10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2003.
	or
[   ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from      to
	Commission File Number 0-25699

P L X   T E C H N O L O G Y,   I N C.

(Exact name of Registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization) 94-3008334
(I.R.S. Employer Identification No.)

870 Maude Avenue, Sunnyvale, CA 94085
(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (408) 774-9060

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes [X]   No [  ]

As of May 1, 2003, there were 20,822,586 shares of common stock, par value $0.001 per share, outstanding.

This Report on Form 10-Q includes 46 pages with the Index to Exhibits located on page 25

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	ITEM I. FINANCIAL STATEMENTS
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE
EXHIBIT INDEX
EXHIBIT 11.1
EXHIBIT 99.1
EXHIBIT 99.2

PLX TECHNOLOGY, INC.
INDEX TO
REPORT ON FORM 10-Q
FOR QUARTER ENDED MARCH 31, 2003

			Page
	PART I.  FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
		Condensed Consolidated Balance Sheets at March 31, 2003 and December 31, 2002		3
		Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002		4
		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002		5
		Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			9
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			21
Item 4.	Controls and Procedures			21
		PART II. OTHER INFORMATION
Item 6.	Exhibits and Reports on Form 8-K			21

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PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

PLX TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

		March 31,			December 31,
		2003			2002 (1)
		(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents	$	4,166		$	5,482
	Short-term investments		16,142			13,131
	Accounts receivable, net		3,320			2,568
	Inventories		847			1,003
	Income tax receivable		3,635			3,635
	Other current assets		2,197			1,793
Total current assets			30,307			27,612
	Property and equipment, net		31,749			31,962
	Long-term investments		1,002			3,067
	Goodwill		8,054			8,054
	Other intangible assets		837			970
	Other assets		277			310
Total assets		$	72,226		$	71,975
LIABILITIES
Current liabilities:
	Accounts payable	$	1,949		$	1,582
	Accrued compensation and benefits		1,075			932
	Deferred revenues		689			613
	Accrued commissions		208			201
	Other accrued expenses		689			683
Total current liabilities			4,610			4,011
STOCKHOLDERS’ EQUITY
	Common stock, par value		21			21
	Additional paid-in capital		74,977			74,953
	Deferred compensation		(443	)		(900	)
	Notes receivable for employee stock purchases		(67	)		(67	)
	Accumulated other comprehensive income		33			46
	Accumulated deficit		(6,905	)		(6,089	)
Total stockholders’ equity			67,616			67,964
Total liabilities and stockholders’ equity		$	72,226		$	71,975

(1)  The balance sheet at December 31, 2002 has been derived from the audited financial statements as of that date.

See accompanying notes to condensed consolidated financial statements.

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PLX TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)

		Three Months Ended
		March 31,
		2003			2002
Net revenues		$	8,503		$	10,118
Cost of revenues			2,515			3,361
Gross margin			5,988			6,757
Operating expenses:
	Research and development		3,713			3,659
	Selling, general and administrative		3,058			3,338
	Amortization of purchased intangible assets		133			133
Total operating expenses			6,904			7,130
Loss from operations			(916	)		(373	)
Interest income and other, net			108			231
Loss before provision for income taxes			(808	)		(142	)
Provision for income taxes			8			129
Net loss		$	(816	)	$	(271	)
Basic and diluted net loss per share		$	(0.04	)	$	(0.01	)
Shares used to compute basic and diluted per share amounts			21,135			23,432

See accompanying notes to condensed consolidated financial statements.

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PLX TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

			Three Months Ended
			March 31,
			2003			2002
Cash flows from operating activities
Net loss			$	(816	)	$	(271	)
Adjustments to reconcile net loss to net cash provided by operating activities:
	Depreciation			564			639
	Amortization of deferred compensation			457			652
	Amortization of other purchased intangible assets			133			133
	Other non-cash items			36			23
	Changes in operating assets and liabilities:
		Accounts receivable		(751	)		(503	)
		Inventories		156			1,287
		Income tax receivable		—			195
		Other current assets		(404	)		(767	)
		Other assets		32			143
		Accounts payable		366			(197	)
		Accrued compensation and benefits		143			76
		Accrued commissions		7			(29	)
		Deferred tax liability		—			577
		Deferred revenues		76			493
		Other accrued expenses		15			41
Net cash provided by operating activities				14			2,492
Investing Activities
Purchases of investments				(2,000	)		(6,125	)
Sales and maturities of investments				1,000			1,000
Purchases of property and equipment				(349	)		(358	)
Net cash used in investing activities				(1,349	)		(5,483	)
Financing Activities
Proceeds from sales of common stock				24			1,162
Net cash provided by financing activities				24			1,162
Effect of exchange rate fluctuations on cash and cash equivalents				(5	)		(1	)
Decrease in cash and cash equivalents				(1,316	)		(1,830	)
Cash and cash equivalents at beginning of year				5,482			9,631
Cash and cash equivalents at end of period			$	4,166		$	7,801

See accompanying notes to condensed consolidated financial statements.

5

PLX TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.	Basis of Presentation
	The accompanying unaudited condensed consolidated financial statements of PLX Technology, Inc. and its wholly-owned subsidiary (collectively, “PLX” or the “Company”) as of March 31, 2003 and for the three-month periods ended March 31, 2003 and 2002 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the condensed consolidated financial statements include all adjustments (consisting only of normal recurring accruals) that management considers necessary for a fair presentation of our financial position, operating results and cash flows for the interim periods presented. Operating results and cash flows for interim periods are not necessarily indicative of results for the entire year.
	This financial data should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
	Use of Estimates
	The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and such differences may be material to the financial statements.
	Comprehensive Loss
	The Company has adopted Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income.” The Company’s comprehensive net loss for the three months ended March 31, 2003 and March 31, 2002 was as follows (in thousands):

	Three Months Ended
	March 31,
	2003			2002
	(unaudited)
Net loss	$	(816	)	$	(271	)
Unrealized losses on investments, net		(17	)		(50	)
Cumulative translation adjustments		4			(2	)
Accumulated other comprehensive loss	$	(829	)	$	(323	)

Recent Accounting Pronouncements

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” It requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Statement 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Adoption of this statement did not have a material impact on the Company’s financial position, results of operations or cash flows.

6

	In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (FIN 45). FIN 45 requires that upon issuance of a guarantee, a guarantor must recognize a liability for the fair value of an obligation assumed under a guarantee. The recognition provisions of FIN 45 were effective for any guarantees issued or modified after December 31, 2002. Adoption of FIN 45 did not have a material impact on the Company’s financial position, results of operations or cash flows. FIN 45 also requires additional disclosures by a guarantor in its interim and annual financial statements about the obligations associated with guarantees issued. As disclosed in the Company’s Form 10-K for the year ended December 31, 2002, the Company’s products are warranted to be free from defect for a period of one year, however, to date, the Company has experienced an immaterial amount of defective product returns. In addition, the Company generally indemnifies, under predetermined conditions, its customers for infringement of third party intellectual property rights by its products or services.
	In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” SFAS 148 amends SFAS 123 “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition guidance and annual disclosure requirements are effective for fiscal years ending after December 15, 2002. The Company has adopted the disclosure provisions for this Form 10-Q (see Note 3 of the Condensed Consolidated Financial Statements). The Company has continued to account for stock-based compensation under the provisions of Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” using the “intrinsic value” method. Accordingly, the adoption of SFAS 148 did not have a material effect on our financial position, results of operations, or cash flows.
	Reclassifications
	Certain previously reported amounts have been reclassified to conform to the current year presentation format with no impact on net income. All financial information has been restated to conform to this presentation.
2.	Inventories
	Inventories are valued at the lower of cost (first-in, first-out method) or market (net realizable value). Inventories were as follows (in thousands):

	March 31,		December 31,
	2003		2002
	(unaudited)
Work in process	$	235	$	338
Finished goods		612		665
Total	$	847	$	1,003

3.

Stock Based Compensation

The Company has elected to follow APB Opinion No. 25 and related interpretations in accounting for its stock options and grants since the alternative fair market value accounting provided for under Statement of Financial Accounting Standards (SFAS) No. 123 requires use of grant valuation models that were not developed for use in valuing employee stock options and grants. Under APB Opinion No. 25, if the exercise price of the Company’s stock grants and options equals the fair value of the underlying stock on the date of grant, no compensation expenses are recognized.

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If compensation cost for the Company’s stock-based compensation plans had been determined based on the fair value at the grant dates for awards under those plans consistent with the method of SFAS No. 123, then the Company’s net loss per share would have been adjusted to the pro forma amounts indicated below:

	Three Months Ended			Three Months Ended
	March 31, 2003			March 31, 2002
	(unaudited)
Net loss as reported	$	(816	)	$	(271	)
Add: Stock-based compensation included in reported net loss		457			652
Deduct: Stock-based compensation cost under SFAS 123		(1,846	)		(2,834	)
Pro forma net loss	$	(2,205	)	$	(2,453	)
Pro forma basic and diluted net loss per common share:
Pro forma shares used in the calculation of pro forma net loss per common share – basic and diluted		21,135			23,432
Reported net loss per common share – basic and diluted	$	(0.04	)	$	(0.01	)
Pro forma net loss per common share – basic and diluted	$	(0.10	)	$	(0.10	)

Pro forma information regarding net loss is required by SFAS 123, which also requires that the information be determined as if the Company had accounted for grants subsequent to December 31, 1994 under a method specified by SFAS 123. Options granted were estimated using the Black-Scholes valuation model. The following weighted average assumptions were used:

	Three Months Ended			Three Months Ended
	March 31, 2003			March 31, 2002
Volatility		1.00			1.00
Expected life of options (in years)		4.05			4.05
Dividend yield		0.00	%		0.00	%
Risk-free interest rate		2.43	%		4.69	%

4.	Net Loss Per Share
	The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share data):

	Three Months Ended
	March 31,
	2003			2002
	(unaudited)
Net loss		(816	)	$	(271	)
Shares used in computing basic and diluted net loss per share		21,135			23,432
Net loss per share – basic and diluted	$	(0.04	)	$	(0.01	)

	As the Company incurred a loss for the three-month periods ended March 31, 2003 and 2002, the effect of dilutive securities, totaling 4.0 million and 3.7 million equivalent shares, respectively, have been excluded from the computation of diluted loss per share, as their impact would be anti-dilutive.
5.	Segments of an Enterprise and Related Information
	The Company has one operating segment, the sale of semiconductor devices. The President has been identified as the Chief Operating Decision Maker (CODM) because he has final authority over resource allocation decisions and performance assessment. The CODM does not receive discrete financial information about individual components of the Company’s business.

