its net income for the years ended December 31, 1996,
1997 and 1998.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (FAS 131). FAS 131 superseded Statement of Financial
Accounting Standards No. 14, "Financial Reporting for Segments of a Business
Enterprise." FAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. FAS 131 also establishes
standards for related disclosures about products and services, geographic areas,
F-9
<PAGE> 78
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
and major customers. The adoption of FAS 131 did not affect the Company's
results of operations or financial position, and did not affect the disclosure
of segment information (see Note 9).
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. FAS 133 is effective for fiscal years beginning after June
15, 1999 and the Company believes that the adoption of FAS 133 will not have a
significant impact on the Company's operating results or cash flows.
2. NET INCOME PER SHARE AND UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
The Company follows the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share." Basic net income per share is computed
by dividing net income by the weighted average number of common shares
outstanding during the period. Diluted net income per share is calculated using
the weighted average number of outstanding shares of common stock plus dilutive
common stock equivalents.
In February 1998, the SEC issued Staff Accounting Bulletin No. 98 which
requires issuances of common stock, options and warrants for nominal
consideration in periods preceding an initial public offering to be included in
the calculations of earnings per share as if they were outstanding for all
periods presented. To date, the Company has had no issuances of common stock,
options, or warrants for nominal consideration.
If the offering contemplated by this prospectus is consummated, all of the
convertible preferred stock outstanding as of the closing date will
automatically be converted into 13,738,908 shares of common stock based on the
shares of convertible preferred stock outstanding at December 31, 1998. The
unaudited pro forma stockholders' equity reflects this conversion.
F-10
<PAGE> 79
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of shares used in the calculation of historical and pro
forma basic and diluted net income per share is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net income (numerator)...................... $ 891,329 $ 1,924,394 $ 2,766,159
=========== =========== ===========
Shares used in computing historical basic
net income per share (denominator)........ 3,137,446 3,292,560 3,601,250
=========== =========== ===========
Historical net income per share -- Basic.... $ 0.28 $ 0.58 $ 0.77
=========== =========== ===========
Outstanding weighted average number of
common shares............................. 3,137,446 3,292,560 3,601,250
Effective of dilutive securities:
Stock options............................. -- -- 9,000
Unvested restricted stock................. 410,799 726,654 1,055,985
Redeemable convertible preferred stock.... 13,738,908 13,738,908 13,738,908
----------- ----------- -----------
14,149,707 14,465,562 14,803,893
----------- ----------- -----------
Shares used in computing historical and pro
forma diluted net income per share
(denominator)............................. 17,287,153 17,758,122 18,405,143
=========== =========== ===========
Historical and pro forma net income per
share -- diluted.......................... $ 0.05 $ 0.11 $ 0.15
=========== =========== ===========
Shares used in computing historical basic
net income per share...................... 3,601,250
Adjustment to reflect the effect of the
assumed conversion of weighted average
shares of redeemable convertible preferred
stock outstanding......................... 13,738,908
-----------
Shares used in computing pro forma basic net
income per share.......................... 17,340,158
===========
Pro forma basic net income per share........ $ 0.16
===========
</TABLE>
3. CONCENTRATIONS OF CREDIT, CUSTOMER AND SUPPLIER RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents and trade
receivables. The Company generally invests its excess money in money market
funds, commercial paper of corporations with high credit ratings, and treasury
bills. The Company has not experienced any significant losses on its cash
equivalents. The Company performs ongoing credit evaluations of its customers
and generally requires no collateral. A relatively small number of customers and
resellers account for a significant percentage of the Company's revenues. The
Company expects that the sale of its products to a limited number of customers
and resellers may continue to account for a high percentage of revenues for the
foreseeable future. The Company analyzes the need for reserves for potential
credit losses and records reserves when necessary.
F-11
<PAGE> 80
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Currently, the Company relies on single source suppliers of materials for
the significant majority of its product inventory. As a result, should the
Company's current suppliers not produce and deliver inventory for the Company to
sell on a timely basis, operating results may be adversely impacted.
4. REDEEMABLE CONVERTIBLE PREFERRED STOCK
Shares of Series A, B, C, and D preferred stock are convertible at the
option of the stockholder into that number of shares of common stock as
determined by dividing $0.167, $0.333, $0.458, and $0.467, respectively, by a
conversion price as determined by the provisions in the Articles of
Incorporation, subject to antidilution provisions. At December 31, 1997 and
1998, each share of preferred stock would convert to common stock on a
three-for-one basis. Conversion is mandatory concurrent with a firm underwritten
public offering of not less than $10,000,000 with a per share price of not less
than $1.67. The preferred stockholders have voting rights equal to the voting
rights of the common stockholders on an as-if-converted basis.
Preferred stockholders are entitled to noncumulative dividends, when and if
declared by the Board of Directors, at an annual amount of $0.05, $0.10,
$0.1375, and $0.14 per share of Series A, B, C, and D preferred stock,
respectively. Such dividends have a preference over the payment of dividends on
common stock.
In the event of liquidation, the preferred stockholders are entitled to a
liquidation preference distribution of $0.50, $1.00, $1.375, and $1.40 per share
of Series A, B, C, and D preferred stock, respectively, plus all declared and
unpaid dividends. Aggregate liquidation preferences amounted to $4,946,027 at
December 31, 1997 and 1998.
The Company may, at the option of the Board of Directors, redeem the Series
A, B, C, or D convertible preferred stock at any time after written request by
the holders of at least 67% of any class of preferred stock outstanding. The
Company may redeem that class of preferred stock in whole or in part by paying
$0.50, $1.00, $1.375, and $1.40 per share of Series A, B, C, and D convertible
preferred stock, respectively, plus all declared but unpaid dividends.
At December 31, 1997 and 1998, 5,000,000 shares of redeemable convertible
preferred stock were authorized. At December 31, 1997 and 1998, designated,
issued, and outstanding redeemable convertible preferred stock by series was as
follows:
<TABLE>
<CAPTION>
SHARES
DESIGNATED ISSUED AND
SERIES SHARES OUTSTANDING
------ ---------- -----------
<S> <C> <C>
A............................................... 1,300,000 1,300,000
B............................................... 650,000 650,000
C............................................... 1,418,738 1,418,529
D............................................... 1,500,000 1,211,107
--------- ---------
Total........................................... 4,868,738 4,579,636
========= =========
</TABLE>
F-12
<PAGE> 81
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMMON STOCK
At December 31, 1998, common stock was reserved for future issuance as
follows:
<TABLE>
<S> <C>
Conversion of preferred stock:
Series A.............................................. 3,900,000
Series B.............................................. 1,950,000
Series C.............................................. 4,255,587
Series D.............................................. 3,633,321
Authorized for future option exercises..................... 800,000
----------
14,538,908
==========
</TABLE>
On May 7, 1986, the Board of Directors of the Company approved a form of
Restricted Stock Purchase Agreement to be used to sell restricted shares of the
Company's common stock (the "Restricted Stock") to its employees, officers and
consultants. There was no formal, written plan. From time to time, the Board of
Directors reserved shares of its common stock for grant under the program. From
May 7, 1986 until November 13, 1997, a total of 4,402,060 shares of Restricted
Stock were issued pursuant to the program. The shares were issued at fair market
value as determined by the Board of Directors. The repurchase price of the
restricted shares is the original sales price. The shares are subject to a
repurchase option in favor of the Company (the "Repurchase Option") that expires
over a period of four years from the date of issuance. Under the program's
standard vesting schedule, the number of shares subject to the Repurchase Option
is reduced as follows: (i) on the first anniversary of the date of issuance, the
number of shares subject to the Repurchase Option is reduced by 25%; and (ii)
each month thereafter, the number of shares subject to the Repurchase Option is
reduced by 2.083% of the total Restricted Stock issued. As consideration for the
issuance of such Restricted Stock, each of the officers has paid 20% of the
aggregate purchase price of the Restricted Stock issued to him in cash and has
executed a promissory note (each, a "Note") for the remaining 80% of the
aggregate purchase price. The Notes bear interest at a rate of 6% per annum and
become due and payable upon the earlier of (i) four years from the date of
issuance or (ii) the effectiveness of a registration statement pursuant to which
the subject securities may be offered and sold by such officers; provided,
however, that in the event the officers are restricted by the terms of market
stand-off agreements relating to the securities, amounts that would become due
under the Notes upon such registration are reduced to the amount that would be
covered by sale of shares allowed to be sold. The due dates of the loans did not
extend past the Repurchase Option of the Company. The notes are full recourse
and, in addition, each of the executive officers has pledged the Restricted
Stock as collateral to secure the obligations under his Note. The program was
terminated upon adoption of our 1998 Incentive Stock Plan on January 15, 1998.
The Company's 1998 Stock Incentive Plan (the 1998 Plan) was approved by the
Board of Directors on January 15, 1998. The 1998 Plan provides for the grant of
both incentive and nonqualified stock options. A total of 800,000 shares of
common stock have been reserved for issuance under the 1998 Plan. The maximum
term of any stock option granted under the 1998 Plan is ten years, except that
with respect to incentive stock options granted to a person possessing more than
10% of the combined voting power of the Company (a 10% stockholder), the term of
such stock options shall be for no more than
F-13
<PAGE> 82
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
five years. The exercise price of incentive stock options granted under the 1998
Plan must be at least 100% of the fair market value of the common stock on the
grant date except that the exercise price of incentive stock options granted to
a 10% stockholder must be at least 110% of such fair market value on the date of
grant. The options generally vest over a period of three to four years.
Activity under the 1998 Plan is summarized as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------------
OPTIONS AGGREGATE WEIGHTED
AVAILABLE NUMBER OF EXERCISE AVERAGE
FOR GRANT OPTIONS PRICE EXERCISE PRICE
--------- --------- ---------- --------------
<S> <C> <C> <C> <C>
Balance at January 1, 1998......... -- -- $ -- $ --
Options authorized............... 800,000 -- -- $ --
Options granted.................. (660,250) 660,250 3,246,250 $4.92
Options canceled................. 15,000 (15,000) (75,000) $5.00
-------- ------- ----------
Balance at December 31, 1998....... 154,750 645,250 $3,171,250 $4.91
======== ======= ==========
</TABLE>
The following table summarizes the information about options outstanding at
December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
-------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$3.00..................... 27,500 9.08 years $3.00 27,500 $3.00
$5.00..................... 617,750 9.43 years $5.00 617,750 $5.00
------- -------
Total..................... 645,250 9.42 years $4.91 645,250 $4.91
======= =======
</TABLE>
As of December 31, 1998, there were 60,124 stock options vested at a
weighted average exercise price of $4.94 per share.
The Company has elected to follow APB Opinion No. 25 and related
interpretations in accounting for its stock grants since the alternative fair
market value accounting provided for under FAS 123 requires use of grant
valuation models that were not developed for use in valuing stock grants. Under
APB Opinion No. 25, as the exercise price of the Company's stock grants and
options equals the deemed fair value of the underlying stock on the date of
grant, no compensation expenses are recognized.
During the years ended December 31, 1997 and 1998, the Company recorded
aggregate deferred compensation of $361,300, representing the difference between
the grant price and the deemed fair value of the Company's common stock options
granted during these periods. The amortization of deferred compensation is
charged to operations and is amortized over the vesting period of the options,
which is typically four years. For the years ended December 31, 1997 and 1998,
the amortization expenses were $0 and $78,681, respectively.
F-14
<PAGE> 83
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pro forma information regarding net income is required by FAS 123, which
also requires that the information be determined as if the Company has accounted
for grants subsequent to December 31, 1994 under a method specified by FAS 123.
The fair value of grants of Restricted Stock in 1996 and 1997 and of options
granted in 1998 was estimated at the date of grant using the minimum value
method with the following weighted average assumptions for 1996, 1997, and 1998:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Expected life of options (in years)................... 3.88 3.86 4.00
Dividend yield........................................ 0.00% 0.00% 0.00%
Risk-free interest rate............................... 5.40% 6.14% 4.95%
</TABLE>
If compensation cost for the Company's stock-based compensation plans had
been determined based on the fair value at the grant dates for awards under
those plans consistent with the method of FAS 123, then the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Net income as reported..................... $891,329 $1,924,394 $2,766,159
Pro forma net income....................... $889,300 $1,917,575 $2,642,790
Net income per share as reported
Basic.................................... $ 0.28 $ 0.58 $ 0.77
Diluted.................................. $ 0.05 $ 0.11 $ 0.15
Pro forma net income per share
Basic.................................... $ 0.28 $ 0.58 $ 0.74
Diluted.................................. $ 0.05 $ 0.11 $ 0.14
</TABLE>
The weighted average grant date fair value for the Restricted Stock grants
during the year was $0.02 and $0.04 for 1996 and 1997, respectively. The
weighted average grant date fair value of options granted during 1998 was $0.86.
For purposes of pro forma disclosures, the minimum value of the stock
grants and stock options is deemed amortized over the grant vesting period.
Because FAS 123 is applicable only to stock grants subsequent to December 31,
1994, the pro forma effect will not be fully reflected until 2000.
6. RETIREMENT SAVINGS PLAN
The Company has a retirement savings plan, commonly known as a 401(k) plan,
that allows all full-time employees to contribute from 1% to 25% of their pretax
salary, subject to IRS limits. Beginning in 1996, the Company made a matching
contribution calculated at 50 cents on each dollar of the first 6% of
participant contributions. The Company's contributions to the 401(k) plan were
$17,250, $50,368, and $123,575 for 1996, 1997, and 1998, respectively. There are
six investment funds in which each employee may invest contributions in whole
percentage increments.
F-15
<PAGE> 84
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1996 1997 1998
------- -------- ----------
<S> <C> <C> <C>
Federal:
Current.................................... $37,714 $291,000 $1,235,000
Deferred................................... - (191,000) (544,000)
------- -------- ----------
37,714 100,000 691,000
State:
Current.................................... 800 10,355 1,000
Deferred................................... - - -
------- -------- ----------
800 10,355 1,000
------- -------- ----------
Total.............................. $38,514 $110,355 $ 692,000
======= ======== ==========
</TABLE>
The provision for income taxes differs from the amount of income taxes
determined by applying the U.S. statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- ----------
<S> <C> <C> <C>
Tax at the U.S. statutory rate.............. $325,000 $712,000 $1,210,000
Benefit of net operating losses............. (249,000) (502,000) -
Impact of temporary differences............. (48,000) 234,000 -
Research and development credits............ - (215,000) (226,000)
Adjustment of the valuation allowance....... - (191,000) (337,000)
Other....................................... 10,514 72,355 45,000
-------- -------- ----------
$ 38,514 $110,355 $ 692,000
======== ======== ==========
</TABLE>
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1998
--------- --------
<S> <C> <C>
Deferred tax assets:
Reserves and accruals not currently
deductible................................. $ 434,000 $683,000
Research credit carryforwards................. 70,000 -
Other individually immaterial items........... 94,000 52,000
--------- --------
Total deferred tax assets....................... 598,000 735,000
Valuation allowance for deferred tax assets..... (407,000) --
--------- --------
Net deferred tax assets......................... $ 191,000 $735,000
========= ========
</TABLE>
The valuation allowance decreased by $639,000 and $407,000 in 1997 and
1998, respectively.
8. LEASE COMMITMENTS
The Company leases its facilities under noncancelable lease agreements, and
rental expenses for all leases aggregated approximately $217,000, $264,000, and
$641,000 for the
F-16
<PAGE> 85
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
years ended December 31, 1996, 1997, and 1998, respectively. Future minimum
lease payments at December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999............................................... $ 658,323
2000............................................... 685,040
2001............................................... 495,919
2002............................................... 473,458
2003............................................... 493,520
Beyond 2003........................................ 469,540
----------
Total minimum lease payments....................... $3,275,800
==========
</TABLE>
9. SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
The Company operates in one business segment, the sale of semiconductor
devices. The President has been identified as the Chief Operating Decision Maker
(CODM) because he has final authority over resource allocation decisions and
performance assessment. The CODM does not receive discrete financial information
about individual components.
Total net export revenues to regions outside of North America were
$2,047,781, $3,903,566, and $8,896,927 for the years ended December 31, 1996,
1997, and 1998, respectively. Revenues by geographic region were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1997 1998
---------- ----------- -----------
<S> <C> <C> <C>
Revenues:
United States........................ $7,130,882 $12,437,302 $16,370,246
Other North America.................. 634,836 1,192,763 1,009,028
Europe............................... 1,588,893 2,962,959 6,282,975
Asia................................. 458,888 940,607 2,613,952
---------- ----------- -----------
Total.................................. $9,813,499 $17,533,631 $26,276,201
========== =========== ===========
</TABLE>
For the year ended December 31, 1996, one customer, a related party,
accounted for 10% of net revenues. For the year ended December 31, 1997, no
customer accounted for more than 10% of net revenues. For the year ended
December 31, 1998, two customers accounted for more than 10% of net revenues.
One customer, a U.S. distributor, accounted for 22% of net revenues and another
customer, a European distributor, accounted for 11% of net revenues.
10. RELATED PARTY TRANSACTIONS
The Company and a customer are related parties because the chairman of the
Company's Board of Directors also serves on the customer's Board of Directors.
For the years ended December 31, 1996, 1997, and 1998, net revenues, which were
transacted at arms' length prices, to the customer were approximately $962,000,
$765,000, and $330,000, respectively.
The Company contributed $100,000 for research and development of a
semiconductor device developed by another company. This amount is included in
research and
F-17
<PAGE> 86
PLX TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
development expenses in the 1997 consolidated statement of income. The chairman
of the Company's Board of Directors is also the chairman of the other company.
11. SUBSEQUENT EVENTS
On January 25, 1999, the Company's Board of Directors approved the 1999
Stock Incentive Plan (the 1999 Plan). The 1999 Plan provides for the grant of
incentive and nonqualified stock options. A total of 1,000,000 shares of common
stock have been reserved for issuance under the 1999 Plan. The maximum term of
any stock option granted under the 1999 Plan is ten years, except that with
respect to incentive stock options granted to a person possessing more than 10%
of the combined voting power of the Company (a 10% Stockholder), the term of
such stock options shall be for no more than five years. The exercise price of
incentive stock options granted under the 1999 Plan must be at least 100% of the
fair market value of the common stock on the grant date except that the exercise
price of incentive stock options granted to a 10% Stockholder must be at least
110% of such fair market value on the date of grant.
On January 25, 1999, the Company's Board of Directors approved an increase
in the number of shares reserved for issuance under the 1998 Plan from 800,000
to 1,300,000.
On January 25, 1999, the Company's Board of Directors, subject to approval
of the Certificate of Incorporation by the State of Delaware, authorized the
reincorporation of the Company in Delaware. The par value of the preferred and
common stock is $0.001 per share. The Company's Certificate of Incorporation
will be amended to authorize 5,000,000 shares of preferred stock. The Board of
Directors has the authority to fix or alter the designations, powers,
preferences and rights of the shares of each such series. The Company's
reincorporation has been reflected in the consolidated financial statements for
all periods presented.
F-18
<PAGE> 87
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THROUGH AND INCLUDING , 1999 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
3,300,000 SHARES
LOGO
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
WIT CAPITAL CORPORATION
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 88
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by the Registrant in connection with the
distribution of the securities being registered, other than underwriting
discounts and commissions, are as follows:
<TABLE>
<CAPTION>
AMOUNT*
--------
<S> <C>
Securities and Exchange Commission Filing Fee............... $ 8,441
NASD Filing Fee............................................. 3,536
Nasdaq National Market Listing Fee.......................... 95,000
Accounting Fees and Expenses................................ 150,000
Blue Sky Fees and Expenses.................................. 100,000
Legal Fees and Expenses..................................... 200,000
Transfer Agent and Registrar Fees and Expenses.............. 7,500
Printing Expenses........................................... 85,000
Miscellaneous Expenses...................................... 50,523
--------
Total............................................. $700,000
========
</TABLE>
- -------------------------
* All amounts are estimates except the SEC filing fee, the NASD filing fee and
the Nasdaq National Market listing fee.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the General Corporate Law of the State of Delaware,
the Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Bylaws (Exhibit 3.2 hereto) also provide for mandatory indemnification of its
directors and executive officers, and permissive indemnification of its
employees and agents, to the fullest extent permissible under Delaware law.
The Registrant's Certificate of Incorporation (Exhibit 3.1 hereto) provides
that the liability of its directors for monetary damages shall be eliminated to
the fullest extent permissible under Delaware law. Pursuant to Delaware law,
this includes elimination of liability for monetary damages for breach of the
directors' fiduciary duty of care to the Registrant and its stockholders. These
provisions do not eliminate the directors' duty of care and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available under Delaware law. In addition, each
director will continue to be subject to liability for breach of the director's
duty of loyalty to the Registrant, for acts or omissions not in good faith or
involving intentional misconduct, for knowing violations of law, for any
transaction from which the director derived an improper personal benefit, and
for payment of dividends or approval of stock repurchases or redemptions that
are unlawful under Delaware law. The provision also does not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.
Prior to the effective date of the Registration Statement, the Registrant
will have entered into agreements with its directors and certain of its
executive officers that require the Registrant to indemnify such persons against
expenses, judgments, fines, settlements
II-1
<PAGE> 89
and other amounts actually and reasonably incurred (including expenses of a
derivative action) in connection with any proceeding, whether actual or
threatened, to which any such person may be made a party by reason of the fact
that such person is or was a director or officer of the Registrant or any of its
affiliated enterprises, provided such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best interests of
the Registrant and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. The indemnification agreements
also set forth certain procedures that will apply in the event of a claim for
indemnification thereunder.
The Registrant intends to obtain in conjunction with the effectiveness of
the Registration Statement a policy of directors' and officers' liability
insurance that insures PLX's directors and officers against the cost of defense,
settlement or payment of a judgment under certain circumstances.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the period from February 28, 1995 to February 28, 1999, the
Registrant has issued and sold the following unregistered securities:
1. The Registrant granted stock options to employees, directors and
consultants under its 1998 Plan covering an aggregate of 660,250 shares of
the Registrant's Common Stock, at exercise prices ranging from $3.00 to
$5.00 with an average of $4.92 per share.
2. The Registrant granted an aggregate of 1,389,727 shares of
Restricted Stock to employees, directors and consultants pursuant to
restricted stock purchase agreements, at purchase prices ranging from
$0.0633 to $0.3000 with an average of $0.1803 per share. The 1,389,727
shares were sold to 76 employees, directors and consultants for cash in the
aggregate amount of $68,776 and promissory notes in the aggregate amount of
$275,104.
3. The Registrant issued and sold an aggregate of 109,791 shares of
its Common Stock pursuant to the exercise of warrants with an exercise
price of $0.05 per share. These shares were purchased by certain holders of
our preferred stock.
The sale and issuance of securities in the transactions described in
paragraphs 1, 2 and 3 above were deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act or Regulation D
promulgated thereunder as transactions by an issuer not involving a public
offering, where the purchasers represented their intention to acquire securities
for investment only and not with a view to distribution and received or had
access to adequate information about the Registrant, or Rule 701 promulgated
thereunder in that they were offered and sold either pursuant to written
compensatory benefit plans or pursuant to a written contract relating to
compensation.
Appropriate legends were affixed to the stock certificates issued in the
above transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. No underwriters were employed in any of
the above transactions.
II-2
<PAGE> 90
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
The exhibits are as set forth in the Exhibit Index.
(b) FINANCIAL STATEMENT SCHEDULES
II -- Valuation and Qualifying Accounts
Schedules other than those listed above have been omitted since they are
not required or are not applicable or the required information is shown in the
financial statements or related notes. Columns omitted from schedules filed have
been omitted since the information is not applicable.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide the underwriters at the closing
specified in the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Sunnyvale, State of California on the 22nd day of March, 1999.
PLX TECHNOLOGY, INC.
By: /s/ MICHAEL J. SALAMEH
-----------------------------------
Michael J. Salameh
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL J. SALAMEH President and Director March 22, 1999
- ------------------------------- (Principal Executive Officer)
Michael J. Salameh
/s/ SCOTT M. GIBSON* Vice President, Finance, Chief March 22, 1999
- ------------------------------- Financial Officer and Secretary
Scott M. Gibson (Principal Financial and Accounting
Officer)
/s/ D. JAMES GUZY, SR.* Director March 22, 1999
- -------------------------------
D. James Guzy, Sr.
/s/ TIMOTHY DRAPER* Director March 22, 1999
- -------------------------------
Timothy Draper
/s/ EUGENE FLATH* Director March 22, 1999
- -------------------------------
Eugene Flath
</TABLE>
*By: /s/ MICHAEL J. SALAMEH
---------------------------------
Michael J. Salameh
Attorney-In-Fact
II-4
<PAGE> 92
PLX TECHNOLOGY, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNT
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO COSTS END
DESCRIPTION OF PERIOD AND EXPENSES DEDUCTIONS(1) OF PERIOD
----------- ---------- ---------------- ------------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Deducted from asset accounts:
Allowance for doubtful accounts.... $ 49,110 $73,492 $(44,505) $ 78,097
Year ended December 1997
Deducted from asset accounts:
Allowance for doubtful accounts.... $ 78,097 $87,931 $ (7,380) $158,648
Year ended December 31, 1998
Deducted from asset accounts:
Allowance for doubtful accounts.... $158,648 $57,929 $(43,293) $173,284
</TABLE>
- ------------------------
(1) Uncollectible accounts written off, net of recoveries
II-5
<PAGE> 93
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT
- ------- --------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Registrant's Amended and Restated Bylaws.
4.1 Reference is made to Exhibit 3.1.
5.1* Opinion of Morrison & Foerster LLP as to the legality of the
Common Stock being registered.
10.1* Form of Indemnification Agreement between PLX and each of
its Officers and Directors.
10.2 1998 Stock Incentive Plan.
10.3 1999 Stock Incentive Plan.
10.4* Lease Agreement dated December 20, 1995 by and between Aetna
Life Insurance Company as Landlord and PLX as Tenant.
10.5* Lease Agreement dated October 17, 1997 between The Arrillaga
Foundation and The Perry Foundation as Landlords and PLX as
Tenant, as amended.
10.6* Form of Restricted Stock Purchase Agreement used in
connection with the 1986 Restricted Stock Purchase Program.
10.7* Form of Pledge Agreement used in connection with the 1986
Restricted Stock Purchase Program.
10.8* Form of Promissory Note used in connection with the 1986
Restricted Stock Purchase Program.
10.9* PLX Technology, Inc. Stock Restriction, Information Rights
and Registration Rights Agreement dated April 19, 1989.
10.10* PLX Technology, Inc. Stock Restriction, Information Rights
and Registration Rights Agreement dated July 3, 1991.
23.1* Consent of Morrison & Foerster LLP. Reference is made to
Exhibit 5.1.
23.2 Consent of Ernst & Young LLP.
24.1* Powers of Attorney.
27.1* Financial Data Schedule.
99.1* Consent of Nominee Director signed by Mr. Sohn.
99.2 Consent of Nominee Director signed by Mr. Hart.
</TABLE>
- -------------------------
* Previously filed.
** To be filed by Amendment
<PAGE> 1
EXHIBIT 1.1
PLX Technology, Inc.
( a Delaware corporation)
3,300,000 Shares of Common Stock
PURCHASE AGREEMENT
Dated: March [*], 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. Representations and Warranties......................................2
(a) Representations and Warranties by the Company.......................2
(i) Compliance with Registration Requirements..................2
(ii) Independent Accountants....................................3
(iii) Financial Statements.......................................3
(iv) No Material Adverse Change in Business.....................4
(v) Good Standing of the Company...............................4
(vi) Good Standing of Subsidiary................................4
(vii) Capitalization.............................................4
(viii) Authorization of Agreement.................................5
(ix) Authorization and Description of Securities................5
(x) Absence of Defaults and Conflicts..........................5
(xi) Absence of Labor Dispute...................................6
(xii) Absence of Proceedings.....................................6
(xiii) Accuracy of Exhibits.......................................6
(xiv) Possession of Intellectual Property........................6
(xv) Absence of Further Requirements............................7
(xvi) Possession of Licenses and Permits.........................7
(xvii) Title to Property..........................................7
(xviii) Compliance with Cuba Act...................................7
(xix) Investment Company Act.....................................8
(xx) Environmental Laws.........................................8
(xxi) Registration Rights........................................8
(b) Officer's Certificates..............................................8
SECTION 2. Sale and Delivery to Underwriters; Closing..........................8
(a) Initial Securities..................................................8
(b) Option Securities...................................................9
(c) Payment.............................................................9
(d) Denominations; Registration........................................10
SECTION 3. Covenants of the Company...........................................10
(a) Compliance with Securities Regulations and Commission Requests.....10
(b) Filing of Amendments...............................................10
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(c) Delivery of Registration Statements................................10
(d) Delivery of Prospectuses...........................................11
(e) Continued Compliance with Securities Laws..........................11
(f) Blue Sky Qualifications............................................11
(g) Rule 158...........................................................12
(h) Use of Proceeds....................................................12
(i) Listing............................................................12
(j) Restriction on Sale of Securities..................................12
(k) Reporting Requirements.............................................12
SECTION 4. Payment of Expenses................................................13
(a) Expenses...........................................................13
(b) Termination of Agreement...........................................13
SECTION 5. Conditions of Underwriters' Obligations............................13
(a) Effectiveness of Registration Statement............................13
(b) Opinion of Counsel for Company.....................................14
(c) Opinion of Counsel for Underwriters................................14
(d) Officers' Certificate..............................................14
(e) Accountant's Comfort Letter........................................14
(f) Bring-down Comfort Letter..........................................15
(g) Approval of Listing................................................15
(h) No Objection.......................................................15
(i) Lockup Agreements..................................................15
(j) Conditions to Purchase of Option Securities........................15
(i) Officers' Certificate.....................................15
(ii) Opinion of Counsel for Company............................15
(iii) Opinion of Counsel for Underwriters.......................15
(iv) Bring-down Comfort Letter.................................15
(k) Additional Documents...............................................16
(l) Termination of Agreement...........................................16
SECTION 6. Indemnification....................................................16
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(a) Indemnification of Underwriters....................................16
(b) Indemnification of Company, Directors and Officers.................17
(c) Actions against Parties; Notification..............................17
(d) Settlement without Consent if Failure to Reimburse.................18
(e) Indemnification for Reserved Securities............................19
SECTION 7. Contribution.......................................................19
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.....20
SECTION 9. Termination of Agreement...........................................21
(a) Termination; General...............................................21
(b) Liabilities........................................................21
SECTION 10. Default by One or More of the Underwriters.........................21
SECTION 11. Notices............................................................22
SECTION 12. Parties............................................................22
SECTION 13. Governing Law and Time.............................................22
SECTION 14. Effect of Headings.................................................23
</TABLE>
-iii-
<PAGE> 5
EXHIBIT 1.1
PLX Technology, Inc.
