PLX TECHNOLOGY INC
DEF 14A, 2000-04-14
SEMICONDUCTORS & RELATED DEVICES
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<PAGE>   1
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                                  SCHEDULE 14A

                                 (RULE 14a-101)

                     INFORMATION REQUIRED IN PROXY STATEMENT

                            SCHEDULE 14a INFORMATION

           PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]

Check the appropriate box:
[ ]  Preliminary proxy statement            [ ] Confidential, For Use of the
                                                Commission Only (as permitted by
                                                Rule 14a-6(e)(2))
[X]  Definitive proxy statement
[ ]  Definitive additional materials
[ ]  Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

                              PLX TECHNOLOGY, INC.
                (NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


    (NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)

Payment of Filing Fee (Check the appropriate box):
[X]  No fee required.
[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)   Title of each class of securities to which transaction applies:

      --------------------------------------------------------------------------
(2)   Aggregate number of securities to which transactions applies:

      --------------------------------------------------------------------------
(3)   Per unit price or other underlying value of transaction computed pursuant
      to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
      calculated and state how it was determined):

      --------------------------------------------------------------------------
(4)   Proposed maximum aggregate value of transaction.

      --------------------------------------------------------------------------
(5)   Total fee paid:

      --------------------------------------------------------------------------

      [ ] Fee paid previously with preliminary materials:

      --------------------------------------------------------------------------

      [ ] Check box if any part of the fee is offset as provided by Exchange Act
      Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
      paid previously. Identify the previous filing by registration statement
      number, or the form or schedule and the date of its filing.

(1)   Amount previously paid:

      --------------------------------------------------------------------------
(2)   Form, Schedule or Registration Statement No.:

      --------------------------------------------------------------------------
(3)   Filing Party:

      --------------------------------------------------------------------------
(4)   Date Filed:

      --------------------------------------------------------------------------


<PAGE>   2


                              PLX TECHNOLOGY, INC.

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                             TO BE HELD MAY 24, 2000


To the Stockholders of PLX Technology, Inc.:

        NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of PLX
Technology, Inc., a Delaware corporation (the "Company"), will be held at the
Company's headquarters, 390 Potrero Avenue, Sunnyvale, California, at 10:00
a.m., Pacific Time, on May 24, 2000, for the following purposes:

        1. ELECTION OF DIRECTORS. To elect six directors of the Company to serve
until the 2001 annual meeting of stockholders or until their successors are
elected and qualified.

        2. APPROVAL OF AMENDMENTS TO THE PLX TECHNOLOGY, INC. 1999 STOCK
INCENTIVE PLAN. To approve amendments to the PLX Technology, Inc. 1999 Stock
Incentive Plan to (i) increase the number of shares reserved for issuance
thereunder from 1,000,000 shares to 2,500,000 shares, and (ii) limit the maximum
number of options and stock appreciation rights that may be awarded to an
employee in any one fiscal year of the Company in order to ensure compliance
with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended.

        3. RATIFICATION AND APPROVAL OF THE APPOINTMENT OF INDEPENDENT AUDITORS.
To ratify and approve the appointment of Ernst & Young LLP as the independent
auditors for the Company for the fiscal year ending December 31, 2000.

        4. OTHER BUSINESS. To transact such other business as may properly come
before the Annual Meeting of Stockholders and any adjournment or postponement
thereof.

        The foregoing items of business are more fully described in the Proxy
Statement which is attached hereto and made a part hereof.

        The Board of Directors has fixed the close of business on March 15, 2000
as the record date for determining the stockholders entitled to notice of and to
vote at the 2000 Annual Meeting of Stockholders and any adjournment or
postponement thereof.

                                        By Order of the Board of Directors,

                                        /s/ Michael J. Salemeh

                                        Michael J. Salameh
                                        President and Director

Sunnyvale, California
April 14, 2000

        WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS
IN PERSON, YOU ARE URGED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR
REPRESENTATION AND THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING. IF YOU SEND
IN YOUR PROXY CARD AND THEN DECIDE TO ATTEND THE ANNUAL MEETING TO VOTE YOUR
SHARES IN PERSON, YOU MAY STILL DO SO. YOUR PROXY IS REVOCABLE IN ACCORDANCE
WITH THE PROCEDURES SET FORTH IN THE PROXY STATEMENT.


<PAGE>   3


                                     [LOGO]

                              PLX TECHNOLOGY, INC.
                               390 POTRERO AVENUE
                           SUNNYVALE, CALIFORNIA 94086

                                 PROXY STATEMENT


GENERAL INFORMATION

        This Proxy Statement is furnished to the stockholders of PLX Technology,
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors of the Company (the "Board" or "Board of
Directors") of proxies in the accompanying form for use in voting at the 2000
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held
on May 24, 2000 at the Company's headquarters, 390 Potrero Avenue, Sunnyvale,
California, at 10:00 a.m., Pacific Time, and any adjournment or postponement
thereof. The shares represented by proxies received, properly marked, dated,
executed and not revoked will be voted at the Annual Meeting.

REVOCABILITY OF PROXIES

        Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is exercised by delivering to the Company
(to the attention of Scott M. Gibson, the Company's Secretary) a written notice
of revocation or a duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person.

SOLICITATION AND VOTING PROCEDURES

        This Proxy Statement and the accompanying proxy were first sent by mail
to stockholders on or about April 14, 2000. The solicitation of proxies will be
conducted by mail, and the Company will bear all attendant costs. These costs
will include the expense of preparing and mailing proxy materials for the Annual
Meeting and reimbursements paid to brokerage firms and others for their expenses
incurred in forwarding solicitation material regarding the Annual Meeting to
beneficial owners of the Company's Common Stock. The Company may conduct further
solicitation personally, by telephone or by facsimile through its officers,
directors and regular employees, none of whom will receive additional
compensation for assisting with such solicitation.

        The close of business on March 15, 2000 has been fixed as the record
date (the "Record Date") for determining the holders of shares of Common Stock
of the Company entitled to notice of and to vote at the Annual Meeting. As of
the close of business on the Record Date, the Company had approximately
22,034,996 shares of Common Stock outstanding and entitled to vote at the Annual
Meeting. Each outstanding share of Common Stock on the Record Date is entitled
to one vote on all matters.

        A majority of the shares entitled to vote, present in person or
represented by proxy, shall constitute a quorum at the Annual Meeting. For the
election of directors, the candidates receiving the greatest number of
affirmative votes are elected, provided a quorum is present and voting. The
affirmative vote of a majority of the outstanding shares of the Company's Common
Stock present in person or represented by proxy at the Annual Meeting shall be
required to approve Proposal Nos. 2 and 3 being submitted to the stockholders
for their consideration.