8

Revenues by geographic region based on customer location were as follows (in thousands):

		Three Months Ended
		March 31,
		2003		2002
		(unaudited)
Revenues:
	North America	$	3,607	$	4,421
	France		930		1,391
	Europe – excluding France		1,147		1,491
	Asia – excluding Taiwan		2,096		1,892
	Taiwan		723		923
Total		$	8,503	$	10,118

	For the three months ended March 31, 2003 and 2002, approximately 11% and 14% respectively, of net revenue was derived from sales to one distributor. No other individual direct customer or distributor represented greater than 10% of net revenues. Two end customers have historically and continue to be significant customers each accounting for over 10% of net revenues. The majority of our sales to these two end customers are sold through both distributors and contract manufacturers
6.	Income Taxes
	There was an $8,000 income tax expense for the three months ended March 31, 2003 on a pretax loss of $0.8 million, compared to a $0.1 million tax expense on a pretax loss of $0.1 million for the three months ended March 31, 2002. Income tax expense for the three months ended March 31, 2003 relates to miscellaneous state and foreign income taxes currently payable and also differs from the expected benefit derived by applying the applicable U.S. federal statutory rate to the loss from operations primarily due to nondeductible acquisition-related items and an increase in the valuation allowance for deferred tax assets. The three months ended March 31, 2002 differs from the expected benefit derived by applying the applicable U.S. federal statutory rate to the loss from operations primarily due to nondeductible acquisition-related items.
7.	Subsequent Event
	Under the Company’s stock repurchase program approved by the Board of Directors of the Company on September 30, 2002, approximately 318,000 shares of the Company’s common stock has been repurchased at a cost of approximately $0.9 million since March 31, 2003.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Report on Form 10-Q contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our expectations, hopes, intentions, beliefs or strategies regarding the future. Such forward-looking statements include, but are not limited to, (i) fluctuation of our gross margins under the sub-heading “Overview,” which is subject to the risk, among other risks, that there are changes in product and customer mix, the position of our products in their respective life cycles, and specific product manufacturing costs; (ii) the length of our sales cycle, under the sub-heading “Overview,” which is subject to the risk, among other risks, that anticipated sales and shipments in any quarter do not occur when expected; (iii) our anticipated expense levels for amortization of goodwill and purchased intangible assets and deferred compensation, under the sub-heading “Results of Operations,” which is subject to various uncertainties, among them the impact of statements of financial accounting standards that we may be required to adopt in the future; and (iv) the sufficiency of our existing resources and cash generated from operations to meet our capital requirements under the sub-heading “Results of Operations,” which is subject to the risk, among other risks, that a decrease in our inventory levels, an increase in our level of investment in new technologies or an increase in the levels of monthly expenses required to launch new products may require that we raise additional funds. Actual results could differ materially from those projected in any forward-looking statements for the reasons detailed above, as well as the reasons noted under the sub-heading “Factors That May Affect Future Operating Results” and in other sections of this Report on Form 10-Q. All forward-looking statements included in this Form 10-Q are based on information available to us on the date of this Report on Form 10-Q, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. See “Factors That May Affect Future Operating

9

Results” below, as well as such other risks and uncertainties as are detailed in our Securities and Exchange Commission reports and filings for a discussion of the factors that could cause actual results to differ materially from the forward-looking statements.

The following discussion should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

OVERVIEW

PLX was founded in 1986, and since 1994 we have focused on development of I/O interface semiconductors and related software and development tools that are used in systems incorporating the PCI standard. In 1994 and 1995, a significant portion of our revenues were derived from the sale of semiconductor devices that perform similar functions as our current products, except they were based on a variety of industry standards. Our revenues since 1996 have been derived predominantly from the sale of semiconductor devices based on the PCI standard to a large number of customers in a variety of applications including networking and telecommunications, enterprise storage, imaging, industrial and other embedded applications as well as in related adapter cards. We generate less than 1% of our revenues from sales of our software and development tools.

We utilize a “fabless” semiconductor business model whereby we purchase packaged and tested semiconductor devices from independent manufacturing foundries. This approach allows us to focus on defining, developing, and marketing our products and eliminates the need for us to invest large amounts of capital in manufacturing facilities and work-in-process inventory.

We rely on a combination of direct sales personnel and distributors and manufacturers’ representatives throughout the world to sell a significant portion of our products. We pay manufacturers’ representatives a commission on sales while we sell products to distributors at a discount from the selling price. We generally recognize revenue at the time of title passage. Recognition of sales to distributors, including international distributors, is deferred until the product is resold by the distributors to end users. See “Certain Factors That May Affect Future Operating Results — A Large Portion of Our Revenues Is Derived From Sales to Third-Party Distributors Who May Terminate Their Relationships with Us at Any Time.”

Our gross margins have fluctuated in the past and are expected to fluctuate in the future due to changes in product and customer mix, write-downs and recoveries of excess or obsolete inventory, the position of our products in their respective life cycles, and specific product manufacturing costs.

The time period between initial customer evaluation and design completion can range from six to twelve months or more. Furthermore, there is typically an additional six to twelve month or greater period after design completion before a customer commences volume production of equipment incorporating our products. Due to these lengthy sales cycles, we may experience significant fluctuations in new orders from month to month. In addition, we typically make inventory purchases prior to receiving customer orders. Consequently, if anticipated sales and shipments in any quarter do not occur when expected, expenses and inventory levels could be disproportionately high, and our results for that quarter and potentially future quarters would be materially and adversely affected.

The supply of semiconductors can quickly and unexpectedly match or exceed demand because customer end demand can change very quickly and semiconductor suppliers can rapidly increase production output. This can lead to a sudden oversupply situation and a subsequent reduction in order rates and revenues as customers adjust their inventories to true demand rates. Customers continuously adjust their inventories resulting in frequent changes in demand for our products.

10

The semiconductor industry experienced such a change in the supply and demand situation over the past three years. During this period, customers in the high-speed communications end market, and the contract manufacturing firms that serve this market, adjusted their demand on component suppliers as they coped with high levels of inventory and sharply reduced demand for their end products. In addition, the slowing of global economic growth during 2001 and 2002 led to lower order rates from customers serving the telecommunications, industrial and computer end markets as they adjusted to lower demand for their products. The decline in order rates resulted in a sequential decline in our revenues for the three months ended March 31, 2002 and 2003. The rapid build-up of semiconductor inventories in global sales channels resulted in reduced lead times for components during this same period relative to previous years. The perceived overabundance of semiconductors combined with uncertain demand for their end products led our customers to move to a just-in-time order pattern as they worked to reduce inventories. Due to the combination of excess supply, reduced demand and lower lead times, orders rates declined during for the three months ended March 31, 2002 and 2003. Customers appear to be placing orders on an “as needed” basis due to short supplier lead times combined with the uncertain macroeconomic outlook. The low backlog and uncertainty of customer demand significantly limits our ability to predict future levels of sales and profitability.

Our long-term success will depend on our ability to introduce new products. While new products typically generate little or no revenues during the first twelve months following their introduction, our revenues in subsequent periods depend upon these new products. Due to the lengthy sales cycle and additional time for customers to commence volume production, significant revenues from our new products typically occur twelve to twenty-four months after product introduction. As a result, revenues from newly introduced products have, in the past, produced a small percentage of our total revenues in the year the product was introduced. See “Certain Factors That May Affect Future Operating Results — Our Lengthy Sales Cycle Can Result in Uncertainty and Delays with Regard to Our Expected Revenues.”

RESULTS OF OPERATIONS

The following table summarizes historical results of operations as a percentage of net revenues for the periods shown.

			Three Months Ended
			March 31,
			2003			2002
Net revenues				100.0	%		100.0	%
Cost of revenues				29.6			33.2
Gross margin				70.4			66.8
Operating expenses:
	Research and development			43.7			36.2
	Selling, general and administrative			36.0			33.0
	Amortization of purchased intangible assets			1.6			1.3
		Total operating expenses		81.3			70.5
Operating loss				(10.9	)		(3.7	)
Interest income and other, net				1.3			2.3
Loss before income taxes				(9.6	)		(1.4	)
Provision for income taxes				0.1			1.3
Net loss				(9.7	)%		(2.7	)%

Net Revenues

Net revenues consist of product revenues generated principally by sales of our semiconductor devices. Net revenues for the three months ended March 31, 2003 were $8.5 million, a decrease of 16.0% from $10.1 million for the three months ended March 31, 2002. The decrease was primarily due to reduced demand from a significant customer, Prediwave, as well as lower overall unit shipments during the three months ended March 31, 2003. Prediwave used our product in their set top boxes targeted for sale in China. We completed our last shipment to Prediwave in the first quarter of 2002. In the first quarter of 2002, Prediwave accounted for approximately $1 million of our net revenues. Excluding sales to Prediwave in the first quarter of 2002, revenues decreased to $8.5 million for the three months ended March 31, 2003 from $9.1 million for the three months ended March 31, 2002. For the three months ended March 31, 2003 and 2002, 11% and 14%, respectively, of net revenues was derived from sales to one significant distributor. No other individual direct customer or distributor represented greater than 10% of net revenues.

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Gross Margin

Gross margin represents net revenues less the cost of revenues. Cost of revenues includes the cost of purchasing packaged semiconductor devices from our independent foundries and our operating costs associated with the procurement, storage, and shipment of products.

The increase in gross margin to 70.4% for the three months ended March 31, 2003 from 66.8% for the same period in 2002 was primarily related to a benefit of approximately $0.2 million from selling previously written-down inventory. Excluding this benefit, gross margin was 68.0% for the three months ended March 31, 2003, compared with 66.8% for the same period in 2002. The increase in gross margin was due to shifts in our product and customer mix.

Research and Development Expenses

Research and development (R&D) expenses consist primarily of salaries and related costs of employees engaged in research, design, and development activities. In addition, expenses for outside engineering consultants and non-recurring engineering at our independent foundries and deferred compensation are included in research and development expenses.

The increase in R&D as a percent of net revenues to 43.7% for the three months ended March 31, 2003, as compared to 36.2% for the same period in 2002 was due primarily to a decline in revenues. In absolute dollars, R&D expenses remained approximately the same at $3.7 million for the three months ended March 31, 2003 and 2002. Excluding deferred compensation of $0.5 million and $0.7 million for the three months ended March 31, 2003 and 2002, R&D increased by $0.3 million to $3.3 million for the three months ended March 31, 2003 from $3.0 million for the same period in 2002. The increase in R&D was due to the development of new products and the enhancement of existing products.

Selling, General and Administrative Expenses

Selling, general and administrative (SG&A) expenses consist primarily of employee-related expenses, professional fees, trade show and other promotional expenses, and sales commissions to manufacturers’ representatives.

The increase in SG&A as a percent of net revenues to 36.0% for the three months ended March 31, 2003, as compared to 33.0% for the same period in 2002 was due primarily to a decline in revenues. In absolute dollars, SG&A expenses decreased by $0.3 million or 8.4% to $3.1 million for the three months ended March 31, 2003 from $3.3 million for the same period in 2002. The decrease was primarily due to decreases in sales commissions to manufacturers’ representatives as a result of lower revenues, decreases in discretionary spending and lower headcount.

Amortization of Purchased Intangible Assets

Amortization of purchased intangible assets remained approximately the same at $0.1 million for the three months ended March 31, 2003 and 2002. We will continue to amortize these intangibles through May 2004.