(a Delaware corporation)
3,300,000 Shares of Common Stock
(Par Value 0.001 Per Share)
PURCHASE AGREEMENT
March [*] , 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
NationsBanc Montgomery Securities LLC
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
PLX Technology, Inc., a Delaware corporation (the "Company"), confirms
its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch and NationsBanc Montgomery Securities LLC are
acting as representatives (in such capacity, the "Representatives"), with
respect to the issue and sale by the Company and the purchase by the
Underwriters, acting severally and not jointly, of the respective numbers of
shares of Common Stock, par value $0.001 per share, of the Company ("Common
Stock") set forth in said Schedule A, and with respect to the grant by the
Company to the Underwriters, acting severally and not jointly, of the option
described in Section 2(b) hereof to purchase all or any part of 495,000
additional shares of Common Stock to cover over-allotments, if any. The
aforesaid 3,300,000 shares of Common Stock (the "Initial Securities") to be
purchased by the Underwriters and all or any part of the 495,000 shares of
Common Stock subject to the option described in Section 2(b) hereof (the "Option
Securities") are hereinafter called, collectively, the "Securities."
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and
<PAGE> 6
delivered.
The Company and the Underwriters agree that up to 100,000 shares of the
Securities to be purchased by the Underwriters (the "Reserved Securities") shall
be reserved for sale by the Underwriters to certain eligible employees and
persons having business relationships with the Company, as part of the
distribution of the Securities by the Underwriters, subject to the terms of this
Agreement, the applicable rules, regulations and interpretations of the National
Association of Securities Dealers, Inc. and all other applicable laws, rules and
regulations. To the extent that such Reserved Securities are not orally
confirmed for purchase by such eligible employees and persons having business
relationships with the Company (collectively, the "Reserved Securities
Purchasers") by the end of the first business day after the date of this
Agreement, such Reserved Securities may be offered to the public as part of the
public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-71795) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations. The information included in such prospectus that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information." Each prospectus used before such registration statement became
effective, and any prospectus that omitted the Rule 430A Information that was
used after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto, at the time it
became effective and including the Rule 430A Information is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final prospectus in
the form first furnished to the Underwriters for use in connection with the
offering of the Securities is herein called the "Prospectus." For purposes of
this Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each Underwriter,
as follows:
-2-
<PAGE> 7
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with. At the respective times the Registration
Statement, any Rule 462(b) Registration Statement and any
post-effective amendments thereto became effective and at the Closing
Time (and, if any Option Securities are purchased, at the Date of
Delivery), the Registration Statement, the Rule 462(b) Registration
Statement and any amendments and supplements thereto complied and will
comply in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations and did not and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. Neither the Prospectus nor any amendments or supplements
thereto, at the time the Prospectus or any such amendment or supplement
was issued and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
The representations and warranties in this subsection shall not apply
to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through Merrill
Lynch expressly for use in the Registration Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
(ii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included
in the Registration Statement and the Prospectus, together with the
related schedules and notes, present fairly the financial position of
the Company and its consolidated subsidiary at the dates indicated and
the statement of operations, stockholders' equity and cash flows of the
Company and its consolidated subsidiary for the periods specified; said
financial statements have been
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prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved.
The supporting schedules included in the Registration Statement present
fairly in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial
information included in the Prospectus present fairly the information
shown therein and have been compiled on a basis consistent with that of
the audited financial statements included in the Registration
Statement.
(iv) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiary considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or its subsidiary, other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiary considered as one enterprise, and (C) there
has been no dividend or distribution of any kind declared, paid or made
by the Company on any class of its capital stock.
(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the state of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(vi) Good Standing of Subsidiary. PLX Technology (Europe)
Limited (the "Subsidiary") has been duly organized and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would
not be reasonably expected to result in a Material Adverse Effect;
except as otherwise disclosed in the Registration Statement, all of the
issued and outstanding capital stock of the Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and is
owned by the Company, directly, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of
the outstanding shares of capital stock of the Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of
such Subsidiary. The Subsidiary is the
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<PAGE> 9
only subsidiary of the Company. The Subsidiary is not a "significant
subsidiary" of the Company as such term is defined in Rule 1-02 of
Regulation S-X.
(vii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of options referred to in the
Prospectus). The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid
and non-assessable; none of the outstanding shares of capital stock of
the Company was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.
(viii) Authorization of Agreement. This Agreement has been
duly authorized, executed and delivered by the Company.
(ix) Authorization and Description of Securities. The
Securities have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered
by the Company pursuant to this Agreement against payment of the
consideration set forth herein, will be validly issued and fully paid
and non-assessable; the Common Stock conforms to all statements
relating thereto contained in the Prospectus and such description
conforms to the rights set forth in the instruments defining the same;
no holder of the Securities will be subject to personal liability by
reason of being such a holder; and the issuance of the Securities is
not subject to the preemptive or other similar rights of any
securityholder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor
its subsidiary is in violation of its charter or by-laws or in default
in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or its subsidiary is a party or by
which either of them may be bound, or to which any of the property or
assets of the Company or its subsidiary is subject (collectively,
"Agreements and Instruments") except for such defaults that would not
be reasonably expected to result in a Material Adverse Effect; and the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and in the
Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities
as described in the Prospectus under the caption "Use of Proceeds") and
compliance by the Company with its obligations hereunder have been duly
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or default or Repayment
Event (as defined below) under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company or its subsidiary pursuant to, the Agreements and Instruments
(except for such conflicts, breaches
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or defaults or liens, charges or encumbrances that would not result in
a Material Adverse Effect), nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or
its subsidiary, nor will such action result in any violation of the
provisions of any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or its
subsidiary or any of their assets, properties or operations, except for
such violations of any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
the Company that would not result in a Material Adverse Effect. As used
herein, a "Repayment Event" means any event or condition which gives
the holder of any note, debenture or other evidence of indebtedness (or
any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or its subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the
employees of the Company or the Company's subsidiary exists or, to the
knowledge of the Company, is imminent, and the Company is not aware of
any existing or imminent labor disturbance by the employees of any of
its or its subsidiary's principal suppliers, manufacturers, customers
or contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against the Company or its
subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might reasonably
be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the
properties or assets thereof taken as a whole or the consummation of
the transactions contemplated in this Agreement or the performance by
the Company of its obligations hereunder; the aggregate of all pending
legal or governmental proceedings to which the Company or its
subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which
have not been so described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
subsidiary own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks,
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<PAGE> 11
service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the
business now operated by them, and neither the Company nor its
subsidiary has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect
to any Intellectual Property or of any facts or circumstances which
would render any Intellectual Property invalid or inadequate to protect
the interest of the Company or its subsidiary therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, would result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act or the 1933
Act Regulations or state securities laws.
(xvi) Possession of Licenses and Permits. The Company and its
subsidiary possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them, except
where the failure to possess such Governmental Licenses would not have
a Material Adverse Effect; the Company and its subsidiary are in
compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or in
the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except where the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor its subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xvii) Title to Property. The Company and its subsidiary have
good and marketable title to all real property owned by the Company and
its subsidiary and good title to all other properties owned by them, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectus or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company or its subsidiary; and all of the leases and
subleases material to the business of the Company and its subsidiary,
considered as one enterprise, and under which the Company or its
subsidiary holds properties described in the Prospectus, are in full
force and effect, and neither the Company nor its subsidiary has any
notice of any
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<PAGE> 12
material claim of any sort that has been asserted by anyone adverse to
the rights of the Company or its subsidiary under any of the leases or
subleases mentioned above, or affecting or questioning the rights of
the Company or such subsidiary to the continued possession of the
leased or subleased premises under any such lease or sublease.
(xviii) Compliance with Cuba Act. The Company has complied
with, and is and will be in compliance with, the provisions of that
certain Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xix) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xx) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor its subsidiary is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule
of common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or
judgment, relating to pollution or protection of human health, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or
threatened release of chemicals, pollutants, contaminants, wastes,
toxic substances, hazardous substances, petroleum or petroleum products
(collectively, "Hazardous Materials") or to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company and its subsidiary have all permits,
authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or its subsidiary
and (D) there are no events or circumstances that might reasonably be
expected to form the basis of an order for clean-up or remediation, or
an action, suit or proceeding by any private party or governmental body
or agency, against or affecting the Company or its subsidiary relating
to Hazardous Materials or any Environmental Laws.
(xxi) Registration Rights. There are no persons with
registration rights or other similar rights to have any securities
registered pursuant to the Registration Statement or otherwise
registered by the Company under the 1933 Act, except pursuant to the
Registration Rights Agreement described in the Prospectus, which rights
have been waived in writing or which are not applicable to the offering
contemplated by the Registration Statement.
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<PAGE> 13
(b) Officer's Certificates. Any certificate signed by any officer of
the Company or its subsidiary delivered to the Representatives or to counsel for
the Underwriters shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B, the number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase up to an additional 495,000 shares of Common Stock
at the price per share set forth in Schedule B, less an amount per share equal
to any dividends or distributions declared by the Company and payable on the
Initial Securities but not payable on the Option Securities. The option hereby
granted will expire 30 days after the date hereof and may be exercised in whole
or in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial Securities upon notice by the Representatives to the Company setting
forth the number of Option Securities as to which the several Underwriters are
then exercising the option and the time and date of payment and delivery for
such Option Securities. Any such time and date of delivery (a "Date of
Delivery") shall be determined by the Representatives, but shall not be later
than seven full business days after the exercise of said option, nor in any
event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the Option Securities, each of the
Underwriters, acting severally and not jointly, will purchase that proportion of
the total number of Option Securities then being purchased which the number of
Initial Securities set forth in Schedule A opposite the name of such Underwriter
bears to the total number of Initial Securities, subject in each case to such
adjustments as the Representatives in their discretion shall make to eliminate
any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Morrison & Foerster LLP, or at such other place as shall be agreed upon by the
Representatives and the Company, at 7:00 A.M. (California time) on the third
(fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day)
business day after the date hereof (unless postponed in accordance with the
provisions of Section 10), or such other time not later than ten business days
after such date as shall be agreed upon by the Representatives and the Company
(such time and date of payment and delivery being herein called "Closing Time").
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<PAGE> 14
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Company, on each Date of Delivery as specified in the notice from the
Representatives to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representatives for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in the City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
and will notify the Representatives immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
shall become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the
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<PAGE> 15
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)) or any amendment, supplement
or revision to either the prospectus included in the Registration Statement at
the time it became effective or to the Prospectus, will furnish the
Representatives with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file or
use any such document to which the Representatives or counsel for the
Underwriters shall object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Representatives, without charge, a
conformed copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 (the "1934 Act"), such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably request. The
Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in this Agreement and in the
Prospectus. If at any time when a prospectus is required by the 1933 Act to be
delivered in connection with sales of the Securities, any event shall occur or
condition shall exist as a result of which it is necessary, in the opinion of
counsel for the Underwriters or for the Company, to amend the Registration
Statement or amend or supplement the Prospectus in order that the Prospectus
will not include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not misleading
in the light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel, at any
such time to amend the Registration Statement or amend or supplement the
Prospectus in order to comply with the requirements of the 1933 Act or the 1933
Act Regulations, the Company will promptly prepare and file with the
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<PAGE> 16
Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Company will
furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
(domestic or foreign) as the Representatives may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds."
(i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Common Stock (including the Securities) on the
Nasdaq National Market and will file with the Nasdaq National Market all
documents and notices required by the Nasdaq National Market of companies that
have securities that are traded in the over-the-counter market and quotations
for which are reported by the Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of 180 days from
the date of this Agreement, the Company will not, without the prior written
consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder, (B) any shares of Common Stock
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issued by the Company upon the exercise of an option outstanding on the date
hereof and referred to in the Prospectus, (C) any shares of Common Stock issued
or options to purchase Common Stock granted pursuant to existing employee
benefit plans of the Company referred to in the Prospectus or (D) any shares of
Common Stock issued pursuant to any non-employee director stock plan referred to
in the Prospectus. The Company agrees not to, without the prior written consent
of Merrill Lynch on behalf of the Underwriters, release any stockholder from any
agreement with the Company, whether by contract or by law, whereby such person
or entity has agreed not to, for a period of up to one hundred fifty (150)
days following the commencement of the public offering of the Common Stock by
the Underwriters, sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company.
(k) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus and of the Prospectus and any amendments or supplements
thereto, (vii) the preparation, printing and delivery to the Underwriters of
copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and
expenses of any transfer agent or registrar for the Securities and (ix) the
filing fees incident to, and the reasonable fees and disbursements of counsel to
the Underwriters in connection with, the review by the National Association of
Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Securities
and (x) the fees and expenses incurred in connection with the inclusion of the
Securities in the Nasdaq National Market and (xi) all costs and expenses of the
Underwriters, including the fees and disbursements of counsel for the
Underwriters, in connection with matters related to the Reserved Securities
which are designated by the Company for sale outside of the United States to
employees and others having a business relationship with the Company.
(b) Termination of Agreement. If this Agreement is terminated by the
Representatives in
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<PAGE> 18
accordance with the provisions of Section 5 or Section 9(a)(i) hereof, the
Company shall reimburse the Underwriters for all of their out-of-pocket
expenses, including the reasonable fees and disbursements of counsel for the
Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or its subsidiary of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A).
(b) Opinion of Counsel for Company. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Morrison & Foerster LLP, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, together with signed or reproduced
copies of such letter for each of the other Underwriters to the effect set forth
in Exhibit A hereto and to such further effect as counsel to the Underwriters
may reasonably request. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certain officers of the Company and certificates of public
officials.
(c) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for
the Underwriters, together with signed or reproduced copies of such letter for
each of the other Underwriters with respect to the matters set forth in clauses
(i), (ii), (v), (vi) (solely as to preemptive or other similar rights arising by
operation of law or under the charter or by-laws of the Company), (viii) through
(x), inclusive, (xii), (xiv) (solely as to the information in the Prospectus
under "Description of Capital Stock--Common Stock") and the penultimate
paragraph of Exhibit A hereto. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its subsidiary and
certificates of public officials.
(d) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or
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<PAGE> 19
business prospects of the Company and its subsidiary considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the President or a Vice
President of the Company and of the chief financial or chief accounting officer
of the Company, dated as of Closing Time, to the effect that (i) there has been
no such material adverse change, (ii) the representations and warranties in
Section 1(a) hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or are contemplated by the
Commission.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from Ernst & Young LLP a
letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(f) Bring-down Comfort Letter. At Closing Time, the Representatives
shall have received from Ernst & Young LLP a letter, dated as of Closing Time,
to the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.
(g) Approval of Listing. At Closing Time, the Securities shall have
been approved for inclusion in the Nasdaq National Market, subject only to
official notice of issuance.
(h) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(i) Lockup Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit B hereto signed by the persons listed on Schedule C hereto.
(j) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Company contained herein and the statements in any certificates furnished
by the Company or its subsidiary hereunder shall be true and correct as of each
Date of Delivery and, at the relevant Date of Delivery, the Representatives
shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(d) hereof remains true and correct as of such Date of
Delivery.
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<PAGE> 20
(ii) Opinion of Counsel for Company. The favorable opinion of
Morrison & Foerster LLP, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(b) hereof.
(iii) Opinion of Counsel for Underwriters. The favorable
opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel for the Underwriters, dated such Date of Delivery, relating to
the Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by Section 5(c)
hereof.
(iv) Bring-down Comfort Letter. A letter from Ernst & Young
LLP, in form and substance satisfactory to the Representatives and
dated such Date of Delivery, substantially in the same form and
substance as the letter furnished to the Representatives pursuant to
Section 5(f) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than five
days prior to such Date of Delivery.
(k) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the
Representatives and counsel for the Underwriters.
(l) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the Company at
any time at or prior to Closing Time or such Date of Delivery, as the case may
be, and such termination shall be without liability of any party to any other
party except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact
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<PAGE> 21
contained in the Registration Statement (or any amendment thereto),
including the Rule 430A Information, if applicable, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact included in any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(d) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that (x) this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto); and (y) the Company will not be liable to
any Underwriter with respect to any Prospectus to the extent that the Company
shall sustain the burden of proving that any such loss, liability, claim, damage
or expense resulted from the fact that such Underwriter, in contravention of a
requirement of this Agreement or applicable law, sold Securities to a person to
whom such Underwriter failed to send or give, at or prior to the Closing Time, a
copy of the Prospectus, as then amended or supplemented if: (i) the Company has
previously furnished copies thereof (sufficiently in advance of the Closing Time
to allow for distribution by the Closing Time) to the Underwriter and the loss,
liability, claim, damage or expense of such Underwriter resulted from an untrue
statement or omission of a material fact contained in or omitted from the
preliminary prospectus which was corrected in the Prospectus as, if applicable,
amended or supplemented prior to the Closing Time and such Prospectus was
required by law to be delivered at or prior the written confirmation of sale to
such person and (ii) such failure to give or send such Prospectus by the Closing
Time to the party or parties asserting such loss, liability, claim, damage or
expense would have constituted a defense of the claim asserted by such person.
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<PAGE> 22
(b) Indemnification of Company, Directors and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Merrill Lynch expressly for
use in the Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give written notice ("Notice of Indemnification") as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with the other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 6 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense thereof,
unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that in connection with such action the indemnifying party shall not be
liable for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
designated by the Underwriters in this Section 6, representing the indemnified
parties who are parties to such action or actions) or (ii) the indemnifying
party does not promptly retain counsel reasonably satisfactory to the
indemnified party or (iii) the indemnifying party has authorized in writing the
employment of counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action
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<PAGE> 23
effected by such indemnified party without the consent of the indemnifying
party. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement; provided that an indemnifying party shall not be liable for any such
settlement effected without its consent if such indemnifying party, prior to the
date of such settlement, (i) reimburses such indemnified party in accordance
with such request for the amount of such fees and expenses of counsel as the
indemnifying party believes in good faith to be reasonable, and (ii) provides
written notice to the indemnified party that the indemnifying party disputes in
good faith the reasonableness of the unpaid balance of such fees and expenses.
(e) Indemnification for Reserved Securities. In connection with the
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request in writing, to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of any of the Reserved Securities Purchasers
to pay for and accept delivery of Reserved Securities which, by the end of the
first business day following the date of this Agreement, were subject to a
properly confirmed agreement to purchase.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the
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<PAGE> 24
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the Securities
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Securities
pursuant to this Agreement (before deducting expenses) received by the Company
and the total underwriting discount received by the Underwriters, in each case
as set forth on the cover of the Prospectus. The relative fault of the Company
on the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or by the Underwriters.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
Each party entitled to contribution agrees that it will give written
notice as promptly as reasonably practicable to the party or parties from whom
contribution may be sought of any action commenced against it in respect of
which contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom contribution
may be sought from any obligation it may have hereunder or otherwise. In no
event shall the indemnifying
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<PAGE> 25
parties be liable for fees and expenses of more than one counsel (in addition to
any local counsel) separate from their own counsel for all indemnified parties
in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent of
the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under Section 6 or Section 7 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or its subsidiary
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter or
controlling person, or by or on behalf of the Company, and shall survive
delivery of the Securities to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiary considered as one enterprise, whether or not arising in the ordinary
course of business, or (ii) if there has occurred any material adverse change in
the financial markets in the United States, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Representatives, impracticable to market the Securities
or to enforce contracts for the sale of the Securities, or (iii) if trading in
any securities of the Company has been suspended or materially limited by the
Commission or the Nasdaq National
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<PAGE> 26
Market, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or (iv) if a banking moratorium has
been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the Underwriters to purchase and of the Company
to sell the Option Securities to be purchased and sold on such Date of
Delivery shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the Representatives or the Company shall have the
right to postpone Closing Time or the relevant Date of Delivery, as the case may
be, for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter"
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<PAGE> 27
includes any person substituted for an Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at 3300 Hillview Avenue,
Suite 150, Palo Alto, California 94304, attention of Robert Quist; and notices
to the Company shall be directed to it at PLX Technology, Inc. at 390 Potrero
Avenue,
Sunnyvale, California 94086, attention of President.
SECTION 12. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
[Remainder of page intentionally left blank]
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<PAGE> 28
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Company in accordance with its terms.
Very truly yours,
PLX TECHNOLOGY, INC.
By: ___________________________________
Michael J. Salameh, President
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES, LLC
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: ___________________________________
Authorized Signatory
Name: _________________________________
Title: ________________________________
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
[UNDERWRITING AGREEMENT SIGNATURE PAGE]
<PAGE> 29
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Name of Underwriter Initial Securities
------------------- ------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................................
NationsBanc Montgomery Securities LLC...............................
---------
Total............................................................... 3,300,000
=========
</TABLE>
Sch A-1
<PAGE> 30
SCHEDULE B
PLX Technology, Inc.
3,300,000 Shares of Common Stock
(Par Value $0.001 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $[*].
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $[*], being an amount equal to the initial public
offering price set forth above less $[*] per share; provided that the purchase
price per share for any Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Company and
payable on the Initial Securities but not payable on the Option Securities.
Sch B-1
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SCHEDULE C
List of Persons and Entities
Subject to Lockup
Sch C-1
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EXHIBIT A
Form of Opinion of Company's Counsel
To Be Delivered Pursuant to Section 5(b)
(1) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware.
(2) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(3) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(4) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus in the column entitled "Actual"
under the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to the Purchase Agreement or pursuant to reservations, agreements or
employee benefit plans referred to in the Prospectus or pursuant to the exercise
of options referred to in the Prospectus); the shares of issued and outstanding
capital stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable; and, to our knowledge, none of the
outstanding shares of capital stock of the Company was issued in violation of
the preemptive or other similar rights of any securityholder of the Company.
(5) The Securities have been duly authorized for issuance and
sale to the Underwriters pursuant to the Purchase Agreement and, when issued and
delivered by the Company pursuant to the Purchase Agreement against payment of
the consideration set forth in the Purchase Agreement, will be validly issued
and fully paid and non-assessable and no holder of the Securities is or will be
subject to personal liability by reason of being such a holder.
(6) To our knowledge, the issuance of the Securities is not
subject to preemptive or other similar rights of any securityholder of the
Company.
(7) The Subsidiary is not a "significant subsidiary" of the
Company as such term is defined in Rule 1-02 of Regulation S-X.
(8) The Purchase Agreement has been duly authorized, executed
and delivered by the Company.
(9) The Registration Statement, including any Rule 462(b)
Registration Statement,
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has been declared effective under the 1933 Act; any required filing of the
Prospectus pursuant to Rule 424(b) has been made in the manner and within the
time period required by Rule 424(b); and, to our knowledge, no stop order
suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no proceedings for
that purpose have been instituted or are pending or threatened by the
Commission.
(10) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information, as applicable, the Prospectus
and each amendment or supplement to the Registration Statement and Prospectus as
of their respective effective or issue dates (other than the financial
statements and supporting schedules included therein or omitted therefrom, as to
which we need express no opinion) complied as to form in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations.
(11) To our knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or its
subsidiary is a party, or to which the property of the Company or its subsidiary
is subject, before or brought by any court or governmental agency or body,
domestic or foreign, which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement or the performance by the
Company of its obligations thereunder.
(12) The information in the Prospectus under "Description of
Capital Stock," and "Shares Eligible" and in the Registration Statement under
Item 14, to the extent that it constitutes matters of law, summaries of legal
matters, the Company's charter and by-laws or legal proceedings, or legal
conclusions, has been reviewed by us and is correct in all material respects.
(13) To our knowledge, there are no franchises, contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments
required to be described or referred to in the Registration Statement or to be
filed as exhibits thereto.
(14) To our knowledge, the Company is not in violation of its
charter or by-laws and no default by the Company or its subsidiary exists in the
due performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement, note,
lease or other agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed as an exhibit to the
Registration Statement (a "Material Contract").
(15) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign (other than under the 1933
Act and the 1933 Act Regulations, which have been obtained, or as may be
required under the securities or blue sky laws of the various states, as to
which we need express no opinion) is necessary or required in connection with
the due authorization, execution and delivery of the Purchase Agreement or for
the offering, issuance or sale of the Securities.
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(16) The execution, delivery and performance of the Purchase
Agreement and the consummation of the transactions contemplated in the Purchase
Agreement and in the Registration Statement (including the issuance and sale of
the Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by the Company with its obligations under the Purchase Agreement do not and will
not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(x) of the Purchase Agreement) under or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or its subsidiary pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any other
agreement or instrument, known to us which is a material contract, to which the
Company or its subsidiary is a party or by which it or any of them may be bound,
or to which any of the property or assets of the Company or its subsidiary is
subject (except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will such
action result in any violation of the provisions of the charter or by-laws of
the Company, or any applicable law, statute, rule, regulation, judgment, order,
writ or decree, known to us, of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any of its
properties, assets or operations (except for such violations of any applicable
law, statute, rule, regulation, judgment, order, writ or decree that would not
result in a Material Adverse Effect).
(17) To our knowledge, there are no persons with registration
rights or other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the 1933 Act
other than those rights which are mentioned in writing in the Registration
Statement, all of which have been waived.
(18) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
Nothing has come to our attention that would lead us to
believe that the Registration Statement or any amendment thereto, including the
Rule 430A Information and Rule 434 Information (if applicable), (except for
financial statements and schedules and other financial data included therein or
omitted therefrom, as to which we need make no statement), at the time such
Registration Statement or any such amendment became effective, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that the Prospectus or any amendment or supplement thereto (except for
financial statements and schedules and other financial data included therein or
omitted therefrom, as to which we need make no statement), at the time the
Prospectus was issued, at the time any such amended or supplemented prospectus
was issued or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and
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public officials. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to the Legal Opinion Accord of the
ABA Section of Business Law (1991).
A-4
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EXHIBIT B
Form of Lockup from Directors, Officers or Other Stockholders Pursuant
to Section 5(i)
B-1
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PLX TECHNOLOGY, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and know, identified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
ARTICLE I
The name of the Corporation is PLX Technology, Inc. (hereinafter called
the "Corporation").
ARTICLE II
The address, including street, number, city, and county, of the
registered office of the Corporation in the State of Delaware is 1209 Orange
Street, City of Wilmington 19805, County of New Castle, Zip Code 19801. The name
of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The nature of the business and the purposes to be conducted and promoted
by the Corporation shall be: To conduct any lawful business, to promote any
lawful purpose, and to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE IV
The Corporation is authorized to issue two classes of shares designated
respectively "Common Stock" and "Preferred Stock." The total number of shares of
all classes of stock which the Corporation has authority to issue is 39,868,738
consisting of 30,000,000 shares of Common Stock, with a par value of $0.001 and
9,868,738 shares of Preferred Stock, with a par value of $0.001.
ARTICLE V
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The relative rights, preferences, privileges and restrictions granted to
or imposed upon the respective classes of Common and Preferred Stock are as
follows:
Part I. COMMON STOCK
Section 1. Voting Rights. Except as otherwise provided by law and
subject to the provisions of Section 5 of Part II hereof with respect to the
election of directors, the holders of shares of Common Stock shall be entitled
to one (1) vote for each share so held with respect to each matter voted on by
the stockholders of the Corporation.
Section 2. Liquidation Rights. Subject to the prior and superior rights
of the holders of Preferred Stock (including those described in Part II, Section
3), upon any liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Common Stock shall be entitled to receive the
remaining assets of the Corporation.
Section 3. Dividends. Dividends may be paid on the Common Stock as and
when declared by the Board of Directors, subject, however, to the prior and
superior rights of the holders of Preferred Stock.