        Under the General Corporation Law of the State of Delaware, an
abstaining vote and a broker "non-vote" are counted as present and are,
therefore, included for purposes of determining whether a quorum of shares is
present at a meeting. However, broker "non-votes" are not deemed to be "votes
entitled to vote." As a result, broker "non-votes" are not included in the
tabulation of the voting results on the election of directors or issues
requiring approval of a majority of the votes entitled to vote and, therefore,
do not have the effect of votes in opposition in such tabulations. A broker
"non-vote" occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have the
discretionary voting power with respect to that item and has not received
instructions from the beneficial owner. Because abstentions will be included in
tabulations of the votes entitled to vote for purposes of determining whether a
proposal has been approved, abstentions have the same effect as negative votes.
Broker non-votes and shares as to which proxy authority has been withheld with
respect to any matter are not deemed to be entitled to vote for purposes of
determining whether stockholder approval of a matter has been obtained and thus
have no effect on the vote.


                                       2
<PAGE>   4


                                 PROPOSAL NO. 1

                              ELECTION OF DIRECTORS


        As set by the Board of Directors pursuant to the Bylaws of the Company,
the authorized number of directors is set at six. Six directors will be elected
at the Annual Meeting to serve until the 2001 annual meeting of stockholders or
until each director's successor is elected or appointed and qualified or until
the earlier resignation or removal of the director. In the event that any
nominee of the Company is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner as will
assure the election of as many of the nominees listed below as possible, and, in
such event, the specific nominees to be voted for will be determined by the
proxy holders. The Board has no reason to believe that any of the persons named
below will be unable or unwilling to serve as a director, if elected. Each of
the six nominees for director who receives the greatest number of votes will be
elected.

        Set forth below are the names, ages and certain biographical information
relating to the director nominees.

<TABLE>
<CAPTION>
NAME OF NOMINEE              AGE          POSITION WITH COMPANY      DIRECTOR SINCE
<S>                          <C>   <C>                               <C>
Michael J. Salameh           45    President and Director                 1986
D. James Guzy (1)(2)         63    Chairman of the Board                  1986
Eugene Flath (2)             62    Director                               1989
Timothy Draper (1)           41    Director                               1986
Young K. Sohn                43    Director                               1999
John H. Hart                 54    Director                               1999
</TABLE>

- -----------------------

(1)  Member of Audit Committee

(2)  Member of Compensation Committee

        MICHAEL J. SALAMEH co-founded the Company and has served as President
and as a member of the Board of Directors since the Company'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.

        D. JAMES GUZY has been a director of the Company 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 the Company 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 the Company since 1986. Mr. Draper
founded and has been Managing Director of Draper Fisher Jurvetson, an investment
company since 1992. Mr. Draper managed Draper Associates LP from 1986 to 1992.
Mr. Draper also serves on the board of directors of Tumbleweed Communications,
GoTo.com and several private companies. Mr. Draper received a B.S. in Electrical
Engineering from Stanford University and an M.B.A. from Harvard Business School.



                                       3
<PAGE>   5
        YOUNG K. SOHN has been a director of the Company since April 1999. 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,
including President of the Hard Disk Drive Business. Prior to joining Quantum,
Mr. Sohn was employed for nine years at Intel Corporation ("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 has been a director of the Company since April 1999. Mr.
Hart has been Senior Vice President and Chief Technical Officer of 3Com
Corporation ("3Com") 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. Mr. Hart received a B.S. in Mathematics from the University
of Georgia.

        An automated system administered by the Company's transfer agent will
tabulate votes cast by proxy at the Annual Meeting and an officer of the Company
will tabulate votes cast in person at the Annual Meeting.

                         THE BOARD RECOMMENDS A VOTE FOR
                    THE ELECTION OF THE NOMINEES NAMED ABOVE

RELATIONSHIPS AMONG DIRECTORS OR EXECUTIVE OFFICERS

        There are no family relationships among any of the directors or
executive officers of the Company.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

        During the fiscal year ended December 31, 1999, the Board met five
times. The Board has two committees: the Audit Committee and the Compensation
Committee. During the fiscal year ended December 31, 1999, no director attended
fewer than 75% of all the meetings of the Board and its committees on which he
served after becoming a member of the Board.

        The Audit Committee, which held four meetings in the fiscal year ended
December 31, 1999, consists of Mr. Guzy and Mr. Draper. The Audit Committee is
primarily responsible for approving the services performed by the Company's
independent auditors, for reviewing and evaluating the Company's accounting
principles and its systems of internal accounting controls, as well as other
matters which may come before it or as directed by the Board.

        The Compensation Committee, which held three meetings in the fiscal year
ended December 31, 1999, consists of Mr. Flath and Mr. Guzy. The Compensation
Committee reviews and approves the compensation and benefits for the Company's
executive officers, administers the Company's 1998 Stock Incentive Plan, 1999
Stock Incentive Plan, 1999 Non-Employee Director Stock Incentive Plan and
performs such other duties as may from time to time be determined by the Board.

        The Board does not have a nominating committee or a committee performing
the functions of a nominating committee. While there are no formal procedures
for stockholders to recommend nominations, the Board will consider stockholder
recommendations. Such recommendations should be addressed to Scott M. Gibson,
the Company's Secretary at the Company's principal executive offices.

COMPENSATION OF DIRECTORS

        Non-employee directors of the Company receive $4,000 upon initial
election at the annual stockholders meeting and receive $2,000 in compensation
for each Board of Directors meeting attended.

        The Company's 1999 Non-Employee Director Plan (the "1999 Director Plan")
provides for annual automatic grants of nonqualified stock options to continuing
non-employee directors. Under the 1999 Director Plan, each non-employee director
will receive a non-qualified stock option grant of 15,000 shares of the
Company's Common Stock upon his or her initial election to the Board of
Directors. On the date of each annual stockholders' meeting, each incumbent
non-employee director who has served on the Board for at least eleven months
will automatically be granted an option to



                                       4
<PAGE>   6

purchase 5,000 shares of the Company's Common Stock. All options automatically
granted to non-employee directors will have an exercise price equal to 100% of
the fair market value on the date of grant and become exercisable immediately.
On March 31, 1999, Messrs. Sohn and Hart received non-qualified stock option
grants under the Company's 1998 Stock Incentive Plan for 15,000 shares each of
the Company's Common Stock at an exercise price of $8.00 per share.








                                       5
<PAGE>   7


                              SECURITY OWNERSHIP OF
                    CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 15, 2000 for (i)
each person who is known by the Company to beneficially own more than 5% of the
Company's Common Stock, (ii) each of the Company's directors, (iii) each of the
Named Executive Officers appearing in the Summary Compensation Table below and
(v) all directors and executive officers as a group.