Deferred Compensation

We recorded deferred compensation of $12.3 million related to stock options granted below fair market value to employees in relation to the acquisition of Sebring Systems in May 2000. Additionally, we recorded deferred compensation of $3.5 million in connection with the grant of stock options below fair market value to our employees in September 2000. The amount of deferred compensation is presented as a reduction of stockholders’ equity and amortized ratably over the vesting period of the applicable stock grants. Amortization of deferred compensation recorded for the three months ended March 31, 2003 and 2002, was $0.5 million and $0.7 million, respectively. The $0.2 million decrease in deferred compensation is due to the termination of employment of employees who had received the underlying stock options. Substantially all of these amounts are included in research and development expenses. We expect to record compensation expenses related to deferred compensation of approximately $0.5 million through September 30, 2003.

Interest Income and Other, Net

Interest income reflects interest earned on average cash, cash equivalents and short-term and long-term investment balances. In absolute dollars, interest income and other decreased by $0.1 million or 53.2% to $0.1 million for the three months ended March 31, 2003 from $0.2 million for the same period in 2002. The decrease for the three months ended March 31, 2003 compared to March 31, 2002 was due primarily to lower rental income as a result of the loss of a subtenant from our office facilities and lower interest earned on the decrease in interest rates.

Provision for Income Taxes

There was an $8,000 income tax expense for the three months ended March 31, 2003 on a pretax loss of $0.8 million, compared to a $0.1 million tax expense on a pretax loss of $0.1 million for the three months ended March 31, 2002. Income tax expense for the three months ended March 31, 2003 relates to miscellaneous state and foreign income taxes currently payable and also differs

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from the expected benefit derived by applying the applicable U.S. federal statutory rate to the loss from operations primarily due to nondeductible acquisition-related items and an increase in the valuation allowance for deferred tax assets. . The three months ended March 31, 2002 differs from the expected benefit derived by applying the applicable U.S. federal statutory rate to the loss from operations primarily due to nondeductible acquisition-related items.

Liquidity and Capital Resources

Cash and cash equivalents and short and long-term investments were $21.3 million at March 31, 2003, a decrease of $0.4 million from $21.7 million at December 31, 2002. The decrease was primarily due to the following: (1) a net loss of $0.8 million adjusted for non-cash expenses of $1.2 million, (2) an increase in accounts receivable and other current assets of $0.8 million and $0.4 million, respectively, and (3) capital expenditures totaling $0.3 million. Such decreases were partially offset by decreases in inventories of $0.2 million and increases in accounts payable and accrued compensation of $0.4 million and $0.1 million, respectively.

We believe that our existing resources, together with cash generated from our operations will be sufficient to meet our capital requirements for at least the next twelve months. Our future capital requirements will depend on many factors, including the inventory levels we maintain, the level of investment we make in new technologies and improvements to existing technologies and the levels of monthly expenses required to launch new products. From time to time, we may also evaluate potential acquisitions and equity investments complementary to our technologies and market strategies. To the extent that existing resources and future earnings are insufficient to fund our future activities, we may need to raise additional funds through public or private financings. Additional funds may not be available or, if available, we may not be able to obtain them on terms favorable to us and our stockholders.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies which involve the use of estimates, judgments and assumptions that are significant to understanding our results. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

Inventory Write-downs. We evaluate the write-downs for inventory based on a combination of factors. Based on the life of the product, sales history, obsolescence, and sales forecast, we record write-downs ranging from 0% to 100%. Any adverse changes to our future product demand may result in increased write-downs, resulting in decreased gross margin. In addition, future sales on any of our previously written down inventory may result in increased gross margin.

Allowance for Doubtful Accounts. We evaluate the collectibility of our accounts receivable based on length of time the receivables are past due. We record reserves for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. We have certain customers with individually large amounts due at any given balance sheet date. Any unanticipated change in one of those customer’s credit worthiness or other matters affecting the collectibility of amounts due from such customers could have a material affect on our results of operations in the period in which such changes or events occur.

Goodwill. We adopted Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002. This standard requires that goodwill and intangible assets deemed to have indefinite lives are no longer amortized, but rather are reviewed for impairment annually, or more frequently if certain indicators arise. Although at March 31, 2003, no impairment of goodwill has been recognized, it is reasonably possible that assumptions upon which the recoverability of goodwill were based could differ in the future. In that event, impairment charges could be required.

Taxes. We account for income taxes using the liability method. Deferred taxes are determined based on the differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. As of March 31, 2003, we carried a valuation allowance for the entire deferred tax asset as a

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result of uncertainties regarding the realization of the asset balance. Future taxable income and/or tax planning strategies may eliminate all or a portion of the need for the valuation allowance. In the event we determine we are able to realize our deferred tax asset, an adjustment to the valuation allowance may increase income in the period such determination is made.

CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

This quarterly report on Form 10-Q contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking statements as a result of certain factors, including those set forth below.

Our Operating Results May Fluctuate Significantly Due To Factors Which Are Not Within Our Control

Our quarterly operating results have fluctuated significantly in the past and are expected to fluctuate significantly in the future based on a number of factors, many of which are not under our control. Our operating expenses, which include product development costs and selling, general and administrative expenses, are relatively fixed in the short-term. If our revenues are lower than we expect because we sell fewer semiconductor devices, delay the release of new products or the announcement of new features, or for other reasons, we may not be able to quickly reduce our spending in response.

Other circumstances that can affect our operating results include:

• the timing of significant orders, order cancellations and reschedulings,

• the loss of a significant customer(s),

• our significant customers could lose market share that may affect our business,

• general economic conditions,

• our ability to develop, introduce and market new products and technologies on a timely basis,

• changes in our pricing policies or those of our competitors or suppliers, including decreases in unit average selling prices of our products,

• introduction of products and technologies by our competitors,

• shifts in our product mix toward lower margin products,

• the availability of production capacity at the fabrication facilities that manufacture our products,

• the availability and cost of materials to our suppliers, and

• political climate.

These factors are difficult to forecast, and these or other factors could adversely affect our business. Any shortfall in our revenues would have a direct impact on our business. In addition, fluctuations in our quarterly results could adversely affect the market price of our common stock in a manner unrelated to our long-term operating performance.

Our Results Of Operations Have Been Adversely Affected By The Ongoing Slowdown In The Global Economy

Over the past year, the global economy has been experiencing a slowdown due to many factors, including decreased consumer confidence, unemployment, the ongoing threat and cost of terrorism and reduced corporate profits and capital spending. As a result of these unfavorable economic conditions, we continue to experience reduced customer order rates. If these economic conditions in the United States continue or worsen or if a wider or global economic slowdown occurs, our business, financial condition and results of operations may be materially and adversely affected.

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Because A Substantial Portion Of Our Net Sales Is Generated By A Small Number Of Large Customers, If Any Of These Customers Delays Or Reduces Its Orders, Our Net Revenues And Earnings Will Be Harmed

Historically, a relatively small number of customers have accounted for a significant portion of our net sales in any particular period. We have no long-term volume purchase commitments from any of our significant customers. We cannot be certain that our current customers will continue to place orders with us, that orders by existing customers will continue at the levels of previous periods or that we will be able to obtain orders from new customers. In addition, some of our customers supply products to end-market purchasers and any of these end-market purchasers could choose to reduce or eliminate orders for our customers’ products. This would in turn lower our customers’ orders for our products.

We anticipate that sales of our products to a relatively small number of customers will continue to account for a significant portion of our net sales. Due to these factors, the following have in the past and may in the future reduce our net sales or earnings:

•     the reduction, delay or cancellation of orders from one or more of our significant customers;

•     the selection of competing products or in-house design by one or more of our current customers;

•     the loss of one or more of our current customers; or

•     a failure of one or more of our current customers to pay our invoices.

Our Lengthy Sales Cycle Can Result In Uncertainty And Delays With Regard To Our Expected Revenues

Our customers typically perform numerous tests and extensively evaluate our products before incorporating them into their systems. The time required for test, evaluation and design of our products into a customer’s equipment can range from six to twelve months or more. It can take an additional six to twelve months or more before a customer commences volume shipments of equipment that incorporates our products. Because of this lengthy sales cycle, we may experience a delay between the time when we increase expenses for research and development and sales and marketing efforts and the time when we generate higher revenues, if any, from these expenditures.

In addition, the delays inherent in our lengthy sales cycle raise additional risks of customer decisions to cancel or change product plans. When we achieve a design win, there can be no assurance that the customer will ultimately ship products incorporating our products. Our business could be materially adversely affected if a significant customer curtails, reduces or delays orders during our sales cycle or chooses not to release products incorporating our products.

Rapid Technological Change Could Make Our Products Obsolete

We operate in an industry that is subject to evolving industry standards, rapid technological changes, rapid changes in customer demands and the rapid introduction of new, higher performance products with shorter product life cycles. As a result, we expect to continue to make significant investments in research and development. However, we may not have adequate funds from operations or otherwise to devote to research and development, forcing us to reduce our research and development efforts. Also, we must manage product transitions successfully, since announcements or introductions of new products by us or our competitors could adversely affect sales of our existing products because these existing products can become obsolete or unmarketable for specific purposes. There can be no assurance that we will be able to develop and introduce new products or enhancements to our existing products on a timely basis or in a manner which satisfies customer needs or achieves widespread market acceptance. Any significant delay in releasing new products could adversely affect our reputation, give a competitor a first-to-market advantage or allow a competitor to achieve greater market share. The failure to adjust to rapid technological change could harm our business, financial condition, results of operations and cash flows.

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Failure Of Our Products To Gain Market Acceptance Would Adversely Affect Our Financial Condition

We believe that our growth prospects depend upon our ability to gain customer acceptance of our products and technology. Market acceptance of products depends upon numerous factors, including compatibility with existing manufacturing processes and products, perceived advantages over competing products and the level of customer service available to support such products. Moreover, manufacturers often rely on a limited number of equipment vendors to meet their manufacturing equipment needs. As a result, market acceptance of our products may be adversely affected to the extent potential customers utilize a competitor’s manufacturing equipment. There can be no assurance that growth in sales of new products will continue or that we will be successful in obtaining broad market acceptance of our products and technology.

We expect to spend a significant amount of time and resources to develop new products and refine existing products. In light of the long product development cycles inherent in our industry, these expenditures will be made well in advance of the prospect of deriving revenues from the sale of any new products. Our ability to commercially introduce and successfully market any new products is subject to a wide variety of challenges during this development cycle, including start-up bugs, design defects and other matters that could delay introduction of these products to the marketplace. In addition, since our customers are not obligated by long-term contracts to purchase our products, our anticipated product orders may not materialize, or orders that do materialize may be cancelled. As a result, if we do not achieve market acceptance of new products, we may not be able to realize sufficient sales of our products in order to recoup research and development expenditures. The failure of any of our new products to achieve market acceptance would harm our business, financial condition, results of operation and cash flows.

We Must Make Significant Research And Development Expenditures Prior To Generating Revenues From Products

To establish market acceptance of a new semiconductor device, we must dedicate significant resources to research and development, production and sales and marketing. We incur substantial costs in developing, manufacturing and selling a new product, which often significantly precede meaningful revenues from the sale of this product. Consequently, new products can require significant time and investment to achieve profitability. Investors should note that our efforts to introduce new semiconductor devices or other products or services may not be successful or profitable. In addition, products or technologies developed by others may render our products or technologies obsolete or noncompetitive.