Part II. PREFERRED STOCK
Preferred Stock may be issued in one or more series. The rights,
preferences, privileges and restrictions granted to, and imposed upon, the first
four such series, designated Series A, Series B, Series C and Series D are set
forth in succeeding provisions of this ARTICLE V. Except as to Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series
D Preferred Stock, the Board of Directors is authorized to fix the number of any
such series of Preferred Stock and to determine the designation of any such
series, subject to (i) such stockholder approvals as may be provided for herein
and (ii) the number of shares of Preferred Stock authorized at that time by
ARTICLE IV and ARTICLE V.. Subject to such stockholder approvals as may be
provided for herein, the Board of Directors is further 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 increase or
decrease (but not below the number of shares of such series then outstanding)
the number of shares of any series of Preferred Stock. In case the number of
shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status that they had prior to the adoption of the
resolution or amendment originally fixing the number of shares of such series.
Section 1. Designation. The initial four series of Preferred Stock shall
be designated and known as "Series A Preferred Stock", "Series B Preferred
Stock", "Series C Preferred Stock", and "Series D Preferred Stock." The number
of authorized shares constituting Series A Preferred Stock shall be 1,300,000
with a par value of $0.001, the number of authorized shares constituting Series
B Preferred Stock shall be 650,000 with a par value of $0.001, the number of
authorized shares constituting Series C Preferred Stock shall be 1,418,738 with
a par value of $0.001, and the number of authorized shares constituting Series D
Preferred Stock shall be 1,500,000 with a par value of $0.001.
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Section 2. Dividends. The holders of the Series A, Series B, Series C
and Series D Preferred Stock (collectively, the "Preferred Stock") shall be
entitled to receive, when, if and as declared by the Board of Directors,
noncumulative dividends at the rate of $0.05, $0.10, $.1375 and $.14 per share,
respectively, per annum, payable quarterly as the Board of Directors may from
time to time determine out of funds legally available therefor. No dividends
(other than those payable solely in the Common Stock of the Corporation) shall
be paid on any Common Stock of the Corporation during any fiscal year of the
Corporation until dividends in the total amount of $0.05 per share, $0.10 per
share, $.1375 per share and $.14 per share on Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock shall have been paid or declared and set apart during that
fiscal year. The right to such dividend on shares of Preferred Stock shall not
be cumulative and no right shall accrue to holders of Preferred Stock by reason
of the fact that dividends on said shares are not declared in any prior year. No
dividend may be declared and paid on any series of Preferred Stock unless a
proportionate dividend is declared and paid on all series of Preferred Stock.
Section 3. Liquidation Preferences.
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, either voluntary or involuntary, (i) the holders of the Series
A Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, the amount of
$0.50 per share for each share of Series A Preferred Stock then held by them
plus an amount equal to all declared but unpaid dividends on the Series A
Preferred Stock and (ii) the holders of the Series B Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of the assets
of the Corporation to the holders of the Common Stock by reason of their
ownership thereof, the amount of $1.00 per share for each share of Series B
Preferred Stock then held by them plus all declared but unpaid dividends on the
Series B Preferred Stock and (iii) the holders of the Series C Preferred Stock
shall be entitled to receive prior to and in preference to any distribution of
the assets of the Corporation to the holders of the Common Stock by reason of
their ownership thereof, the amount of $1.375 per share for each share of Series
C Preferred Stock then held by them plus all declared but unpaid dividends on
the Series C Preferred Stock and (iv) the holders of the Series D Preferred
Stock shall be entitled to receive prior to and in preference to any
distribution of the assets of the Corporation to the holders of the Common Stock
by reason of their ownership thereof, the amount of $1.40 per share for each
share of Series D Preferred Stock then held by them plus all declared but unpaid
dividends on the Series D Preferred Stock. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Preferred Stock
shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amount for the Preferred Stock, then the entire assets
and funds of the Corporation legally available for distribution shall be
distributed ratably among the holders of the Preferred Stock in proportion to
the preferential amount each such holder is otherwise entitled to receive.
(b) After full payment has been made to the holders of Preferred
Stock under subsection (a) above, any remaining assets of the Corporation shall
be distributed to the holders of Preferred Stock and of Common Stock in an equal
amount per "Common equivalent" share
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(each holder's shares of Preferred Stock being treated as having been converted
into the number of shares of Common Stock into which such shares could be
converted for the purposes of the calculation).
(c) A consolidation or merger of the Corporation with or into any
other corporation or any other entity or person, or any other corporate
reorganization in which the Corporation shall not be the continuing or surviving
entity, or a sale of all or substantially all of the assets of the Corporation,
or a transaction or series of transactions in which more than fifty percent
(50%) or the outstanding stock of the Corporation is transferred, shall not be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 3, but shall be subjected to the provisions of Section 7 hereof.
Section 4. Redemption.
(a) At or at any time after the receipt by the Corporation in
writing from the holders of not less than 67% of the Series A Preferred Stock
then outstanding of their consent to redemption hereunder, the Corporation may
at any time it may lawfully do so, at the option of the Board of Directors,
redeem in whole or in part the Series A Preferred Stock by paying in cash
therefor $0.50 per share for each share of Series A Preferred Stock then
outstanding (appropriately adjusted for any stock dividend, stock split,
recapitalization, consolidation or the like of the Series A Preferred Stock),
plus an amount equal to all declared and unpaid dividends on the outstanding
shares of Series A Preferred Stock (such total amount is hereinafter referred to
as the "Series A Redemption Price"). At or at any time after the receipt by the
Corporation in writing from the holders of not less than 67% of the Series B
Preferred Stock then outstanding of their consent of redemption hereunder, the
Corporation may at any time it may lawfully do so, at the option of the Board of
Directors, redeem in whole or in part the Series B Preferred Stock by paying in
cash therefor $1.00 per share for each share of Series B Preferred Stock then
outstanding (appropriately adjusted for any stock dividend, stock split,
recapitalization, consolidation or the like of the Series B Preferred Stock),
plus an amount equal to all declared and unpaid dividends on the outstanding
shares of Series B Preferred Stock (such total amount is hereinafter referred to
as the "Series B Redemption Price"). At or at any time after the receipt by the
Corporation in writing from the holders of not less than 67% of the Series C
Preferred Stock then outstanding of their consent of redemption hereunder, the
Corporation may at any time it may lawfully do so, at the option of the Board of
Directors, redeem in whole or in part the Series C Preferred Stock by paying in
cash therefor $1.375 per share for each share of Series C Preferred Stock then
outstanding (appropriately adjusted for any stock dividend, stock split,
recapitalization, consolidation or the like of the Series C Preferred Stock),
plus an amount equal to all declared and unpaid dividends on the outstanding
shares of Series C Preferred Stock (such total amount is hereinafter referred to
as the Series C Redemption Price"). At or at any time after the receipt by the
Corporation in writing from the holders of not less than 67% of the Series D
Preferred Stock then outstanding of their consent of redemption hereunder, the
Corporation may at any time it may lawfully do so, at the option of the Board of
Directors, redeem in whole or in part the Series D Preferred Stock by paying in
cash therefor $1.40 per share for each share of Series D Preferred Stock then
outstanding (appropriately adjusted for any stock dividend, stock split,
recapitalization, consolidation or the like of the Series D Preferred Stock),
plus an amount
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equal to all declared and unpaid dividends on the outstanding shares of Series D
Preferred Stock (such total amount is hereinafter referred to as the "Series D
Redemption Price"). If the Corporation proposes to redeem any series of
Preferred Stock, it shall give notice to holders of all other series of
Preferred Stock and offer to redeem shares of such series upon request of the
holders.
(b) In the event of any redemption of only a part of the then
outstanding shares of the Series A Preferred Stock, or Series B Preferred Stock,
or Series C Preferred Stock, or Series D Preferred Stock, the Corporation shall
effect such redemption pro rata among the holders thereof (as to the number of
shares held on the date of notice of redemption).
(c) At least forty-five (45) days prior to the date fixed for any
redemption of the Series A Preferred Stock or Series B Preferred Stock or Series
C Preferred Stock or Series D Preferred Stock (hereinafter referred to as the
"Redemption Date"), written notice shall be mailed, postage prepaid, to each
holder of record of such series of the Preferred Stock to be redeemed, at his
post office address last shown on the records of the Corporation, notifying such
holder of the election of the Corporation to redeem such shares, specifying the
Redemption Date and the date on which such holder's Conversion Rights (as
hereinafter defined) as to such shares terminate and calling upon such holder to
surrender to the Corporation, in the manner and at the place designated, his
certificate or certificates representing the shares to be redeemed (such notice
is hereinafter referred to as the "Redemption Notice"). On or prior to the
Redemption Date, each holder of the Series A Preferred Stock or Series B
Preferred Stock or Series C Preferred Stock or Series D Preferred Stock to be
redeemed shall surrender his certificate or certificates representing such
shares to the Corporation, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares (except
that such number of shares shall be reduced by the number of shares which have
been converted pursuant to Section 6 hereof between the date of notice of
redemption and the date of which Conversion Rights to such shares terminate)
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares. From and after the Redemption Date,
unless there shall have been a default in payment of the Redemption Price
(whether because there is no source of funds legally available for such
redemption or because such funds shall not be paid or made available for
payment), all rights of the holders of the Series A Preferred Stock, or Series B
Preferred Stock, or Series C Preferred Stock, or Series D Preferred Stock
designated for redemption in the Redemption Notice as holders of such series of
the Preferred Stock of the Corporation (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.
(d) On or prior to the Redemption Date, the Corporation shall
deposit the Redemption Price of all shares of Series A Preferred Stock, or
Series B Preferred Stock, or Series C Preferred Stock, or Series D Preferred
Stock designated for redemption in the Redemption Notice and not yet redeemed
with a bank or trust company having aggregate capital
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and surplus in excess $20,000,000 as a trust fund for the benefit of the
respective holders of the shares designated for redemption and not yet redeemed,
with irrevocable instructions and authority to the bank or trust company to pay
the Redemption Price for such shares to their respective holders on or after the
Redemption Date upon receipt of notification from the Corporation that such
holder has surrendered his share certificate to the Corporation pursuant to
Section 4(c) above. Such instructions shall also provide that any moneys
deposited by the Corporation pursuant to this Section 4(d) for the redemption of
shares thereafter converted into shares of the Corporation's Common Stock
pursuant to Section 6 hereof no later than the fifth (5th) day preceding the
Redemption Date shall be returned to the Corporation forthwith upon such
conversion. The balance of any moneys deposited by the Corporation pursuant to
this Section 4(d) remaining unclaimed at the expiration of two (2) years
following the Redemption Date shall thereafter be returned to the Corporation
upon its request expressed in a resolution of its Board of Directors.
Section 5. Voting Rights.
(a) Except as specifically provided herein and as otherwise
provided by law, the holder of each share of the Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which such share of Preferred Stock could be converted and shall have
voting rights and powers equal to the voting rights and powers of the Common
Stock (voting together with the Common Stock as a single class) and shall be
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula shall be rounded to
the nearest whole number (with one/half being rounded upward).
(b) As to elections of directors, the holders of the Preferred
Stock shall vote together with the holders of the Common Stock as a single
class, as provided in the preceding subsection (a); provided, however, that so
long as there are at least one million (1,000,000) shares of Preferred Stock
outstanding, should the holders of all of the shares of Preferred Stock (by
cumulating their votes) not be able to elect at least three (3) of the
directors, then the holders of the Preferred Stock voting as a class shall be
entitled to elect three (3) directors and all remaining directors authorized by
the Bylaws shall be elected by the holders of the Common Stock as a class. At
such time as the holders of Preferred Stock are no longer entitled to elect any
directors voting as a separate class, the holders of the outstanding Preferred
shall vote with the holders of the Common Stock.
Section 6. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert.
(i) Each share of each series of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and on or prior to the fifth (5th) day prior to the
Redemption Date fixed in any Redemption Notice, at the
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office of the Corporation or any transfer agent for such stock, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing the Conversion Value (as hereinafter defined) per share in effect for
such series by the per share Conversion Price ( as hereinafter defined) of such
series at the time of conversion. The initial Conversion Price per share of the
Series A Preferred Stock shall be $0.50 and the per share Conversion Value of
the Series A Preferred Stock shall be $0.50. The initial Conversion Price of the
Series B Preferred Stock shall be $1.00 and the per share Conversion Value of
the Series B Preferred Stock shall be $1.00. The initial Conversion Price of the
Series C Preferred Stock shall be $1.375 and the per share Conversion Value of
the Series C Preferred Stock shall be $1.375. The initial Conversion Price of
the Series D Preferred Stock shall be $1.40 and the per share Conversion Value
of the Series D Preferred Stock shall be $1.40. The number of shares of Common
Stock into which a series of Preferred Stock is convertible is hereinafter
referred to as the "Conversion Rate" of such series. In the event of a call for
redemption of any shares of Preferred Stock pursuant to Section 4 hereof, the
Conversion Rights shall terminate as to the shares designated for redemption at
the close of business on the fifth (5) day preceding the Redemption Date, unless
default is made in payment of the Redemption Price, in which case the Conversion
Rights for such shares shall continue until such payment.
(ii) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock at then effective applicable Conversion
Rate immediately upon the closing of the sale of the Corporation's Common Stock
in a firm commitment, underwritten public offering registered under the
Securities Act of 1933, as amended (the "Act"), at a public offering price equal
to or exceeding $5.00 per share of Common Stock (said offering price determined
prior to underwriting commissions and expenses and appropriately adjusted for
any stock dividend, stock split or combination, recapitalization, consolidation
or the like of the Common Stock) and the aggregate gross proceeds to the
Corporation of which equal or exceed $10,000,000 (before underwriting
commissions and expenses).
(b) Mechanics of Conversion. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock he shall
surrender the certificate or certificates thereof, duly endorsed, at the office
of the Corporation or of any transfer agent for such stock, and shall give
written notice to the Corporation at such office that he elects to convert the
same and shall state therein the name or names in which he wishes the
certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Preferred Stock, a certificate or certificates for the
number of shares of Common Stock to which he shall be entitled as aforesaid and
a check payable to holder in the amount of any cash amounts payable as the
result of a conversion into fractional shares of Common Stock pursuant to
Section 6(k) hereunder and any declared but unpaid dividends on the converted
Preferred Stock to which the holder may be entitled. Except for a conversion in
connection with an underwritten offer of securities under the Act, such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of surrender of the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date. In the
case of a conversion in connection with an underwritten offer of securities
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under the Act, at the option of the holder of the Preferred Stock tendered for
conversion, the conversion may be conditioned upon the closing with the
underwriter or underwriters of the sale of securities pursuant to such offering,
and such conversion shall then be deemed to occur immediately prior to the
closing of such sale of securities.
(c) Adjustments to Conversion Prices for Diluting Issues.
(i) Special Definitions. For purposes of this Section
6(c), the following definitions apply:
(1) `Options' shall mean rights, options, or
warrants to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(2) `Original Issue Date' shall mean the date on
which a share of Series A Preferred Stock, or Series B Preferred Stock, or
Series C Preferred Stock, or Series D Preferred Stock was first issued.
(3) `Convertible Securities' shall mean any
evidence of indebtedness, shares (other than Common Stock and Series A Preferred
Stock and Series B Preferred Stock and Series C Preferred Stock and Series D
Preferred Stock) or other securities convertible into or exchangeable for Common
Stock.
(4) `Additional Shares of Common Stock' shall mean
all shares of Common Stock issued (or, pursuant to Section 6(c) (iii), deemed to
be issued) by the Corporation after the Original Issue Date, other than shares
of Common Stock issued or issuable:
(A) upon conversion of shares of Series A
Preferred Stock, or Series B Preferred Stock, or Series C Preferred Stock, or
Series D Preferred Stock;
(B) to founders, officers or employees of,
or consultants to, the Corporation pursuant to a stock grant or option plan or
other employee stock incentive program (collectively, the "Plans") approved by
the Board of Directors or assumed by the Corporation but not exceeding 1,363,064
shares of Common Stock, subject to adjustment for all subdivisions and
combinations and including reissuance of any such shares which may be
repurchased;
(C) as a dividend or distribution on Series
A Preferred Stock, or Series B Preferred Stock, or Series C Preferred Stock, or
Series D Preferred Stock;
(D) by way of dividend or other distribution
on shares of Common Stock excluded from the definition of Additional Shares of
Common Stock by the foregoing clauses (A), (B), and (C) or this clause (D) or on
shares of Common Stock so excluded.
(ii) No Adjustment of Conversion Prices. No adjustment in
the Conversion Price of a particular share of Preferred Stock shall be made in
respect of the issuance
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of Additional Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the Conversion Price in effect on the date of, and
immediately prior to such issue, for such share of Preferred Stock.
(iii) Deemed Issue of Additional Shares of Common Stock.
(1) Options and Convertible Securities. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities then entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against dilution) of Common
Stock issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 6(c)(v) hereof) of such additional
Shares of Common Stock would be less than the Conversion Price for a series of
Preferred Stock in effect of the date of and immediately prior to such issue, or
such record date, as the case may be, and provided further that in any such case
in which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustments in the Conversion
Price for any series of Preferred Stock shall be made upon the subsequent issue
of Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(B) If such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, or decrease in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Conversion Price for the Preferred Stock computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities (provided, however, that no such
adjustment of the Conversion Price for any series of Preferred Stock shall
affect Common Stock previously issued upon conversion on any Preferred Stock);
and
(C) no readjustment pursuant to clause (B)
above shall have the effect of increasing the Conversion Price for any series of
Preferred Stock to an amount which exceeds the lower of (i) the Conversion Price
for such series of Preferred Stock on the original adjustment date, or (ii) the
Conversion Price for such series of Preferred Stock that would have resulted
from any issuance of Additional Shares of Common Stock between the
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<PAGE> 10
original adjustment date and such readjustment date.
(iv) Adjustment of Conversion Prices Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 6(c)(iii)) without consideration or for
a consideration per share less than the Conversion Price for any series of
Preferred Stock in effect on the date of and immediately prior such issue
(except in the case of a stock dividend or subdivision which shall have the
results set forth in paragraph 6(C)(vi) below), then and in such event, the
Conversion Price for any such series shall be reduced, concurrently with such
issue, to a price (calculated to the nearest cent) determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issue, plus the
number of shares of Common Stock that could be purchased for the aggregate
consideration to be received for the Additional Shares of Common Stock at the
then existing Conversion Price, and the denominator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issue plus the
number of such Additional Shares of Common Stock so issued; and provided further
that, for the purposes of this sentence, all shares of Common Stock issuable
upon conversion of outstanding Convertible Securities shall be deemed to be
outstanding, and immediately after any Additional Shares of Common Stock are
deemed issued pursuant to Section 6(c)(iii), such Additional Shares of Common
Stock shall be deemed to be outstanding.
(v) Determination of Consideration. For purposes of this
Section 6(c), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair market value thereof at the time of such
issue, as determined in good faith by the Board; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board.
(2) Options and Convertible Securities. The consideration
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 6(c)(iii)(1), relating to Options
and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable
by the
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Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) payable to the
Corporation upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein designed to protect against dilution) issuable upon
the exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) Adjustments for Subdivisions, Stock Dividends,
Combinations or Consolidation of Common Stock
(1) In the event the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, the Conversion Price in effect
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
increased.
(2) Stock Dividends and Subdivisions. In the event
that this Corporation at any time or from time to time after the Original Issue
Date shall declare or pay any dividend on the Common Stock payable in Common
Stock, or effect a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in Common Stock), then and in any such event, the
Conversion Price in effect immediately prior to such dividend or subdivision
shall, concurrently with the effectiveness of such dividend or subdivision, be
proportionately decreased. For purposes of this Section 6(c)(vi)(2) the
Conversion Price shall be proportionately decreased immediately after the
Original Issue Date to reflect a three for one stock split of the Common Stock
effected by the Corporation's predecessor, PLX Technology, Inc., a California
corporation.
(d) Adjustments for Other Distributions. In the event the
Corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution payable in securities of the Corporation other than Common Stock,
Options or Convertible Securities, then in each such event provision shall be
made so that the holders of Preferred Stock shall receive upon conversion
thereof, in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Corporation which they would have
received had their Preferred Stock been converted into Common Stock on the date
of such event and had they thereafter, during the period from the date of such
event to and including the date of conversion, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 6 with respect to
the rights of the holders of the Preferred Stock.
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(e) Adjustments for Reorganization, Reclassification, Exchange
and Substitution. If the Common Stock issuable upon conversion of the Preferred
Stock shall be changed into the same or a different number of shares of any
other class or classes of stock or other securities or property, whether by
reorganization (unless such reorganization is deemed a liquidation under Section
3(b) hereof), reclassification or otherwise (other than a subdivision or
combination of shares provided for above), the Conversion Price then in effect
shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted such that the Preferred Stock
shall be convertible into, in lieu of the number of shares of Common Stock which
the holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock or other securities or property equivalent
to the number of shares of Common Stock that would have been subject to receipt
by the holders upon conversion of the Preferred Stock immediately before such
event; and, in any such case, appropriate adjustment (as determined by the
Board) shall be made in the application of the provisions herein set forth with
respect to the rights and interest thereafter of the holders of the Preferred
Stock, to the end that the provisions set forth herein (including provisions
with respect to change in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the Preferred Stock.
(f) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
(g) Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 6,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment and
readjustment is based. Then Corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such applicable adjustments and
readjustments, (ii) the applicable Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of Preferred
Stock. Any certificate sent to the holders of Preferred Stock pursuant to this
Section 6(g) shall be signed by an officer of the Corporation.
(h) Notice of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any security or right convertible into or
entitling the holder thereof to receive Common Stock, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any other
securities or property,
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or to receive any other right, the Corporation shall mail to each holder of
Preferred Stock at least twenty (20) days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution, security or right, and the amount and
character of such dividend, distribution, security or right.
(i) Issue Taxes. The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock in conversion of shares of Preferred Stock pursuant hereto;
provided, however, that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in connection
with any such conversion.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(k) Fractional Shares. No fractional share shall be issued upon
the conversion of any share or shares of Preferred Stock. If the conversion
would result in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the date of conversion (as determined in good faith by the
Board of Directors of the Corporation).
(1) Notices. Any notice required by the provision of this Section
6 to be given to the holders of shares of Preferred Stock shall be deemed given
if delivered personally or deposited in the United States mail, first class
postage prepaid, and addressed to each holder of record at his address appearing
on the books of the Corporation.
Section 7. Merger, Consolidation.
(a) At any time, in the event of a consolidation or merger of the
Corporation with or into any other corporation, or any other entity or person,
or any other corporate reorganization in which the Corporation shall not be the
continuing or surviving entity, or a sale of all or substantially all of the
assets of the Corporation, or a transaction or series of transactions in which
more that fifty percent (50%) of the outstanding stock of the Corporation is
transferred, the documents effecting such transaction shall provide that the
holders of each series of Preferred Stock shall be entitled to receive, prior
and in preference to the holders of the Common Stock, the amount of the then
existing Redemption Price for such series, in cash or in securities received
from the acquiring corporation, or in a combination thereof, at the closing of
such transaction, before payment of any amount to the holders of Common Stock.
If, at such closing the proceeds
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are insufficient to permit the payment to the holders of Preferred Stock of the
full amount set forth above, then all of the consideration paid by the acquiring
corporation in such transaction shall be distributed at the closing of such
transaction to the holders of the Preferred Stock, in proportion to the
preferential amount such holder is entitled to receive.
(b) Any securities to be delivered to the holders of the
Preferred Stock pursuant to Section 7(a) above shall be valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability.
(1) If traded on a securities exchange, or the
NASDAQ National Market System, the value shall be deemed to be the average of
the security's closing prices in such exchange or System over the 30-day period
ending three (3) days prior to the closing;
(2) If actively traded over-the-counter (but not on
the NASDAQ National Market System), the value shall be deemed to be the average
of the closing bid prices over the 30-day period ending three (3) days prior to
the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of not less than a majority of the outstanding
Preferred Stock; and
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in (i)(1), (2)
or (3) to reflect the approximate fair market value thereof, as mutually
determined by the Corporation and the holders of not less than a majority of the
outstanding Preferred Stock.
(c) The Corporation shall give each holder of record of Preferred
Stock written notice of such impending transaction not later than twenty (20)
days prior to the stockholders' meeting called to approve such transaction or
twenty (20) days prior to the closing of such transaction whichever is earlier,
and shall also notify such holders in writing of the final approval of such
transaction. The first of said notices shall describe the material terms and
conditions of the contemplated transaction as well as the terms and conditions
of this Section 7, and the Corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after the mailing by the Corporation of the first
notice provided for herein or sooner than ten (10) days after the mailing by the
Corporation of any notice of material changes provided for herein; provided,
however, that such period may be shortened upon the written consent of the
holders of not less than a majority of the then outstanding Preferred Stock.
Section 8. Amendment. Any term relating to the Preferred Stock may be
amended only with the written consent of the holders of not less than sixty
seven percent (67%) of the shares of the Preferred Stock then outstanding and
the Corporation. Any amendment so effected
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shall be binding upon the Corporation and any holder of shares of the Preferred
Stock. Provided, however, consent of sixty seven percent (67%) of the holders of
a Series of Preferred Stock shall be required for any amendment that would
adversely affect that Series in a different manner than other shares of the
Preferred Stock.
Section 9. [Intentionally Omitted]
Section 10. Covenants. In addition to any other rights provided by law,
so long as any Preferred Stock shall be outstanding, the Corporation shall not,
without the vote or written consent by the holders of at least sixty seven
percent (67%) of the then outstanding shares of Preferred Stock:
(i) Purchase, redeem or otherwise acquire (or pay into or
set aside for a sinking fund for such purpose), any of the Common Stock of the
Corporation, provided, however, that this restriction shall not apply to the
repurchase of shares of Common Stock from directors, officers, employees or
consultants of the Corporation or any subsidiary, at the initial purchase price
thereof, or at such other price as may be approved by the Board of Directors,
upon termination of their employment or services pursuant to agreements between
the Corporation and such person providing for the right of the Corporation to
repurchase such shares, or
(ii) Effect any sale or other conveyance of all or
substantially all of the assets of the Corporation or any of its subsidiaries,
or any consolidation or merger involving the Corporation or any of its
subsidiaries if the Corporation shall not be the continuing or surviving entity
of such consolidation or merger, or any reclassification or other change of any
stock, or any recapitalization, or any transaction or series of transactions in
which more than 50% of the outstanding stock of the Corporation is transferred,
or
(iii) Increase or decrease (other than by redemption or
conversion) the total number of shares of Preferred Stock of the Corporation (or
any other senior equity securities of the Corporation) (with such consent to be
obtained on a Series basis from the holders of each Series of Preferred Stock
whose rights would be adversely affected in a material manner by the proposed
increase or decrease);
(iv) Amend or repeal any provision of, or add any
provision to, its Certificate of Incorporation or Bylaws if such action would
alter or change any of the rights, preferences, privileges of, or limitations
provided for herein for the benefit of, any shares of any series of Preferred
Stock, or
(v) Authorize or issue, or obligate itself to issue, any
other equity security senior to or on a parity with any outstanding series of
Preferred Stock as to dividend or redemption rights, liquidation preferences,
conversion rights, voting rights or otherwise, create any obligation or security
convertible into or exchangeable for, or having any option rights to purchase,
any such equity security which is senior to or on a parity with any outstanding
series of Preferred Stock.
Section 11. No Reissuance of Preferred Stock. No share or shares of
Preferred Stock
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acquired by the Corporation by reason of redemption, purchase, conversion or
otherwise shall be reissued, and all such shares shall be cancelled, retired and
eliminated from the shares which the Corporation shall be authorized to issue.
ARTICLE VI
The Corporation is to have perpetual existence.
ARTICLE VII
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
ARTICLE VIII
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation, and regulation of the
powers of the Corporation and of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided:
The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by, or in the
manner provided in, the Bylaws. The phrase "whole Board" and the phrase "total
number of directors" shall be deemed to have the same meaning, to wit, the total
number of directors which the Corporation would have if there were no vacancies.
No election of directors need be by written ballot.
After the original or other Bylaws of the Corporation have been adopted,
amended, or repealed, as the case may be, in accordance with the provisions of
Section 109 of the General
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Corporation Law of the State of Delaware, and, after the Corporation has
received any payment for any of its stock, the power to adopt, amend, or repeal
the Bylaws of the Corporation may be exercised by the Board of directors of the
Corporation; provided, however, that any provision for the classification of
directors of the Corporation for staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General Corporation Law of the State of
Delaware shall be set forth in an initial Bylaw adopted by the stockholders
entitled to vote of the Corporation unless provisions for such classification
shall be set forth in this Certificate of Incorporation.
Whenever the Corporation shall be authorized to issue only one class of
stock, each outstanding share shall entitle the holder thereof to notice of, and
the right to vote at, any meeting of stockholders. Whenever the Corporation
shall be authorized to issue more than one class of stock, no outstanding share
of any class of stock which is denied voting power under the provisions of the
Certificate of Incorporation shall entitle the holder thereto to the right to
vote any meeting of stockholders except as the provisions of paragraph (2) of
subsection (b) of Section 242 of the General Corporation Law of the State of
Delaware shall otherwise require; provided, that no share of any such class
which is otherwise denied voting power shall entitle the holder thereof to vote
upon the increase or decrease in the number of authorized shares of said class.
ARTICLE IX
The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of Paragraph (7) of
subsection (b) of Section 102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
ARTICLE X
The Corporation shall, to the fullest extent permitted by the provisions
of Section 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said section from and against any and all of
the expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such person.