<TABLE>
<CAPTION>
                                                   SHARES BENEFICIALLY OWNED(1)
DIRECTORS,  EXECUTIVE OFFICERS AND 5%              ----------------------------
STOCKHOLDERS                                         NUMBER        PERCENT(2)
- ------------                                         ------        ----------
<S>                                                 <C>            <C>
Timothy Draper(3)..............................     2,084,460         9.5%
D. James Guzy(4)...............................     1,955,436         8.9%
Arbor Company
  P.O. Box 128
  Glenbrook, NV 89413..........................     1,955,436         8.9%
Zweig-DiMenna Partners L.P.
Zweig-DiMenna International Limited
Zweig-DiMenna International Managers, Inc.
Zweig-DiMenna Investors L.P.
Zweig-DiMenna Select L.P.
Zweig-DiMenna Special Opportunites, L.P.
Gotham Advisors
  900 Third Avenue, 30th Floor
  New York, New York 10022(5)..................     1,680,300         7.6%
Draper Associates
  400 Seaport Court, Suite 250
  Redwood City, CA 94063.......................     1,656,294         7.5%
AIM Management Group, Inc.
11 Greenway Plaza, 18th Floor
Houston, TX 77046(6)...........................     1,298,600         5.9%
Michael J. Salameh(7)..........................       993,847         4.4%
Michael A. Hopwood(8)..........................       310,000         1.4%
Mark R. Easley(9)..............................       222,500         1.0%
Scott M. Gibson(10)............................       200,000         *
Kenyon Mei, Ph.D...............................       191,458         *
William E. Hart(11)............................       190,650         *
Eugene Flath...................................       119,271         *
Young K. Sohn(12)..............................        15,000         *
John H. Hart(13)...............................        15,000         *
All executive officers and directors
  as a group (12 persons)(14)..................     6,447,622        27.9%
</TABLE>

*    Less than 1% of the outstanding common stock

(1)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission. In computing the number of shares
     beneficially owned by a person and the percentage ownership of that person,
     shares of Common Stock subject to options held by that person that are
     currently exercisable or exercisable within 60 days of March 15, 2000 are
     deemed outstanding. Such shares, however, are not deemed outstanding for
     the purpose of computing the percentage ownership of each other person. To
     the Company's knowledge, except as set forth in the footnotes to this table
     and subject to applicable community property laws, each person named in the
     table has sole voting and investment power with respect to the shares set
     forth opposite such person's name.

(2)  Percentage beneficially owned is based on 22,034,996 shares of Common Stock
     outstanding as of March 15, 2000.

(3)  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.

(4)  Includes 1,955,436 shares held by Arbor Company of which Mr. Guzy is
     President.

(5)  Based upon a Schedule 13G/A filed with the Securities and Exchange
     Commission on February 11, 2000 which reports sole voting and sole
     dispositive power over shares as follows: Zweig-DiMenna Partners L.P.,
     444,900 shares; Zweig-DiMenna International Limited, 777,900 shares;
     Zweig-DiMenna International Managers, Inc., 90,700 shares; Zweig-DiMenna
     Investors L.P., 12,300 shares; Zweig-DiMenna Select L.P., 33,900 shares;
     Zweig-DiMenna Special Opportunities, L.P., 213,400 shares; and Gotham
     Advisors, Inc., 107,200 shares.



                                       6

<PAGE>   8

(6)  Based upon a Schedule 13G/A filed with the Securities and Exchange
     Commission on February 4, 2000.

(7)  Includes 387,364 shares subject to options exercisable within 60 days of
     March 15, 2000.

(8)  Includes 175,000 shares subject to options exercisable within 60 days of
     March 15, 2000.

(9)  Includes 165,000 shares subject to options exercisable within 60 days of
     March 15,2000.

(10) Includes 110,000 shares subject to options exercisable within 60 days of
     March 15, 2000

(11) Includes 90,000 shares subject to options exercisable within 60 days of
     March 15, 2000.

(12) Includes 15,000 shares subject to options exercisable within 60 days of
     March 15, 2000.

(13) Includes 15,000 shares subject to options exercisable within 60 days of
     March 15, 2000

(14) Includes 1,107,364 shares subject to options exercisable within 60 days of
     March 15, 2000







                                       7
<PAGE>   9


                                 PROPOSAL NO. 2

                             APPROVAL OF AMENDMENTS
                        TO THE 1999 STOCK INCENTIVE PLAN


        The Company's stockholders are being asked to approve amendments to the
Company's 1999 Stock Incentive Plan (the "1999 Plan"). The proposed amendments
to the 1999 Plan will (i) increase the number of shares reserved for issuance
under the 1999 Plan from 1,000,000 shares to 2,500,000 shares and (ii) limit the
maximum number of options and stock appreciation rights that may be awarded to
an employee in any one fiscal year of the Company in order to ensure compliance
with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").

        The amendments to the 1999 Plan will enable the Company to grant awards
as needed to attract employees and other service providers. The 1999 Plan is
intended to enhance the Company's ability to provide key individuals with awards
and incentives commensurate with their contributions and competitive with those
offered by other employers, and to increase stockholder value by further
aligning the interests of key individuals with the interests of the Company's
stockholders by providing an opportunity to benefit from stock price
appreciation that generally accompanies improved financial performance. The
Board of Directors believes that the Company's long term success is dependent
upon the ability of the Company to attract and retain highly qualified
individuals who, by virtue of their ability and qualifications, make important
contributions to the Company.

        The affirmative vote of a majority of the shares present in person or by
proxy at the Annual Meeting and entitled to vote is required for adoption of
Proposal No. 2.

              THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
                       OF THE AMENDMENTS TO THE 1999 PLAN

        The following summary of the 1999 Plan, including the proposed
amendments, is subject in its entirety to the specific language of the 1999
Plan, a copy of which is available to any stockholder upon request.

GENERAL DESCRIPTION

        The 1999 Plan was approved by the Board of Directors in January 1999 and
by the Company's stockholders in March 1999. In March 2000, the Board of
Directors approved amendments to the 1999 Plan, conditioned upon and not to take
effect until approved by the Company's stockholders, (i) to increase the number
of shares reserved for issuance under the 1999 Plan from 1,000,000 shares to
2,500,000 shares, and (ii) to limit the maximum number of options and stock
appreciation rights that may be awarded to an employee in any one fiscal year of
the Company in order to ensure compliance with the requirements of Section
162(m) of the Code.