We record as expenses the costs related to the development of new semiconductor devices and other products as these expenses are incurred. As a result, our profitability from quarter to quarter and from year to year may be adversely affected by the number and timing of our new product launches in any period and the level of acceptance gained by these products.

Our Independent Manufacturers May Not Be Able To Meet Our Manufacturing Requirements

We do not manufacture any of our semiconductor devices. Therefore, we are referred to in the semiconductor industry as a “fabless” producer of semiconductors. Consequently, we depend upon third party manufacturers to produce semiconductors that meet our specifications. We currently have third party manufacturers that can produce semiconductors which meet our needs. However, as the semiconductor industry continues to progress towards smaller manufacturing and design geometries, the complexities of producing semiconductors will increase. Decreasing geometries may introduce new problems and delays that may affect product development and deliveries. Due to the nature of the semiconductor industry and our status as a “fabless” semiconductor company, we could encounter fabrication-related problems that may affect the availability of our semiconductor devices, delay our shipments or may increase our costs.

None of our semiconductor devices are currently manufactured by more than one supplier. We place our orders on a purchase order basis and do not have a long term purchase agreement with any of our existing suppliers. In the event that the supplier of a semiconductor device was unable or unwilling to continue to manufacture this product in the required volume, we would have to identify and qualify a substitute supplier. Introducing new products or transferring existing products to a new third party manufacturer or process may result in unforeseen device specification and operating problems. These problems may affect product shipments and may be costly to correct. Silicon fabrication capacity may also change, or the costs per silicon wafer may increase. Manufacturing-related problems may have a material adverse effect on our business.

Further, the spread of the Severe Acute Respiratory Syndrome (SARS) virus and the extent of local preventive measures could affect the production capabilities of our manufacturers, all of which are located in Asia. If this or any factor hinders our ability to obtain products from our manufacturers in a timely basis, there could be significant disruption in our business.

Intense Competition In The Markets In Which We Operate May Reduce The Demand For Or Prices Of Our Products

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Competition in the semiconductor industry is intense. If our main target market, the embedded systems market, continues to grow, the number of competitors may increase significantly. In addition, new semiconductor technology may lead to new products that can perform similar functions as our products. Some of our competitors and other semiconductor companies may develop and introduce products that integrate into a single semiconductor device the functions performed by our semiconductor devices. This would eliminate the need for our products in some applications.

In addition, competition in our markets comes from companies of various sizes, many of which are significantly larger and have greater financial and other resources than we do and thus can better withstand adverse economic or market conditions. Also, as we start to sell our processor products, we will compete with established embedded microprocessor companies and others. Many of these indirect competitors and microprocessor companies have significantly greater financial, technical, marketing and other resources than PLX. Therefore, we cannot assure you that we will be able to compete successfully in the future against existing or new competitors, and increased competition may adversely affect our business. See “Business — Competition,” and “ — Products” in Part I of Item I of our Form 10-K for the year ended December 31, 2002.

Failure To Have Our Products Designed Into The Products Of Electronic Equipment Manufacturers Will Result In Reduced Sales

Our future success depends on electronic equipment manufacturers that design our semiconductor devices into their systems. We must anticipate market trends and the price, performance and functionality requirements of current and potential future electronic equipment manufacturers and must successfully develop and manufacture products that meet these requirements. In addition, we must meet the timing requirements of these electronic equipment manufacturers and must make products available to them in sufficient quantities. These electronic equipment manufacturers could develop products that provide the same or similar functionality as one or more of our products and render these products obsolete in their applications.

We do not have purchase agreements with our customers that contain minimum purchase requirements. Instead, electronic equipment manufacturers purchase our products pursuant to short-term purchase orders that may be canceled without charge. We believe that in order to obtain broad penetration in the markets for our products, we must maintain and cultivate relationships, directly or through our distributors, with electronic equipment manufacturers that are leaders in the embedded systems markets. Accordingly, we will incur significant expenditures in order to build relationships with electronic equipment manufacturers prior to volume sales of new products. If we fail to develop relationships with additional electronic equipment manufacturers to have our products designed into new embedded systems or to develop sufficient new products to replace products that have become obsolete, our business would be materially adversely affected.

Lower Demand For Our Customers’ Products Will Result In Lower Demand For Our Products

Demand for our products depends in large part on the development and expansion of the high-performance embedded systems markets including networking and telecommunications, enterprise storage, imaging and industrial applications. The size and rate of growth of these embedded systems markets may in the future fluctuate significantly based on numerous factors. These factors include the adoption of alternative technologies, capital spending levels and general economic conditions. Demand for products that incorporate high-performance embedded systems may not grow.

Defects In Our Products Could Increase Our Costs And Delay Our Product Shipments

Our products are complex. While we test our products, these products may still have errors, defects or bugs that we find only after commercial production has begun. We have experienced errors, defects and bugs in the past in connection with new products.

Our customers may not purchase our products if the products have reliability, quality or compatibility problems. This delay in acceptance could make it more difficult to retain our existing customers and to attract new customers. Moreover, product errors, defects or bugs could result in additional development costs, diversion of technical and other resources from our other development efforts, claims by our customers or others against us, or the loss of credibility with our current and prospective customers. In the past, the additional time required to correct defects has caused delays in product shipments and resulted in lower revenues. We may have to spend significant amounts of capital and resources to address and fix problems in new products.

We must continuously develop our products using new process technology with smaller geometries to remain competitive on a cost and performance basis. Migrating to new technologies is a challenging task requiring new design skills, methods and tools and is difficult to achieve.

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We Could Lose Key Personnel Due To Competitive Market Conditions And Attrition

Our success depends to a significant extent upon our senior management and key technical and sales personnel. The loss of one or more of these employees could have a material adverse effect on our business. We do not have employment contracts with any of our executive officers.

Our success also depends on our ability to attract and retain qualified technical, sales and marketing, customer support, financial and accounting, and managerial personnel. Competition for such personnel in the semiconductor industry is intense, and we may not be able to retain our key personnel or to attract, assimilate or retain other highly qualified personnel in the future. In addition, we may lose key personnel due to attrition, including health, family and other reasons. We have experienced, and may continue to experience, difficulty in hiring and retaining candidates with appropriate qualifications. If we do not succeed in hiring and retaining candidates with appropriate qualifications, our business could be materially adversely affected.

A Large Portion Of Our Revenues Is Derived From Sales To Third-Party Distributors Who May Terminate Their Relationships With Us At Any Time

We depend on distributors to sell a significant portion of our products. In the three months ended March 31, 2003 and 2002, net revenues through distributors accounted for approximately 52% and 54%, respectively, of our net revenues. Some of our distributors also market and sell competing products. Distributors may terminate their relationships with us at any time. Our future performance will depend in part on our ability to attract additional distributors that will be able to market and support our products effectively, especially in markets in which we have not previously distributed our products. We may lose one or more of our current distributors or may not be able to recruit additional or replacement distributors. The loss of one or more of our major distributors could have a material adverse effect on our business, as we may not be successful in servicing our customers directly or through manufacturers’ representatives.

The Demand For Our Products Depends Upon Our Ability To Support Evolving Industry Standards

Substantially all of our revenues are derived from sales of products, which rely on the PCI standard. If the embedded systems markets move away from this standard and begin using new standards, we may not be able to successfully design and manufacture new products that use these new standards. There is also the risk that new products we develop in response to new standards may not be accepted in the market. In addition, the PCI standard is continuously evolving, and we may not be able to modify our products to address new PCI specifications. Any of these events would have a material adverse effect on our business.

The Successful Marketing And Sales Of Our Products Depend Upon Our Third Party Relationships, Which Are Not Supported By Written Agreements

When marketing and selling our semiconductor devices, we believe we enjoy a competitive advantage based on the availability of development tools offered by third parties. These development tools are used principally for the design of other parts of the embedded system but also work with our products. We will lose this advantage if these third party tool vendors cease to provide these tools for existing products or do not offer them for our future products. This event could have a material adverse effect on our business. We have no written agreements with these third parties, and these parties could choose to stop providing these tools at any time.

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Our Limited Ability To Protect Our Intellectual Property And Proprietary Rights Could Adversely Affect Our Competitive Position

Our future success and competitive position depend upon our ability to obtain and maintain proprietary technology used in our principal products. Currently, we have limited protection of our intellectual property in the form of patents and rely instead on trade secret protection. Our existing or future patents may be invalidated, circumvented, challenged or licensed to others. The rights granted thereunder may not provide competitive advantages to us. In addition, our future patent applications may not be issued with the scope of the claims sought by us, if at all. Furthermore, others may develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents owned or licensed by us. In addition, effective patent, trademark, copyright and trade secret protection may be unavailable or limited in foreign countries where we may need protection. We cannot be sure that steps taken by us to protect our technology will prevent misappropriation of the technology.

We may from time to time receive notifications of claims that we may be infringing patents or other intellectual property rights owned by third parties. While there is currently no intellectual property litigation pending against us, litigation could result in significant expenses to us and adversely affect sales of the challenged product or technology. This litigation could also divert the efforts of our technical and management personnel, whether or not the litigation is determined in our favor. In addition, we may not be able to develop or acquire non-infringing technology or procure licenses to the infringing technology under reasonable terms. This could require expenditures by us of substantial time and other resources. Any of these developments would have a material adverse effect on our business.

The Cyclical Nature Of The Semiconductor Industry May Lead To Significant Variances In The Demand For Our Products

In the last few years, the semiconductor industry has been characterized by significant downturns and wide fluctuations in supply and demand. Also, during this time, the industry has experienced significant fluctuations in anticipation of changes in general economic conditions. This cyclicality has led to significant variances in product demand and production capacity. It has also accelerated erosion of average selling prices per unit. We may experience periodic fluctuations in our future financial results because of industry-wide conditions.

Because We Sell Our Products To Customers Outside Of North America And Because Our Products Are Incorporated With Products Of Others That Are Sold Outside Of North America We Face Foreign Business, Political And Economic Risks

Sales outside of North America accounted for 58% of our revenues for the three months ended March 31, 2003. In 2002, 2001 and 2000, sales outside of North America accounted for 58%, 44% and 39% of our revenues, respectively. Sales outside of North America may fluctuate in future periods and may continue to account for a large portion of our revenues. In addition, equipment manufacturers who incorporate our products into their products sell their products outside of North America, thereby exposing us indirectly to foreign risks. Further, most of our semiconductor products are manufactured outside of North America. Accordingly, we are subject to international risks, including:

• difficulties in managing distributors,

• difficulties in staffing and managing foreign subsidiary and branch operations,

• political and economic instability,

• foreign currency exchange fluctuations,

• difficulties in accounts receivable collections,

• potentially adverse tax consequences,

• timing and availability of export licenses,

• changes in regulatory requirements, tariffs and other barriers,

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• difficulties in obtaining governmental approvals for telecommunications and other products, and

• the burden of complying with complex foreign laws and treaties.