ARTICLE XI
From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed
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by said laws, and all rights at any time conferred upon the stockholders of the
Corporation by this Certificate of Incorporation are granted subject to the
provisions of this Article XI.
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EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
PLX TECHNOLOGY, INC.
A DELAWARE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I OFFICES................................................................................................1
Section 1.1 Registered Office.............................................................................1
Section 1.2 Other Offices.................................................................................1
ARTICLE II STOCKHOLDERS' MEETINGS................................................................................1
Section 2.1 Place of Meetings.............................................................................1
Section 2.2 Annual Meetings...............................................................................2
Section 2.3 Special Meetings..............................................................................2
Section 2.4 Notice of Meetings............................................................................2
Section 2.5 Quorum and Voting.............................................................................3
Section 2.6 Voting Rights.................................................................................3
Section 2.7 Voting Procedures and Inspectors of Elections.................................................4
Section 2.8 List of Stockholders..........................................................................5
Section 2.9 Stockholder Proposals at Annual Meetings......................................................5
Section 2.10 Nominations of Persons for Election to the Board of Directors.................................6
Section 2.11 Action Without Meeting........................................................................7
ARTICLE III DIRECTORS............................................................................................7
Section 3.1 Number and Term of Office.....................................................................7
Section 3.2 Powers........................................................................................8
Section 3.3 Vacancies.....................................................................................8
Section 3.4 Resignations and Removals.....................................................................8
Section 3.5 Meetings......................................................................................8
Section 3.6 Quorum and Voting.............................................................................9
Section 3.7 Action Without Meeting.......................................................................10
Section 3.8 Fees and Compensation........................................................................10
Section 3.9 Committees...................................................................................10
ARTICLE IV OFFICERS.............................................................................................11
Section 4.1 Officers Designated..........................................................................11
Section 4.2 Tenure and Duties of Officers................................................................11
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V EXECUTION OF CORPORATE INSTRUMENTS, AND VOTING OF SECURITIES OWNED BY THE CORPORATION.................13
Section 5.1 Execution of Corporate Instruments...........................................................13
Section 5.2 Voting of Securities Owned by Corporation....................................................13
ARTICLE VI SHARES OF STOCK......................................................................................13
Section 6.1 Form and Execution of Certificates...........................................................13
Section 6.2 Lost Certificates............................................................................14
Section 6.3 Transfers....................................................................................14
Section 6.4 Fixing Record Dates..........................................................................14
Section 6.5 Registered Stockholders......................................................................15
ARTICLE VII OTHER SECURITIES OF THE CORPORATION.................................................................15
ARTICLE VIII INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS.......................................16
Section 8.1 Right to Indemnification.....................................................................16
Section 8.2 Authority to Advance Expenses................................................................17
Section 8.3 Right of Claimant to Bring Suit..............................................................17
Section 8.4 Provisions Nonexclusive......................................................................17
Section 8.5 Authority to Insure..........................................................................18
Section 8.6 Survival of Rights...........................................................................18
Section 8.7 Settlement of Claims.........................................................................18
Section 8.8 Effect of Amendment..........................................................................18
Section 8.9 Subrogation..................................................................................18
Section 8.10 No Duplication of Payments...................................................................18
ARTICLE IX NOTICES..............................................................................................18
ARTICLE X AMENDMENTS............................................................................................19
</TABLE>
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AMENDED AND RESTATED
BYLAWS
OF
PLX TECHNOLOGY, INC.
ARTICLE I
OFFICES
SECTION 1.1 REGISTERED OFFICE.
The registered office of the corporation in the State of Delaware shall be
in the City of Wilmington, County of New Castle.
SECTION 1.2 OTHER OFFICES.
The corporation shall also have and maintain an office or principal place
of business at 390 Potrero Avenue, Sunnyvale, California, and may also have
offices at such other places, both within and without the State of Delaware as
the Board of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
SECTION 2.1 PLACE OF MEETINGS.
Meetings of the stockholders of the corporation shall be held at such
place, either within or without the State of Delaware, as may be designated from
time to time by the Board of Directors, or, if not so designated, then at the
office of the corporation required to be maintained pursuant to Section 1.2 of
Article I hereof.
SECTION 2.2 ANNUAL MEETINGS.
The annual meetings of the stockholders of the corporation, commencing with
the year 2000, for the purpose of election of directors and for such other
business as may lawfully come before it, shall be held on such date and at such
time as may be designated from time to time by the Board of Directors.
SECTION 2.3 SPECIAL MEETINGS.
Special Meetings of the stockholders of the corporation may be called, for
any purpose or purposes, by the Chairman of the Board or the President or the
Board of Directors at any time.
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SECTION 2.4 NOTICE OF MEETINGS.
(a) Except as otherwise provided by law or the Certificate of
Incorporation, written notice of each meeting of stockholders, specifying the
place, date and hour and purpose or purposes of the meeting, shall be given not
less than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote thereat, directed to his address as it appears upon
the books of the corporation; except that where the matter to be acted on is a
merger or consolidation of the Corporation or a sale, lease or exchange of all
or substantially all of its assets, such notice shall be given not less than
twenty (20) nor more than sixty (60) days prior to such meeting.
(b) If at any meeting action is proposed to be taken which, if taken,
would entitle stockholders fulfilling the requirements of section 262(d) of the
Delaware General Corporation Law to an appraisal of the fair value of their
shares, the notice of such meeting shall contain a statement of that purpose and
to that effect and shall be accompanied by a copy of that statutory section.
(c) When a meeting is adjourned to another time or place, 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 unless the adjournment is for more
than thirty days, or unless after the adjournment a new record date is fixed for
the adjourned meeting, in which event a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
(d) Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, either before or after such meeting, and to the extent
permitted by law, will be waived by any stockholder by his attendance thereat,
in person or by proxy. Any stockholder so waiving notice of such meeting shall
be bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
(e) Unless and until voted, every proxy shall be revocable at the pleasure
of the person who executed it or of his legal representatives or assigns, except
in those cases where an irrevocable proxy permitted by statute has been given.
SECTION 2.5 QUORUM AND VOTING.
(a) At all meetings of stockholders, except where otherwise provided by
law, the Certificate of Incorporation, or these Bylaws, the presence, in person
or by proxy duly authorized, of the holders of a majority of the outstanding
shares of stock entitled to vote shall constitute a quorum for the transaction
of business. Shares, the voting of which at said meeting have been enjoined, or
which for any reason cannot be lawfully voted at such meeting, shall not be
counted to determine a quorum at said meeting. In the absence of a quorum, any
meeting of stockholders may be adjourned, from time to time, by vote of the
holders of a majority of the shares represented thereat, but no other business
shall be transacted at such meeting. At such adjourned meeting at which a quorum
is present or represented any business may be transacted which might have been
transacted at the original meeting. The stockholders present at a duly called or
convened meeting, at which a quorum is present, may continue to transact
business
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until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum.
(b) Except as otherwise provided by law, the Certificate of Incorporation
or these Bylaws, all action taken by the holders of a majority of the voting
power represented at any meeting at which a quorum is present shall be valid and
binding upon the corporation.
SECTION 2.6 VOTING RIGHTS.
(a) Except as otherwise provided by law, only persons in whose names
shares entitled to vote stand on the stock records of the corporation on the
record date for determining the stockholders entitled to vote at said meeting
shall be entitled to vote at such meeting. Shares standing in the names of two
or more persons shall be voted or represented in accordance with the
determination of the majority of such persons, or, if only one of such persons
is present in person or represented by proxy, such person shall have the right
to vote such shares and such shares shall be deemed to be represented for the
purpose of determining a quorum.
(b) Every person entitled to vote or execute consents shall have the right
to do so either in person or by an agent or agents authorized by a written proxy
executed by such person or his duly authorized agent, which proxy shall be filed
with the Secretary of the corporation at or before the meeting at which it is to
be used. Said proxy so appointed need not be a stockholder. No proxy shall be
voted on after three years from its date unless the proxy provides for a longer
period.
(c) Without limiting the manner in which a stockholder may authorize
another person or persons to act for him as proxy pursuant to subsection (b) of
this section, the following shall constitute a valid means by which a
stockholder may grant such authority:
(1) A stockholder may execute a writing authorizing another person or
persons to act for him as proxy. Execution may be accomplished by the
stockholder or his authorized officer, director, employee or agent signing such
writing or causing his or her signature to be affixed to such writing by any
reasonable means including, but not limited to, by facsimile signature.
(2) A stockholder may authorize another person or persons to act for
him as proxy by transmitting or authorizing the transmission of a telegram,
cablegram, or other means of electronic transmission to the person who will be
the holder of the proxy or to a proxy solicitation firm, proxy support service
organization or like agent duly authorized by the person who will be the holder
of the proxy to receive such transmission, provided that any such telegram,
cablegram or other means of electronic transmission must either set forth or be
submitted with information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the stockholder.
Such authorization can be established by the signature of the stockholder on the
proxy, either in writing or by a signature stamp or facsimile signature, or by a
number or symbol from which the identity of the stockholder can be determined,
or by any other procedure deemed appropriate by the inspectors or other persons
making the determination as to due authorization. If it is determined that such
telegrams, cablegrams or other electronic transmissions are valid, the
inspectors or, if there are
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no inspectors, such other persons making that determination shall specify the
information upon which they relied.
Any copy, facsimile telecommunication or other reliable reproduction of the
writing or transmission created pursuant to subsection (c) of this section may
be substituted or used in lieu of the original writing or transmission for any
and all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile telecommunication or other reproduction shall
be a complete reproduction of the entire original writing or transmission.
SECTION 2.7 VOTING PROCEDURES AND INSPECTORS OF ELECTIONS.
(a) The corporation shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at the meeting and make a written report
thereof. The corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares outstanding
and the voting power of each, (ii) determine the shares represented at a meeting
and the validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots. The inspectors may appoint or retain other
persons or entities to assist the inspectors in the performance of the duties of
the inspectors.
(c) The date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting shall be announced at
the meeting. No ballot, proxies or votes, nor any revocations thereof or changes
thereto, shall be accepted by the Inspectors after the closing of the polls
unless the Court of Chancery upon application by a stockholder shall determine
otherwise.
(d) In determining the validity and counting of proxies and ballots, the
inspectors shall be limited to an examination of the proxies, any envelopes
submitted with those proxies, any information provided in accordance with
Section 212(c)(2) of the Delaware General Corporation Law, ballots and the
regular books and records of the corporation, except that the inspectors may
consider other reliable information for the limited purpose of reconciling
proxies and ballots submitted by or on behalf of banks, brokers, their nominees
or similar persons which represent more votes than the holder of a proxy is
authorized by the record owner to cast or more votes than the stockholder holds
of record. If the inspectors consider other reliable information for the limited
purpose permitted herein, the inspectors at the time they make their
certification pursuant to subsection (b)(v) of this section shall specify the
precise information considered by them including the person or persons from whom
they obtained the information, when the information was obtained, the means by
which the information was obtained and the basis for the inspectors' belief that
such information is accurate and reliable.
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SECTION 2.8 LIST OF STOCKHOLDERS.
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at said meeting, arranged in
alphabetical order, showing the address of 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 days prior to the meeting, either
at a place within the city where the meeting is to be held and which place shall
be specified in the notice of the meeting, or, if not specified, at the place
where said meeting is to be held, and the list shall be produced and kept at the
time and place of meeting during the whole time thereof, and may be inspected by
any stockholder who is present.
SECTION 2.9 STOCKHOLDER PROPOSALS AT ANNUAL MEETINGS.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, otherwise properly brought before the meeting by or at the direction
of the Board of Directors or otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the corporation, not less
than 45 days nor more than 75 days prior to the date on which the corporation
first mailed its proxy materials for the previous year's annual meeting of
shareholders (or the date on which the corporation mails its proxy materials for
the current year if during the prior year the corporation did not hold an annual
meeting or if the date of the annual meeting was changed more than 30 days from
the prior year). A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and record address of the stockholder proposing such business, (iii)
the class and number of shares of the corporation which are beneficially owned
by the stockholder, and (iv) any material interest of the stockholder in such
business.
Notwithstanding anything in the By-Laws to the contrary, no business shall
be conducted at the annual meeting except in accordance with the procedures set
forth in this Section 2.9, provided, however, that nothing in this Section 2.9
shall be deemed to preclude discussion by any stockholder of any business
properly brought before the annual meeting in accordance with said procedure.
The Chairman of an annual meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 2.9, and if he should
so determine he shall so declare to the meeting, and any such business not
properly brought before the meeting shall not be transacted.
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Nothing in this Section 2.9 shall affect the right of a stockholder to
request inclusion of a proposal in the corporation's proxy statement to the
extent that such right is provided by an applicable rule of the Securities and
Exchange Commission.
SECTION 2.10 NOMINATIONS OF PERSONS FOR ELECTION TO THE BOARD OF DIRECTORS.
In addition to any other applicable requirements, only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors. Nominations of persons for election to the Board of
Directors of the corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors, by any nominating committee or person
appointed by the Board of Directors or by any stockholder of the corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 2.10. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the corporation. To be
timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation, not less than 45 days nor
more than 75 days prior to the date on which the corporation first mailed its
proxy materials for the previous year's annual meeting of shareholders (or the
date on which the corporation mails its proxy materials for the current year if
during the prior year the corporation did not hold an annual meeting or if the
date of the annual meeting was changed more than 30 days from the prior year).
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number of
shares of the corporation which are beneficially owned by the person, and (iv)
any other information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Rule 14a under
the Securities Exchange Act of 1934; and (b) as to the stockholder giving the
notice, (i) the name and record address of the stockholder, and (ii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder. The corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the corporation to determine
the eligibility of such proposed nominee to serve as a director of the
corporation. No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth herein.
These provisions shall not apply to nomination of any persons entitled to be
separately elected by holders of preferred stock.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 2.11 ACTION WITHOUT MEETING.
Unless otherwise provided in the Certificate of Incorporation, any action
required by statute to be taken at any annual or special meeting of stockholders
of the corporation, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, are signed by the holders of outstanding stock having not
less
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than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. To be effective, a written consent must be delivered to the
corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. Every written consent shall bear the
date of signature of each stockholder who signs the consent and no written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the earliest dated consent delivered in the manner
required by this Section to the corporation, written consents signed by a
sufficient number of holders to take action are delivered to the corporation in
accordance with this Section. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 3.1 NUMBER AND TERM OF OFFICE.
The number of directors of the corporation shall not be less than four (4)
nor more than seven (7) until changed by amendment of the Certificate of
Incorporation or by a Bylaw amending this Section 3.1 duly adopted by the vote
or written consent of holders of a majority of the outstanding shares or by the
Board of Directors. The exact number of directors shall be fixed from time to
time, within the limits specified in the Certificate of Incorporation or in this
Section 3.1, by a bylaw or amendment thereof duly adopted by the vote of a
majority of the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or by the written consent of the holders of a
majority of the outstanding shares entitled to vote, or by the Board of
Directors. Subject to the foregoing provisions for changing the number of
directors, the number of directors of the corporation has been fixed at five
(5).
With the exception of the first Board of Directors, which shall be elected
by the incorporators, and except as provided in Section 3.3 of this Article III,
the directors shall be elected by a plurality vote of the shares represented in
person or by proxy, at the stockholders annual meeting in each year and entitled
to vote on the election of directors. Elected directors shall hold office until
the next annual meeting and until their successors shall be duly elected and
qualified. Directors need not be stockholders. If, for any cause, the Board of
Directors shall not have been elected at an annual meeting, they may be elected
as soon thereafter as convenient at a special meeting of the stockholders called
for that purpose in the manner provided in these Bylaws.
SECTION 3.2 POWERS.
The powers of the corporation shall be exercised, its business conducted
and its property controlled by or under the direction of the Board of Directors.
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SECTION 3.3 VACANCIES.
Vacancies and newly created directorships resulting from any increase in
the authorized number of directors may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director,
and each director so elected shall hold office for the unexpired portion of the
term of the director whose place shall be vacant, and until his successor shall
have been duly elected and qualified. A vacancy in the Board of Directors shall
be deemed to exist under this section in the case of the death, removal or
resignation of any director, or if the stockholders fail at any meeting of
stockholders at which directors are to be elected (including any meeting
referred to in Section 3.4 below) to elect the number of directors then
constituting the whole Board.
SECTION 3.4 RESIGNATIONS AND REMOVALS.
(a) Any director may resign at any time by delivering his written
resignation to the Secretary, such resignation to specify whether it will be
effective at a particular time, upon receipt by the Secretary or at the pleasure
of the Board of Directors. If no such specification is made it shall be deemed
effective at the pleasure of the Board of Directors. When one or more directors
shall resign from the Board, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office for the unexpired portion of the term of the director whose
place shall be vacated and until his successor shall have been duly elected and
qualified.
(b) At a special meeting of stockholders called for the purpose in the
manner hereinabove provided, the Board of Directors, or any individual director,
may be removed from office, with or without cause, and a new director or
directors elected by a vote of stockholders holding a majority of the
outstanding shares entitled to vote at an election of directors.
SECTION 3.5 MEETINGS.
(a) The annual meeting of the Board of Directors shall be held immediately
after the annual stockholders' meeting and at the place where such meeting is
held or at the place announced by the Chairman at such meeting. No notice of an
annual meeting of the Board of Directors shall be necessary and such meeting
shall be held for the purpose of electing officers and transacting such other
business as may lawfully come before it.
(b) Except as hereinafter otherwise provided, regular meetings of the
Board of Directors shall be held in the office of the corporation required to be
maintained pursuant to Section 1.2 of Article I hereof. Regular meetings of the
Board of Directors may also be held at any place within or without the State of
Delaware which has been designated by resolutions of the Board of Directors or
the written consent of all directors.
(c) Special meetings of the Board of Directors may be held at any time and
place within or without the State of Delaware whenever called by the Chairman of
the Board or, if there is no Chairman of the Board, by the President, or by any
of the directors.
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(d) Written notice of the time and place of all regular and special
meetings of the Board of Directors shall be delivered personally to each
director or sent by telegram or facsimile transmission at least 48 hours before
the start of the meeting, or sent by first class mail at least 120 hours before
the start of the meeting. Notice of any meeting may be waived in writing at any
time before or after the meeting and will be waived by any director by
attendance thereat.
SECTION 3.6 QUORUM AND VOTING.
(a) A quorum of the Board of Directors shall consist of a majority of the
exact number of directors fixed from time to time in accordance with Section 3.1
of Article III of these Bylaws, but not less than one; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board at which a quorum is present all
questions and business shall be determined by a vote of a majority of the
directors present, unless a different vote be required by law, the Certificate
of Incorporation, or these Bylaws.
(c) Any member of the Board of Directors, or of any committee thereof, may
participate in a meeting by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting by such means shall
constitute presence in person at such meeting.
(d) The transactions of any meeting of the Board of Directors, or any
committee thereof, however called or noticed, or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice, if a
quorum be present and if, either before or after the meeting, each of the
directors not present shall sign a written waiver of notice, or a consent to
holding such meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
SECTION 3.7 ACTION WITHOUT MEETING.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting, if all
members of the Board or of such committee, as the case may be, consent thereto
in writing, and such writing or writings are filed with the minutes of
proceedings of the Board or committee.
SECTION 3.8 FEES AND COMPENSATION.
Directors and members of committees may receive such compensation, if
any, for their services, and such reimbursement for expenses, as may be fixed or
determined by resolution of the Board of Directors.
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SECTION 3.9 COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may, by resolution passed
by a majority of the whole Board, appoint an Executive Committee of not less
than one member, each of whom shall be a director. The Executive Committee, to
the extent permitted by law, shall have and may exercise when the Board of
Directors is not in session all powers of the Board in the management of the
business and affairs of the corporation, including, without limitation, the
power and authority to declare a dividend or to authorize the issuance of stock,
except such committee shall not have the power or authority to amend the
Certificate of Incorporation, to adopt an agreement or merger or consolidation,
to recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, to recommend to the
stockholders of the Corporation a dissolution of the Corporation or a revocation
of a dissolution, or to amend these Bylaws.
(b) OTHER COMMITTEES. The Board of Directors may, by resolution passed by
a majority of the whole Board, from time to time appoint such other committees
as may be permitted by law. Such other committees appointed by the Board of
Directors shall have such powers and perform such duties as may be prescribed by
the resolution or resolutions creating such committee, but in no event shall any
such committee have the powers denied to the Executive Committee in these
Bylaws.
(c) TERM. The members of all committees of the Board of Directors shall
serve a term coexistent with that of the Board of Directors which shall have
appointed such committee. The Board, subject to the provisions of subsections
(a) or (b) of this Section 3.9, may at any time increase or decrease the number
of members of a committee or terminate the existence of a committee; provided,
that no committee shall consist of less than one member. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation, but the Board may at any time for any reason remove any individual
committee member and the Board may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 3.9 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter; special meetings of any such
committee may be held at the principal office of the corporation required to be
maintained pursuant to Section 1.2 of Article I hereof; or at any place which
has been designated from time to time by resolution of such committee or by
written consent of all members thereof, and may be called by any director who is
a member of such committee, upon written notice to the members of such committee
of the time and place of such special meeting given in the
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manner provided for the giving of written notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors.
Notice of any special meeting of any committee may be waived in writing at any
time after the meeting and will be waived by any director by attendance thereat.
A majority of the authorized number of members of any such committee shall
constitute a quorum for the transaction of business, and the act of a majority
of those present at any meeting at which a quorum is present shall be the act of
such committee.
ARTICLE IV
OFFICERS
SECTION 4.1 OFFICERS DESIGNATED.
The officers of the corporation shall be a Chairman of the Board of
Directors and a President, one or more vice-presidents, a Secretary, and a Chief
Financial Officer. The Board of Directors or the President may also appoint
assistant secretaries, assistant Chief Financial Officers, and such other
officers and agents with such powers and duties as it or he shall deem
necessary. The order of the seniority of the Vice- Presidents shall be in the
order of their nomination, unless otherwise determined by the Board of
Directors. The Board of Directors may assign such additional titles to one or
more of the officers as they shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 4.2 TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the Board
of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors. Nothing in these Bylaws shall be construed as creating any
kind of contractual right to employment with the corporation.
(b) DUTIES OF THE CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors (if there be such an officer appointed) shall be the chief
executive officer of the corporation and, when present, shall preside at all
meetings of the stockholders and the Board of Directors. The Chairman of the
Board of Directors shall perform such other duties and have such other powers as
the Board of Directors shall designate from time to time.
(c) DUTIES OF PRESIDENT. The President shall be the chief executive
officer of the corporation in the absence of the Chairman of the Board and shall
preside at all meetings of the stockholders and at all meetings of the Board of
Directors, unless the Chairman of the Board of Directors has been appointed and
is present. The President shall perform such other duties and have such other
powers as the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE-PRESIDENTS. The Vice-Presidents, in the order of their
seniority, may assume and perform the duties of the President in the absence or
disability of the President
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or whenever the office of the President is vacant. The Vice-President shall
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors and any committee thereof, and shall
record all acts and proceedings thereof in the minute book of the corporation.
The Secretary shall give notice, in conformity with these Bylaws, of all
meetings of the stockholders, and of all meetings of the Board of Directors and
any Committee thereof requiring notice. The Secretary shall perform such other
duties and have such other powers as the Board of Directors shall designate from
time to time. The President may direct any Assistant Secretary to assume and
perform the duties of the Secretary in the absence or disability of the
Secretary, and each Assistant Secretary shall perform such other duties and have
such other powers as the Board of Directors or the President shall designate
from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep or cause to be kept the books of account of the corporation in a thorough
and proper manner, and shall render statements of the financial affairs of the
corporation in such form and as often as required by the Board of Directors or
the President. The Chief Financial Officer, subject to the order of the Board of
Directors, shall have the custody of all funds and securities of the
corporation. The Chief Financial Officer shall perform all other duties commonly
incident to his office and shall perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time. The President may direct any Assistant Treasurer to assume and perform the
duties of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Assistant Treasurer shall perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
ARTICLE V
EXECUTION OF CORPORATE INSTRUMENTS, AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
SECTION 5.1 EXECUTION OF CORPORATE INSTRUMENTS.
(a) The Board of Directors may, in its discretion, determine the method
and designate the signatory officer or officers, or other person or persons, to
execute any corporate instrument or document, or to sign the corporate name
without limitation, except where otherwise provided by law, and such execution
or signature shall be binding upon the corporation.
(b) Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, formal contracts of the corporation, promissory
notes, deeds of trust, mortgages and other evidences of indebtedness of the
corporation, and other corporate instruments or documents requiring the
corporate seal, and certificates of shares of stock owned by the corporation,
shall be executed, signed or endorsed by the Chairman of the Board (if there be
such an officer appointed) or by the President; such documents may also be
executed by any Vice-President and by the Secretary or Chief Financial Officer
or any Assistant Secretary or Assistant
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Chief Financial Officer. All other instruments and documents requiring the
corporate signature, but not requiring the corporate seal, may be executed as
aforesaid or in such other manner as may be directed by the Board of Directors.
(c) All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation, or in special accounts of the corporation, shall
be signed by such person or persons as the Board of Directors shall authorize so
to do.
SECTION 5.2 VOTING OF SECURITIES OWNED BY CORPORATION.
All stock and other securities of other corporations owned or held by the
corporation for itself, or for other parties in any capacity, shall be voted,
and all proxies with respect thereto shall be executed, by the person authorized
so to do by resolution of the Board of Directors or, in the absence of such
authorization, by the Chairman of the Board (if there be such an officer
appointed), or by the President, or by any Vice-President.
ARTICLE VI
SHARES OF STOCK
SECTION 6.1 FORM AND EXECUTION OF CERTIFICATES.
Certificates for the shares of stock of the corporation shall be in such
form as is consistent with the Certificate of Incorporation and applicable law.
Every holder of stock in the corporation shall be entitled to have a certificate
signed by, or in the name of the corporation by, the Chairman of the Board (if
there be such an officer appointed), or by the President or any Vice-President
and by the Chief Financial Officer or Assistant Chief Financial Officer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. If the corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, provided that, except as otherwise provided in section 202 of the
Delaware General Corporation Law, in lieu of the foregoing requirements, there
may be set forth on the face or back of the certificate which 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, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
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SECTION 6.2 LOST CERTIFICATES.
The Board of Directors may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to indemnify the
corporation in such manner as it shall require and/or to give the corporation a
surety bond in such form and amount as it may direct as indemnity against any
claim that may be made against the corporation with respect to the certificate
alleged to have been lost or destroyed.
SECTION 6.3 TRANSFERS.
Transfers of record of shares of stock of the corporation shall be made
only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a certificate or certificates for a like
number of shares, properly endorsed.
SECTION 6.4 FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which record date shall not be more than sixty
nor less than ten days before the date of such meeting. If no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
date on which the meeting is held. A determination of stockholders of record
entitled notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by the Delaware General Corporation Law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If
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no record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine 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
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
SECTION 6.5 REGISTERED STOCKHOLDERS.
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, and
to vote as such owner, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VII
OTHER SECURITIES OF THE CORPORATION
All bonds, debentures and other corporate securities of the corporation,
other than stock certificates, may be signed by the Chairman of the Board (if
there be such an officer appointed), or the President or any Vice-President or
such other person as may be authorized by the Board of Directors and the
corporate seal impressed thereon or a facsimile of such seal imprinted thereon
and attested by the signature of the Secretary or an Assistant Secretary, or the
Chief Financial Officer or an Assistant Chief Financial Officer; provided,
however, that where any such bond, debenture or other corporate security shall
be authenticated by the manual signature of a trustee under an indenture
pursuant to which such bond, debenture or other corporate security shall be
issued, the signature of the persons signing and attesting the corporate seal on
such bond, debenture or other corporate security may be the imprinted facsimile
of the signatures of such persons. Interest coupons appertaining to any such
bond, debenture or other corporate security, authenticated by a trustee as
aforesaid, shall be signed by the Chief Financial Officer or an Assistant Chief
Financial Officer of the corporation, or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or before the bond, debenture or other corporate security so signed or
attested shall have been delivered, such bond, debenture or other corporate
security nevertheless may be adopted by the corporation and issued and delivered
as though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
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ARTICLE VIII
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
SECTION 8.1 RIGHT TO INDEMNIFICATION.
Each person who was or is a party or is threatened to be made a party to or
is involved (as a party, witness, or otherwise), in any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (hereinafter a "Proceeding"), by reason of the fact that he, or
a person of whom he is the legal representative, 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 or
of a partnership, joint venture, trust, or other enterprise, including service
with respect to employee benefit plans, whether the basis of the Proceeding is
alleged action in an official capacity as a director, officer, employee, or
agent or in any other capacity while serving as a director, officer, employee,
or agent (hereafter an "Agent"), shall be indemnified and held harmless by the
corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended or interpreted (but, in the
case of any such amendment or interpretation, only to the extent that such
amendment or interpretation permits the corporation to provide broader
indemnification rights than were permitted prior thereto) against all expenses,
liability, and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties, and amounts paid or to be paid in settlement, and any
interest, assessments, or other charges imposed thereon, and any federal, state,
local, or foreign taxes imposed on any Agent as a result of the actual or deemed
receipt of any payments under this Article) reasonably incurred or suffered by
such person in connection with investigating, defending, being a witness in, or
participating in (including on appeal), or preparing for any of the foregoing
in, any Proceeding (hereinafter "Expenses"). The right to indemnification
conferred in this Article shall be a contract right.
