<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1998
REGISTRATION NO. 333-50643
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
MIPS TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
<TABLE>
<S> <C> <C>
DELAWARE 3571 77-0322161
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
2011 NORTH SHORELINE BLVD.
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 960-1980
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JOHN E. BOURGOIN
MIPS TECHNOLOGIES, INC.
2011 NORTH SHORELINE BLVD.
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 960-1980
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
<TABLE>
<S> <C>
WILLIAM H. HINMAN, JR. JOSHUA L. GREEN
SHEARMAN & STERLING JEFFREY Y. SUTO
555 CALIFORNIA STREET VENTURE LAW GROUP
SAN FRANCISCO, CALIFORNIA 94104 A PROFESSIONAL CORPORATION
(415) 616-1100 2800 SAND HILL ROAD
MENLO PARK, CALIFORNIA 94025
(650) 854-4488
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Company in connection with the sale
of the Common Stock being registered. All of the amounts shown are estimates
except for the SEC registration fee, the NASD filing fee and the Nasdaq
National Market Application Fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 26,123
NASD Filing Fee............................................. 8,090
Nasdaq National Market Application Fee...................... 95,000
Blue Sky Qualification Fees and Expenses.................... 5,000
Printing and Engraving Expenses............................. 175,000
Legal Fees and Expenses..................................... 450,000
Accounting Fees and Expenses................................ 275,000
Miscellaneous............................................... 15,787
----------
Total..................................................... $1,050,000*
==========
</TABLE>
- --------
* Of this amount, approximately $240,000 will be paid by the Company and
$810,000 will be paid by Silicon Graphics, Inc.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of such corporation), by reason of the fact
that such person is or was an officer or director of such corporation or is or
was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and, in the
case of criminal proceedings, had no reasonable cause to believe his or her
conduct was illegal. A Delaware corporation may indemnify officers and
directors against expenses (including attorneys' fees) in connection with the
defense or settlement of an action by or in the right of the corporation under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him or her against expenses which such officer or director actually
and reasonably incurred. The Restated Certificate of Incorporation of the
Company provides for indemnification of the officers and directors of the
Company to the full extent permitted by applicable law.
In accordance with Delaware law, the Restated Certificate of Incorporation
of the Company contains a provision to limit the personal liability of
directors of the Company for violations of their fiduciary duty. This
provision eliminates each director's liability to the Company or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, providing for liability
of directors for unlawful payment of dividends or unlawful stock
II-1
<PAGE>
purchases or redemptions or (iv) for any transaction from which a director
derived an improper personal benefit. The effect of this provision is to
eliminate the personal liability of directors for monetary damages for actions
involving a breach of their fiduciary duty of care, including any such actions
involving gross negligence.
Pursuant to the underwriting agreement between the Company, Silicon Graphics
and the underwriters filed as an exhibit to this Registration Statement, the
underwriters a party thereto have agreed to indemnify each officer and
director of the Company and Silicon Graphics, Inc. and each person, if any,
who controls the Company and Silicon Graphics, Inc. within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), against certain
liabilities, including liabilities under said Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years, the Company has not issued or sold any
unregistered securities.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Form of Certificate of Incorporation of the Registrant**
3.2 Form of By-Laws of the Registrant**
4.1 Form of Common Stock Certificate**
5.1 Opinion of Shearman & Sterling**
10.1 Form of Separation Agreement
10.2 Form of Corporate Agreement**
10.3 Form of Management Services Agreement**
10.4 Form of Tax Sharing Agreement**
10.5 Form of Technology Agreement
10.6 Form of Trademark Agreement
10.7.1 Joint Development and License Agreement between Nintendo Co., Ltd.
and Nintendo of America Inc. on the one hand and Silicon Graphics,
Inc. and MIPS Technologies, Inc. on the other hand (the "Joint
Development and License Agreement")+
10.7.2 First Addendum to the Joint Development and License Agreement+
10.7.3 Second Addendum to the Joint Development and License Agreement+
10.7.4 Fourth Addendum to the Joint Development and License Agreement+
10.8 Form of MIPS Technologies, Inc. 1998 Long-Term Incentive Plan
10.9 Form of Employee Stock Purchase Plan
10.10 Promissory Notes between Silicon Graphics, Inc. and Lavi Lev
23.1 Consent of Ernst & Young LLP, Independent Auditors**
23.2 Consent of Shearman & Sterling (included in Exhibit 5.1)**
23.3 Consent of Anthony B. Holbrook**
23.4 Consent of Fred M. Gibbons**
24.1 Power of Attorney for Kevin C. Eichler**
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
24.2 Power of Attorney for John E. Bourgoin, William M. Kelly, Kenneth L.
Coleman, Teruyasu Sekimoto and Dr. Forest Baskett**
27.1 Financial Data Schedule**
</TABLE>
- --------
*To be filed by amendment.