Because sales of our products have been denominated to date exclusively in United States dollars, increases in the value of the United States dollar will increase the price of our products so that they become relatively more expensive to customers in the local currency of a particular country, which could lead to a reduction in sales and profitability in that country.

Our Potential Future Acquisitions May Not Be Successful Because Of Our Limited Experience With Acquisitions In The Past

There have been a significant number of mergers and acquisitions in the semiconductor industry in the past. As part of our business strategy, we expect to review acquisition prospects that would complement our existing product offerings, improve market coverage or enhance our technological capabilities. Future acquisitions could result in any or all of the following:

• potentially dilutive issuances of equity securities,

• large one-time write-offs,

• the incurrence of debt and contingent liabilities or amortization expenses related to goodwill and other intangible assets,

• difficulties in the assimilation of operations, personnel, technologies, products and the information systems of the acquired companies,

• diversion of management’s attention from other business concerns,

• risks of entering geographic and business markets in which we have no or limited prior experience, and

• potential loss of key employees of acquired organizations.

We have had limited experience with acquisitions in the past and may not be able to successfully integrate any businesses, products, technologies or personnel that may be acquired in the future. Our failure to do so could have a material adverse effect on our business.

Our Principal Stockholders Have Significant Voting Power And May Take Actions That May Not Be In The Best Interests Of Our Other Stockholders

Our executive officers, directors and other principal stockholders, in the aggregate, beneficially own a substantial amount of our outstanding common stock. Although these stockholders do not have majority control, they currently have, and likely will continue to have, significant influence with respect to the election of our directors and approval or disapproval of our significant corporate actions. This influence over our affairs might be adverse to the interests of other stockholders. In addition, the voting power of these stockholders could have the effect of delaying or preventing a change in control of PLX.

The Anti-Takeover Provisions In Our Certificate of Incorporation Could Adversely Affect The Rights Of The Holders Of Our Common Stock

Anti-takeover provisions of Delaware law and our Certificate of Incorporation may make a change in control of PLX more difficult, even if a change in control would be beneficial to the stockholders. These provisions may allow the Board of Directors to prevent changes in the management and control of PLX.

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As part of our anti-takeover devices, our Board of Directors has the ability to determine the terms of preferred stock and issue preferred stock without the approval of the holders of the common stock. Our Certificate of Incorporation allows the issuance of up to 5,000,000 shares of preferred stock. There are no shares of preferred stock outstanding. However, because the rights and preferences of any series of preferred stock may be set by the Board of Directors in its sole discretion without approval of the holders of the common stock, the rights and preferences of this preferred stock may be superior to those of the common stock. Accordingly, the rights of the holders of common stock may be adversely affected. Consistent with Delaware law, our Board of Directors may adopt additional anti-takeover measures in the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have an investment portfolio of fixed income securities, including those classified as cash equivalents, of approximately $20.0 million at March 31, 2003. These securities are subject to interest rate fluctuations and will decrease in market value if interest rates increase.

The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. We invest primarily in high quality, short-term and long-term debt instruments. A hypothetical 100 basis point increase in interest rates would result in less than a $0.1 million decrease (less than 1%) in the fair value of our available-for-sale securities.

ITEM 4. CONTROLS AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures.

Within the 90 days prior to the filing of this report, we carried out an evaluation, under the supervision and with the participation of our President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our President and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in this report on Form 10-Q.

(b)  Changes in internal controls.

There have been no significant changes in our internal controls or in other factors which could significantly affect internal controls subsequent to our most recent evaluation of our internal controls.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit
Number	Description
2.1(1)	Agreement and Plan of Merger dated April 19, 2000 by and among PLX Technology, Inc., OKW Technology Acquisition Corporation and Sebring Systems, Inc.
11.1*	Sebring Systems, Inc. 1997 Stock Option/Stock Issuance Plan.
99.1	Certification of President Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2	Certification of Chief Financial Officer Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*  Management contract or compensatory plan or arrangement.

(1) Incorporated by reference to Exhibit 2.1 to Form 8-K as filed on June 2, 2000.

(b) Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PLX TECHNOLOGY, INC.
Date: May 2, 2003	By	/s/	Rafael Torres
			Rafael Torres Vice President, Finance and Chief Financial Officer (Authorized Officer and Principal Financial Officer)

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PLX TECHNOLOGY, INC.

CERTIFICATION

I, Michael J. Salameh, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of PLX Technology, Inc.;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 2, 2003

By: /s/ Michael J. Salameh Michael J. Salameh
President

23

PLX TECHNOLOGY, INC.

CERTIFICATION

I, Rafael Torres, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of PLX Technology, Inc.;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 2, 2003

By: /s/ Rafael Torres
Rafael Torres
Chief Financial Officer

24

EXHIBIT INDEX

Exhibit
Number	Description
2.1(1)	Agreement and Plan of Merger dated April 19, 2000 by and among PLX Technology, Inc., OKW Technology Acquisition Corporation and Sebring Systems, Inc.
11.1*	Sebring Systems, Inc. 1997 Stock Option/Stock Issuance Plan.
99.1	Certification of President Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2	Certification of Chief Financial Officer Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contract or compensatory plan or arrangement.

(1) Incorporated by reference to Exhibit 2.1 to Form 8-K as filed on June 2, 2000.