SECTION 8.2 AUTHORITY TO ADVANCE EXPENSES.
Expenses incurred by an executive officer or director (acting in his
capacity as such) in defending a Proceeding shall be paid by the corporation in
advance of the final disposition of such Proceeding, provided, however, that if
required by the Delaware General Corporation Law, as amended, such Expenses
shall be advanced only upon delivery to the corporation of an undertaking by or
on behalf of such director or executive officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article or otherwise. Expenses incurred by
other Agents of the corporation (or by the directors or officers not acting in
their capacity as such, including service with respect to employee benefit
plans) may be advanced upon such terms and conditions as the Board of Directors
deems appropriate. Any obligation to reimburse the corporation for Expense
advances shall be unsecured and no interest shall be charged thereon.
SECTION 8.3 RIGHT OF CLAIMANT TO BRING SUIT.
If a claim under Section 8.1 or 8.2 of this Article is not paid in full by
the corporation within ninety (90) days after a written claim has been received
by the corporation, the claimant may at any time thereafter bring suit against
the corporation to recover the unpaid amount of the
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claim and, if successful in whole or in part, the claimant shall be entitled to
be paid also the expense (including attorneys' fees) of prosecuting such claim.
It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending a Proceeding in advance of
its final disposition where the required undertaking has been tendered to the
corporation) that the claimant has not met the standards of conduct that make it
permissible under the Delaware General Corporation Law for the corporation to
indemnify the claimant for the amount claimed. The burden of proving such a
defense shall be on the corporation. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper under the circumstances
because he has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant had not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
SECTION 8.4 PROVISIONS NONEXCLUSIVE.
The rights conferred on any person by this Article shall not be exclusive
of any other rights that such person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office. To the extent that any provision of the Certificate, agreement, or vote
of the stockholders or disinterested directors is inconsistent with these
bylaws, the provision, agreement, or vote shall take precedence.
SECTION 8.5 AUTHORITY TO INSURE.
The corporation may purchase and maintain insurance to protect itself and
any Agent against any Expense, whether or not the corporation would have the
power to indemnify the Agent against such Expense under applicable law or the
provisions of this Article.
SECTION 8.6 SURVIVAL OF RIGHTS.
The rights provided by this Article shall continue as to a person who has
ceased to be an Agent and shall inure to the benefit of the heirs, executors,
and administrators of such a person.
SECTION 8.7 SETTLEMENT OF CLAIMS.
The corporation shall not be liable to indemnify any Agent under this
Article (a) for any amounts paid in settlement of any action or claim effected
without the corporation's written consent, which consent shall not be
unreasonably withheld; or (b) for any judicial award if the corporation was not
given a reasonable and timely opportunity, at its expense, to participate in the
defense of such action.
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SECTION 8.8 EFFECT OF AMENDMENT.
Any amendment, repeal, or modification of this Article shall not adversely
affect any right or protection of any Agent existing at the time of such
amendment, repeal, or modification.
SECTION 8.9 SUBROGATION.
In the event of payment under this Article, the corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the
Agent, who shall execute all papers required and shall do everything that may be
necessary to secure such rights, including the execution of such documents
necessary to enable the corporation effectively to bring suit to enforce such
rights.
SECTION 8.10 NO DUPLICATION OF PAYMENTS.
The corporation shall not be liable under this Article to make any payment
in connection with any claim made against the Agent to the extent the Agent has
otherwise actually received payment (under any insurance policy, agreement,
vote, or otherwise) of the amounts otherwise indemnifiable hereunder.
ARTICLE IX
NOTICES
Whenever, under any provisions of these Bylaws, notice is required to be
given to any stockholder, the same shall be given in writing, timely and duly
deposited in the United States Mail, postage prepaid, and addressed to his last
known post office address as shown by the stock record of the corporation or its
transfer agent. Any notice required to be given to any director may be given by
the method hereinabove stated, or by telegram or other means of electronic
transmission, except that such notice other than one which is delivered
personally, shall be sent to such address or (in the case of facsimile
telecommunication) facsimile telephone number as such director shall have filed
in writing with the Secretary of the corporation, or, in the absence of such
filing, to the last known post office address of such director. If no address of
a stockholder or director be known, such notice may be sent to the office of the
corporation required to be maintained pursuant to Section 1.2 of Article I
hereof. An affidavit of mailing, executed by a duly authorized and competent
employee of the corporation or its transfer agent appointed with respect to the
class of stock affected, specifying the name and address or the names and
addresses of the stockholder or stockholders, director or directors, to whom any
such notice or notices was or were given, and the time and method of giving the
same, shall be conclusive evidence of the statements therein contained. All
notices given by mail, as above provided, shall be deemed to have been given as
at the time of mailing and all notices given by telegram or other means of
electronic transmission shall be deemed to have been given as at the sending
time recorded by the telegraph company or other electronic transmission
equipment operator transmitting the same. It shall not be necessary that the
same method of giving be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
The period or limitation of time within which any stockholder may exercise
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any option or right, or enjoy any privilege or benefit, or be required to act,
or within which any director may exercise any power or right, or enjoy any
privilege, pursuant to any notice sent him in the manner above provided, shall
not be affected or extended in any manner by the failure of such a stockholder
or such director to receive such notice. Whenever any notice is required to be
given under the provisions of the statutes or of the Certificate of
Incorporation, or of these Bylaws, a waiver thereof in writing signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. Whenever notice is required
to be given, under any provision of law or of the Certificate of Incorporation
or Bylaws of the corporation, to any person with whom communication is unlawful,
the giving of such notice to such person shall not be required and there shall
be no duty to apply to any governmental authority or agency for a license or
permit to give such notice to such person. Any action or meeting which shall be
taken or held without notice to any such person with whom communication is
unlawful shall have the same force and effect as if such notice had been duly
given. In the event that the action taken by the corporation is such as to
require the filing of a certificate under any provision of the Delaware General
Corporation Law, the certificate shall state, if such is the fact and if notice
is required, that notice was given to all persons entitled to receive notice
except such persons with whom communication is unlawful.
ARTICLE X
AMENDMENTS
These Bylaws may be repealed, altered or amended or new Bylaws adopted by
written consent of stockholders in the manner authorized by Section 2.11 of
Article II, or at any meeting of the stockholders, either annual or special, by
the affirmative vote of a majority of the stock entitled to vote at such
meeting, unless a larger vote is required by these Bylaws or the Certificate of
Incorporation. The Board of Directors shall also have the authority to repeal,
alter or amend these Bylaws or adopt new Bylaws (including, without limitation,
the amendment of any Bylaws setting forth the number of directors who shall
constitute the whole Board of Directors) by unanimous written consent or at any
annual, regular, or special meeting by the affirmative vote of a majority of the
whole number of directors, subject to the power of the stockholders to change or
repeal such Bylaws and provided that the Board of Directors shall not make or
alter any Bylaws fixing the qualifications, classifications, or term of office
of directors.
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EXHIBIT 10.2
PLX TECHNOLOGY, INC.
1998 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of the Committees
appointed to administer the Plan.
(b) "Applicable Laws" means the legal requirements relating to
the administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, California corporate and securities laws, the Code,
the rules of any applicable stock exchange or national market system, and the
rules of any foreign jurisdiction applicable to Awards granted to residents
therein.
(c) "Award" means the grant of an Option, Restricted Stock, SAR,
Dividend Equivalent Right, Performance Unit, Performance Share, or other right
or benefit under the Plan.
(d) "Award Agreement" means the written agreement evidencing the
grant of an Award executed by the Company and the Grantee, including any
amendments thereto.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means any committee appointed by the Board to
administer the Plan.
(h) "Common Stock" means the common stock of the Company.
(i) "Company" means PLX Technology, Inc, a California
corporation.
(j) "Consultant" means any person who is engaged by the Company
or Related Entity to render consulting or advisory services as an independent
contractor and is compensated for such services.
(k) "Continuous Status as an Employee, Director or Consultant"
means that the provision of services to the Company or a Related Entity in any
capacity of Employee, Director or Consultant, is not interrupted or terminated.
Continuous Status as an Employee, Director or Consultant shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
between locations of the Company or among the Company, any Related Entity, or
any successor, in any capacity of Employee, Director or Consultant, or (iii) any
change
<PAGE> 2
in status as long as the individual remains in the service of the Company or a
Related Entity in any capacity of Employee, Director or Consultant (except as
otherwise provided in the Award Agreement). An approved leave of absence shall
include sick leave, military leave, or any other authorized personal leave. For
purposes of Incentive Stock Options, no such leave may exceed ninety (90) days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract.
(l) "Corporate Transaction" means any of the following
shareholder-approved transactions to which the Company is a party:
(i) a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose of which is
to change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company; or
(iii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding securities
are transferred to a person or persons different from those who held such
securities immediately prior to such merger.
(m) "Director" means a member of the Board.
(n) "Dividend Equivalent Right" means a right entitling the
Grantee to compensation measured by dividends paid with respect to Common Stock.
(o) "Employee" means any person, including an Officer or
Director, who is an employee of the Company or any Related Entity. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(q) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) Where there exists a public market for the Common
Stock, the Fair Market Value shall be (A) the closing price for a Share for the
last market trading day prior to the time of the determination (or, if no
closing price was reported on that date, on the last trading date on which a
closing price was reported) on the stock exchange determined by the
Administrator to be the primary market for the Common Stock or the Nasdaq
National Market, whichever is applicable or (B) if the Common Stock is not
traded on any such exchange or national market system, the average of the
closing bid and asked prices of a Share on the Nasdaq Small Cap Market for the
day prior to the time of the determination (or, if no such prices were reported
on that date, on the last date on which such prices were reported), in each
case, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or
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(ii) In the absence of an established market of the type
described in (i), above, for the Common Stock, the Fair Market Value thereof
shall be determined by the Administrator in good faith and in a manner
consistent with Section 260.140.50 of Title 10 of the California Code of
Regulations.
(r) "Grantee" means an Employee, Director or Consultant who
receives an Award under the Plan.
(s) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code
(t) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(u) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(v) "Option" means a stock option granted pursuant to the Plan.
(w) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "Performance Shares" means Shares or an award denominated in
Shares which may be earned in whole or in part upon attainment of performance
criteria established by the Administrator.
(y) "Performance Units" means an award which may be earned in
whole or in part upon attainment of performance criteria established by the
Administrator and which may be settled for cash, Shares or other securities or a
combination of cash, Shares or other securities as established by the
Administrator.
(z) "Plan" means this 1998 Stock Incentive Plan.
(aa) "Registration Date" means the closing of the first sale of
Common Stock to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
(bb) "Related Entity" means any Parent, Subsidiary and any
business, corporation, partnership, limited liability company or other entity in
which the Company, a Parent or a Subsidiary holds a substantial ownership
interest, directly or indirectly.
(cc) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.
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(dd) "SAR" means a stock appreciation right entitling the Grantee
to Shares or cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.
(ee) "Share" means a share of the Common Stock.
(ff) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 11(a), below, the
maximum aggregate number of Shares which may be issued pursuant to all Awards
(including Incentive Stock Options) is eight hundred thousand (800,000) Shares.
The Shares may be authorized, but unissued, or reacquired Common Stock.
(b) If an Award expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an Award exchange program,
or if any unissued Shares are retained by the Company upon exercise of an Award
in order to satisfy the exercise price for such Award or any withholding taxes
due with respect to such Award, such unissued or retained Shares shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that actually have been issued under the Plan pursuant to an
Award shall not be returned to the Plan and shall not become available for
future distribution under the Plan, except that if unvested Shares are
forfeited, or repurchased by the Company at their original purchase price, such
Shares shall become available for future grant under the Plan.
4. Administration of the Plan.
(a) Plan Administrator. With respect to grants of Awards to
Employees, Directors, Officers or Consultants, the Plan shall be administered by
(A) the Board or (B) a Committee (or a subcommittee of the Committee) designated
by the Board, which Committee shall be constituted in such a manner as to
satisfy Applicable Laws. Once appointed, such Committee shall continue to serve
in its designated capacity until otherwise directed by the Board. The Board may
authorize one or more Officers to grant Awards and may limit such authority as
the Board determines from time to time.
(b) Multiple Administrative Bodies. The Plan may be administered
by different bodies with respect to Directors, Officers, Consultants, and
Employees who are neither Directors nor Officers.
(c) Powers of the Administrator. Subject to Applicable Laws and
the provisions of the Plan (including any other powers given to the
Administrator hereunder), and except as otherwise provided by the Board, the
Administrator shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to
whom Awards may be granted from time to time hereunder;
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<PAGE> 5
(ii) to determine whether and to what extent Awards are
granted hereunder;
(iii) to determine the number of Shares or the amount of
other consideration to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreement for use under the
Plan;
(v) to determine the terms and conditions of any Award
granted hereunder;
(vi) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable treatment under such laws; provided, however,
that no Award shall be granted under any such additional terms, conditions,
rules or procedures with terms or conditions which are inconsistent with the
provisions of the Plan;
(vii) to amend the terms of any outstanding Award granted
under the Plan, including a reduction in the exercise price (or base amount on
which appreciation is measured) of any Award to reflect a reduction in the Fair
Market Value of the Common Stock since the grant date of the Award, provided
that any amendment that would adversely affect the Grantee's rights under an
outstanding Award shall not be made without the Grantee's written consent;
(viii) to construe and interpret the terms of the Plan and
Awards granted pursuant to the Plan; and
(ix) to take such other action, not inconsistent with the
terms of the Plan, as the Administrator deems appropriate.
(d) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be conclusive and
binding on all persons.
5. Eligibility. Awards other than Incentive Stock Options may be granted
to Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.
6. Terms and Conditions of Awards.
(a) Type of Awards. The Administrator is authorized under the
Plan to award any type of arrangement to an Employee, Director or Consultant
that is not inconsistent with the provisions of the Plan and that by its terms
involves or might involve the issuance of (i) Shares, (ii) an Option, a SAR or
similar right with an exercise or conversion privilege at a fixed or variable
price related to the Common Stock and/or the passage of time, the occurrence of
one or
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<PAGE> 6
more events, or the satisfaction of performance criteria or other conditions, or
(iii) any other security with the value derived from the value of the Common
Stock or securities issued by a Related Entity. Such awards include, without
limitation, Options, sales or bonuses of Restricted Stock, SARs, Dividend
Equivalent Rights, Performance Units or Performance Shares, and an Award may
consist of one such security or benefit, or two or more of them in any
combination or alternative.
(b) Designation of Award. Each Award shall be designated in the
Award Agreement. In the case of an Option, the Option shall be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of Shares subject to Options designated as Incentive Stock Options which
become exercisable for the first time by a Grantee during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds $100,000,
such excess Options, to the extent of the Shares covered thereby in excess of
the foregoing limitation, shall be treated as Non-Qualified Stock Options. For
this purpose, Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the date the Option with respect to such Shares is granted.
(c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total shareholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.
(d) Deferral of Award Payment. The Administrator may establish
one or more programs under the Plan to permit selected Grantees the opportunity
to elect to defer receipt of consideration upon exercise of an Award,
satisfaction of performance criteria, or other event that absent the election
would entitle the Grantee to payment or receipt of Shares or other consideration
under an Award. The Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred, and such other terms, conditions, rules and procedures that the
Administrator deems advisable for the administration of any such deferral
program.
(e) Award Exchange Programs. The Administrator may establish one
or more programs under the Plan to permit selected Grantees to exchange an Award
under the Plan for one or more other types of Awards under the Plan on such
terms and conditions as determined by the Administrator from time to time.
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<PAGE> 7
(f) Separate Programs. The Administrator may establish one or
more separate programs under the Plan for the purpose of issuing particular
forms of Awards to one or more classes of Grantees on such terms and conditions
as determined by the Administrator from time to time.
(g) Early Exercise. The Award may, but need not, include a
provision whereby the Grantee may elect at any time while an Employee, Director
or Consultant to exercise any part or all of the Award prior to full vesting of
the Award. Any unvested Shares received pursuant to such exercise may be subject
to a repurchase right in favor of the Company or to any other restriction the
Administrator determines to be appropriate.
(h) Term of Award. The term of each Award shall be the term
stated in the Award Agreement, provided, however, that the term shall be no more
than ten (10) years from the date of grant thereof. However, in the case of an
Incentive Stock Option granted to a Grantee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant
thereof or such shorter term as may be provided in the Award Agreement.
(i) Non-Transferability of Awards. Awards may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Grantee, only by the Grantee.
(j) Time of Granting Awards. The date of grant of an Award shall
for all purposes be the date on which the Administrator makes the determination
to grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.
7. Award Exercise or Purchase Price, Consideration, Taxes and Reload
Options.
(a) Exercise or Purchase Price. The exercise or purchase price,
if any, for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of
the grant of such Incentive Stock Option owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be not less than one
hundred ten percent (110%) of the Fair Market Value per Share on the date of
grant.
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
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<PAGE> 8
(ii) In the case of a Non-Qualified Stock Option:
(A) granted to a person who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be not less than one hundred ten percent
(110%) of the Fair Market Value per Share on the date of grant.
(B) granted to any person other than a person
described in the preceding paragraph, the per Share exercise price shall be not
less than eighty-five percent (85%) of the Fair Market Value per Share on the
date of grant.
(iii) In the case of the sale of Shares:
(A) granted to a person who, at the time of the
grant of such Award, or at the time the purchase is consummated, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share purchase price
shall be not less than one hundred percent (100%) of the Fair Market Value per
share on the date of grant.
(B) granted to any person other than a person
described in the preceding paragraph, the per Share purchase price shall be not
less than eighty-five percent (85%) of the Fair Market Value per Share on the
date of grant.
(iv) In the case of other Awards, such price as is
determined by the Administrator.
(b) Consideration. Subject to Applicable Laws, the consideration
to be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares
issued under the Plan the following:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such
recourse, interest, security, and redemption provisions as the Administrator
determines as appropriate;
(iv) if the exercise occurs on or after the Registration
Date, surrender of Shares or delivery of a properly executed form of attestation
of ownership of Shares as the Administrator may require (including withholding
of Shares otherwise deliverable upon exercise of the Award) which have a Fair
Market Value on the date of surrender or attestation equal to the aggregate
exercise price of the Shares as to which said Award shall be exercised (but only
to the
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<PAGE> 9
extent that such exercise of the Award would not result in an accounting
compensation charge with respect to the Shares used to pay the exercise price
unless otherwise determined by the Administrator);
(v) if the exercise occurs on or after the Registration
Date, delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, shall require
to effect an exercise of the Award and delivery to the Company of the sale or
loan proceeds required to pay the exercise price; or
(vi) any combination of the foregoing methods of payment.
(c) Taxes. No Shares shall be delivered under the Plan to any
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
(d) Reload Options. In the event the exercise price or tax
withholding of an Option is satisfied by the Company or the Grantee's employer
withholding Shares otherwise deliverable to the Grantee, the Administrator may
issue the Grantee an additional Option, with terms identical to the Award
Agreement under which the Option was exercised, but at an exercise price as
determined by the Administrator in accordance with the Plan.
8. Exercise of Award.
(a) Procedure for Exercise; Rights as a Shareholder.
(i) Any Award granted hereunder shall be exercisable at
such times and under such conditions as determined by the Administrator under
the terms of the Plan and specified in the Award Agreement but in the case of an
Option, in no case at a rate of less than 20% per year over five (5) years from
the date the Option is granted, subject to reasonable conditions such as
continued employment. However, in the case of an Option granted to an Officer,
Director or Consultant, the Award Agreement may provide that the Option may
become fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established in the Award Agreement.
(ii) An Award shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and full payment
for the Shares with respect to which the Award is exercised has been received by
the Company. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to
Shares subject to an Award, notwithstanding the exercise of an Option or other
Award. The Company shall issue (or cause to
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<PAGE> 10
be issued) such stock certificate promptly upon exercise of the Award. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in the
Award Agreement or Section 11(a), below.
(b) Exercise of Award Following Termination of Employment,
Director or Consulting Relationship. In the event of termination of a grantee's
Continuous Status as an Employee, Director or Consultant for any reason other
than disability or death (but not in the event of a grantee's change of status
from Employee to Consultant or from Consultant to Employee), such Grantee may,
but only within three (3) months after the date of such termination (but in no
event later than the expiration date of the term of such Award as set forth in
the Award Agreement), exercise his or her Award to the extent that the Grantee
was entitled to exercise it at the date of such termination or to such other
extent as may be determined by the Administrator. The Grantee's Award Agreement
may provide that upon the event of termination of the Grantee's Continuous
Status as an Employee, Director or Consultant for "Cause," the Grantee's right
to exercise the Award shall terminate concurrently with the termination of
Grantee's Continuous Status as an Employee, Director or Consultant. The term
"Cause" shall be as defined in the Award Agreement. If the Grantee should die
within three (3) months after the date of such termination, the Grantee's estate
or the person who acquired the right to exercise the Award by bequest or
inheritance may exercise the Award to the extent that the Grantee was entitled
to exercise it at the date of such termination within twelve (12) months of the
Grantee's date of death, but in no event later than the expiration date of the
term of such Award as set forth in the Award Agreement. In the event of a
grantee's change of status from Employee to Consultant, an Employee's Incentive
Stock Option shall convert automatically to a Non-Qualified Stock Option on the
day three (3) months and one day following such change of status. To the extent
that the Grantee is not entitled to exercise the Award at the date of
termination, or if Grantee does not exercise such Award to the extent so
entitled within the time specified herein, the Award shall terminate.
(c) Disability of Grantee. In the event of termination of a
grantee's Continuous Status as an Employee, Director or Consultant as a result
of his or her disability, Grantee may, but only within twelve (12) months from
the date of such termination (and in no event later than the expiration date of
the term of such Award as set forth in the Award Agreement), exercise the Award
to the extent otherwise entitled to exercise it at the date of such
termination; provided, however, that if such disability is not a "disability"
as such term is defined in Section 22(e)(3) of the Code, in the case of an
Incentive Stock Option such Incentive Stock Option shall automatically convert
to a Non-Qualified Stock Option on the day three (3) months and one day
following such termination. To the extent that the Grantee is not entitled to
exercise the Award at the date of termination, or if Grantee does not exercise
such Award to the extent so entitled within the time specified herein, the
Award shall terminate.
(d) Death of Grantee. In the event of the death of a grantee, the
Award may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Award as
set forth in the Award Agreement), by the Grantee's estate or by a person who
acquired the right to exercise the Award by bequest or inheritance, but only to
the extent that the Grantee was entitled to exercise the Award at the date of
death. If, at the time of death, the Grantee was not entitled to exercise his or
her entire Award,
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the Shares covered by the unexercisable portion of the Award shall immediately
revert to the Plan. If, after death, the Grantee's estate or a person who
acquired the right to exercise the Award by bequest or inheritance does not
exercise the Award within the time specified herein, the Award shall terminate.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Award previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Grantee at the time that such offer is made.
9. Conditions Upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and delivery of such
Shares pursuant thereto shall comply with all Applicable Laws, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Repurchase Rights. If the provisions of an Award Agreement grant to
the Company the right to repurchase Shares upon termination of the Grantee's
Continuous Status as an Employee, Director or Consultant, the Award Agreement
shall provide that the repurchase price will be either:
(a) Not less than the Fair Market Value of the Shares to be
repurchased on the date of termination of the Grantee's Continuous Status as an
Employee, Director or Consultant, and the right to repurchase must be exercised
for cash or cancellation of purchase money indebtedness for the Shares within
ninety (90) days of the termination of the Grantee's Continuous Status as an
Employee, Director or Consultant (or in the case of Shares issued upon exercise
of Awards after the date of termination of the Grantee's Continuous Status as an
Employee, Director or Consultant, within ninety (90) days after the date of the
Award exercise), and the right terminates when the Company's securities become
publicly traded; or
(b) The original purchase price, provided that the right to
repurchase at the original purchase price lapses at the rate of at least twenty
percent (20%) of the Shares subject to the Award per year over five (5) years
from the date the Award is granted (without respect to the date the Award was
exercised or became exercisable), and the right to repurchase must be exercised
for cash or cancellation of purchase money indebtedness for the Shares within
ninety (90) days of termination of the Grantee's Continuous Status as an
Employee, Director or Consultant (or in the case of Shares issued upon exercise
of Awards after the date of termination of the Grantee's Continuous Status as an
Employee, Director or Consultant, within ninety (90) days after the date of the
Award exercise).
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(c) In addition to the restrictions set forth in (a) and (b)
above, the Shares held by an Officer, Director or Consultant may be subject to
additional or greater restrictions.
11. Adjustments Upon Changes in Capitalization or Corporate Transaction.
(a) Adjustments upon Changes in Capitalization. Subject to any
required action by the shareholders of the Company, the number of Shares covered
by each outstanding Award, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Awards have yet been granted or
which have been returned to the Plan, as well as the price per share of Common
Stock covered by each such outstanding Award, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other similar event resulting in
an increase or decrease in the number of issued shares of Common Stock. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
number or price of Shares subject to an Award.
(b) Corporate Transaction. Except as provided otherwise in an
individual Award Agreement, in the event of any Corporate Transaction, the Award
will terminate immediately prior to the specified effective date of the
Corporate Transaction, unless the Award is assumed or an equivalent Award is
substituted by the successor corporation or a Parent or Subsidiary of such
successor corporation. For the purposes of this subsection, the Award shall be
considered assumed or substituted for an equivalent Award if, following the
Corporate Transaction, the Award confers with substantially equivalent
provisions as the original Award, for each Share subject to the Award
immediately prior to the Corporate Transaction, (i) the consideration (whether
stock, cash, or other securities or property) received in the Corporate
Transaction by holders of Common Stock for each Share subject to the Award held
on the effective date of the Corporate Transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares), or (ii) the right to purchase such
consideration in the case of an Option or similar Award; provided, however, that
if such consideration received in the Corporate Transaction was not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise or exchange of the Award for each Share subject to
the Award to be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received by holders of
Common Stock in the Corporate Transaction.
12. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company. It shall continue in effect for a term of ten (10) years unless sooner
terminated.
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13. Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the
Plan. To the extent necessary to comply with Applicable Laws, the Company shall
obtain shareholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) No Award may be granted during any suspension of the Plan or
after termination of the Plan.
(c) Any amendment, suspension or termination of the Plan
(including termination of the Plan under Section 12, above) shall not affect
Awards already granted, and such Awards shall remain in full force and effect as
if the Plan had not been amended, suspended or terminated, unless mutually
agreed otherwise between the Grantee and the Administrator, which agreement must
be in writing and signed by the Grantee and the Company.
14. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. No Effect on Terms of Employment/Consulting Relationship. The Plan
shall not confer upon any Grantee any right with respect to continuation of
employment or consulting relationship with the Company, nor shall it interfere
in any way with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.
16. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under Applicable Laws. Any Award exercised
before shareholder approval is obtained shall be rescinded if shareholder
approval is not obtained within the time prescribed, and Shares issued on the
exercise of any such Award shall not be counted in determining whether
shareholder approval is obtained.
17. Information to Grantees. The Company shall provide to each Grantee,
during the period for which such Grantee has one or more Awards outstanding,
copies of financial statements at least annually.
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FORM OF STOCK OPTION GRANT AND STOCK OPTION AGREEMENT
PLX TECHNOLOGY, INC. 1998 STOCK INCENTIVE PLAN
NOTICE OF IMMEDIATELY EXERCISABLE STOCK OPTION GRANT
Optionee's Name and Address: ____________________________________
____________________________________
____________________________________
You have been granted an option to purchase shares of Common Stock of
the Company, subject to the terms and conditions of the Plan and the Option
Agreement, as follows:
Grant Number ____________________________________
Date of Grant ____________________________________
Vesting Commencement Date ____________________________________
Exercise Price per Share $___________________________________
Total Number of Shares Granted ____________________________________
Total Exercise Price $___________________________________
Type of Option: _______ Incentive Stock Option
_______ Non-Qualified Stock Option
Expiration Date: ____________________________________
Vesting Schedule:
Subject to other limitations set forth in the Option Agreement, the
Option may be exercised at any time from the date hereof.
The Shares purchased hereunder are subject to a Repurchase Right, at the
Exercise Price, in favor of the Company as described in Section 12 of the Option
Agreement (the "Repurchase Right for Unvested Shares"). The Repurchase Right for
Unvested Shares shall lapse at the rate of _________________ such that no Shares
shall be subject to the Repurchase Right for Unvested Shares __________ after
the Vesting Commencement Date, regardless of the date the Option or any portion
is exercised. Shares that are no longer subject to the Repurchase Right for
Unvested Shares are deemed to be "Vested Shares."
During any authorized leave of absence, the vesting of the Shares as
provided in this schedule shall cease after the leave of absence exceeds a
period of ninety (90) days. Vesting of the Shares shall resume upon the
Optionee's termination of the leave of absence and return to service with the
Company or a Related Entity. In the event of the Optionee's change in status
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from Employee to Consultant, vesting of the Shares shall continue only to the
extent determined by the Administrator as of such change in status.