**Previously filed.
+ The Company has applied for confidential treatment of portions of this
Exhibit. Accordingly, portions thereof have been omitted and filed
separately.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules have been omitted because the information required to be set forth
therein is not applicable or is shown in the Consolidated Financial Statements
or the Notes thereto.
ITEM 17. UNDERTAKINGS
(a) The Registrant hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(ii) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Amendment No. 2
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Mountain View, State of California,
on the 19th day of June, 1998.
MIPS Technologies, Inc.
John E. Bourgoin
By: _________________________________
Name: John E. Bourgoin
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
John E. Bourgoin
___________________________________
John E. Bourgoin Chief Executive Officer and June 19, 1998
Director (Principal Executive
Officer)
*
___________________________________
Kevin C. Eichler (Principal Financial and June 19, 1998
Accounting Officer)
*
___________________________________
William M. Kelly Director June 19, 1998
*
___________________________________
Kenneth L. Coleman Director June 19, 1998
*
___________________________________
Teruyasu Sekimoto Director June 19, 1998
*
___________________________________
Forest Baskett Director June 19, 1998
*By: John E. Bourgoin
---------------------------
John E. Bourgoin
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT 10.1
SEPARATION AGREEMENT
dated as of _______, 1998
between
SILICON GRAPHICS, INC.
and
MIPS TECHNOLOGIES, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I DEFINITIONS
Section 1.1. Definitions.................................................1
-----------
ARTICLE II TRANSFER OF ASSETS ANDASSUMPTION OF LIABILITIES
Section 2.1. Transfer of Assets..........................................7
------------------
Section 2.2. Assignment and Assumption of Liabilities. (a)..............8
----------------------------------------
Section 2.3. Transfers Not Effected On or Prior to the Closing Date. ...10
------------------------------------------------------
Section 2.4. No Representations or Warranties; Consents. ...............10
------------------------------------------
Section 2.5. Documents Relating to Transfer of Assets and Assignment
-------------------------------------------------------
and Assumption of Liabilities. ..........................11
-----------------------------
Section 2.6. Termination of Agreements..................................11
-------------------------
ARTICLE III THE SEPARATION AND THE INITIAL PUBLIC OFFERING
Section 3.1. Cooperation Prior to the Separation........................12
-----------------------------------
Section 3.2. Conduct of Company Business Pending Separation. ...........13
----------------------------------------------
Section 3.3. Silicon Graphics Board Action; Conditions
-----------------------------------------
Precedent to the Separation..............................13
---------------------------
ARTICLE IV INDEMNIFICATION
Section 4.1. Release of Claims..........................................15
-----------------
Section 4.2. Indemnification by the Company.............................17
------------------------------
Section 4.3. Indemnification by Silicon Graphics........................17
-----------------------------------
Section 4.4. Notice and Payment of Claims...............................18
-----------------------------
Section 4.5. Notice and Defense of Third-Party Claims...................18
----------------------------------------
Section 4.6. Insurance Proceeds........................................20
-------------------
Section 4.7. Contribution...............................................20
------------
Section 4.8. Subrogation................................................20
-----------
Section 4.9. No Third-Party Beneficiaries...............................21
----------------------------
Section 4.10. Remedies Cumulative......................................21
-------------------
Section 4.11. Survival of Indemnities..................................21
-----------------------
Section 4.12. After-Tax Indemnification Payments.......................21
----------------------------------
ARTICLE V CERTAIN ADDITIONAL MATTERS
Section 5.1. Ancillary Agreements.......................................21
--------------------
Section 5.2. Company Officers and Board of Directors....................21
---------------------------------------
i
<PAGE>
Section 5.3. The Company Certificate of Incorporation and Bylaws.......21
---------------------------------------------------
Section 5.4 New Credit Facility......................................22
---------------------
Section 5.5. Insurance Policies and Claims Administration..............22
--------------------------------------------
ARTICLE VI ACCESS TO INFORMATION
Section 6.1. Provision of Corporate Records............................24
------------------------------
Section 6.2. Access to Information....................................24
----------------------
Section 6.3. Litigation Cooperation....................................24
----------------------