EX-11.1 3 f89740exv11w1.txt EXHIBIT 11.1 EXHIBIT 11.1 SEBRING SYSTEMS, INC. 1997 STOCK OPTION/STOCK ISSUANCE PLAN (AMENDED AND RESTATED AS OF JUNE 9. 1998) ARTICLE ONE GENERAL PROVISIONS I. PURPOSE OF THE PLAN This 1997 Stock Option/Stock Issuance Plan, as amended and restated, is intended to promote the interests of Sebring Systems, Inc., a New York corporation, by providing eligible persons with the opportunity to acquire a proprietary interest or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation. Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix. II. STRUCTURE OF THE PLAN A. The Plan shall be divided into two (2) separate equity programs: (i) the Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock, and (ii) the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary). B. The provisions of Articles One and Four shall apply to both equity programs under the Plan and shall accordingly govern the interests of all persons under the Plan. 1 III. ADMINISTRATION OF THE PLAN A. The Plan shall be administered by the Board. However, any or all administrative functions otherwise exercisable by the Board may be delegated to the Committee. Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee. B. The Plan Administrator shall have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the Plan and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator shall be final and binding on all parties who have an interest in the Plan or any option or stock issuance thereunder. IV. ELIGIBILITY A. The persons eligible to participate in the Plan are as follows: (i) Employees, (ii) non-employee members of the Board or the non-employee members of the board of directors of any Parent or Subsidiary, and (in) consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). B. The Plan Administrator shall have full authority to determine, (i) with respect to the grants under the Option Grant Program, which eligible persons are to receive the option grants, the time or times when those grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding, and (ii) with respect to stock issuances under the Stock Issuance Program, which eligible persons are to receive such stock issuances, the time or times when those issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration to be paid by the Participant for such shares. C. The Plan Administrator shall have the absolute discretion either to grant options in accordance with the Option Grant Program or to effect stock issuances in accordance with the Stock Issuance Program. 2 V. STOCK SUBJECT TO THE PLAN A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock. The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed 9,939,262 shares. Such share reserve includes (i) 6,400,000 shares initially reserved for issuance, and (ii) an additional 3,539,262 shares approved by the Board on June 9, 1998, and subsequently approved by the shareholders. B. Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent (i) the options expire or terminate for any reason prior to exercise in full or (ii) the options are cancelled in accordance with the cancellation-regrant provisions of Article Two. Unvested shares issued under the Plan and subsequently repurchased by the Corporation, at the option exercise or direct issue price paid per share, pursuant to the Corporation's repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock issuances under the Plan. C. Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan and (ii) the number and/or class of securities and the exercise price per share in effect under each outstanding option in order to prevent the dilution or en1argement of benefits thereunder. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. In no event shall any such adjustments be made in connection with the Conversion of one or more outstanding shares of the Corporation's preferred stock into shares of Common Stock. 3 ARTICLE TWO OPTION GRANT PROGRAM I. OPTION TERMS Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator, provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options. A. EXERCISE PRICE. 1. The exercise price per share shall be fixed by the Plan Administrator in accordance with the following provisions: (i) The exercise price per share shall not be less than eighty-five percent (85%) of the Fair Market Value per share of Common Stock on the option grant date. (ii) If the person to whom the option is granted is a 10% Shareholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date. 2. The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of Article Four and the documents evidencing the option, be payable in cash or check made payable to the Corporation. Should the Common Stock be registered under Section 12(g) of the 1934 Act at the time the option is exercised, then the exercise price may also be paid as follows: (i) in shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or (ii) to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions (A) to a Corporation- designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased 4 shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (B) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale. Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option grant. However, no options shall have a term in excess of ten (10) years measured from the option grant date. C. EFFECT OF TERMINATION OF SERVICE. 1. Upon termination of Service, Optionee shall cease vesting in such Optionee's options and option shares and shall be entitled to purchase or retain, as the case may be, the options or shares that have vested to the date of termination. The following additional provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death: (i) Should the Optionee cease to remain in Service for any reason other than death, Disability or Misconduct, then the Optionee shall have a period of three (3) months following the date of such cessation of Service during which to exercise each outstanding option held by such Optionee. (ii) Should Optionee's Service terminate by reason of Disability, then the Optionee shall have a period of twelve (12) months following the date of such cessation of Service during which to exercise each outstanding option held by such Optionee. (iii) If the Optionee dies while holding an outstanding option, then the personal representative of his or her estate or the person or persons to whom the option is transferred pursuant to the Optionee's will or the laws of inheritance shall have a twelve (12)-mouth period following the date of the Optionee's death to exercise such option. (iv) Under no circumstances, however, shall any such option be exercisable after the specified expiration of the option term. 5 (v) During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date of the Optionee's cessation of Service. Upon the expiration of the applicable exercise Period or (if earlier) upon the expiration of the option term, the option Shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee's cessation of Service, terminate and cease to be outstanding with respect to any and all option shares for which the option is not otherwise at the time exercisable or in which the Optionee is not otherwise at that time vested. (vi) Should Optionee's Service be terminated for Misconduct, then all outstanding options held by the Optionee shall terminate immediately and cease to remain outstanding. 2. The Plan Administrator shall have the discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to: (i) extend the period of time for which the option in to remain exercisable following Optionee's cessation of Service or death from the limited period otherwise in effect for that option to such a greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or (ii) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee's cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested under the option had the Optionee continued in Service. D. SHAREHOLDER RIGHTS. The holder of an option shall have no shareholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares. E. UNVESTED SHARES. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the Purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. The Plan Administrator may not impose a vesting schedule upon the option grant or any shares of Common 6 Stock subject to that option which is more restrictive than twenty percent (20%) per year vesting, with the initial vesting to occur not later than one (1) year after the option grant date. However, such limitation shall not be applicable to any option grants made to individuals who are officers of the Corporation, non-employee Board members or independent consultants. F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is first registered under Section 12(g) of the 1934 Act, the Corporation shall have the right of first refusal with respect to any proposed disposition by the Optionee (or any successor in interest) of any shares of Common Stock issued under the Plan. Such right of first refusal shall be exercisable in accordance with the terms established by the Plan Administrator and set forth in the document evidencing such right. G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, the option shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or by the laws of descent and distribution following the Optionee's death. H. WITHHOLDING. The Corporation's obligation to deliver shares of Common Stock upon the exercise of any options granted under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. II. INCENTIVE OPTIONS The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of the Plan shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options shall not be subject to the terms of this Section II. A. ELIGIBILITY. Incentive Options may only be granted to Employees. B. EXERCISE PRICE. The exercise price per share shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. C. DOLLAR- LIMITATION. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one (1) calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. 7 D. 10% SHAREHOLDER. If any Employee to whom an Incentive Option is granted is a 10% Shareholder, then the option term shall not exceed five (5) years measured from the option grant date. III. CORPORATE TRANSACTION A. The shares subject to each option outstanding under the Plan at the time of a Corporate Transaction shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for all of shares of Common Stock at the time subject to that option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. However, the shares subject to an outstanding option shall not vest on such an accelerated basis if and to the extent (i) such option is assumed by the successor corporation (or parent thereof) in the Corporate Transaction and the Corporation's repurchase rights with respect to the unvested option shares are concurrently assigned to such successor corporation (or parent thereof) or (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested option shares at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to those unvested option shares or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. B. All outstanding repurchase rights shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent: (i) those repurchase rights are assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. C. Immediately following the consummation of the Corporate Transaction, all outstanding options shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof). D. Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction, had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to (i) the number and class of securities available for issuance under the Plan following the consummation of such Corporate Transaction and (ii) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same. 8 E. The Plan Administrator shall have the discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding, to provide for the automatic acceleration (in whole or in part) of one or more outstanding options (and the immediate termination of the Corporation's repurchase rights with respect to the shares subject to those options) upon the occurrence of a Corporate Transaction, whether or not those options are to be assumed in the Corporate Transaction. F. The Plan Administrator shall also have full power and authority, exercisable either at the time the option is granted or at any time while the option remains outstanding, to the structure such option so that the shares subject to that option will automatically vest on an accelerated basis should the Optionee's Service terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Corporate Transaction in which the option is assumed and the repurchase rights applicable to those shares do not otherwise terminate. Any option so accelerated shall remain exercisable for the fully-vested option shares until the earlier of (i) the expiration of the option term or (ii) the expiration of the one (1)-year period measured from the effective date of the Involuntary Termination. In addition, the Plan Administrator may provide that one or more of the Corporation's outstanding repurchase rights with respect to shares held by the Optionee at the time of such Involuntary Termination shall immediately terminate on an accelerated basis, and the shares subject to those terminated rights shall accordingly vest at that time. G. The portion of any Incentive Option accelerated in connection with a Corporate Transaction shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws. H. The grant of options under the Plan shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. IV. CANCELLATION AND REGRANT OF OPTIONS The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of any or all outstanding options under the Plan and to grant in substitution therefore new options covering the same or different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new option grant date. 9 ARTICLE THREE STOCK ISSUANCE PROGRAM I. STOCK ISSUANCE TERMS Shares of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening option grants. Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms specified below. A. Purchase Price. 1. The purchase price per share shall be fixed by the Plan Administrator but shall not be less than eighty-five percent (85%) of the Fair Market Value per share of Common Stock on the issue date. However, the purchase price per share of Common Stock issued to a 10% Shareholder shall not be less than one hundred and ten percent (110%) of such Fair Market Value. 2. Subject to the provisions of Section I of Article Four, shares of Common Stock may be issued under the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance: (i) cash or check made payable to the corporation, or (ii) past services rendered to the corporation (or any Parent or Subsidiary). B. Vesting Provisions. 1. Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more installments over the Participant's period of Service or upon attainment of specified performance objectives. However, the Plan Administrator may not impose a vesting schedule upon any stock issuance effected under the Stock Issuance Program which is more restrictive than twenty percent (20%) per year vesting, with initial vesting to occur not later than one (1) year after the issuance date. Such limitation shall not apply to any Common Stock issuances made to the officers of the Corporation, non-employee Board members or independent consultants. 10 2. Any new, substituted or additional securities or other property (including money paid other than as regular cash dividend) which the Participant may have the right to receive with respect to the Participant's unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration shall be issued subject to (i) the same vesting requirements applicable to the Participant's unvested shares of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate. 3. The Participant shall have full shareholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or not the Participant's interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. 4. Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further shareholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant's purchase-money indebtedness), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase- money note of the Participant attributable to such surrendered shares. 5. The Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the non-completion of the vesting schedule applicable to such shares. Such waiver shall result in the immediate vesting of the Participant's interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant's cessation of Service or the attainment or non- attainment of the applicable performance objectives. C. First Refusal Rights. Until such time as the Common Stock is first registered under Section 12(g) of the 1934 Act, the Corporation shall have the right of first refusal with respect to any proposed disposition by the Participant (or any successor in interest) of any shares of Common Stock issued under the Stock Issuance Program. Such right of first refusal shall be exercisable in accordance with the terms established by the Plan Administrator and set forth in the document evidencing such right. 11 II. CORPORATE TRANSACTION A. Upon the occurrence of a Corporate Transaction, all outstanding repurchase rights under the Stock Issuance Program shall terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, except to the extent: (i) those repurchase rights are assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. B. The Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the Corporation's repurchase rights with respect to those shares remain outstanding, to provide that those rights shall automatically terminate on an accelerated basis, and the shares of Common Stock subject to those terminated rights shall immediately vest in the event the Participant's Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Corporate Transaction in which those repurchase rights are assigned to the successor corporation (or parent thereof). III. SHARE ESCROW /LEGENDS Unvested shares may, in the Plan Administrator's discretion, be held in escrow by the Corporation until the Participant's interest in such shares vests or may be issued directly to the participant with restrictive legends on the certificates evidencing those unvested shares. 12 ARTICLE FOUR MISCELLANEOUS I. FINANCING The Plan Administrator may permit any Optionee or Participant to pay the option exercise price or the purchase price for shares issued to such person under the Plan by delivering a full-recourse, interest-bearing promissory note payable in one or more installments and secured by the purchased shares. However, any promissory note delivered by a consultant must be secured by collateral in addition to the purchased shares of Common Stock. In no event shall the maximum credit available to the Optionee or Participant exceed the sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares plus (ii) any Federal, state and local income and employment tax liability incurred by the Optionee or the Participant in connection with the option exercise or share purchase. II. EFFECTIVE DATE AND TERM OF PLAN A. The Plan became effective when adopted by the Board on August 13, 1997. The shareholders also approved the Plan on August 13, 1997. On June 9, 1998, the Board approved an increase of 3,539,262 shares of Common Stock in the number of shares reserved for issuance under the Plan, and such increase was subsequently approved by the shareholders on June 9, 1998. Accordingly, the maximum number of reserved for issuance under the Plan increased on June 9,1998, from 6,400,000 shares to 9,939,262 shares of Common Stock. B. The Plan shall terminate upon the earliest of (i) August 12, 2007, (ii) the date on which all shares available for issuance under the Plan shall have been issued as vested shares or (ii) the termination of all outstanding options in connection with a Corporate Transaction. All options and unvested stock issuances outstanding at that time under the Plan shall continue to have full force and effect in accordance with the provisions of the documents evidencing such options or issuances. III. AMENDMENT OF THE PLAN A. The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification. In addition, certain amendments may require shareholder approval pursuant to applicable laws and regulations. 13 B. Options may be granted under the Option Grant Program and shares may be issued under the Stock Issuance Program which are in each instance in excess of the number of shares of Common Stock then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained shareholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such shareholder approval is not obtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding. IV. USE OF PROCEEDS Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes. V. WITHHOLDING The Corporation's obligation to deliver shares of Common Stock upon the exercise of any options or upon the issuance or vesting of any shares issued under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. VI. REGULATORY APPROVALS The implementation of the Plan, the granting of any options under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any option or (ii) under the Stock Issuance Program shall be subject to the Corporation's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted under it and the shares of Common Stock issued pursuant to it. VII. NO EMPLOYMENT OR SERVICE RIGHTS Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person's Service at any time for any reason, with or without cause. 14 VII. FINANCIAL REPORTS The Corporation shall deliver a balance sheet and an income statement at least annually to each individual holding an outstanding option under the Plan, unless such individual is a key Employee whose duties in connection with the Corporation (or any Parent or Subsidiary) assure such individual access to equivalent information. 15 APPENDIX The following definitions shall be in effect under the Plan: A. BOARD shall mean the Corporation's Board of Directors. B. CODE shall mean the Internal Revenue Code of 1986, as amended. C. COMMITTEE shall mean a committee of two (2) or more Board members appointed by the Board to exercise one or more administrative functions under the Plan. D. COMMON STOCK shall mean the Corporation's common stock. E. CORPORATE TRANSACTION shall mean either of the following shareholder-approved transactions to which the corporation is a party: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to the person or person's different from the persons holding those securities immediately prior to such transaction, or (ii) the sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. F. CORPORATION shall mean Sebring Systems, Inc, a New York corporation and any successor corporation to all of the assets or voting stock of Sebring Systems, Inc. which shall by appropriate action adopt the Plan. G. DISABILITY shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment and shall be determined by the Plan Administrator on the basis of such medical evidence as the Plan Administrator deems warranted under the circumstances. H. EMPLOYEE shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. I. EXERCISE DATE shall mean date on which the Corporation shall have received written notice of the option exercise. A-1 16 J. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. (iii) If the Common Stock is at the time neither listed on any Stock Exchange nor traded on the Nasdaq National Market, then the Fair Market Va1ue shall be determined by the Plan Administrator after taking into account such factors as the Plan Administrator shall deem appropriate. K. INCENTIVE OPTION shall mean an option which satisfies the requirements of Code Section 422. L. INVOLUNTARY TERMINATION shall mean the termination of the Service of any individual which occurs by reason of: (i) such individual's involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or: (ii) such individual's voluntary resignation following (A) a change in his or her position with the Corporation which materially reduces his or her level of responsibility, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonuses under any corporate-performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual's place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected without the individual's consent. A-2 17 M. MISCONDUCT shall mean the commission of any act of fraud, embezzlement or dishonesty, by the Optionee or Participant any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of any Optionee, Participant, or other person in the Service of the Corporation (or any Parent or Subsidiary). N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended. O. NON-STATUTORY OPTION shall mean an option not intended to satisfy the requirements of Code Section 422. P. OPTION GRANT PROGRAM shall mean the option grant program in effect under the Plan. Q. OPTIONEE shall mean any person to whom an option is granted under the Plan. R. PARENT shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. S. PARTICIPANT shall mean any person who is issued shares of Common Stock under the Stock Issuance Program. T. PLAN shall mean the Corporation's 1997 Stock Option/Stock Issuance Plan, as amended and restated, as set forth in this document U. PLAN ADMINISTRATOR shall mean either the Board or the Committee acting in its capacity as administrator of the Plan. V. SERVICE shall mean the provision of services to the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of director's or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant. W. STOCK EXCHANGE shall mean either the American Stock Exchange or the New York Stock Exchange A-3 18 X. STOCK ISSUANCE AGREEMENT mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock Issuance Program. Y. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect under the Plan. Z. SUBSIDIARY shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns) at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. AA. 10% SHAREHOLDER shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary). A-4 19 EX-99.1 4 f89740exv99w1.txt EXHIBIT 99.1 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of PLX Technology, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael J. Salameh, President of the Company, certify as of the date hereof, solely for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange of 1934; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. Date: May 2, 2003 By: /s/ Michael J. Salameh --------------------------------------------------- Michael J. Salameh President EX-99.2 5 f89740exv99w2.txt EXHIBIT 99.2 EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of PLX Technology, Inc. (the "Company") on Form 10-Q for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Rafael Torres, Chief Financial Officer of the Company, certify as of the date hereof, solely for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange of 1934; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated. Date: May 2, 2003 By: /s/ Rafael Torres --------------------------------------------------- Rafael Torres Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----