Termination Period:
Except in the event of termination of the Optionee's Continuous Status
as an Employee, Director or Consultant for "Cause" (as defined below), the
Option may be exercised on the date of termination within three (3) months from
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant or such longer period as may be applicable upon death or disability
of the Optionee as provided in the Option Agreement. In the event of the
Optionee's change in status from Employee to Consultant or Consultant to
Employee, the Option shall remain in effect; provided, however, that in the
event of a change in status from Employee to Consultant, the Optionee's
Incentive Stock Option shall cease to be treated as an Incentive Stock Option
and shall be treated as a Non-Qualified Stock Option on the day three (3) months
and one day following such change in status. In no event shall the Option be
exercised later than the Expiration Date as provided above.
In the event of termination of the Optionee's Continuous Status as an
Employee, Director or Consultant for "Cause," the Optionee's right to exercise
the Option shall terminate concurrently with the termination of the Optionee's
Continuous Status as an Employee, Director or Consultant.
Definition of "Cause":
For purposes of the Option, termination of the Optionee's Continuous
Status as an Employee, Director or Consultant shall be for "Cause" as such term
is defined in the Optionee's employment agreement, or in the absence of such
definition, then as in the opinion of the Company, the Optionee: (i) refuses or
fails to act in accordance with any specific direction or order of the Company;
(ii) exhibits in regard to his employment unfitness or unavailability for
service, or unsatisfactory performance, but not disability; (iii) acts in bad
faith and to the detriment of the Company; (iv) exhibits dishonesty, intentional
misconduct, or materially breaches any agreement with the Company or a Related
Entity; or (v) commits a crime involving dishonesty, breach of trust, or
physical or emotional harm to any person. At least 30 days prior to terminating
the Optionee's Continuous Status as an Employee, Director or Consultant pursuant
to (i) or (ii) above, the Company shall provide the Optionee with notice of the
Company's intent to terminate, the Company's reason therefor, and an opportunity
for the Optionee to cure such defects in his service to the Company's
satisfaction. During this 30 day (or longer) period, the Optionee shall not be
entitled to exercise the Option.
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<PAGE> 16
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Notice of Stock Option Grant and agree that the Option is to be governed by the
terms and conditions of this Notice of Stock Option Grant, the Plan, and the
Option Agreement.
PLX Technology, Inc.,
a California corporation
By:_____________________________________
Its: ___________________________________
THE OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). THE OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS NOTICE OF STOCK OPTION GRANT, THE OPTION AGREEMENT, NOR IN THE
COMPANY'S 1998 STOCK INCENTIVE PLAN, SHALL CONFER UPON THE OPTIONEE ANY RIGHT
WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH THE OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT
TO TERMINATE THE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR
WITHOUT CAUSE.
The Optionee acknowledges receipt of a copy of the Plan and the Option
Agreement, and represents that he is familiar with the terms and provisions
thereof, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee has reviewed this Notice of Stock Option Grant,
the Plan, and the Option Agreement in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing the Notice of Stock Option Grant
and fully understands all provisions of this Notice of Stock Option Grant, the
Plan, and the Option Agreement. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board or
Administrator upon any questions arising under this Notice of Stock Option
Grant, the Plan, and the Option Agreement. The Optionee further agrees to notify
the Company upon any change in the residence address indicated in this Notice of
Stock Option Grant.
Dated: ______________________ Signed: ________________________________
Optionee
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<PAGE> 17
PLX TECHNOLOGY, INC. 1998 STOCK INCENTIVE PLAN
IMMEDIATELY EXERCISABLE STOCK OPTION AGREEMENT
1. Grant of Option. PLX Technology, Inc., a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Stock Option
Grant (the "Optionee"), an option (the "Option") to purchase the total number of
shares of Common Stock (the "Shares") set forth in the Notice of Stock Option
Grant (the "Notice"), at the exercise price per share set forth in the Notice
(the "Exercise Price") subject to the terms, definitions and provisions of the
Notice and the Company's 1998 Stock Incentive Plan (the "Plan") adopted by the
Company, which are incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option Agreement.
If designated in the Notice as an Incentive Stock Option, the Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of
the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of
Section 422(d) of the Code, the Option shall be treated as a Non-Qualified Stock
Option.
2. Exercise of Option.
(a) Right to Exercise. The Option shall be exercisable
immediately during its term as set out in the Notice and with the applicable
provisions of the Plan and this Option Agreement. The Option shall be subject to
the provisions of Section 11(b) of the Plan relating to the exercisability or
termination of the Option in the event of a Corporate Transaction. No partial
exercise of the Option may be for less than the lesser of five percent (5%) of
the total number of Shares subject to the Option or the remaining number of
Shares subject to the Option. In no event shall the Company issue fractional
Shares.
(b) Method of Exercise. The Option shall be exercisable only by
delivery of an Exercise Notice (attached as Exhibit A) which shall state the
election to exercise the Option, the whole number of Shares in respect of which
the Option is being exercised, and such other provisions as may be required by
the Administrator. Such Exercise Notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company accompanied by payment of the Exercise Price. The Option shall be deemed
to be exercised upon receipt by the Company of such written notice accompanied
by the Exercise Price.
No Shares will be issued pursuant to the exercise of the Option
unless such issuance and such exercise shall comply with all Applicable Laws.
Assuming such compliance, for income tax purposes, the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
(c) Taxes. No Shares will be issued to the Optionee or other
person pursuant to the exercise of the Option until the Optionee or other person
has made arrangements acceptable to the Administrator for the satisfaction of
foreign, federal, state and local income and employment tax withholding
obligations.
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<PAGE> 18
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of the Option have not been registered under the
Securities Act of 1933, as amended, at the time the Option is exercised, the
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion the Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B.
4. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee;
provided, however, that such exercise method does not then violate an Applicable
Law:
(a) cash;
(b) check;
(c) if the exercise occurs on or after the Registration Date,
surrender of Shares or delivery of a properly executed form of attestation of
ownership of Shares as the Administrator may require (including withholding of
Shares otherwise deliverable upon exercise of the Option) which have a Fair
Market Value on the date of surrender or attestation equal to the aggregate
Exercise Price of the Shares as to which the Option is being exercised <(but
only to the extent that such exercise of the Option would not result in an
accounting compensation charge with respect to the Shares used to pay the
exercise price); or
(d) if the exercise occurs on or after the Registration Date,
delivery of a properly executed Exercise Notice together with such other
documentation as the Administrator and the broker, if applicable, shall require
to effect an exercise of the Option and delivery to the Company of the sale or
loan proceeds required to pay the Exercise Price.
5. Restrictions on Exercise. The Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company. In
addition, the Option may not be exercised if the issuance of the Shares subject
to the Option upon such exercise would constitute a violation of any Applicable
Laws.
6. Termination of Relationship. In the event the Optionee's Continuous
Status as an Employee, Director or Consultant terminates, the Optionee may, to
the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise the Option during the Termination Period set out
in the Notice. Except as provided in Sections 7 and 8, below, to the extent that
the Optionee was not entitled to exercise the Option on the Termination Date, or
if the Optionee does not exercise the Option within the Termination Period, the
Option shall terminate.
7. Disability of Optionee. In the event the Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of his or her
disability, the Optionee may, but only within twelve (12) months from the
Termination Date (and in no event later than the Expiration Date), exercise the
Option to the extent otherwise entitled to exercise it on the Termination Date;
provided, however, that if such disability is not a "disability" as such term is
defined in Section 22(e)(3) of the Code and the Option is an Incentive Stock
Option, such Incentive Stock Option shall cease to be treated as an Incentive
Stock Option and shall be treated
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<PAGE> 19
as a Non-Qualified Stock Option on the day three (3) months and one day
following the Termination Date. To the extent that the Optionee was not entitled
to exercise the Option on the Termination Date, or if the Optionee does not
exercise the Option to the extent so entitled within the time specified herein,
the Option shall terminate.
8. Death of Optionee. In the event of the Optionee's death, the Option
may be exercised at any time within twelve (12) months following the date of
death (and in no event later than the Expiration Date), by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee could exercise the Option at
the date of death. To the extent that the Optionee was not entitled to exercise
the Option on the date of death, or if the Option is not exercised to the extent
so entitled within the time specified herein, the Option shall terminate.
9. Non-Transferability of Option. The Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of the Optionee only by the Optionee. The
terms of the Option shall be binding upon the executors, administrators, heirs
and successors of the Optionee.
10. Term of Option. The Option may be exercised no later than the
Expiration Date set forth in the Notice.
11. Company's Right of First Refusal.
(a) Transfer Notice. Neither the Optionee nor a transferee (either
being sometimes referred to herein as the "Holder") shall sell, hypothecate,
encumber or otherwise transfer any Shares or any right or interest therein
without first obtaining the prior written consent of the Company. In the event
the Holder desires to accept a bona fide third-party offer for any or all of the
Shares the Holder shall provide the Company with written notice (the "Transfer
Notice") of:
(i) The Holder's intention to transfer;
(ii) The name of the proposed transferee;
(iii) The number of Shares to be transferred; and
(iv) The proposed transfer price or value and terms
thereof.
(b) First Refusal Exercise Notice. Within 45 days after receipt of
the Transfer Notice (the "Option Period") the Company and/or its assigns shall
have the right to purchase (the "Right of First Refusal") all, but not less than
all of the Shares which are described in the Transfer Notice (the "Offered
Shares") at the per share price or value and in accordance with the terms stated
in the Transfer Notice, which Right of First Refusal shall be exercised by
written notice (the "First Refusal Exercise Notice") to the Holder setting forth
the number of Offered Shares the Company and/or its assigns elects to purchase,
provided that the number equals all of the Offered Shares.
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<PAGE> 20
(c) Payment Terms. The Company shall consummate the purchase of
the Offered Shares on the terms set forth in the Transfer Notice within 15 days
after delivery of the First Refusal Exercise Notice; provided, however, that in
the event the Transfer Notice provides for the payment for the Offered Shares
other than in cash, the Company and/or its assigns shall have the right to pay
for the Offered Shares by the discounted cash equivalent of the consideration
described in the Transfer Notice as reasonably determined by the Administrator.
Upon payment for the Offered Shares to the Holder or into escrow for the benefit
of the Holder, the Company or its assigns shall become the legal and beneficial
owner of the Offered Shares and all rights and interest therein or related
thereto, and the Company shall have the right to transfer the Offered Shares to
its own name or its assigns without the further action by the Holder.
(d) Assignment. Whenever the Company shall have the right to
purchase Shares under this Right of First Refusal, the Company may designate and
assign one or more employees, officers, directors or shareholders of the Company
or other persons or organizations, to exercise all or a part of the Company's
Right of First Refusal.
(e) Non-Exercise. If the Company and/or its assigns do not
collectively elect to exercise the Right of First Refusal within the specified
45-day period or such earlier time if the Company and/or its assigns notifies
the Holder that it will not exercise the Right of First Refusal, then the Holder
may transfer the Shares upon the terms and conditions stated in the Transfer
Notice, provided that:
(i) The transfer is made within 120 days of the date of
the Transfer Notice; and
(ii) The transferee agrees in writing that such Shares
shall be held subject to the provisions of this Right of First
Refusal.
(f) Expiration of Transfer Period. Following such 120-day period,
no transfer of the Offered Shares and no change in the terms of the transfer as
stated in the Transfer Notice (including the name of the proposed transferee)
shall be permitted without a new written Transfer Notice prepared and submitted
in accordance with the requirements of this Right of First Refusal.
(g) Exception for Certain Family Transfers. Anything to the
contrary contained in this section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's Immediate Family or a trust for the benefit of
the Optionee or the Optionee's Immediate Family shall be exempt from the
provisions of this Right of First Refusal. "Immediate Family" as used herein
shall mean spouse, domestic partner (as determined by the Administrator), child,
lineal descendant or antecedent, father, mother, brother or sister and the
lineal descendants of such individuals. In such case, the transferee or other
recipient shall receive and hold the Shares so transferred subject to the
provisions of this Right of First Refusal, and there shall be no further
transfer of such Shares except in accordance with the terms of this Right of
First Refusal.
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<PAGE> 21
(h) Termination of Right of First Refusal. The provisions of this
Right of First Refusal shall terminate as to all Shares upon the Registration
Date.
(i) Additional Shares or Substituted Securities. In the event of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class effected without the Company's receipt of consideration, any new,
substituted or additional securities or other property which is by reason of any
such transaction distributed with respect to the Shares shall be immediately
subject to the Right of First Refusal, but only to the extent the Shares are at
the time covered by such right.
(j) Corporate Transaction. Immediately prior to the consummation
of a Corporate Transaction, the Right of First Refusal shall automatically lapse
in its entirety, except to the extent the Right of First Refusal is to be
assigned to the successor corporation (or its parent company) in connection with
such Corporate Transaction, the right shall apply to the new capital stock or
other property received in exchange for the Shares in consummation of the
Corporate Transaction, but only to the extent the Shares are at the time covered
by such right.
12. Company's Repurchase Right for Unvested Shares.
(a) Grant of Repurchase Right. The Company is hereby granted the
right (the "Repurchase Right for Unvested Shares"), exercisable at any time (i)
during the ninety (90) day period following the Termination Date, (ii) during
the ninety (90) day period following an exercise of the Option that occurs after
the Termination Date, or (iii) during the sixty (60) day period immediately
prior to a Corporate Transaction (the "Repurchase Period"), or the merger of the
Company into or with a corporation that is a member of a "controlled group"
(within the meaning of Section 267(f) of the Code) of which the Company is a
member, to repurchase all (or at the discretion of the Company and with the
consent of the Optionee, any portion) of the Unvested Shares.
(b) Exercise of the Repurchase Right for Unvested Shares. The
Repurchase Right for Unvested Shares shall be exercisable by written notice
delivered to each Holder of the Shares prior to the expiration of the applicable
Repurchase Period specified above. The notice shall indicate the number of
Shares to be repurchased and the date on which the repurchase is to be effected,
such date to be not later than the last day of the Repurchase Period. On the
date on which the repurchase is to be effected, the Company and/or its assigns
shall pay to the Holder in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness) an amount equal to the Exercise Price
previously paid for the Unvested Shares which are to be repurchased from the
Holder. Upon such payment or into escrow for the benefit of the Holder, the
Company and/or its assigns shall become the legal and beneficial owner of the
Shares being repurchased and all rights and interest thereon or related thereto,
and the Company shall have the right to transfer to its own name or its assigns
the number of Shares being repurchased, without further action by the Holder.
(c) Assignment. Whenever the Company shall have the right to
purchase Shares under this Repurchase Right for Unvested Shares, the Company may
designate and assign
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<PAGE> 22
one or more employees, officers, directors or shareholders of the Company or
other persons or organizations, to exercise all or a part of the Company's
Repurchase Right.
(d) Termination of the Repurchase Right for Unvested Shares. The
Repurchase Right for Unvested Shares shall terminate with respect to any Shares
for which it is not timely exercised except as otherwise provided in Section
12(f) of this Agreement.
(e) Additional Shares or Substituted Securities. In the event of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class effected without the Company's receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as a regular cash dividend) which is by reason of any such
transaction distributed with respect to the Shares shall be immediately subject
to the Repurchase Right for Unvested Shares, but only to the extent the Shares
are at the time covered by such right. Appropriate adjustments to reflect the
distribution of such securities or property shall be made to the price per share
to be paid upon the exercise of the Repurchase Right for Unvested Shares in
order to reflect the effect of any such transaction upon the Company's capital
structure.
(f) Corporate Transaction. Immediately prior to the consummation
of a Corporate Transaction, the Repurchase Right for Unvested Shares to the
extent it has not been exercised shall automatically lapse in its entirety,
except to the extent the Repurchase Right for Unvested Shares is to be assigned
to the successor corporation (or its parent company) in connection with such
Corporate Transaction, the right shall apply to the new capital stock or other
property (including cash paid other than as a regular cash dividend) received in
exchange for the Shares in consummation of the Corporate Transaction, but only
to the extent the Shares are at the time covered by such right. Appropriate
adjustments shall be made to the price per share payable upon exercise of the
Repurchase Right for Unvested Shares to reflect the effect of the Corporate
Transaction upon the Company's capital structure.
13. Stop-Transfer Notices. In order to ensure compliance with the
restrictions on transfer referred to in the legends placed upon certificates
evidencing ownership of the Shares, the Company may issue appropriate "stop
transfer" instructions to its transfer agent, if any, and, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
14. Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Option Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
15. Tax Consequences. Set forth below is a brief summary as of the date
of this Option Agreement of some of the federal tax consequences of exercise of
the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
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<PAGE> 23
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE
SHARES.
(a) Exercise of Incentive Stock Option. If the Option qualifies
as an Incentive Stock Option, there will be no regular federal income tax
liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise Price
will be treated as an adjustment to the alternative minimum tax for federal tax
purposes and may subject the Optionee to the alternative minimum tax in the year
of exercise.
(b) Exercise of Incentive Stock Option Following Disability. If
the Optionee's Continuous Status as an Employee, Director or Consultant
terminates as a result of disability that is not total and permanent disability
as defined in Section 22(e)(3) of the Code, to the extent permitted on the date
of termination, the Optionee must exercise an Incentive Stock Option within
three (3) months of such termination for the Incentive Stock Option to be
qualified as an Incentive Stock Option.
(c) Exercise of Non-Qualified Stock Option. There may be a
regular federal income tax liability upon the exercise of a Non-Qualified Stock
Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If
the Optionee is an Employee or a former Employee, the Company will be required
to withhold from the Optionee's compensation or collect from the Optionee and
pay to the applicable taxing authorities an amount in cash equal to a percentage
of this compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(d) Disposition of Shares. In the case of a Non-Qualified Stock
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes and subject to tax at a maximum rate of 28%. For Shares held
more than 18 months, the maximum rate falls to 20%. In the case of an Incentive
Stock Option, if Shares transferred pursuant to the Option are held for at least
one year after receipt of the Shares and are disposed of at least two years
after the Date of Grant, any gain realized on disposition of the Shares also
will be treated as long-term capital gain for federal income tax purposes and
subject to the same tax rates and holding periods that apply to Shares acquired
upon exercise of a Non-Qualified Stock Option. If Shares purchased under an
Incentive Stock Option are disposed of within such one-year or two-year periods,
any gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the difference between the
Exercise Price and the lesser of (i) the Fair Market Value of the Shares on the
date of exercise, or (ii) the sale price of the Shares.
16. Special Tax Election.
(a) Section 83(b) Election For Exercise of Non-Qualified Stock
Option. If the Shares are acquired hereunder pursuant to the exercise of a
Non-Qualified Stock Option, as specified in the Notice, then the Optionee
understands that under Code Section 83, the excess of
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<PAGE> 24
the Fair Market Value of the Shares on the date any forfeiture restrictions
applicable to the Shares lapse over the Exercise Price paid for the Shares will
be reportable as ordinary income on the lapse date. For this purpose, the term
"forfeiture restrictions" includes the right of the Company to repurchase the
Shares pursuant to the Repurchase Right for Unvested Shares provided under
Section 12. The Optionee understands that he/she may elect under Code Section
83(b) to be taxed at the time the Shares are acquired hereunder, rather than
when and as the Shares cease to be subject to the forfeiture restrictions. Such
election (the "83(b) Election") must be filed with the Internal Revenue Service
within thirty (30) days after the date Shares are acquired upon exercise of the
Option. Even if the Fair Market Value of the Shares on the date the Option is
exercised equals the Exercise Price paid (and thus no tax is payable), the 83(b)
Election must be made to avoid adverse tax consequences in the future. THE FORM
FOR MAKING THIS 83(b) ELECTION IS ATTACHED AS EXHIBIT C HERETO. THE OPTIONEE
UNDERSTANDS THAT FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY
(30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY THE
OPTIONEE AS THE FORFEITURE RESTRICTIONS LAPSE.
(b) Conditional Section 83(b) Election For Exercise of Incentive
Stock Option. If the Shares are acquired hereunder pursuant to the exercise of
an Incentive Stock Option, as specified in Notice, then the following tax
principles shall be applicable to the Shares:
(i) For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
(ii) The excess of (A) the Fair Market Value of the Shares
on the date the Option is exercised or (if later) on the date any
forfeiture restrictions applicable to the Shares lapse over (B)
the Exercise Price paid for the Shares will be includible in
Optionee's income for alternative minimum tax purposes.
(iii) If Optionee makes a disqualifying disposition of the
Shares, then Optionee will recognize ordinary income in the year
of such disposition equal in amount to the excess of (A) the Fair
Market Value of the Shares on the date Option is exercised or (if
later) on the date any forfeiture restrictions applicable to the
Shares lapse over (B) the Exercise Price paid for Shares. Any
additional gain recognized upon the disqualifying disposition
will be either short-term or long-term capital gain depending
upon the period for which the Shares are held prior to the
disposition.
(iv) For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Company to repurchase
the Shares pursuant to the Repurchase Right for Unvested Shares
under Section 12. The term "disqualifying
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<PAGE> 25
disposition" means any sale or other disposition(1) of the Shares within two
(2) years after the Grant Date or within one (1) year after the exercise of the
Option.
(v) In the absence of final Treasury Regulations relating
to Incentive Stock Options, it is not certain whether the
Optionee may, in connection with the exercise of the Option for
any Shares at the time subject to forfeiture restrictions, file a
protective 83(b) Election under Code Section 83(b) which would
limit (A) Optionee's alternative minimum taxable income upon
exercise and (B) Optionee's ordinary income upon a disqualifying
disposition to the excess of the Fair Market Value of Shares on
the date the Option is exercised over the Exercise Price paid for
the Shares. The appropriate form for making such a protective
83(b) Election is attached as Exhibit C and must be filed with
the Internal Revenue Service within thirty (30) days after the
date the Option is exercised. However, such election if properly
filed will only be allowed to the extent the final Treasury
Regulations permit such a protective election.
(c) FILING RESPONSIBILITY. THE OPTIONEE ACKNOWLEDGES THAT IT IS
THE OPTIONEE'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY
83(b) ELECTION UNDER CODE SECTION 83(b), EVEN IF THE OPTIONEE REQUESTS THE
COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
17. Lock-Up Agreement.
(a) Agreement. The Optionee, if requested by the Company and the
lead underwriter of any public offering of the Common Stock or other securities
of the Company (the "Lead Underwriter"), hereby irrevocably agrees not to sell,
contract to sell, grant any option to purchase, transfer the economic risk of
ownership in, make any short sale of, pledge or otherwise transfer or dispose of
any interest in any Common Stock or any securities convertible into or
exchangeable or exercisable for or any other rights to purchase or acquire
Common Stock (except Common Stock included in such public offering or acquired
on the public market after such offering) during the 180-day period following
the effective date of a registration statement of the Company filed under the
Securities Act of 1933, as amended, or such shorter period of time as the Lead
Underwriter shall specify. The Optionee further agrees to sign such documents as
may be requested by the Lead Underwriter to effect the foregoing and agrees that
the Company may impose stop-transfer instructions with respect to such Common
Stock subject until the end of such period. The Company and the Optionee
acknowledge that each Lead Underwriter of a public offering of the Company's
stock, during the period of such offering and for the 180-day period thereafter,
is an intended beneficiary of this Section 17.
- --------
(1) Generally, a disposition of shares purchased under an Incentive Stock Option
includes any transfer of legal title, including a transfer by sale,
exchange, or gift, but does not include a transfer to the Optionee's spouse,
transfer into joint ownership with right of survivorship if Optionee remains
one of the joint owners, a pledge, a transfer by bequest or inheritance or
certain tax free exchanges permitted under the Code.
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<PAGE> 26
(b) Permitted Transfers. Notwithstanding the foregoing, Section
17(a) shall not prohibit the Optionee from transferring any shares of Common
Stock or securities convertible into or exchangeable or exercisable for the
Company's Common Stock to the extent such transfer is not otherwise prohibited
by this Option Agreement, either during the Optionee's lifetime or on death by
will or intestacy to the Optionee's immediate family or to a trust the
beneficiaries of which are exclusively the Optionee and/or a member or members
of the Optionee's immediate family; provided, however, that prior to any such
transfer, each transferee shall execute an agreement pursuant to which each
transferee shall agree to receive and hold such securities subject to the
provisions of Section 17 hereof. For the purposes of this subsection, the term
"immediate family" shall mean spouse, domestic partner (as determined by the
Administrator), child, lineal descendant or antecedent, father, mother, brother
or sister and the lineal descendants of such individuals.
(c) No Amendment Without Consent of Underwriter. During the
period from identification as a Lead Underwriter in connection with any public
offering of the Company's Common Stock until the earlier of (i) the expiration
of the lock-up period specified in Section 17(a) in connection with such
offering or (ii) the abandonment of such offering by the Company and the Lead
Underwriter, the provisions of this Section 17 may not be amended or waived
except with the consent of the Lead Underwriter.
18. Entire Agreement: Governing Law. The Notice of Stock Option Grant,
the Plan and this Option Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and the Optionee
with respect to the subject matter hereof, and may not be modified adversely to
the Optionee's interest except by means of a writing signed by the Company and
Optionee. These agreements are governed by California law except for that body
of law pertaining to conflict of laws.
19. Headings. The captions used in the Notice of Stock Option Grant and
this Option Agreement are inserted for convenience and shall not be deemed a
part of the Option for construction or interpretation.
20. Interpretation. Any dispute regarding the interpretation of the
Notice of Stock Option Grant, the Plan, and this Option Agreement shall be
submitted by the Optionee or by the Company forthwith to the Board or the
Administrator that administers the Plan, which shall review such dispute at its
next regular meeting. The resolution of such dispute by the Board or the
Administrator shall be final and binding on all persons.
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EXHIBIT A
PLX TECHNOLOGY, INC. 1998 STOCK INCENTIVE PLAN
EXERCISE NOTICE
PLX Technology, Inc.
390 Potrero Avenue
Sunnyvale, CA 94086
Attention: Secretary
1. Exercise of Option. Effective as of today, ______________,
________________ ________________, the undersigned (the "Optionee") hereby
elects to exercise the Optionee's option to purchase ___________ shares of the
Common Stock (the "Shares") of PLX Technology, Inc. (the "Company") under and
pursuant to the Company's 1998 Stock Incentive Plan (the "Plan") and the [ ]
Incentive [ ] Non-Qualified Immediately Exercisable Stock Option Agreement and
Notice of Immediately Exercisable Stock Option Grant dated ______________,
________ (the "Option Agreement").
2. Representations of the Optionee. The Optionee acknowledges that the
Optionee has received, read and understood the Notice of Stock Option Grant, the
Plan and the Option Agreement and agrees to abide by and be bound by their terms
and conditions.
3. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Shares, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11(a) of the Plan.
(i) The Optionee shall enjoy rights as a shareholder until
such time as the Optionee disposes of the Shares or the Company
and/or its assignee(s) exercises the Right of First Refusal or
the Repurchase Right for Unvested Shares. Upon such exercise, the
Optionee shall have no further rights as a holder of the Shares
so purchased except the right to receive payment for the Shares
so purchased in accordance with the provisions of the Option
Agreement, and the Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be
surrendered to the Company for transfer or cancellation.
4. Delivery of Payment. The Optionee herewith delivers to the Company
the full Exercise Price for the Shares.
5. Tax Consultation. The Optionee understands that the Optionee may
suffer adverse tax consequences as a result of the Optionee's purchase or
disposition of the Shares. The
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<PAGE> 28
Optionee represents that the Optionee has consulted with any tax consultants the
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that the Optionee is not relying on the Company for any tax advice.
6. Tax Election; Taxes. The Optionee shall provide the Company with a
copy of any timely filed 83(b) Election relating to the purchase of the Shares.
If the Optionee makes a timely 83(b) Election, the Optionee shall immediately
pay the Company (or the Related Entity that employs the Optionee) the amount
necessary to satisfy any applicable federal, state, and local income and
employment tax withholding obligations. If the Optionee does not make a timely
83(b) Election, the Optionee shall, either at the time that the restrictions
lapse under the Option Agreement and the Plan or at the time withholding is
otherwise required by Applicable Law, pay the Company (or the Related Entity
that employs the Optionee) the amount necessary to satisfy any applicable
federal, state, and local income and employment tax withholding obligations. In
addition, the Optionee agrees to satisfy all other applicable federal, state and
local income and employment tax withholding obligations and herewith delivers to
the Company the full amount of such obligations or has made arrangements
acceptable to the Company to satisfy such obligations. In the case of an
Incentive Stock Option, the Optionee also agrees, as partial consideration for
the designation of the Option as an Incentive Stock Option, to notify the
Company in writing within thirty (30) days of any disposition of any shares
acquired by exercise of the Option if such disposition occurs within two (2)
years from the Grant Date or within one (1) year from the date the Shares were
transferred to the Optionee. If the Company is required to satisfy any federal,
state or local income or employment tax withholding obligations as a result of
such an early disposition, the Optionee agrees to satisfy the amount of such
withholding in a manner that the Administrator prescribes.
7. Restrictive Legends. The Optionee understands and agrees that the
Company shall cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership of
the Shares together with any other legends that may be required by the Company
or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE
OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, A
RIGHT OF FIRST REFUSAL AND RIGHT OF REPURCHASE
HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH
IN THE OPTION AGREEMENT BETWEEN THE ISSUER AND
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<PAGE> 29
THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF
THE ISSUER SUCH TRANSFER RESTRICTIONS, RIGHT OF
FIRST REFUSAL AND RIGHT OF REPURCHASE ARE BINDING
ON TRANSFEREES OF THESE SHARES.