        The purposes of the 1999 Plan are to give the Company's employees and
others who perform substantial services to the Company an incentive, through
ownership of the Company's Common Stock, to continue in service to the Company,
and to help the Company compete effectively with other enterprises for the
services of qualified individuals. The 1999 Plan permits the grant of "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Code only to
employees of the Company or any parent or subsidiary corporation of the Company.
Awards other than incentive stock options may be granted to employees, directors
and consultants. As of March 15, 2000, options to purchase a total of 818,314
shares held by 83 optionees were outstanding as of such date at a weighted
average exercise price of $20.59 per share, and 181,686 shares remained
available for future grant under 1999 Plan. As of that same date, the number of
employees, directors and consultants eligible to receive grants under the 1999
Plan was approximately 95 persons.

        The 1999 Plan provides for the grant of (i) shares, (ii) options, stock
appreciation rights ("SARs") or similar rights 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 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 of the Company (collectively,



                                       8
<PAGE>   10
the "Awards"). Such Awards include, without limitation, options, SARs, sales or
bonuses of restricted stock, dividend equivalent rights, performance units or
performance shares.

        AMENDMENT TO INCREASE SHARES RESERVED. The current number of shares
reserved for issuance under the 1999 Plan is 1,000,000. The proposed amendment
to the 1999 Plan provides that the number of shares reserved for issuance will
be increased by 1,500,000 shares to a total reserve of 2,500,000 shares.

        APPROVAL OF CODE SECTION 162(M) LIMITATIONS. The Board of Directors,
subject to stockholder approval, adopted an amendment to the 1999 Plan to limit
the maximum number of options and SARs which may be awarded to an employee in
any fiscal year of the Company to 1,000,000 shares. The purpose of the amendment
is to ensure that any options and SARs granted under the 1999 Plan after the
Annual Meeting will qualify as "performance-based compensation" under Code
Section 162(m).

        Under Code Section 162(m) no deduction is allowed in any taxable year of
the Company for compensation in excess of $1 million paid to its chief executive
officer and each of its four most highly paid other executive officers who are
serving in such capacities as of the last day of such taxable year. An exception
to this rule applies to compensation that is paid pursuant to a stock incentive
plan approved by the Company's stockholders and that specifies, among other
things, the maximum number of shares with respect to which options and SARs may
be granted to eligible employees under such plan during a specified period.
Compensation paid pursuant to options and SARs granted under such a plan is
deemed to be inherently performance-based, since such awards provide value to
employees only if the stock price appreciates. While Code Section 162(m)
generally became effective in 1994, a special rule allows options granted under
the 1999 Plan to be treated as qualifying under Code Section 162(m) until this
Annual Meeting without having a per-person share limit.

        If stockholders do not approve the Code Section 162(m) amendment, any
compensation expense of the Company associated with the options and SARs granted
under the 1999 Plan in excess of the shares currently available for issuance
(together with all other non-performance based compensation) in excess of $1
million for any of the Company's five highest paid officers will not be
deductible under the Code.

        ADMINISTRATION. The 1999 Plan is administered, with respect to grants to
directors, officers, consultants, and employees, by the Administrator of the
1999 Plan, defined as the Board or a committee designated by the Board. The
committee is constituted in such a manner as to satisfy applicable laws,
including Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended ("Rule 16b-3"). With respect to Awards subject to Code Section 162(m),
the committee will be comprised solely of two or more "outside directors" as
defined under Code Section 162(m) and applicable tax regulations. For grants of
Awards to individuals not subject to Rule 16b-3 and Code Section 162(m), the
Board of Directors may authorize one or more officers to grant such Awards.

        AMENDMENT AND TERMINATION. The Board may at any time amend, suspend or
terminate the 1999 Plan. To the extent necessary to comply with 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, the Company will obtain stockholder approval of any amendment to the
1999 Plan in such a manner and to such a degree as required. The 1999 Plan will
terminate in January 2009 unless previously terminated by the Board of
Directors.

        OTHER TERMS. Stock options granted under the 1999 Plan may be either
incentive stock options under the provisions of Section 422 of the Code, or
non-qualified stock options. Incentive stock options may be granted only to
employees of the Company or any parent or subsidiary corporation of the Company.
Awards other than incentive stock options may be granted to employees, directors
and consultants. Under the 1999 Plan, 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.

        The 1999 Plan authorizes the Administrator to select the employees,
directors and consultants of the Company to whom Awards may be granted and to
determine the terms and conditions of any Award; however, the term of an
incentive stock option may not be for more than 10 years (or 5 years in the case
of incentive stock options granted to any grantee who owns stock representing
more than 10% of the combined voting power of the Company or any parent or
subsidiary corporation of the Company). The 1999 Plan authorizes the
Administrator to grant Awards at an exercise price determined by the
Administrator. In the case of incentive stock options, such price cannot be less
than 100% (or 110%, in the case of incentive stock options granted to any
grantee who owns stock representing more than 10% of the combined voting power
of the Company or any parent or subsidiary corporation of the Company) of



                                       9
<PAGE>   11

the fair market value of the Common Stock on the date the option is granted. The
exercise price of Awards intended to qualify as performance-based compensation
for purposes of Code Section 162(m) shall not be less than 100% of the fair
market value. The exercise price is payable in cash with such documentation as
the Administrator and the broker, if applicable, shall require to effect an
exercise of an Award and delivery to the Company of the sale proceeds required
to pay the exercise price, or with shares of Common Stock. The aggregate fair
market value of the Common Stock with respect to any incentive stock options
that are exercisable for the first time by an eligible employee in any calendar
year may not exceed $100,000.

        The Awards may be granted subject to vesting schedules and restrictions
on transfer and repurchase or forfeiture rights in favor of the Company as
specified in the agreements to be issued under the 1999 Plan. The Administrator
has the authority to accelerate the vesting schedule of Awards so that they
become fully vested, exercisable, and released from any restrictions on transfer
and repurchase or forfeiture rights in the event of a Corporate Transaction, a
Change in Control or a Subsidiary Disposition, each as defined in the 1999 Plan.
Effective upon the consummation of the Corporate Transaction, all outstanding
Awards under the 1999 Plan will terminate unless assumed by the successor
company or its parent. In the event of a Change in Control or a Subsidiary
Disposition, each Award shall remain exercisable until the expiration or sooner
termination of the Award term. The 1999 Plan also permits the Administrator to
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.

        The 1999 Plan provides that 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. However, the 1999 Plan
permits the designation of beneficiaries by holders of incentive stock options.
Other Awards are transferable to the extent provided in the Award agreement.

        Under the 1999 Plan, the Administrator may establish one or more
programs under the 1999 Plan to permit selected grantees the opportunity to
elect to defer receipt of consideration payable under an Award. The
Administrator also may establish under the 1999 Plan separate programs for the
grant of particular forms of Awards to one or more classes of grantees.