EX-11.1

                                                                    EXHIBIT 11.1

                              SEBRING SYSTEMS, INC.
                      1997 STOCK OPTION/STOCK ISSUANCE PLAN

                    (AMENDED AND RESTATED AS OF JUNE 9. 1998)

                                   ARTICLE ONE

                               GENERAL PROVISIONS

I.       PURPOSE OF THE PLAN

         This 1997 Stock Option/Stock Issuance Plan, as amended and restated, is
intended to promote the interests of Sebring Systems, Inc., a New York
corporation, by providing eligible persons with the opportunity to acquire a
proprietary interest or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in the service of the
Corporation.

         Capitalized terms herein shall have the meanings assigned to such terms
in the attached Appendix.

II.      STRUCTURE OF THE PLAN

         A. The Plan shall be divided into two (2) separate equity programs:

         (i)      the Option Grant Program under which eligible persons may, at
the discretion of the Plan Administrator, be granted options to purchase shares
of Common Stock, and

         (ii)     the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common Stock
directly, either through the immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or Subsidiary).

         B.       The provisions of Articles One and Four shall apply to both
equity programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.

                                       1



         III. ADMINISTRATION OF THE PLAN

         A.       The Plan shall be administered by the Board. However, any or
all administrative functions otherwise exercisable by the Board may be delegated
to the Committee. Members of the Committee shall serve for such period of time
as the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.

         B.       The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding options or stock issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan Administrator shall be final and binding on all
parties who have an interest in the Plan or any option or stock issuance
thereunder.

         IV.      ELIGIBILITY

         A. The persons eligible to participate in the Plan are as follows:

         (i) Employees,

         (ii) non-employee members of the Board or the non-employee members of
the board of directors of any Parent or Subsidiary, and

         (in) consultants and other independent advisors who provide services to
the Corporation (or any Parent or Subsidiary).

         B. The Plan Administrator shall have full authority to determine, (i)
with respect to the grants under the Option Grant Program, which eligible
persons are to receive the option grants, the time or times when those grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option as either an Incentive Option or a Non-Statutory
Option, the time or times when each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for which
the option is to remain outstanding, and (ii) with respect to stock issuances
under the Stock Issuance Program, which eligible persons are to receive such
stock issuances, the time or times when those issuances are to be made, the
number of shares to be issued to each Participant, the vesting schedule (if any)
applicable to the issued shares and the consideration to be paid by the
Participant for such shares.

         C. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.

                                       2



         V.       STOCK SUBJECT TO THE PLAN

         A.       The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. The maximum number of shares
of Common Stock which may be issued over the term of the Plan shall not exceed
9,939,262 shares. Such share reserve includes (i) 6,400,000 shares initially
reserved for issuance, and (ii) an additional 3,539,262 shares approved by the
Board on June 9, 1998, and subsequently approved by the shareholders.

         B.       Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the option exercise or direct issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan.

         C.       Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan and (ii) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or en1argement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive. In no event shall
any such adjustments be made in connection with the Conversion of one or more
outstanding shares of the Corporation's preferred stock into shares of Common
Stock.

                                       3



                                   ARTICLE TWO

                              OPTION GRANT PROGRAM

I.       OPTION TERMS

         Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator, provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

         A.       EXERCISE PRICE.

         1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:

         (i) The exercise price per share shall not be less than eighty-five
percent (85%) of the Fair Market Value per share of Common Stock on the option
grant date.

         (ii) If the person to whom the option is granted is a 10% Shareholder,
then the exercise price per share shall not be less than one hundred ten percent
(110%) of the Fair Market Value per share of Common Stock on the option grant
date.

         2. The exercise price shall become immediately due upon exercise of the
option and shall, subject to the provisions of Section I of Article Four and the
documents evidencing the option, be payable in cash or check made payable to the
Corporation. Should the Common Stock be registered under Section 12(g) of the
1934 Act at the time the option is exercised, then the exercise price may also
be paid as follows:

         (i) in shares of Common Stock held for the requisite period necessary
to avoid a charge to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date, or

         (ii) to the extent the option is exercised for vested shares, through a
special sale and remittance procedure pursuant to which the Optionee shall
concurrently provide irrevocable instructions (A) to a Corporation- designated
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased

                                       4



shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (B) to
the Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale.

         Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

         B.       EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option grant. However, no options shall have a term in excess of
ten (10) years measured from the option grant date.

         C.       EFFECT OF TERMINATION OF SERVICE.

         1.       Upon termination of Service, Optionee shall cease vesting in
such Optionee's options and option shares and shall be entitled to purchase or
retain, as the case may be, the options or shares that have vested to the date
of termination. The following additional provisions shall govern the exercise of
any options held by the Optionee at the time of cessation of Service or death:

         (i) Should the Optionee cease to remain in Service for any reason other
than death, Disability or Misconduct, then the Optionee shall have a period of
three (3) months following the date of such cessation of Service during which to
exercise each outstanding option held by such Optionee.

         (ii) Should Optionee's Service terminate by reason of Disability, then
the Optionee shall have a period of twelve (12) months following the date of
such cessation of Service during which to exercise each outstanding option held
by such Optionee.

         (iii) If the Optionee dies while holding an outstanding option, then
the personal representative of his or her estate or the person or persons to
whom the option is transferred pursuant to the Optionee's will or the laws of
inheritance shall have a twelve (12)-mouth period following the date of the
Optionee's death to exercise such option.

         (iv) Under no circumstances, however, shall any such option be
exercisable after the specified expiration of the option term.

                                       5



         (v) During the applicable post-Service exercise period, the option may
not be exercised in the aggregate for more than the number of vested shares for
which the option is exercisable on the date of the Optionee's cessation of
Service. Upon the expiration of the applicable exercise Period or (if earlier)
upon the expiration of the option term, the option Shall terminate and cease to
be outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's cessation
of Service, terminate and cease to be outstanding with respect to any and all
option shares for which the option is not otherwise at the time exercisable or
in which the Optionee is not otherwise at that time vested.

         (vi) Should Optionee's Service be terminated for Misconduct, then all
outstanding options held by the Optionee shall terminate immediately and cease
to remain outstanding.

         2. The Plan Administrator shall have the discretion, exercisable either
at the time an option is granted or at any time while the option remains
outstanding, to:

         (i) extend the period of time for which the option in to remain
exercisable following Optionee's cessation of Service or death from the limited
period otherwise in effect for that option to such a greater period of time as
the Plan Administrator shall deem appropriate, but in no event beyond the
expiration of the option term, and/or

         (ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested under the option had the
Optionee continued in Service.

         D.       SHAREHOLDER RIGHTS. The holder of an option shall have no
shareholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

         E.       UNVESTED SHARES. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the Purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.
The Plan Administrator may not impose a vesting schedule upon the option grant
or any shares of Common

                                       6



Stock subject to that option which is more restrictive than twenty percent (20%)
per year vesting, with the initial vesting to occur not later than one (1) year
after the option grant date. However, such limitation shall not be applicable to
any option grants made to individuals who are officers of the Corporation,
non-employee Board members or independent consultants.

         F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is first
registered under Section 12(g) of the 1934 Act, the Corporation shall have the
right of first refusal with respect to any proposed disposition by the Optionee
(or any successor in interest) of any shares of Common Stock issued under the
Plan. Such right of first refusal shall be exercisable in accordance with the
terms established by the Plan Administrator and set forth in the document
evidencing such right.

         G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death.

         H. WITHHOLDING. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of any options granted under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.

II.      INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive Options. Except
as modified by the provisions of this Section II, all the provisions of the Plan
shall be applicable to Incentive Options. Options which are specifically
designated as Non-Statutory Options shall not be subject to the terms of this
Section II.

         A. ELIGIBILITY. Incentive Options may only be granted to Employees.

         B. EXERCISE PRICE. The exercise price per share shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.

         C. DOLLAR- LIMITATION. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one (1) calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

                                       7



         D. 10% SHAREHOLDER. If any Employee to whom an Incentive Option is
granted is a 10% Shareholder, then the option term shall not exceed five (5)
years measured from the option grant date.

         III. CORPORATE TRANSACTION

         A.       The shares subject to each option outstanding under the Plan
at the time of a Corporate Transaction shall automatically vest in full so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of shares of Common Stock at the
time subject to that option and may be exercised for any or all of those shares
as fully-vested shares of Common Stock. However, the shares subject to an
outstanding option shall not vest on such an accelerated basis if and to the
extent (i) such option is assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and the Corporation's repurchase rights
with respect to the unvested option shares are concurrently assigned to such
successor corporation (or parent thereof) or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing on the unvested option shares at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to those unvested option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.

         B.       All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.

         C.       Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

         D.       Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction, had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same.

                                       8



         E.       The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration (in whole or in part) of
one or more outstanding options (and the immediate termination of the
Corporation's repurchase rights with respect to the shares subject to those
options) upon the occurrence of a Corporate Transaction, whether or not those
options are to be assumed in the Corporate Transaction.

         F.       The Plan Administrator shall also have full power and
authority, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to the structure such option so that the
shares subject to that option will automatically vest on an accelerated basis
should the Optionee's Service terminate by reason of an Involuntary Termination
within a designated period (not to exceed eighteen (18) months) following the
effective date of any Corporate Transaction in which the option is assumed and
the repurchase rights applicable to those shares do not otherwise terminate. Any
option so accelerated shall remain exercisable for the fully-vested option
shares until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1)-year period measured from the effective date of the
Involuntary Termination. In addition, the Plan Administrator may provide that
one or more of the Corporation's outstanding repurchase rights with respect to
shares held by the Optionee at the time of such Involuntary Termination shall
immediately terminate on an accelerated basis, and the shares subject to those
terminated rights shall accordingly vest at that time.

         G.       The portion of any Incentive Option accelerated in connection
with a Corporate Transaction shall remain exercisable as an Incentive Option
only to the extent the applicable One Hundred Thousand Dollar limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such option shall be exercisable as a Non-Statutory Option under the
Federal tax laws.