8. Successors and Assigns. The Company may assign any of its rights
under this Exercise Notice to single or multiple assignees, and this agreement
shall inure to the benefit of the successors and assigns of the Company. Subject
to the restrictions on transfer herein set forth, this Exercise Notice shall be
binding upon the Optionee and his or her heirs, executors, administrators,
successors and assigns.
9. Headings. The captions used in this Exercise Notice are inserted for
convenience and shall not be deemed a part of this agreement for construction or
interpretation.
10. Interpretation. Any dispute regarding the interpretation of this
Exercise Notice shall be submitted by the Optionee or by the Company forthwith
to the Company's Board of Directors or the Administrator that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or Administrator shall be final and
binding on all persons.
11. Governing Law; Severability. This Exercise Notice shall be governed
by and construed in accordance with the laws of the State of California
excluding that body of law pertaining to conflicts of law. Should any provision
of this Exercise Notice be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
12. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
13. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this agreement.
14. Entire Agreement. The Notice of Stock Option Grant, the Plan and the
Option Agreement are incorporated herein by reference and together with this
Exercise Notice constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and the Optionee with respect to the subject
matter hereof, and may not be modified adversely to the Optionee's interest
except by means of a writing signed by the Company and the Optionee.
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<PAGE> 30
Submitted by: Accepted by:
OPTIONEE: PLX TECHNOLOGY, INC.
By: _______________________________
___________________________________ Its:_______________________________
(Signature)
Address: Address:
___________________________________ PLX Technology, Inc.
___________________________________ 390 Potrero Avenue
Sunnyvale, CA 94086
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<PAGE> 31
EXHIBIT B
PLX TECHNOLOGY, INC. 1998 STOCK INCENTIVE PLAN
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE: ___________________________________
COMPANY: PLX TECHNOLOGY, INC.
SECURITY: COMMON STOCK
AMOUNT: ___________________________________
DATE: ___________________________________
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon among other things, the bona fide nature
of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of
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<PAGE> 32
"restricted securities" acquired, directly or indirectly from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of the grant of the Option to the Optionee, the exercise will be exempt
from registration under the Securities Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter (or such longer period as any
market stand-off agreement may require) the Securities exempt under Rule 701 may
be resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (1) the resale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of Securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
Signature of Optionee:
___________________________________
Date:____________________, _____
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<PAGE> 33
EXHIBIT C
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the Internal
Revenue Code, to include in gross income for 19__ the amount of any compensation
taxable in connection with the taxpayer's receipt of the property described
below:
1. The name, address, taxpayer identification number and taxable
year of the undersigned are:
TAXPAYER'S NAME _________________________________
SPOUSE'S NAME _________________________________
TAXPAYER'S SOCIAL SECURITY NO.: _________________________________
SPOUSE'S SOCIAL SECURITY NO.: _________________________________
TAXABLE YEAR: Calendar Year 19__
ADDRESS: _________________________________
_________________________________
_________________________________
2. The property which is the subject of this election is
__________ shares of common stock of ______________________.
3. The property was transferred to the undersigned on
____________, 19__.
4. The property is subject to the following restrictions: The
right of the Company to repurchase the shares, or a portion thereof, at
the purchase price of the shares. The rights lapses as to a portion of
the shares per month according to a vesting schedule, based upon
continued service to the Company.
5. The fair market value of the property at the time of transfer
(determined without regard to any restriction other than a restriction
which by its terms will never lapse) is: $_______ per share x ________
shares = $___________.
6. The undersigned paid $______ per share x _________ shares for
the property transferred or a total of $______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The undersigned taxpayer is the person performing the
services in connection with the transfer of said property.
The undersigned will file this election with the Internal Revenue
Service office to which he or she files his annual income tax return not later
than 30 days after the date of transfer of the property. Additionally, the
undersigned will include a copy of the election with his income tax return for
the taxable year in which the property is transferred.
Dated:_____________________________ ___________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated:_____________________________ ___________________________________
Spouse of Taxpayer
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The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Internal Revenue Code (the "Code"). Accordingly,
it is the intent of the Taxpayer to utilize this election to achieve the
following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount by
which the fair market value of such shares at the time of their transfer to the
Taxpayer exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for
such shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN CONNECTION
WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION.
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<PAGE> 35
AMENDMENT
TO
1998 STOCK INCENTIVE PLAN
OF
PLX TECHNOLOGY, INC.,
A CALIFORNIA CORPORATION
----------------------------------------
January 25, 1999
The undersigned, Scott M. Gibson, hereby certifies that:
1. He is the duly elected and acting Secretary of PLX Technology, Inc., a
Delaware corporation (the "Corporation").
2. Section 3(a) of the Corporation's 1998 Stock Incentive Plan (the
"Plan") is amended to read in its entirety as follows:
"(a) Subject to the provisions of Section 11(a), below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards
(including Incentive Stock Options) is one million three hundred
thousand (1,300,000) Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock."
Dated: January 25, 1999
/s/ SCOTT M. GIBSON
----------------------------------------
Scott M. Gibson, Secretary
<PAGE> 1
EXHIBIT 10.3
PLX TECHNOLOGY, INC.
1999 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Stock Incentive Plan are
to attract and retain the best available personnel, to provide additional
incentive to Employees, Directors and Consultants and to promote the success of
the Company's business.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of the Committees
appointed to administer the Plan.
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act.
(c) "Applicable Laws" means the legal requirements relating to
the administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.
(d) "Award" means the grant of an Option, SAR, Dividend
Equivalent Right, Restricted Stock, Performance Unit, Performance Share, or
other right or benefit under the Plan.
(e) "Award Agreement" means the written agreement evidencing the
grant of an Award executed by the Company and the Grantee, including any
amendments thereto.
(f) "Board" means the Board of Directors of the Company.
(g) "Cause" means, with respect to the termination by the Company
or a Related Entity of the Grantee's Continuous Service, that such termination
is for "Cause" as such term is expressly defined in a then-effective written
agreement between the Grantee and the Company or such Related Entity, or in the
absence of such then-effective written agreement and definition, is based on, in
the determination of the Administrator, the Grantee's: (i) refusal or failure to
act in accordance with any specific, lawful direction or order of the Company or
a Related Entity; (ii) unfitness or unavailability for service or unsatisfactory
performance (other than as a result of Disability); (iii) performance of any act
or failure to perform any act in bad faith and to the detriment of the Company
or a Related Entity; (iv) dishonesty, intentional misconduct or material breach
of any agreement with the Company or a Related Entity; or (v) commission of a
crime involving dishonesty, breach of trust, or physical or emotional harm to
any person. At least 30 days prior to the termination of the Grantee's
Continuous Service pursuant to (i) or (ii) above, the Administrator shall
provide the Grantee with notice of the Company's or such Related Entity's intent
to terminate, the reason therefor, and an opportunity for the Grantee to cure
such defects in his or her service to the Company's or such Related
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<PAGE> 2
Entity's satisfaction. During this 30 day (or longer) period, no Award issued to
the Grantee under the Plan may be exercised or purchased.
(h) "Change in Control" means a change in ownership or control of
the Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or
related group of persons (other than an acquisition from or by the Company or by
a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's stockholders which a
majority of the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such stockholders accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) months or less such that a majority of the Board
members (rounded up to the next whole number) ceases, by reason of one or more
contested elections for Board membership, to be comprised of individuals who are
Continuing Directors.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Committee" means any committee appointed by the Board to
administer the Plan.
(k) "Common Stock" means the common stock of the Company.
(l) "Company" means PLX Technology, Inc., a Delaware corporation.
(m) "Consultant" means any person (other than an Employee or,
solely with respect to rendering services in such person's capacity as a
Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.
(n) "Continuing Directors" means members of the Board who either
(i) have been Board members continuously for a period of at least thirty-six
(36) months or (ii) have been Board members for less than thirty-six (36) months
and were elected or nominated for election as Board members by at least a
majority of the Board members described in clause (i) who were still in office
at the time such election or nomination was approved by the Board.
(o) "Continuous Service" means that the provision of services to
the Company or a Related Entity in any capacity of Employee, Director or
Consultant, is not interrupted or terminated. Continuous Service shall not be
considered interrupted in the case of (i) any approved leave of absence, (ii)
transfers between locations of the Company or among the Company, any Related
Entity, or any successor, in any capacity of Employee, Director or Consultant,
or (iii) any change in status as long as the individual remains in the service
of the
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<PAGE> 3
Company or a Related Entity in any capacity of Employee, Director or Consultant
(except as otherwise provided in the Award Agreement). An approved leave of
absence shall include sick leave, military leave, or any other authorized
personal leave. For purposes of Incentive Stock Options, no such leave may
exceed ninety (90) days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract.
(p) "Corporate Transaction" means any of the following
transactions:
(i) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company;
(iii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding securities
are transferred to a person or persons different from those who held such
securities immediately prior to such merger; or
(iv) an acquisition by any person or related group of
persons (other than the Company or by a Company-sponsored employee benefit plan)
of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act)
of securities possessing more than fifty percent (50%) of the total combined
voting power of the Company's outstanding securities (whether or not in a
transaction also constituting a Change in Control), but excluding any such
transaction that the Administrator determines shall not be a Corporate
Transaction.
(q) "Director" means a member of the Board or the board of
directors of any Related Entity.
(r) "Disability" means that a Grantee would qualify for benefit
payments under the long-term disability policy of the Company or the Related
Entity to which the Grantee provides services regardless of whether the Grantee
is covered by such policy.
(s) "Dividend Equivalent Right" means a right entitling the
Grantee to compensation measured by dividends paid with respect to Common Stock.
(t) "Employee" means any person, including an Officer or
Director, who is an employee of the Company or any Related Entity. The payment
of a director's fee by the Company or a Related Entity shall not be sufficient
to constitute "employment" by the Company.
(u) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(v) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
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<PAGE> 4
(i) Where there exists a public market for the Common
Stock, the Fair Market Value shall be (A) the closing price for a Share for the
last market trading day prior to the time of the determination (or, if no
closing price was reported on that date, on the last trading date on which a
closing price was reported) on the stock exchange determined by the
Administrator to be the primary market for the Common Stock or the Nasdaq
National Market, whichever is applicable or (B) if the Common Stock is not
traded on any such exchange or national market system, the average of the
closing bid and asked prices of a Share on the Nasdaq Small Cap Market for the
day prior to the time of the determination (or, if no such prices were reported
on that date, on the last date on which such prices were reported), in each
case, as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or
(ii) In the absence of an established market for the
Common Stock of the type described in (i), above, the Fair Market Value thereof
shall be determined by the Administrator in good faith.
(w) "Grantee" means an Employee, Director or Consultant who
receives an Award pursuant to an Award Agreement under the Plan.
(x) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(y) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(z) "Officer" means a person who is an officer of the Company or
a Related Entity within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.
(aa) "Option" means an option to purchase Shares pursuant to an
Award Agreement granted under the Plan.
(bb) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(cc) "Performance Shares" means Shares or an Award denominated in
Shares which may be earned in whole or in part upon attainment of performance
criteria established by the Administrator.
(dd) "Performance Units" means an Award which may be earned in
whole or in part upon attainment of performance criteria established by the
Administrator and which may be settled for cash, Shares or other securities or a
combination of cash, Shares or other securities as established by the
Administrator.
(ee) "Plan" means this 1999 Stock Incentive Plan.
(ff) "Registration Date" means the first to occur of (i) the
closing of the first sale to the general public of (A) the Common Stock or (B)
the same class of securities of a
4
<PAGE> 5
successor corporation (or its Parent) issued pursuant to a Corporate Transaction
in exchange for or in substitution of the Common Stock, pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission under the Securities Act of 1933, as amended; and (ii) in
the event of a Corporate Transaction, the date of the consummation of the
Corporate Transaction if the same class of securities of the successor
corporation (or its Parent) issuable in such Corporate Transaction shall have
been sold to the general public pursuant to a registration statement filed with
and declared effective by, on or prior to the date of consummation of such
Corporate Transaction, the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
(gg) "Related Entity" means any Parent, Subsidiary and any
business, corporation, partnership, limited liability company or other entity in
which the Company, a Parent or a Subsidiary holds a substantial ownership
interest, directly or indirectly.
(hh) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.
(ii) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor thereto.
(jj) "SAR" means a stock appreciation right entitling the Grantee
to Shares or cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.
(kk) "Share" means a share of the Common Stock.
(ll) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
(mm) "Related Entity Disposition" means the sale, distribution or
other disposition by the Company of all or substantially all of the Company's
interests in any Related Entity effected by a sale, merger or consolidation or
other transaction involving that Related Entity or the sale of all or
substantially all of the assets of that Related Entity.
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards (including
Incentive Stock Options) is 1,000,000 Shares. The Shares to be issued pursuant
to Awards may be authorized, but unissued, or reacquired Common Stock.
(b) Any Shares covered by an Award (or portion of an Award) which
is forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. If any unissued Shares are retained
by the Company upon exercise of an Award in
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order to satisfy the exercise price for such Award or any withholding taxes due
with respect to such Award, such retained Shares subject to such Award shall
become available for future issuance under the Plan (unless the Plan has
terminated). Shares that actually have been issued under the Plan pursuant to an
Award shall not be returned to the Plan and shall not become available for
future issuance under the Plan, except that if unvested Shares are forfeited, or
repurchased by the Company at their original purchase price, such Shares shall
become available for future grant under the Plan.
4. Administration of the Plan.
(a) Plan Administrator.
(i) Administration with Respect to Directors and
Officers. With respect to grants of Awards to Directors or Employees who are
also Officers or Directors of the Company, the Plan shall be administered by (A)
the Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws and to permit
such grants and related transactions under the Plan to be exempt from Section
16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board.
(ii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Awards to Employees or Consultants
who are neither Directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the Applicable
Laws. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. The Board may authorize one or
more Officers to grant such Awards and may limit such authority as the Board
determines from time to time.
(iii) Administration Errors. In the event an Award is
granted in a manner inconsistent with the provisions of this subsection (a),
such Award shall be presumptively valid as of its grant date to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to Applicable Laws and
the provisions of the Plan (including any other powers given to the
Administrator hereunder), and except as otherwise provided by the Board, the
Administrator shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants
to whom Awards may be granted from time to time hereunder;
(ii) to determine whether and to what extent Awards are
granted hereunder;
(iii) to determine the number of Shares or the amount of
other consideration to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under
the Plan;
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(v) to determine the terms and conditions of any Award
granted hereunder;
(vi) to amend the terms of any outstanding Award granted
under the Plan, provided that any amendment that would adversely affect the
Grantee's rights under an outstanding Award shall not be made without the
Grantee's written consent;
(vii) to construe and interpret the terms of the Plan
and Awards granted pursuant to the Plan, including without limitation, any
notice of Award or Award Agreement, granted pursuant to the Plan;
(viii) to establish additional terms, conditions, rules
or procedures to accommodate the rules or laws of applicable foreign
jurisdictions and to afford Grantees favorable treatment under such laws;
provided, however, that no Award shall be granted under any such additional
terms, conditions, rules or procedures with terms or conditions which are
inconsistent with the provisions of the Plan; and
(ix) to take such other action, not inconsistent with
the terms of the Plan, as the Administrator deems appropriate.
(c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be conclusive and
binding on all persons.
5. Eligibility. Awards other than Incentive Stock Options may be granted
to Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company, a Parent or a Subsidiary. An Employee,
Director or Consultant who has been granted an Award may, if otherwise eligible,
be granted additional Awards. Awards may be granted to such Employees, Directors
or Consultants who are residing in foreign jurisdictions as the Administrator
may determine from time to time.
6. Terms and Conditions of Awards.
(a) Type of Awards. The Administrator is authorized under the
Plan to award any type of arrangement to an Employee, Director or Consultant
that is not inconsistent with the provisions of the Plan and that by its terms
involves or might involve the issuance of (i) Shares, (ii) an Option, a SAR or
similar right with a fixed or variable price related to the Fair Market Value of
the Shares and with an exercise or conversion privilege related to the passage
of time, the occurrence of one or more events, or the satisfaction of
performance criteria or other conditions, or (iii) any other security with the
value derived from the value of the Shares. Such awards include, without
limitation, Options, SARs, sales or bonuses of Restricted Stock, Dividend
Equivalent Rights, Performance Units or Performance Shares, and an Award may
consist of one such security or benefit, or two (2) or more of them in any
combination or alternative.
(b) Designation of Award. Each Award shall be designated in the
Award Agreement. In the case of an Option, the Option shall be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the
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extent that the aggregate Fair Market Value of Shares subject to Options
designated as Incentive Stock Options which become exercisable for the first
time by a Grantee during any calendar year (under all plans of the Company or
any Parent or Subsidiary) exceeds $100,000, such excess Options, to the extent
of the Shares covered thereby in excess of the foregoing limitation, shall be
treated as Non-Qualified Stock Options. For this purpose, Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the date the
Option with respect to such Shares is granted.
(c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.
(d) Acquisitions and Other Transactions. The Administrator may
issue Awards under the Plan in settlement, assumption or substitution for,
outstanding awards or obligations to grant future awards in connection with the
Company or a Related Entity acquiring another entity, an interest in another
entity or an additional interest in a Related Entity whether by merger, stock
purchase, asset purchase or other form of transaction.
(e) Deferral of Award Payment. The Administrator may establish
one or more programs under the Plan to permit selected Grantees the opportunity
to elect to defer receipt of consideration upon exercise of an Award,
satisfaction of performance criteria, or other event that absent the election
would entitle the Grantee to payment or receipt of Shares or other consideration
under an Award. The Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred, and such other terms, conditions, rules and procedures that the
Administrator deems advisable for the administration of any such deferral
program.
(f) Award Exchange Programs. The Administrator may establish one
or more programs under the Plan to permit selected Grantees to exchange an Award
under the Plan for one or more other types of Awards under the Plan on such
terms and conditions as determined by the Administrator from time to time.
(g) Separate Programs. The Administrator may establish one or
more separate programs under the Plan for the purpose of issuing particular
forms of Awards to one or more classes of Grantees on such terms and conditions
as determined by the Administrator from time to time.
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(h) Early Exercise. The Award Agreement may, but need not,
include a provision whereby the Grantee may elect at any time while an Employee,
Director or Consultant to exercise any part or all of the Award prior to full
vesting of the Award. Any unvested Shares received pursuant to such exercise may
be subject to a repurchase right in favor of the Company or a Related Entity or
to any other restriction the Administrator determines to be appropriate.
(i) Term of Award. The term of each Award shall be the term
stated in the Award Agreement, provided, however, that the term of an Incentive
Stock Option shall be no more than ten (10) years from the date of grant
thereof. However, in the case of an Incentive Stock Option granted to a Grantee
who, at the time the Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Award Agreement.
(j) Transferability of Awards. Incentive Stock Options may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of the Grantee's Incentive
Stock Option in the event of the Grantee's death on a beneficiary designation
form provided by the Administrator. Other Awards shall be transferable to the
extent provided in the Award Agreement.
(k) Time of Granting Awards. The date of grant of an Award shall
for all purposes be the date on which the Administrator makes the determination
to grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.
7. Award Exercise or Purchase Price, Consideration, Taxes and Reload
Options.
(a) Exercise or Purchase Price. The exercise or purchase price,
if any, for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of
the grant of such Incentive Stock Option owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be not less than one
hundred ten percent (110%) of the Fair Market Value per Share on the date of
grant; or
(B) granted to any Employee other than an
Employee described in the preceding paragraph, the per Share exercise price
shall be not less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.
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(ii) In the case of a Non-Qualified Stock Option, the
per Share exercise price shall be not less than one hundred percent (100%) of
the Fair Market Value per Share on the date of grant unless otherwise determined
by the Administrator.
(iii) In the case of other Awards, such price as is
determined by the Administrator.
(iv) Notwithstanding the foregoing provisions of this
Section 7(a), in the case of an Award issued pursuant to Section 6(d), above,
the exercise or purchase price for the Award shall be determined in accordance
with the principles of Section 424(a) of the Code.
(b) Consideration. Subject to Applicable Laws, the consideration
to be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares
issued under the Plan the following, provided that the portion of the
consideration equal to the par value of the Shares must be paid in cash or other
legal consideration permitted by the Delaware General Corporation Law:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such
recourse, interest, security, and redemption provisions as the Administrator
determines as appropriate;
(iv) surrender of Shares or delivery of a properly
executed form of attestation of ownership of Shares as the Administrator may
require (including withholding of Shares otherwise deliverable upon exercise of
the Award) which have a Fair Market Value on the date of surrender or
attestation equal to the aggregate exercise price of the Shares as to which said
Award shall be exercised (but only to the extent that such exercise of the Award
would not result in an accounting compensation charge with respect to the Shares
used to pay the exercise price unless otherwise determined by the
Administrator);
(v) with respect to Options, payment through a
broker-dealer sale and remittance procedure pursuant to which the Grantee (A)
shall provide written instructions to a Company designated brokerage firm to
effect the immediate sale of some or all of the purchased Shares and remit to
the Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
Shares and (B) shall provide written directives to the Company to deliver the
certificates for the purchased Shares directly to such brokerage firm in order
to complete the sale transaction; or
(vi) any combination of the foregoing methods of
payment.
(c) Taxes. No Shares shall be delivered under the Plan to any
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the
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Administrator for the satisfaction of any foreign, federal, state, or local
income and employment tax withholding obligations, including, without
limitation, obligations incident to the receipt of Shares or the disqualifying
disposition of Shares received on exercise of an Incentive Stock Option. Upon
exercise of an Award, the Company shall withhold or collect from Grantee an
amount sufficient to satisfy such tax obligations.
(d) Reload Options. In the event the exercise price or tax
withholding of an Option is satisfied by the Company or the Grantee's employer
withholding Shares otherwise deliverable to the Grantee, the Administrator may
issue the Grantee an additional Option, with terms identical to the Award
Agreement under which the Option was exercised, but at an exercise price as
determined by the Administrator in accordance with the Plan.
8. Exercise of Award.
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Award granted hereunder shall be exercisable at
such times and under such conditions as determined by the Administrator under
the terms of the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Award by the person entitled to exercise the Award and full
payment for the Shares with respect to which the Award is exercised, including,
to the extent selected, use of the broker-dealer sale and remittance procedure
to pay the purchase price as provided in Section 7(b)(v). Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to Shares subject to an Award,
notwithstanding the exercise of an Option or other Award. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Award. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in the Award Agreement or Section 10, below.
(b) Exercise of Award Following Termination of Continuous
Service.
(i) An Award may not be exercised after the termination
date of such Award set forth in the Award Agreement and may be exercised
following the termination of a Grantee's Continuous Service only to the extent
provided in the Award Agreement.
(ii) Where the Award Agreement permits a Grantee to
exercise an Award following the termination of the Grantee's Continuous Service
for a specified period, the Award shall terminate to the extent not exercised on
the last day of the specified period or the last day of the original term of the
Award, whichever occurs first.
(iii) Any Award designated as an Incentive Stock Option
to the extent not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Service shall convert automatically to a
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Non-Qualified Stock Option and thereafter shall be exercisable as such to the
extent exercisable by its terms for the period specified in the Award Agreement.
(c) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Award previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Grantee at the time that such offer is made.
9. Conditions Upon Issuance of Shares.
(a) Shares shall not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and delivery of such
Shares pursuant thereto shall comply with all Applicable Laws, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, as well as any other terms that the Administrator determines
require adjustment shall be proportionately adjusted for (i) any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Shares, (ii)
any other increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company, or (iii) as the Administrator may
determine in its discretion, any other transaction with respect to Common Stock
to which Section 424(a) of the Code applies; provided, however that conversion
of any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Administrator and its determination shall be final, binding and conclusive.
Except as the Administrator determines, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason hereof shall be made with respect to,
the number or price of Shares subject to an Award.
11. Corporate Transactions/Changes in Control/Related Entity
Dispositions. Except as may be provided in an Award Agreement:
(a) Effective upon the consummation of a Corporate Transaction,
all outstanding Awards under the Plan shall terminate. However, all such Awards
shall not terminate if they are, in connection with the Corporate Transaction,
assumed by the successor corporation or Parent thereof.
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(b) Effective upon the consummation of a Related Entity
Disposition, for purposes of the Plan and all Awards, the Continuous Service of
each Grantee who is at the time engaged primarily in service to the Related
Entity involved in such Related Entity Disposition shall terminate and each
Award of such Grantee which is at the time outstanding under the Plan shall be
exercisable in accordance with the terms of the Award Agreement evidencing such
Award. However, such Continuous Service shall be not to deemed to terminate if
such Award is, in connection with the Related Entity Disposition, assumed by the
successor entity or its parent.
12. Effective Date and Term of Plan. The Plan shall become effective
upon the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 16, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.
13. Amendment, Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the
Plan. To the extent necessary to comply with Applicable Laws, the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) No Award may be granted during any suspension of the Plan or
after termination of the Plan.
(c) Any amendment, suspension or termination of the Plan
(including termination of the Plan under Section 12, above) shall not affect
Awards already granted, and such Awards shall remain in full force and effect as
if the Plan had not been amended, suspended or terminated, unless mutually
agreed otherwise between the Grantee and the Administrator, which agreement must
be in writing and signed by the Grantee and the Company.
14. Reservation of Shares.
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
(b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
15. No Effect on Terms of Employment/Consulting Relationship. The Plan
shall not confer upon any Grantee any right with respect to the Grantee's
Continuous Service, nor shall it interfere in any way with his or her right or
the Company's right to terminate the Grantee's Continuous Service at any time,
with or without cause.
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16. No Effect on Retirement and Other Benefit Plans. Except as
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Awards shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The Plan
is not a "Retirement-Plan" or "Welfare Plan" under the Employee Retirement
Income Security Act of 1974, as amended.
17. Stockholder Approval. The grant of Incentive Stock Options under the
Plan shall be subject to approval by the stockholders of the Company within
twelve (12) months before or after the date the Plan is adopted excluding
Incentive Stock Options issued in substitution for outstanding Incentive Stock
Options pursuant to Section 424(a) of the Code. Such stockholder approval shall
be obtained in the degree and manner required under Applicable Laws. The
Administrator may grant Incentive Stock Options under the Plan prior to approval
by the stockholders, but until such approval is obtained, no such Incentive
Stock Option shall be exercisable. In the event that stockholder approval is not
obtained within the twelve (12) month period provided above, all Incentive Stock
Options previously granted under the Plan shall be exercisable as Non-Qualified
Stock Options.
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EXHIBIT 10.3 PART 2
PLX TECHNOLOGY, INC.
1999 NON-EMPLOYEE DIRECTOR OPTION PROGRAM
ARTICLE I
ESTABLISHMENT AND PURPOSE OF THE PROGRAM
1.01 ESTABLISHMENT OF PROGRAM
The PLX Technology, Inc. 1999 Non-Employee Director Option Program (the
"Program") is adopted pursuant to the PLX Technology, Inc. 1999 Stock Incentive
Plan (the "Plan") and, in addition to the terms and conditions set forth below,
is subject to the provisions of the Plan.
1.02 PURPOSE OF PROGRAM
The purpose of the Program is to enhance the ability of the Company to attract
and retain directors who are not Employees ("Non-Employee Directors") through a
program of automatic Option grants.
1.03 EFFECTIVE DATE OF THE PROGRAM
The Program is effective as of the Registration Date.
ARTICLE II
DEFINITIONS
Capitalized terms in this Program, unless otherwise defined herein, have the
meaning given to them in the Plan.
ARTICLE III
OPTION TERMS
3.01 DATE OF GRANT AND NUMBER OF SHARES
A Non-Qualified Stock Option to purchase 15,000 shares of Common Stock shall be
granted ("Initial Grant") to each Non-Employee Director elected or appointed to
the Board after the Registration Date upon the date each such Non-Employee
Director first becomes a Non-Employee Director. In addition, immediately
following each annual meeting of the Company's stockholders, commencing with the
annual meeting of the
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Company's stockholders in 2000, each Non-Employee Director who continues as a
Non-Employee Director following such annual meeting shall be granted a
Non-Qualified Stock Option to purchase 5,000 shares of Common Stock ("Subsequent
Grant"); provided that no Subsequent Grant shall be made to any Non-Employee
Director who has not served as a director of the Company, as of the time of such
annual meeting, for at least eleven (11) months. Each such Subsequent Grant
shall be made on the date of the annual stockholders' meeting in question.
3.02 VESTING
Each Option under the Program will be fully vested and exercisable as to all
Shares subject to the Option on the date of grant.
3.03 EXERCISE PRICE
The exercise price per share of Common Stock of each Initial Grant and
Subsequent Grant shall be one hundred percent (100%) of the Fair Market Value
per Share on the date of grant.
3.04 OTHER TERMS
The Administrator shall determine the remaining terms and conditions of the
Options awarded under the Program.
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FORM OF STOCK OPTION GRANT AND STOCK OPTION AGREEMENT
PLX TECHNOLOGY, INC. 1999 STOCK INCENTIVE PLAN
NOTICE OF IMMEDIATELY EXERCISABLE STOCK OPTION GRANT
Optionee's Name and Address: ____________________________________
____________________________________
____________________________________
You have been granted an option to purchase shares of Common Stock of
the Company, subject to the terms and conditions of the Plan and the Option
Agreement, as follows:
Grant Number ____________________________________
Date of Grant ____________________________________
Vesting Commencement Date ____________________________________
Exercise Price per Share $___________________________________
Total Number of Shares Granted ____________________________________
Total Exercise Price $___________________________________
Type of Option: _______ Incentive Stock Option
_______ Non-Qualified Stock Option
Expiration Date: ____________________________________
Vesting Schedule:
Subject to other limitations set forth in the Option Agreement, the
Option may be exercised at any time from the date hereof.