        CERTAIN FEDERAL TAX CONSEQUENCES. The grant of a non-qualified stock
option under the 1999 Plan will not result in any federal income tax
consequences to the optionee or to the Company. Upon exercise of a non-qualified
stock option, the optionee is subject to income taxes at the rate applicable to
ordinary compensation income on the difference between the option exercise price
and the fair market value of the shares on the date of exercise. This income is
subject to withholding for federal income and employment tax purposes. The
Company is entitled to an income tax deduction in the amount of the income
recognized by the optionee, subject to possible limitations imposed by Section
162(m) of the Code. Any gain or loss on the optionee's subsequent disposition of
the shares of Common Stock will receive long or short-term capital gain or loss
treatment, depending on whether the shares are held for more than one year
following exercise. The Company does not receive a tax deduction for any such
gain.

        The grant of an ISO under the 1999 Plan will not result in any federal
income tax consequences to the optionee or to the Company. An optionee
recognizes no federal taxable income upon exercising an ISO (subject to the
alternative minimum tax rules discussed below), and the Company receives no
deduction at the time of exercise. In the event of a disposition of stock
acquired upon exercise of an ISO, the tax consequences depend upon how long the
optionee has held the shares of Common Stock. If the optionee does not dispose
of the shares within two years after the ISO was granted, nor within one year
after the ISO was exercised, the optionee will recognize a long-term capital
gain (or loss) equal to the difference between the sale price of the shares and
the exercise price. The Company is not entitled to any deduction under these
circumstances.

        If the optionee fails to satisfy either of the foregoing holding
periods, he or she must recognize ordinary income in the year of the disposition
(referred to as a "disqualifying disposition"). The amount of such ordinary
income generally is the lesser of (i) the difference between the amount realized
on the disposition and the exercise price, or (ii) the difference between the
fair market value of the stock on the exercise date and the exercise price. Any
gain in excess of the amount taxed as ordinary income will be treated as a long
or short-term capital gain, depending on whether the stock was held for more
than one year. The Company, in the year of the disqualifying disposition, is
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee.



                                       10
<PAGE>   12

        The "spread" under an ISO -- i.e., the difference between the fair
market value of the shares at exercise and the exercise price -- is classified
as an item of adjustment in the year of exercise for purposes of the alternative
minimum tax.

        The grant of restricted stock will subject the recipient to ordinary
compensation income on the difference between the amount paid for such stock and
the fair market value of the shares on the date that the restrictions lapse.
This income is subject to withholding for federal income and employment tax
purposes. The Company is entitled to an income tax deduction in the amount of
the ordinary income recognized by the recipient, subject to possible limitations
imposed by Section 162(m) of the Code. Any gain or loss on the recipient's
subsequent disposition of the shares will receive long or short-term capital
gain or loss treatment depending on whether the shares are held for more than
one year and depending on how long the stock has been held since the
restrictions lapsed. The Company does not receive a tax deduction for any such
gain.

        Recipients of restricted stock may make an election under Internal
Revenue Code Section 83(b) ("Section 83(b) Election") to recognize as ordinary
compensation income in the year that such restricted stock is granted the amount
equal to the spread between the amount paid for such stock and the fair market
value on the date of the issuance of the stock. If such an election is made, the
recipient recognizes no further amounts of compensation income upon the lapse of
any restrictions and any gain or loss on subsequent disposition will be long or
short-term capital gain to the recipient. The Section 83(b) Election must be
made within thirty days from the time the restricted stock is issued.

        THE FOREGOING IS ONLY A SUMMARY OF THE CURRENT EFFECT OF FEDERAL INCOME
TAXATION UPON THE GRANTEE AND THE COMPANY WITH RESPECT TO THE SHARES PURCHASED
UNDER THE 1999 PLAN. REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF
THE CODE. IN ADDITION, THE SUMMARY DOES NOT DISCUSS THE TAX CONSEQUENCES OF A
GRANTEE'S DEATH OR THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY TO WHICH THE GRANTEE MAY BE SUBJECT.

        AMENDED PLAN BENEFITS. As of the date of this Proxy Statement, no
executive officer, director and no associate of any executive office or
director, has been granted any options subject to stockholder approval of the
proposed amendments. The benefits to be received pursuant to the 1999 Plan
amendments by the Company's executive officers, directors and employees are not
determinable at this time.




                                       11
<PAGE>   13


                                 PROPOSAL NO. 3

               RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS


        Ernst & Young LLP has served as the Company's independent auditors since
the Company's inception and has been appointed by the Board to continue as the
Company's independent auditors for the Company's fiscal year ending December 31,
2000. In the event that ratification of this selection of auditors is not
approved by a majority of the shares of Common Stock voting at the Annual
Meeting in person or by proxy, management will review its future selection of
auditors. A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting. The representative will have an opportunity to make a statement
and to respond to appropriate questions.

          THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
              THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
                    INDEPENDENT AUDITORS FOR THE FISCAL YEAR
                            ENDING DECEMBER 31, 2000


                      REPORT OF THE COMPENSATION COMMITTEE
                            OF THE BOARD OF DIRECTORS


        Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
report shall not be deemed to be incorporated by reference into any such
filings.

        The Compensation Committee of the Board was formed in July 1990 and
consists of D. James Guzy and Eugene Flath. Decisions concerning the
compensation of the Company's executive officers are made by the Compensation
Committee and reviewed by the full Board (excluding any interested director).

EXECUTIVE OFFICER COMPENSATION PROGRAMS

        The objectives of the executive officer compensation program are to
attract, retain, motivate and reward key personnel who possess the necessary
leadership and management skills, through competitive base salary, annual cash
bonus incentives, long-term incentive compensation in the form of stock options,
and various benefits, including medical and life insurance plans.

        The executive compensation policies of the Compensation Committee are
intended to combine competitive levels of compensation and rewards for above
average performance and to align relative compensation with the achievements of
key business objectives, optimal satisfaction of customers, and maximization of
stockholder value. The Compensation Committee believes that stock ownership by
management is beneficial in aligning management and stockholder interests,
thereby enhancing stockholder value.

        Base Salaries. Salaries for the Company's executive officers are
determined primarily on the basis of the executive officer's responsibility,
general salary practices of peer companies and the officer's individual
qualifications and experience. The base salaries are reviewed annually and may
be adjusted by the Compensation Committee in accordance with certain criteria
which include individual performance, the functions performed by the executive
officer, the scope of the executive officer's on-going duties, general changes
in the compensation peer group in which the Company competes for executive
talent, and the Company's financial performance generally. The weight given each
such factor by the Compensation Committee may vary from individual to
individual.