Section 6.4. Reimbursement.............................................24
-------------
Section 6.5. Retention of Records......................................24
--------------------
Section 6.6. Confidentiality...........................................25
---------------
Section 6.7. Protective Arrangements...................................25
-----------------------
Section 6.8. Mail......................................................25
----
ARTICLE VII DISPUTE RESOLUTION
Section 7.1. Agreement to Mediate......................................26
--------------------
Section 7.2. Escalation................................................26
----------
Section 7.3. Demand for Mediation......................................26
--------------------
Section 7.4. Certain Additional Matters................................27
--------------------------
Section 7.5. Continuity of Service and Performance.....................27
-------------------------------------
ARTICLE VIII MISCELLANEOUS
Section 8.1. Termination...............................................27
-----------
Section 8.2. Expenses..................................................27
--------
Section 8.3. Notices...................................................28
-------
Section 8.4. Amendment and Waiver......................................29
--------------------
Section 8.5. Counterparts..............................................29
------------
Section 8.6. Governing Law; Jurisdiction; Forum........................29
----------------------------------
Section 8.7. Entire Agreement..........................................29
----------------
Section 8.8. Parties in Interest.......................................29
-------------------
Section 8.9. Tax Sharing Agreement.....................................29
---------------------
Section 8.10. Further Assurances and Consents..........................30
-------------------------------
Section 8.11. Exhibits and Schedules...................................30
----------------------
Section 8.12. Legal Enforceability.....................................30
--------------------
Section 8.13. Titles and Headings......................................30
-------------------
ii
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES:
<S> <C> <C>
1.1(a) - Company Contracts
2.1(a)(i) - Tangible Personal Property
2.1(a)(ii) - Inventory
2.1(a)(iii) - Receivables
2.1(a)(vi) - Intellectual Property Agreements
2.1(a)(ix) - Sales and Promotional Material
2.1(a)(x) - Governmental Permits and Approvals
2.1(b)(i) - Excluded Assets
2.2(b)(i) - Excluded Liabilities
2.6(b) - Agreements that will not Terminate
5.5(a) - Covered Claims
6.6 - Non-disclosure Confidential Information
</TABLE>
iii
<PAGE>
SEPARATION AGREEMENT
SEPARATION AGREEMENT ("Agreement") dated as of June 1, 1998 by and between
Silicon Graphics, Inc., a Delaware corporation ("Silicon Graphics"), and MIPS
Technologies, Inc., a Delaware corporation (the "Company").
RECITALS
WHEREAS, the Board of Directors of Silicon Graphics has determined that it
is in the best interests of Silicon Graphics and its shareholders to separate
the Company Business from Silicon Graphics' other operations;
WHEREAS, in furtherance of the foregoing, it is appropriate and desirable
to transfer the Company Assets to the Company and to cause the Company to assume
the Company Liabilities, all as more fully described in this Agreement and the
Ancillary Agreements (such transfer of assets and assumption of liabilities are
herein after referred to as the "Separation.");
WHEREAS, the Board of Directors of Silicon Graphics has further
determined that it is appropriate and desirable, on the terms and conditions
contemplated hereby, to cause the Company and Silicon Graphics to sell, in an
initial public offering (the "Initial Public Offering"), up to such number of
shares of the Common Stock which shall not exceed 20% of the Company's
outstanding capital stock on a fully-diluted basis;
WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions required to effect the Separation and the Initial Public
Offering and certain other agreements that will govern certain matters relating
to the Separation and the Initial Public Offering and the relationship of
Silicon Graphics and the Company and their respective subsidiaries following the
Initial Public Offering.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements, provisions and covenants contained in this Agreement, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used herein, the following terms have the
-----------
following meanings:
"Action" means any claim, suit, arbitration, inquiry, proceeding
------
or investigation by or before any court, governmental or regulatory or
administrative agency or commission or any other tribunal or other
Governmental Authority.
<PAGE>
"Affiliate" of any specified Person means any other Person that,
---------
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with such specified Person.
"Agreement" has the meaning specified in the Recitals.
---------
"Ancillary Agreements" means the Corporate Agreement, the Management
--------------------
Services Agreement, the Tax Sharing Agreement, the Technology License
Agreement and the Trademark Agreement.