The Shares purchased hereunder are subject to a Repurchase Right, at the
Exercise Price, in favor of the Company as described in Section 12 of the Option
Agreement (the "Repurchase Right for Unvested Shares"). The Repurchase Right for
Unvested Shares shall lapse at the rate of ____________________________________
such that no Shares shall be subject to the Repurchase Right for Unvested Shares
_____________ after the Vesting Commencement Date, regardless of the date the
Option or any portion is exercised. Shares that are no longer subject to the
Repurchase Right for Unvested Shares are deemed to be "Vested Shares."
During any authorized leave of absence, the vesting of the Shares as
provided in this schedule shall cease after the leave of absence exceeds a
period of ninety (90) days. Vesting of the Shares shall resume upon the
Optionee's termination of the leave of absence and return to service with the
Company or a Related Entity. In the event of the Optionee's change in status
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from Employee to Consultant, vesting of the Shares shall continue only to the
extent determined by the Administrator as of such change in status.
Termination Period:
Except in the event of termination of the Optionee's Continuous Status
as an Employee, Director or Consultant for "Cause" (as defined below), the
Option may be exercised on the date of termination within three (3) months from
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant or such longer period as may be applicable upon death or disability
of the Optionee as provided in the Option Agreement. In the event of the
Optionee's change in status from Employee to Consultant or Consultant to
Employee, the Option shall remain in effect; provided, however, that in the
event of a change in status from Employee to Consultant, the Optionee's
Incentive Stock Option shall cease to be treated as an Incentive Stock Option
and shall be treated as a Non-Qualified Stock Option on the day three (3) months
and one day following such change in status. In no event shall the Option be
exercised later than the Expiration Date as provided above.
In the event of termination of the Optionee's Continuous Status as an
Employee, Director or Consultant for "Cause," the Optionee's right to exercise
the Option shall terminate concurrently with the termination of the Optionee's
Continuous Status as an Employee, Director or Consultant.
Definition of "Cause":
For purposes of the Option, termination of the Optionee's Continuous
Status as an Employee, Director or Consultant shall be for "Cause" as such term
is defined in the Optionee's employment agreement, or in the absence of such
definition, then as in the opinion of the Company, the Optionee: (i) refuses or
fails to act in accordance with any specific direction or order of the Company;
(ii) exhibits in regard to his employment unfitness or unavailability for
service, or unsatisfactory performance, but not disability; (iii) acts in bad
faith and to the detriment of the Company; (iv) exhibits dishonesty, intentional
misconduct, or materially breaches any agreement with the Company or a Related
Entity; or (v) commits a crime involving dishonesty, breach of trust, or
physical or emotional harm to any person. At least 30 days prior to terminating
the Optionee's Continuous Status as an Employee, Director or Consultant pursuant
to (i) or (ii) above, the Company shall provide the Optionee with notice of the
Company's intent to terminate, the Company's reason therefor, and an opportunity
for the Optionee to cure such defects in his service to the Company's
satisfaction. During this 30 day (or longer) period, the Optionee shall not be
entitled to exercise the Option.
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IN WITNESS WHEREOF, the Company and the Optionee have executed this Notice of
Stock Option Grant and agree that the Option is to be governed by the terms and
conditions of this Notice of Stock Option Grant, the Plan, and the Option
Agreement.
PLX Technology, Inc.,
a California corporation
By: _______________________________
Its: _______________________________
THE OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). THE OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS NOTICE OF STOCK OPTION GRANT, THE OPTION AGREEMENT, NOR IN THE
COMPANY'S 1999 STOCK INCENTIVE PLAN, SHALL CONFER UPON THE OPTIONEE ANY RIGHT
WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH THE OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT
TO TERMINATE THE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR
WITHOUT CAUSE.
The Optionee acknowledges receipt of a copy of the Plan and the Option
Agreement, and represents that he is familiar with the terms and provisions
thereof, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee has reviewed this Notice of Stock Option Grant,
the Plan, and the Option Agreement in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing the Notice of Stock Option Grant
and fully understands all provisions of this Notice of Stock Option Grant, the
Plan, and the Option Agreement. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board or
Administrator upon any questions arising under this Notice of Stock Option
Grant, the Plan, and the Option Agreement. The Optionee further agrees to notify
the Company upon any change in the residence address indicated in this Notice of
Stock Option Grant.
Dated: ______________________ Signed: _______________________________
Optionee
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<PAGE> 20
PLX TECHNOLOGY, INC. 1999 STOCK INCENTIVE PLAN
IMMEDIATELY EXERCISABLE STOCK OPTION AGREEMENT
1. Grant of Option. PLX Technology, Inc., a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Stock Option
Grant (the "Optionee"), an option (the "Option") to purchase the total number of
shares of Common Stock (the "Shares") set forth in the Notice of Stock Option
Grant (the "Notice"), at the exercise price per share set forth in the Notice
(the "Exercise Price") subject to the terms, definitions and provisions of the
Notice and the Company's 1999 Stock Incentive Plan (the "Plan") adopted by the
Company, which are incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option Agreement.
If designated in the Notice as an Incentive Stock Option, the Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of
the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of
Section 422(d) of the Code, the Option shall be treated as a Non-Qualified Stock
Option.
2. Exercise of Option.
(a) Right to Exercise. The Option shall be exercisable
immediately during its term as set out in the Notice and with the applicable
provisions of the Plan and this Option Agreement. The Option shall be subject to
the provisions of Section 11 of the Plan relating to the exercisability or
termination of the Option in the event of a Corporate Transaction, Change in
Control or Related Entity Disposition. No partial exercise of the Option may be
for less than the lesser of five percent (5%) of the total number of Shares
subject to the Option or the remaining number of Shares subject to the Option.
In no event shall the Company issue fractional Shares.
(b) Method of Exercise. The Option shall be exercisable only by
delivery of an Exercise Notice (attached as Exhibit A) which shall state the
election to exercise the Option, the whole number of Shares in respect of which
the Option is being exercised, such other representations and agreements as to
the holder's investment intent with respect to such Shares and such other
provisions as may be required by the Administrator. Such Exercise Notice shall
be signed by the Optionee and shall be delivered in person or by certified mail
to the Secretary of the Company accompanied by payment of the Exercise Price.
The Option shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of the Option
unless such issuance and such exercise shall comply with all Applicable Laws.
Assuming such compliance, for income tax purposes, the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
(c) Taxes. No Shares will be issued to the Optionee or other
person pursuant to the exercise of the Option until the Optionee or other person
has made arrangements
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<PAGE> 21
acceptable to the Administrator for the satisfaction of foreign, federal, state
and local income and employment tax withholding obligations.
3. Method of Payment. Payment of the Exercise Price shall be made by any
of the following, or a combination thereof, at the election of the Optionee;
provided, however, that such exercise method does not then violate an Applicable
Law, and provided further, that the portion of the Exercise Price equal to the
par value of the Shares must be paid in cash or other legal consideration
permitted by the Delaware General Corporation Law:
(a) cash;
(b) check;
(c) surrender of Shares or delivery of a properly executed form
of attestation of ownership of Shares as the Administrator may require
(including withholding of Shares otherwise deliverable upon exercise of the
Option) which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate Exercise Price of the Shares as to which the Option is
being exercised (but only to the extent that such exercise of the Option would
not result in an accounting compensation charge with respect to the Shares used
to pay the exercise price); or
(d) delivery of a properly executed Exercise Notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the Exercise Price.
4. Restrictions on Exercise. The Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company. In
addition, the Option may not be exercised if the issuance of the Shares subject
to the Option upon such exercise would constitute a violation of any Applicable
Laws.
5. Termination of Relationship. In the event the Optionee's Continuous
Status as an Employee, Director or Consultant terminates, other than for Cause,
the Optionee may, to the extent otherwise so entitled at the date of such
termination (the "Termination Date"), exercise the Option during the Termination
Period set out in the Notice. In the event of termination of the Optionee's
Continuous Service for Cause, the Optionee's right to exercise the Option shall,
except as otherwise determined by the Administrator, terminate concurrently with
the termination of the Grantee's Continuous Service. Except as provided in
Sections 6 and 7, below, to the extent that the Optionee was not entitled to
exercise the Option on the Termination Date, or if the Optionee does not
exercise the Option within the Termination Period, the Option shall terminate.
6. Disability of Optionee. In the event the Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of his or her
disability, the Optionee may, but only within twelve (12) months from the
Termination Date (and in no event later than the Expiration Date), exercise the
Option to the extent otherwise entitled to exercise it on the
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<PAGE> 22
Termination Date; provided, however, that if such disability is not a
"disability" as such term is defined in Section 22(e)(3) of the Code and the
Option is an Incentive Stock Option, such Incentive Stock Option shall cease to
be treated as an Incentive Stock Option and shall be treated as a Non-Qualified
Stock Option on the day three (3) months and one day following the Termination
Date. To the extent that the Optionee was not entitled to exercise the Option on
the Termination Date, or if the Optionee does not exercise the Option to the
extent so entitled within the time specified herein, the Option shall terminate.
7. Death of Optionee. In the event of the Optionee's death, the Option
may be exercised at any time within twelve (12) months following the date of
death (and in no event later than the Expiration Date), by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee could exercise the Option at
the date of death. To the extent that the Optionee was not entitled to exercise
the Option on the date of death, or if the Option is not exercised to the extent
so entitled within the time specified herein, the Option shall terminate.
8. Non-Transferability of Option. The Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of the Optionee only by the Optionee. The
terms of the Option shall be binding upon the executors, administrators, heirs
and successors of the Optionee.
9. Term of Option. The Option may be exercised no later than the
Expiration Date set forth in the Notice.
10. Company's Repurchase Right for Unvested Shares.
(a) Grant of Repurchase Right. The Company is hereby granted the
right (the "Repurchase Right for Unvested Shares"), exercisable at any time (i)
during the ninety (90) day period following the Termination Date, (ii) during
the ninety (90) day period following an exercise of the Option that occurs after
the Termination Date, or (iii) during the sixty (60) day period immediately
prior to a Corporate Transaction (the "Repurchase Period"), or the merger of the
Company into or with a corporation that is a member of a "controlled group"
(within the meaning of Section 267(f) of the Code) of which the Company is a
member, to repurchase all (or at the discretion of the Company and with the
consent of the Optionee, any portion) of the Unvested Shares.
(b) Exercise of the Repurchase Right for Unvested Shares. The
Repurchase Right for Unvested Shares shall be exercisable by written notice
delivered to each Holder of the Shares prior to the expiration of the applicable
Repurchase Period specified above. The notice shall indicate the number of
Shares to be repurchased and the date on which the repurchase is to be effected,
such date to be not later than the last day of the Repurchase Period. On the
date on which the repurchase is to be effected, the Company and/or its assigns
shall pay to the Holder in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness) an amount equal to the Exercise Price
previously paid for the Unvested Shares which are to be repurchased from the
Holder. Upon such payment or into escrow for the benefit of the Holder, the
Company and/or its assigns shall become the legal and beneficial owner of the
Shares being
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<PAGE> 23
repurchased and all rights and interest thereon or related thereto, and the
Company shall have the right to transfer to its own name or its assigns the
number of Shares being repurchased, without further action by the Holder.
(c) Assignment. Whenever the Company shall have the right to
purchase Shares under this Repurchase Right for Unvested Shares, the Company may
designate and assign one or more employees, officers, directors or shareholders
of the Company or other persons or organizations, to exercise all or a part of
the Company's Repurchase Right.
(d) Termination of the Repurchase Right for Unvested Shares. The
Repurchase Right for Unvested Shares shall terminate with respect to any Shares
for which it is not timely exercised except as otherwise provided in Section
10(f) of this Agreement.
(e) Additional Shares or Substituted Securities. In the event of
any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class effected without the Company's receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as a regular cash dividend) which is by reason of any such
transaction distributed with respect to the Shares shall be immediately subject
to the Repurchase Right for Unvested Shares, but only to the extent the Shares
are at the time covered by such right. Appropriate adjustments to reflect the
distribution of such securities or property shall be made to the price per share
to be paid upon the exercise of the Repurchase Right for Unvested Shares in
order to reflect the effect of any such transaction upon the Company's capital
structure.
(f) Corporate Transaction. Immediately prior to the consummation
of a Corporate Transaction, the Repurchase Right for Unvested Shares to the
extent it has not been exercised shall automatically lapse in its entirety,
except to the extent the Repurchase Right for Unvested Shares is to be assigned
to the successor corporation (or its parent company) in connection with such
Corporate Transaction, the right shall apply to the new capital stock or other
property (including cash paid other than as a regular cash dividend) received in
exchange for the Shares in consummation of the Corporate Transaction, but only
to the extent the Shares are at the time covered by such right. Appropriate
adjustments shall be made to the price per share payable upon exercise of the
Repurchase Right for Unvested Shares to reflect the effect of the Corporate
Transaction upon the Company's capital structure.
11. Stop-Transfer Notices. In order to ensure compliance with the
restrictions on transfer referred to in the legends placed upon certificates
evidencing ownership of the Shares, the Company may issue appropriate "stop
transfer" instructions to its transfer agent, if any, and, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
12. Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Option Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
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<PAGE> 24
13. Tax Consequences. Set forth below is a brief summary as of the date
of this Option Agreement of some of the federal tax consequences of exercise of
the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE
SHARES.
(a) Exercise of Incentive Stock Option. If the Option qualifies
as an Incentive Stock Option, there will be no regular federal income tax
liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise Price
will be treated as an adjustment to the alternative minimum tax for federal tax
purposes and may subject the Optionee to the alternative minimum tax in the year
of exercise.
(b) Exercise of Incentive Stock Option Following Disability. If
the Optionee's Continuous Status as an Employee, Director or Consultant
terminates as a result of disability that is not total and permanent disability
as defined in Section 22(e)(3) of the Code, to the extent permitted on the date
of termination, the Optionee must exercise an Incentive Stock Option within
three (3) months of such termination for the Incentive Stock Option to be
qualified as an Incentive Stock Option.
(c) Exercise of Non-Qualified Stock Option. There may be a
regular federal income tax liability upon the exercise of a Non-Qualified Stock
Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If
the Optionee is an Employee or a former Employee, the Company will be required
to withhold from the Optionee's compensation or collect from the Optionee and
pay to the applicable taxing authorities an amount in cash equal to a percentage
of this compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(d) Disposition of Shares. In the case of a Non-Qualified Stock
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes and subject to tax at a maximum rate of 28%. For Shares held
more than 18 months, the maximum rate falls to 20%. In the case of an Incentive
Stock Option, if Shares transferred pursuant to the Option are held for at least
one year after receipt of the Shares and are disposed of at least two years
after the Date of Grant, any gain realized on disposition of the Shares also
will be treated as long-term capital gain for federal income tax purposes and
subject to the same tax rates and holding periods that apply to Shares acquired
upon exercise of a Non-Qualified Stock Option. If Shares purchased under an
Incentive Stock Option are disposed of within such one-year or two-year periods,
any gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the difference between the
Exercise Price and the lesser of (i) the Fair Market Value of the Shares on the
date of exercise, or (ii) the sale price of the Shares.
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<PAGE> 25
14. Special Tax Election.
(a) Section 83 (b) Election For Exercise of Non-Qualified Stock
Option. If the Shares are acquired hereunder pursuant to the exercise of a
Non-Qualified Stock Option, as specified in the Notice, then the Optionee
understands that under Code Section 83, the excess of the Fair Market Value of
the Shares on the date any forfeiture restrictions applicable to the Shares
lapse over the Exercise Price paid for the Shares will be reportable as ordinary
income on the lapse date. For this purpose, the term "forfeiture restrictions"
includes the right of the Company to repurchase the Shares pursuant to the
Repurchase Right for Unvested Shares provided under Section 10. The Optionee
understands that he/she may elect under Code Section 83(b) to be taxed at the
time the Shares are acquired hereunder, rather than when and as the Shares cease
to be subject to the forfeiture restrictions. Such election (the "83(b)
Election") must be filed with the Internal Revenue Service within thirty (30)
days after the date Shares are acquired upon exercise of the Option. Even if the
Fair Market Value of the Shares on the date the Option is exercised equals the
Exercise Price paid (and thus no tax is payable), the 83(b) Election must be
made to avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS
83(b) ELECTION IS ATTACHED AS EXHIBIT B HERETO. THE OPTIONEE UNDERSTANDS THAT
FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL
RESULT IN THE RECOGNITION OF ORDINARY INCOME BY THE OPTIONEE AS THE FORFEITURE
RESTRICTIONS LAPSE.
(b) Conditional Section 83(b) Election For Exercise of Incentive
Stock Option. If the Shares are acquired hereunder pursuant to the exercise of
an Incentive Stock Option, as specified in Notice, then the following tax
principles shall be applicable to the Shares:
(i) For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
(ii) The excess of (A) the Fair Market Value of the
Shares on the date the Option is exercised or (if later) on the
date any forfeiture restrictions applicable to the Shares lapse
over (B) the Exercise Price paid for the Shares will be
includible in Optionee's income for alternative minimum tax
purposes.
(iii) If Optionee makes a disqualifying disposition of
the Shares, then Optionee will recognize ordinary income in the
year of such disposition equal in amount to the excess of (A) the
Fair Market Value of the Shares on the date Option is exercised
or (if later) on the date any forfeiture restrictions applicable
to the Shares lapse over (B) the Exercise Price paid for Shares.
Any additional gain recognized upon the disqualifying disposition
will be either short-term or long-term capital gain depending
upon the period for which the Shares are held prior to the
disposition.
(iv) For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Company to repurchase
the Shares pursuant to the Repurchase Right for Unvested Shares
under Section 10. The term "disqualifying
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<PAGE> 26
disposition" means any sale or other disposition(1) of the Shares
within two (2) years after the Grant Date or within one (1) year
after the exercise of the Option.
(v) In the absence of final Treasury Regulations
relating to Incentive Stock Options, it is not certain whether
the Optionee may, in connection with the exercise of the Option
for any Shares at the time subject to forfeiture restrictions,
file a protective 83(b) Election under Code Section 83(b) which
would limit (A) Optionee's alternative minimum taxable income
upon exercise and (B) Optionee's ordinary income upon a
disqualifying disposition to the excess of the Fair Market Value
of Shares on the date the Option is exercised over the Exercise
Price paid for the Shares. The appropriate form for making such a
protective 83(b) Election is attached as Exhibit B and must be
filed with the Internal Revenue Service within thirty (30) days
after the date the Option is exercised. However, such election if
properly filed will only be allowed to the extent the final
Treasury Regulations permit such a protective election.
(c) FILING RESPONSIBILITY. THE OPTIONEE ACKNOWLEDGES THAT IT IS
THE OPTIONEE'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY
83(b) ELECTION UNDER CODE SECTION 83(b), EVEN IF THE OPTIONEE REQUESTS THE
COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
15. Entire Agreement; Governing Law. The Notice of Stock Option Grant,
the Plan and this Option Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and the Optionee
with respect to the subject matter hereof, and may not be modified adversely to
the Optionee's interest except by means of a writing signed by the Company and
Optionee. These agreements are to be construed in accordance with and governed
by the internal laws of the State of California (as permitted by Section 1646.5
of the California Civil Code, or any similar successor provision) without giving
effect to any choice of law rule that would cause the application of the laws of
any jurisdiction other than the internal laws of the State of California to the
rights and duties of the parties. Should any provision of these agreements be
determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.
16. Headings. The captions used in the Notice of Stock Option Grant and
this Option Agreement are inserted for convenience and shall not be deemed a
part of the Option for construction or interpretation.
- --------
(1) Generally, a disposition of shares purchased under an Incentive Stock Option
includes any transfer of legal title, including a transfer by sale, exchange, or
gift, but does not include a transfer to the Optionee's spouse, transfer into
joint ownership with right of survivorship if Optionee remains one of the joint
owners, a pledge, a transfer by bequest or inheritance or certain tax free
exchanges permitted under the Code.
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<PAGE> 27
17. Interpretation. Any dispute regarding the interpretation of the
Notice of Stock Option Grant, the Plan, and this Option Agreement shall be
submitted by the Optionee or by the Company forthwith to the Board or the
Administrator that administers the Plan, which shall review such dispute at its
next regular meeting. The resolution of such dispute by the Board or the
Administrator shall be final and binding on all persons. `
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<PAGE> 28
EXHIBIT A
PLX TECHNOLOGY, INC. 1999 STOCK INCENTIVE PLAN
EXERCISE NOTICE
PLX Technology, Inc.
390 Potrero Avenue
Sunnyvale, CA 94086
Attention: Secretary
1. Exercise of Option. Effective as of today, ______________,
________________ ________________, the undersigned (the "Optionee") hereby
elects to exercise the Optionee's option to purchase ___________ shares of the
Common Stock (the "Shares") of PLX Technology, Inc. (the "Company") under and
pursuant to the Company's 1999 Stock Incentive Plan (the "Plan") and the [ ]
Incentive [ ] Non-Qualified Immediately Exercisable Stock Option Agreement and
Notice of Immediately Exercisable Stock Option Grant dated ______________,
________ (the "Option Agreement").
2. Representations of the Optionee;. The Optionee acknowledges that the
Optionee has received, read and understood the Notice of Stock Option Grant, the
Plan and the Option Agreement and agrees to abide by and be bound by their terms
and conditions.
3. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Shares, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such stock certificate promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 10 of the Plan.
(i) The Optionee shall enjoy rights as a shareholder
until such time as the Optionee disposes of the Shares or the
Company and/or its assignee(s) exercises the Repurchase Right for
Unvested Shares. Upon such exercise, the Optionee shall have no
further rights as a holder of the Shares so purchased except the
right to receive payment for the Shares so purchased in
accordance with the provisions of the Option Agreement, and the
Optionee shall forthwith cause the certificate(s) evidencing the
Shares so purchased to be surrendered to the Company for transfer
or cancellation.
4. Delivery of Payment. The Optionee herewith delivers to the Company
the full Exercise Price for the Shares.
5. Tax Consultation. The Optionee understands that the Optionee may
suffer adverse tax consequences as a result of the Optionee's purchase or
disposition of the Shares. The
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<PAGE> 29
Optionee represents that the Optionee has consulted with any tax consultants the
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that the Optionee is not relying on the Company for any tax advice.
6. Tax Election; Taxes. The Optionee shall provide the Company with a
copy of any timely filed 83(b) Election relating to the purchase of the Shares.
If the Optionee makes a timely 83(b) Election, the Optionee shall immediately
pay the Company (or the Related Entity that employs the Optionee) the amount
necessary to satisfy any applicable federal, state, and local income and
employment tax withholding obligations. If the Optionee does not make a timely
83(b) Election, the Optionee shall, either at the time that the restrictions
lapse under the Option Agreement and the Plan or at the time withholding is
otherwise required by Applicable Law, pay the Company (or the Related Entity
that employs the Optionee) the amount necessary to satisfy any applicable
federal, state, and local income and employment tax withholding obligations. In
addition, the Optionee agrees to satisfy all other applicable federal, state and
local income and employment tax withholding obligations and herewith delivers to
the Company the full amount of such obligations or has made arrangements
acceptable to the Company to satisfy such obligations. In the case of an
Incentive Stock Option, the Optionee also agrees, as partial consideration for
the designation of the Option as an Incentive Stock Option, to notify the
Company in writing within thirty (30) days of any disposition of any shares
acquired by exercise of the Option if such disposition occurs within two (2)
years from the Grant Date or within one (1) year from the date the Shares were
transferred to the Optionee. If the Company is required to satisfy any federal,
state or local income or employment tax withholding obligations as a result of
such an early disposition, the Optionee agrees to satisfy the amount of such
withholding in a manner that the Administrator prescribes.
7. Restrictive Legend. The Optionee understands and agrees that the
Company shall cause the legend set forth below or a legend substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership of
the Shares together with any other legends that may be required by the Company
or by state or federal securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF REPURCHASE HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE OPTION AGREEMENT
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A
COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER SUCH TRANSFER RESTRICTIONS AND RIGHT OF REPURCHASE ARE
BINDING ON TRANSFEREES OF THESE SHARES.
8. Successors and Assigns. The Company may assign any of its rights
under this Exercise Notice to single or multiple assignees, and this agreement
shall inure to the benefit of the successors and assigns of the Company. Subject
to the restrictions on transfer herein set
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<PAGE> 30
forth, this Exercise Notice shall be binding upon the Optionee and his or her
heirs, executors, administrators, successors and assigns.
9. Headings. The captions used in this Exercise Notice are inserted for
convenience and shall not be deemed a part of this agreement for construction or
interpretation.
10. Interpretation. Any dispute regarding the interpretation of this
Exercise Notice shall be submitted by the Optionee or by the Company forthwith
to the Company's Board of Directors or the Administrator that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or Administrator shall be final and
binding on all persons.
11. Governing Law; Severability. This Exercise Notice shall be governed
by and construed in accordance with the internal laws of the State of California
(as permitted by Section 1646.5 of the California Civil Code, or any similar
successor provision) without giving effect to any choice of law rule that would
cause the application of the laws of any jurisdiction other than the internal
laws of the State of California to the rights and duties of the parties. Should
any provision of this Exercise Notice be determined by a court of law to be
illegal or unenforceable, the other provisions shall nevertheless remain
effective and shall remain enforceable.
12. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
13. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this agreement.
14. Entire Agreement. The Notice of Stock Option Grant, the Plan and the
Option Agreement are incorporated herein by reference and together with this
Exercise Notice constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and the Optionee with respect to the subject
matter hereof, and may not be modified adversely to the Optionee's interest
except by means of a writing signed by the Company and the Optionee.
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<PAGE> 31
Submitted by: Accepted by:
OPTIONEE: PLX TECHNOLOGY, INC.
By:
----------------------------------
Its:
- ---------------------------------- ----------------------------------
(Signature)
Address: Address:
PLX Technology, Inc.
- ---------------------------------- 390 Potrero Avenue
Sunnyvale, CA 94086]
- ----------------------------------
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<PAGE> 32
EXHIBIT B
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to the Internal
Revenue Code, to include in gross income for 19__ the amount of any compensation
taxable in connection with the taxpayer's receipt of the property described
below:
1. The name, address, taxpayer identification number and
taxable year of the undersigned are:
TAXPAYER'S NAME ________________________________
SPOUSE'S NAME ________________________________
TAXPAYER'S SOCIAL SECURITY NO.: ________________________________
SPOUSE'S SOCIAL SECURITY NO.: ________________________________
TAXABLE YEAR: Calendar Year 19__
ADDRESS: ________________________________
________________________________
2. The property which is the subject of this election is
__________ shares of common stock of ______________________.
3. The property was transferred to the undersigned on
____________, 19__.
4. The property is subject to the following restrictions:
The right of the Company to repurchase the shares, or a portion thereof,
at the purchase price of the shares. The rights lapses as to a portion
of the shares per month according to a vesting schedule, based upon
continued service to the Company.
5. The fair market value of the property at the time of
transfer (determined without regard to any restriction other than a
restriction which by its terms will never lapse) is: $_______ per share
x ________ shares = $___________.
6. The undersigned paid $______ per share x _________
shares for the property transferred or a total of $______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The undersigned taxpayer is the person performing the
services in connection with the transfer of said property.
The undersigned will file this election with the Internal Revenue
Service office to which he or she files his annual income tax return not later
than 30 days after the date of transfer of the property. Additionally, the
undersigned will include a copy of the election with his income tax return for
the taxable year in which the property is transferred.
Dated: __________________________ _________________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
1
<PAGE> 33
Dated: __________________________ _________________________________________
Spouse of Taxpayer
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Internal Revenue Code (the "Code"). Accordingly,
it is the intent of the Taxpayer to utilize this election to achieve the
following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount by
which the fair market value of such shares at the time of their transfer to the
Taxpayer exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for
such shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN CONNECTION
WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION.
2
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
January 14, 1999 (except for Note 11, as to which the date is January 25, 1999)
in Amendment No. 2 to the Registration Statement (Form S-1 No. 333-71795) and
related Prospectus of PLX Technology, Inc. for the registration of 3,795,000
shares of its common stock.
Our audits also included the financial statement schedule of PLX
Technology, Inc. for each of the three years in the period ended December 31,
1998 listed in item 16(b) of this Registration Statement. This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
San Jose, California
March __, 1999
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon the approval of
the Certificate of Incorporation in the State of Delaware as described in Note
11 to the financial statements.
/s/ Ernst & Young LLP
San Jose, California
March 19, 1999
<PAGE> 1
EXHIBIT 99.2
CONSENT OF NOMINEE DIRECTOR
I hereby consent to the reference to me as a Nominee Director under the caption
"Management" in the Registration Statement on Form S-1 and related Prospectus
of PLX Technology, Inc. (the "Company") for the registration of shares of the
Company's Common Stock, $.001 par value.
Dated: March 19, 1999
/s/ John Hart
---------------------------------
John Hart