                                       12
<PAGE>   14


        Incentive Bonuses. The Compensation Committee believes that a cash
incentive bonus plan can serve to motivate the Company's executive officers and
management to address annual performance goals, using more immediate measures
for performance than those reflected in the appreciation in value of stock
options. The bonus amounts are based upon recommendations by management and a
subjective consideration of factors including such officer's level of
responsibility, individual performance, contributions to the Company's success
and the Company's financial performance generally.

        Stock Option Grants. Stock options may be granted to executive officers
and other employees under the 1999 Plan. Because of the direct relationship
between the value of an option and the stock price, the Compensation Committee
believes that options motivate executive officers to manage the Company in a
manner that is consistent with stockholder interests. Stock option grants are
intended to focus the attention of the recipient on the Company's long-term
performance which the Company believes results in improved stockholder value,
and to retain the services of the executive officers in a competitive job market
by providing significant long-term earnings potential. To this end, stock
options generally vest and become fully exercisable over a four-year period. The
principal factors considered in granting stock options to executive officers of
the Company are prior performance, level of responsibility, other compensation
and the executive officer's ability to influence the Company's long-term growth
and profitability. However, the 1999 Plan does not provide any quantitative
method for weighting these factors, and a decision to grant an award is
primarily based upon a subjective evaluation of the past as well as future
anticipated performance.

        Other Compensation Plans. The Company has adopted certain general
employee benefit plans in which executive officers are permitted to participate
on parity with other employees. The Company also provides a 401(k) deferred
compensation plan. Benefits under these general plans are indirectly tied to the
Company's performance.

        Deductibility of Compensation. The Company is required to disclose its
policy regarding qualifying executive compensation for deductibility under
Section 162(m) of the Code, which provides that, for purposes of the regular
income tax and the alternative minimum tax, the otherwise allowable deduction
for compensation paid or accrued with respect to a covered employee of a
publicly held corporation is limited to no more than $1 million per year. For
the fiscal year ended December 31, 1999, no executive officer of the Company
received $1 million in total compensation, nor does the Company anticipate that
compensation payable to any executive officer will exceed $l million for fiscal
year 2000.

CHIEF EXECUTIVE OFFICER COMPENSATION

        The compensation of the President is reviewed annually on the same basis
as discussed above for all executive officers. Mr. Salameh's base salary for the
fiscal year ended December 31, 1999 was $170,000. Mr. Salameh's base salary was
established in part by comparing the base salaries of chief executive officers
at other companies of similar size. Mr. Salameh's base salary was at the
approximate median of the base salary range for Presidents/Chief Executive
Officers of comparative companies. Mr. Salameh received 163,000 stock options
and a $175,744 bonus for the fiscal year ended December 31, 1999.


                                       MEMBERS OF THE COMPENSATION COMMITTEE

                                       D. James Guzy
                                       Eugene Flath



                                       13
<PAGE>   15


                  EXECUTIVE COMPENSATION AND OTHER INFORMATION

                           SUMMARY COMPENSATION TABLE

        The following table sets forth certain information concerning
compensation of (i) each person that served as the Company's Chief Executive
Officer during the fiscal year of the Company ending December 31, 1999, (ii) the
four other most highly compensated executive officers of the Company whose
aggregate cash compensation exceeded $100,000 during the fiscal year ended
December 31, 1999, and (iii) up to two former executive officers of the Company
who would have been one of the Company's four most highly compensated officers
had such officer been serving as such as the end of the Company's fiscal year
ending December 31, 1999 (collectively, the "Named Executive Officers"):

<TABLE>
<CAPTION>
                                                                   LONG-TERM
                                       ANNUAL COMPENSATION        COMPENSATION
                                  ----------------------------    ------------
                                                                   SECURITIES
                                                                   UNDERLYING        ALL OTHER
  NAME AND PRINCIPAL POSITION     YEAR    SALARY($)   BONUS($)      OPTIONS(#)    COMPENSATION($)
  ---------------------------     ----    --------    --------     -----------    ---------------
<S>                               <C>     <C>         <C>         <C>             <C>
Michael J. Salameh,               1999    $170,000    $175,744       163,000            --
  President                       1998     144,000     101,258       150,000

Kenyon Mei, Ph.D(1),              1999     216,000      57,139            --            --
  Vice President, Engineering     1998     210,000      87,202            --

Mark R. Easley,                   1999     152,000     159,050       100,000            --
  Vice President, Marketing       1998     138,000     109,407        65,000

Michael A. Hopwood,               1999     132,000     192,600        80,000            --
  Vice President, Worldwide       1998     124,000      96,953        25,000
  Sales
Scott M. Gibson                   1999     128,000      84,046        40,000            --
  Vice President, Finance         1998     120,000      48,923        30,000

William E. Hart                   1999     116,000      75,699        40,000            --
  Vice President, Operations      1998     110,000      48,423        15,000

</TABLE>

- ---------------

(1) Mr. Mei terminated his employment with the Company on October 15, 1999.



                                       14
<PAGE>   16


                        OPTION GRANTS IN LAST FISCAL YEAR

        The following table provides certain information with respect to stock
options granted to the Named Executive Officers during the fiscal year ended
December 31, 1999. In addition, as required by the Securities and Exchange
Commission rules, the table sets forth the potential realizable value over the
term of the option (the period from the grant to the expiration date) based on
assumed rates of stock appreciation of 5% and 10%, compounded annually. These
amounts are based on certain assumed rates of appreciation and do not represent
the Company's estimate of future stock price. Actual gains, if any, on stock
option exercises will be dependent on the future performance of the Common
Stock.

<TABLE>
<CAPTION>
                                         INDIVIDUAL GRANTS
                       ------------------------------------------------------    POTENTIAL REALIZABLE
                                       PERCENT OF                                   VALUE AT ASSUMED
                                         TOTAL                                       ANNUAL RATE OF
                        NUMBER OF       OPTIONS                                       STOCK PRICE
                        SECURITIES     GRANTED TO                                     APPRECIATION
                        UNDERLYING     EMPLOYEES     EXERCISE                       FOR OPTION TERM
                          OPTIONS      IN FISCAL     PRICE PER     EXPIRATION   -----------------------
NAME                   GRANTED(#)(1)    YEAR(2)    SHARE($/SH)(3)    DATE(4)       5%           10%
                       -------------   ----------  --------------  ----------   ---------   -----------
<S>                    <C>             <C>         <C>             <C>          <C>         <C>
Michael J. Salameh        163,000        16.9%         $9.00         4/5/09     $2,389,58   $ 3,805,020

Kenyon Mei, Ph.D.              --          --             --            --            --            --

Mark R. Easley            100,000        10.4%         $9.00         4/5/09      1,466,00    52,334,368

Michael A. Hopwood         80,000         8.3%         $9.00         4/5/09      1,172,80    41,867,495

Scott M. Gibson            40,000         4.1%         $9.00         4/5/09       586,402       933,747

William E. Hart            40,000         4.1%         $9.00         4/5/09       586,402       933,747
</TABLE>

- ------------------

(1)  Each of these options are immediately exercisable and vests over four years
     at a rate of 25% per year. Each option has a ten year term from the date of
     grant.