         H.       The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.

IV.      CANCELLATION AND REGRANT OF OPTIONS

         The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefore new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.

                                       9



                                  ARTICLE THREE

                             STOCK ISSUANCE PROGRAM

I.       STOCK ISSUANCE TERMS

         Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

         A.       Purchase Price.

         1. The purchase price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the issue date. However, the purchase
price per share of Common Stock issued to a 10% Shareholder shall not be less
than one hundred and ten percent (110%) of such Fair Market Value.

         2. Subject to the provisions of Section I of Article Four, shares of
Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

(i)      cash or check made payable to the corporation, or

(ii)     past services rendered to the corporation (or any Parent or
         Subsidiary).

         B. Vesting Provisions.

         1. Shares of Common Stock issued under the Stock Issuance Program may,
in the discretion of the Plan Administrator, be fully and immediately vested
upon issuance or may vest in one or more installments over the Participant's
period of Service or upon attainment of specified performance objectives.
However, the Plan Administrator may not impose a vesting schedule upon any stock
issuance effected under the Stock Issuance Program which is more restrictive
than twenty percent (20%) per year vesting, with initial vesting to occur not
later than one (1) year after the issuance date. Such limitation shall not apply
to any Common Stock issuances made to the officers of the Corporation,
non-employee Board members or independent consultants.

                                       10



         2.       Any new, substituted or additional securities or other
property (including money paid other than as regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

         3. The Participant shall have full shareholder rights with respect to
any shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.

         4. Should the Participant cease to remain in Service while holding one
or more unvested shares of Common Stock issued under the Stock Issuance Program
or should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further shareholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant's purchase-money
indebtedness), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase- money note of the Participant
attributable to such surrendered shares.

         5. The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the non-completion of the
vesting schedule applicable to such shares. Such waiver shall result in the
immediate vesting of the Participant's interest in the shares of Common Stock as
to which the waiver applies. Such waiver may be effected at any time, whether
before or after the Participant's cessation of Service or the attainment or non-
attainment of the applicable performance objectives.

         C. First Refusal Rights. Until such time as the Common Stock is first
registered under Section 12(g) of the 1934 Act, the Corporation shall have the
right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock issued
under the Stock Issuance Program. Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.

                                       11



         II.      CORPORATE TRANSACTION

              A. Upon the occurrence of a Corporate Transaction, all outstanding
repurchase rights under the Stock Issuance Program shall terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, except to the extent: (i) those repurchase
rights are assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.

              B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the unvested shares are issued or any time while
the Corporation's repurchase rights with respect to those shares remain
outstanding, to provide that those rights shall automatically terminate on an
accelerated basis, and the shares of Common Stock subject to those terminated
rights shall immediately vest in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those repurchase rights are assigned
to the successor corporation (or parent thereof).

         III.     SHARE ESCROW /LEGENDS

         Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the participant with restrictive legends on the
certificates evidencing those unvested shares.

                                       12



                                  ARTICLE FOUR

                                  MISCELLANEOUS

         I.       FINANCING

         The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price or the purchase price for shares issued to such person
under the Plan by delivering a full-recourse, interest-bearing promissory note
payable in one or more installments and secured by the purchased shares.
However, any promissory note delivered by a consultant must be secured by
collateral in addition to the purchased shares of Common Stock. In no event
shall the maximum credit available to the Optionee or Participant exceed the sum
of (i) the aggregate option exercise price or purchase price payable for the
purchased shares plus (ii) any Federal, state and local income and employment
tax liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.

         II.      EFFECTIVE DATE AND TERM OF PLAN

         A. The Plan became effective when adopted by the Board on August 13,
1997. The shareholders also approved the Plan on August 13, 1997.

         On June 9, 1998, the Board approved an increase of 3,539,262 shares of
Common Stock in the number of shares reserved for issuance under the Plan, and
such increase was subsequently approved by the shareholders on June 9, 1998.
Accordingly, the maximum number of reserved for issuance under the Plan
increased on June 9,1998, from 6,400,000 shares to 9,939,262 shares of Common
Stock.

         B. The Plan shall terminate upon the earliest of (i) August 12, 2007,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as vested shares or (ii) the termination of all outstanding
options in connection with a Corporate Transaction. All options and unvested
stock issuances outstanding at that time under the Plan shall continue to have
full force and effect in accordance with the provisions of the documents
evidencing such options or issuances.

         III.     AMENDMENT OF THE PLAN

         A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require shareholder approval
pursuant to applicable laws and regulations.

                                       13



         B.       Options may be granted under the Option Grant Program and
     shares may be issued under the Stock Issuance Program which are in each
     instance in excess of the number of shares of Common Stock then available
     for issuance under the Plan, provided any excess shares actually issued
     under those programs shall be held in escrow until there is obtained
     shareholder approval of an amendment sufficiently increasing the number of
     shares of Common Stock available for issuance under the Plan. If such
     shareholder approval is not obtained within twelve (12) months after the
     date the first such excess issuances are made, then (i) any unexercised
     options granted on the basis of such excess shares shall terminate and
     cease to be outstanding and (ii) the Corporation shall promptly refund to
     the Optionees and the Participants the exercise or purchase price paid for
     any excess shares issued under the Plan and held in escrow, together with
     interest (at the applicable Short Term Federal Rate) for the period the
     shares were held in escrow, and such shares shall thereupon be
     automatically cancelled and cease to be outstanding.

         IV.      USE OF PROCEEDS

         Any cash proceeds received by the Corporation from the sale of shares
     of Common Stock under the Plan shall be used for general corporate
     purposes.

         V.       WITHHOLDING

         The Corporation's obligation to deliver shares of Common Stock upon the
     exercise of any options or upon the issuance or vesting of any shares
     issued under the Plan shall be subject to the satisfaction of all
     applicable Federal, state and local income and employment tax withholding
     requirements.

         VI.      REGULATORY APPROVALS

         The implementation of the Plan, the granting of any options under the
     Plan and the issuance of any shares of Common Stock (i) upon the exercise
     of any option or (ii) under the Stock Issuance Program shall be subject to
     the Corporation's procurement of all approvals and permits required by
     regulatory authorities having jurisdiction over the Plan, the options
     granted under it and the shares of Common Stock issued pursuant to it.

         VII.     NO EMPLOYMENT OR SERVICE RIGHTS

         Nothing in the Plan shall confer upon the Optionee or the Participant
     any right to continue in Service for any period of specific duration or
     interfere with or otherwise restrict in any way the rights of the
     Corporation (or any Parent or Subsidiary employing or retaining such
     person) or of the Optionee or the Participant, which rights are hereby
     expressly reserved by each, to terminate such person's Service at any time
     for any reason, with or without cause.

                                       14



         VII.     FINANCIAL REPORTS

         The Corporation shall deliver a balance sheet and an income statement
at least annually to each individual holding an outstanding option under the
Plan, unless such individual is a key Employee whose duties in connection with
the Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.

                                       15



                                    APPENDIX

The following definitions shall be in effect under the Plan:

         A.       BOARD shall mean the Corporation's Board of Directors.

         B.       CODE shall mean the Internal Revenue Code of 1986, as amended.

         C.       COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to exercise one or more administrative functions
under the Plan.

         D.       COMMON STOCK shall mean the Corporation's common stock.

         E.       CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the corporation is a party:

         (i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to the person or person's different from
the persons holding those securities immediately prior to such transaction, or

         (ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of the
Corporation.

         F.       CORPORATION shall mean Sebring Systems, Inc, a New York
corporation and any successor corporation to all of the assets or voting stock
of Sebring Systems, Inc. which shall by appropriate action adopt the Plan.

         G.       DISABILITY shall mean the inability of the Optionee or the
Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be determined by
the Plan Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances.

         H.       EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

         I.       EXERCISE DATE shall mean date on which the Corporation shall
have received written notice of the option exercise.

                                       A-1

                                       16



         J.       FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:

         (i)   If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price per share
of Common Stock on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq National Market or any
successor system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.

         (ii)  If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined by the
Plan Administrator to be the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such exchange. If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

         (iii) If the Common Stock is at the time neither listed on any Stock
Exchange nor traded on the Nasdaq National Market, then the Fair Market Va1ue
shall be determined by the Plan Administrator after taking into account such
factors as the Plan Administrator shall deem appropriate.

K.       INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.

L.       INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:

         (i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or:

         (ii) such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or her
level of responsibility, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and target bonuses under any
corporate-performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual's place of employment by
more than fifty (50) miles, provided and only if such change, reduction or
relocation is effected without the individual's consent.

                                       A-2

                                       17



         M.       MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty, by the Optionee or Participant any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant, or other person in the
Service of the Corporation (or any Parent or Subsidiary).

         N.       1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.

         O.       NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.

         P.       OPTION GRANT PROGRAM shall mean the option grant program in
effect under the Plan.

         Q.       OPTIONEE shall mean any person to whom an option is granted
under the Plan.

         R.       PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

         S.       PARTICIPANT shall mean any person who is issued shares of
Common Stock under the Stock Issuance Program.

         T.       PLAN shall mean the Corporation's 1997 Stock Option/Stock
Issuance Plan, as amended and restated, as set forth in this document

         U.       PLAN ADMINISTRATOR shall mean either the Board or the
Committee acting in its capacity as administrator of the Plan.

         V.       SERVICE shall mean the provision of services to the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of director's or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.

         W.       STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange

                                       A-3

                                       18



         X.       STOCK ISSUANCE AGREEMENT mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

         Y.       STOCK ISSUANCE PROGRAM shall mean the stock issuance program
in effect under the Plan.

         Z.       SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns) at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

         AA.      10% SHAREHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

                                       A-4

                                       19

EX-99.1

                                                                    EXHIBIT 99.1

                                  CERTIFICATION
                       PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Quarterly Report of PLX Technology, Inc. (the
"Company") on Form 10-Q for the period ended March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Michael
J. Salameh, President of the Company, certify as of the date hereof, solely for
purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

                  The Report fully complies with the requirements of section
                           13(a) or 15(d), as applicable, of the Securities
                           Exchange of 1934; and

                  The information contained in the Report fairly presents, in
                           all material respects, the financial condition and
                           results of operations of the Company at the dates and
                           for the periods indicated.

         Date: May 2, 2003

By:               /s/ Michael J. Salameh
                  ---------------------------------------------------
                  Michael J. Salameh
                  President

EX-99.2

                                                                    EXHIBIT 99.2

                                  CERTIFICATION
                       PURSUANT TO 18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Quarterly Report of PLX Technology, Inc. (the
"Company") on Form 10-Q for the period ended March 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Rafael
Torres, Chief Financial Officer of the Company, certify as of the date hereof,
solely for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that:

                  The Report fully complies with the requirements of section
                           13(a) or 15(d), as applicable, of the Securities
                           Exchange of 1934; and

                  The information contained in the Report fairly presents, in
                           all material respects, the financial condition and
                           results of operations of the Company at the dates and
                           for the periods indicated.

         Date: May 2, 2003

By:               /s/ Rafael Torres
                  ---------------------------------------------------
                  Rafael Torres
                  Chief Financial Officer