(2)  In fiscal year 1999, the Company granted options to employees to purchase
     an aggregate of 964,000 shares.

(3)  The exercise price per share of options granted represented the fair market
     value of the underlying shares of Common Stock at the date the options were
     granted.

(4)  Options may terminate before their expiration dates if the optionees status
     as an employee or consultant is terminated or upon the optionee's death or
     disability.



                                       15
<PAGE>   17


                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

        The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers during fiscal year ending
December 31, 1999, including the aggregate value of gains on the date of
exercise. In addition, the table sets forth the number of shares covered by
stock options as of December 31, 1999, and the value of "in-the-money" stock
options, which represent the positive spread between the exercise price of a
stock option and the market price of the shares subject to such option on
December 31, 1999.

<TABLE>
<CAPTION>
                                                 NUMBER OF SECURITIES         VALUE OF UNEXERCISED
                                                UNDERLYING UNEXERCISED        IN-THE-MONEY OPTIONS
                                                      OPTIONS AT                AT DECEMBER 31,
                                                DECEMBER 31, 1999(#)(1)            1999($)(2)
                                               --------------------------  --------------------------
                       SHARES
                     ACQUIRED ON     VALUE
       NAME          EXERCISE(#)  REALIZED($)  EXERCISABLE  UNEXERCISABLE  EXERCISABLE  UNEXERCISABLE
       ----          -----------  -----------  -----------  -------------  -----------  -------------
<S>                  <C>          <C>          <C>          <C>            <C>          <C>
    MICHAEL J.           0            0         313,000           0        $3,710,594         0
    SALAMEH

    KENYON MEI,          0            0               0           0                 0         0
    PH.D

    MARK R.              0            0         165,000           0        $1,899,770         0
    EASLEY

    MICHAEL A.           0            0         105,000           0        $1,143,490         0
    HOPWOOD

    SCOTT M.             0            0          70,000           0        $  815,660         0
    GIBSON

    WILLIAM E.           0            0          55,000           0        $  606,590         0
    HART
</TABLE>

- ----------------------

(1)   The value realized upon the exercise of stock options represents the
      positive spread between the exercise price of stock options and the fair
      market of the shares subject to such options on the exercise date. Shares
      are 100% exerciseable at grant date, but vest evenly over a four-year
      period.

(2)   Calculated by determining the difference between the fair market value of
      the securities underlying the option at December 31, 1999 ($18.938 per
      share) and the exercise price of the Named Executive Officers' respective
      options.

                      CERTAIN TRANSACTIONS WITH MANAGEMENT

        The Company and Intel Corporation are related parties due to the fact
that the chairman of the Company's Board of Directors, D. James Guzy also serves
on the Board of Directors of Intel Corporation. For the years ended December 31,
1999, 1998, and 1997, net revenues, which were transacted at arm's length
prices, with Intel Corporation were approximately $896,000, $330,000 and
$765,000 respectively.

        In November 1999, the Company purchased 33,048,731 shares of preferred
stock of Sebring Systems for $1,000,000. The Company expensed approximately
$340,000 in 1999 due to Sebring Systems spending this amount on research and
development. This amount is included below income before loss from investee in
the Company's 1999 consolidated statement of operations. The Chairman of the
Company's Board of Directors, D. James Guzy, also serves on the Board of
Directors of Sebring Systems.

                             STOCK PERFORMANCE GRAPH

        Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
report and the graph shall not be deemed to be incorporated by reference into
any such filings.

        The following graph compares the percentage change in the cumulative
total stockholder return on the Company's Common Stock from April 5, 1999, the
date of the Company's initial public offering, through the end of the Company's
fiscal year ended December 31, 1999, with the percentage change in the
cumulative total return for the Philadelpha Semiconductor Index and Russell 2000
Index. The comparison assumes an investment of $100 on April 5,



                                       16
<PAGE>   18
1999 in the Company's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends, if any. The stock performance shown on the
graph below is not necessarily indicative of future price performance.

                              PLX TECHNOLOGY, INC.
                            STOCK PERFORMANCE GRAPH

<TABLE>
<CAPTION>
                                        SYMBOL          4/6/99      12/31/99
                                        ------          ------      --------
<S>                                     <C>             <C>         <C>
PLX                                      PLXT             100          210
Philadelphia Semiconductor Index         SOXX             100          171
Russell 2000 Index                       RUT              100          126
</TABLE>



                                       17
<PAGE>   19


                              STOCKHOLDER PROPOSALS

        Requirements for Stockholder Proposals to be Brought Before an Annual
Meeting. For stockholder proposals to be considered properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
therefor in writing to the Secretary of the Company. To be timely for the 2001
annual meeting of stockholders, a stockholder's notice must be delivered to or
mailed and received by the Secretary of the Company at the principal executive
offices of the Company, between January 28, 2001 and February 28, 2001. A
stockholder's notice to the Secretary must 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 Company which are beneficially owned by the stockholder, and
(iv) any material interest of the stockholder in such business.


        Requirements for Stockholder Proposals to be Considered for Inclusion in
the Company's Proxy Materials. Stockholder proposals submitted pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and intended to be presented at the Company's 2001 annual meeting of
stockholders must be received by the Company not later than December 15, 2000 in
order to be considered for inclusion in the Company's proxy materials for that
meeting.

                                  OTHER MATTERS

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file reports of ownership and
changes in ownership of the Company's Common Stock. Reporting Persons are
required by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) reports they file. Based solely on its
review of the copies of such reports received or written representations from
certain Reporting Persons, the Company believes that during the fiscal year
ended December 31, 1999, all Reporting Persons complied with all applicable
filing requirements.

OTHER MATTERS

        The Board of Directors knows of no other business which will be
presented at the Annual Meeting. If any other business is properly brought
before the Annual Meeting, it is intended that proxies in the enclosed form will
be voted in respect thereof in accordance with the judgments of the persons
voting the proxies.

        It is important that the proxies be returned promptly and that your
shares be represented. Stockholders are urged to mark, date, execute and
promptly return the accompanying proxy card in the enclosed envelope.

                                        By Order of the Board of Directors,

                                        /s/ Michael J. Salameh

                                        Michael J. Salameh
                                        President and Director

April 14, 2000
Sunnyvale, California



                                       18
<PAGE>   20

                              PLX TECHNOLOGY, INC.
                            1999 STOCK INCENTIVE PLAN
                      Amended and Restated on March 7, 2000


        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



                                       1
<PAGE>   21

for the Grantee to cure such defects in his or her service to the Company's or
such Related 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



                                       2
<PAGE>   22

Consultant, or (iii) any change 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.

               (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) "Covered Employee" means an Employee who is a "covered
employee" under Section 162(m)(3) of the Code.

               (r) "Director" means a member of the Board or the board of
directors of any Related Entity.

               (s) "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.

               (t) "Dividend Equivalent Right" means a right entitling the
Grantee to compensation measured by dividends paid with respect to Common Stock.

               (u) "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.

               (v) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.



                                       3
<PAGE>   23

               (w) "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

                      (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.

               (x) "Grantee" means an Employee, Director or Consultant who
receives an Award pursuant to an Award Agreement under the Plan.

               (y) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

               (z) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

               (aa) "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.

               (bb) "Option" means an option to purchase Shares pursuant to an
Award Agreement granted under the Plan.

               (cc) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

               (dd) "Performance - Based Compensation" means compensation
qualifying as "performance-based compensation" under Section 162(m) of the Code.

               (ee) "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.

               (ff) "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



                                       4
<PAGE>   24

settled for cash, Shares or other securities or a combination of cash, Shares or
other securities as established by the Administrator.

               (gg) "Plan" means this 1999 Stock Incentive Plan. ----

               (hh) "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 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.

               (ii) "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.

               (jj) "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.

               (kk) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor thereto.

               (ll) "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.

               (mm) "Share" means a share of the Common Stock.

               (nn) "Subsidiary" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.

               (oo) "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



                                       5
<PAGE>   25

Options) is 2,500,000 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 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 With Respect to Covered Employees.
Notwithstanding the foregoing, grants of Awards to any Covered Employee intended
to qualify as Performance-Based Compensation shall be made only by a Committee
(or subcommittee of a Committee) which is comprised solely of two or more
Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to Covered
Employees, references to the "Administrator" or to a "Committee" shall be deemed
to be references to such Committee or subcommittee.

                      (iv) 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.



                                       6
<PAGE>   26

               (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;

                      (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.



                                       7
<PAGE>   27

               (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 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



                                       8
<PAGE>   28

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.

               (h) Individual Option and SAR Limit. The maximum number of Shares
with respect to which Options and SARs may be granted to any Grantee in any
fiscal year of the Company shall be one million (1,000,000) Shares. The
foregoing limitation shall be adjusted proportionately in connection with any
change in the Company's capitalization pursuant to Section 10, below. To the
extent required by Section 162(m) of the Code or the regulations thereunder, in
applying the foregoing limitation with respect to a Grantee, if any Option or
SAR is canceled, the canceled Option or SAR shall continue to count against the
maximum number of Shares with respect to which Options and SARs may be granted
to the Grantee. For this purpose, the repricing of an Option (or in the case of
a SAR, the base amount on which the stock appreciation is calculated is reduced
to reflect a reduction in the Fair Market Value of the Common Stock) shall be
treated as the cancellation of the existing Option or SAR and the grant of a new
Option or SAR.

               (i) 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.

               (j) 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.

               (k) 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,



                                       9
<PAGE>   29

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.

               (l) 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.

                      (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 Awards intended to qualify as
Performance-Based Compensation, the exercise or purchase price, if any, shall be
not less than one hundred percent (100%) 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.

                      (v) 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



                                       10
<PAGE>   30

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 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.



                                       11
<PAGE>   31

        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 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



                                       12
<PAGE>   32

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.

               (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



                                       13
<PAGE>   33

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.

        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 Plan became effective when adopted by the
Board in January 1999. On March 7, 2000, the Board adopted and approved an
amendment and restatement of the Plan (a) to increase the number of Shares
available for issuance under the Plan and (b) to adopt a limit on the maximum
number of Shares with respect to which Options may be



                                       14
<PAGE>   34

granted to any Grantee in any fiscal year of the Company and certain other
administrative provisions to comply with the performance-based compensation
exception to the deduction limit of Section 162(m) of the Code, which amendments
are subject to approval by the stockholders of the Company.




                                       15
<PAGE>   35


                          [FORM OF FRONT OF PROXY CARD]

                                                                           PROXY

                              PLX TECHNOLOGY, INC.
                               390 Potrero Avenue
                               Sunnyvale, CA 94086

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
                     FOR THE ANNUAL MEETING ON MAY 24, 2000

        Michael J. Salameh and Scott M. Gibson, or either of them, each with the
power of substitution, are hereby authorized to represent and vote the shares of
the undersigned, with all the powers which the undersigned would possess if
personally present, at the Annual Meeting of Stockholders of PLX Technology,
Inc. (the "Company"), to be held on Wednesday, May 24, 2000 at the Company's
headquarters, 390 Potrero Avenue, Sunnyvale, California, and any adjournment or
postponement thereof.

        Election of six directors (or if any nominee is not available for
election, such substitute as the Board of Directors or the proxy holders may
designate). Nominees: MICHAEL J. SALAMEH, D. JAMES GUZY, EUGENE FLATH, TIMOTHY
DRAPER, YOUNG K. SOHN, AND JOHN H. HART.


<PAGE>   36


                          [FORM OF BACK OF PROXY CARD]

           Please mark your choice like this [X] in blue or black ink.

        Shares represented by this proxy will be voted as directed by the
stockholder. If no such directions are indicated, the Proxies will have
authority to vote FOR the election of all directors, and FOR proposals 2 and 3.

- --------------------------------------------------------------------------------

                The Board of Directors recommends a vote FOR the
                Election of Directors and FOR proposals 2 and 3.

- --------------------------------------------------------------------------------
1.  Election of Directors (see reverse):

        [ ] FOR          [ ] WITHHELD

        FOR, except vote withheld from the following nominee(s):

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
2.  To approve amendments to the PLX Technology, Inc. 1999 Stock Incentive Plan
    to (i) increase to the number of shares reserved for issuance thereunder
    from 1,000,000 shares to 2,500,000 shares, and (ii) to comply with Section
    162(m) of the Internal Revenue Code of 1986, as amended

        [ ] FOR          [ ] AGAINST         [ ] ABSTAIN

3.  To ratify and approve the appointment of Ernst & Young LLP as the Company's
    independent auditors for the fiscal year ending December 31, 2000:

        [ ] FOR          [ ] AGAINST         [ ] ABSTAIN

4.  In their discretion, the Proxies are authorized to vote upon such other
    business as may properly come before the Annual Meeting.


MARK HERE FOR         [ ]
ADDRESS CHANGE
AND NOTE AT RIGHT

Please sign exactly as your name appears herein. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.

Signature ______________________________          Date ______________________

Signature ______________________________          Date ______________________


PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
REPLY ENVELOPE.




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