"Closing Date" means the first time at which any shares of Common
------------
Stock are sold to the Underwriters pursuant to the Initial Public Offering
in accordance with the terms of the Underwriting Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" means the common stock, par value $0.001 per share, of
------------
the Company.
"Company Assets" has the meaning set forth in Section 2.1(a).
--------------
"Company Balance Sheet" means the audited balance sheet of the
---------------------
Company, including the notes thereto, as of March 31, 1998.
"Company Business" means the business and operations of the various
----------------
divisions and subsidiaries of Silicon Graphics engaged in the development
and licensing of processor designs for the embedded market based on
reduced-instruction-set-computing (RISC) architecture, consisting
principally of Silicon Graphics' MIPS Group.
"Company Bylaws" means the bylaws of the Company in the form filed as
--------------
an exhibit to the Registration Statement.
"Company Certificate" means the restated certificate of incorporation
-------------------
of the Company in the form filed as an exhibit to the Registration
Statement.
"Company Contracts" means the following contracts and agreements to
-----------------
which Silicon Graphics or any of its Affiliates is a party or by which it
or any of its Affiliates or and of their respective assets is bound,
whether or not in writing, except for any such contract or agreement that
is contemplated to be retained by Silicon Graphics or any of its Affiliates
(other than the Company) pursuant to any provision of this Agreement or any
Ancillary Agreement:
2
<PAGE>
(a) all contracts or agreements listed or described on Schedule
1.1(a) (as such Schedule may be supplemented by mutual agreement of
the parties hereto after the date hereof and prior to the Closing
Date);
(b) any contracts or agreements entered into in the name of, or
expressly on behalf of, the Company;
(c) any contract or agreement that relates primarily to the
Company Business;
(d) any guarantee, indemnity, representation, warranty or other
Liability of the Company or Silicon Graphics in respect of any other
Company Contract, any Company Liability or the Company Business; and
(e) any contract or agreement that is otherwise expressly
contemplated pursuant to this Agreement or any of the Ancillary
Agreements to be assigned to the Company.
"Company Liabilities" has the meaning set forth in Section 2.2.
-------------------
"Consents" means any consents, waivers or approvals from, or
--------
notification requirements to, any third parties.
"Covered Claims" means any claim that is of a type covered by
--------------
insurance or self insurance of Silicon Graphics in effect on the Closing
Date and that is a type of claim specified as a covered claim on Schedule
5.5(a).
"Effective Initial Public Offering Date" means the date on which the
--------------------------------------
Registration Statement is declared effective by the Commission.
"Escalation Notice" has the meaning set forth in Section 7.2.
-----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Excluded Assets" has the meaning set forth in Section 2.1(b).
---------------
"Excluded Liabilities" has the meaning set forth in Section 2.2(b).
--------------------
"Governmental Approvals" means any notices, reports or other filings
----------------------
to be made, or any consents, registrations, approvals, permits or
authorizations to be obtained from, any Governmental Authority.
3
<PAGE>
"Governmental Authority" means any federal, state, local, foreign or
----------------------
international court, government, department, commission, board, bureau,
agency, official or other regulatory, administrative or governmental
authority.
"Intellectual Property" means (a) inventions, whether or not
---------------------
patentable, whether or not reduced to practice or whether or not yet made
the subject of a pending patent application or applications, (b) ideas and
conceptions of potentially patentable subject matter, including, without
limitation, any patent disclosures, whether or not reduced to practice and
whether or not yet made the subject of a pending patent application or
applications, (c) national (including the United States) and multinational
statutory invention registrations, patents, patent registrations and patent
applications (including all reissues, divisions, continuations,
continuations-in-part, extensions and reexaminations) and all rights
therein provided by multinational treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent
or application, (d) trademarks, service marks, trade dress, logos, trade
names and corporate names, whether or not registered, including all common
law rights, and registrations and applications for registration thereof,
including, but not limited to, all marks registered in the United States
Patent and Trademark Office, the Trademark Offices of the States and
Territories of the United States of America, and the Trademark offices of
other nations throughout the world, and all rights therein provided by
multinational treaties or conventions, (e) copyrights (registered or
otherwise) and registrations and applications for registration thereof, and
all rights therein provided by multinational treaties or conventions, (f)
moral rights (including, without limitation, rights of paternity and
integrity), and waivers of such rights by others, (g) computer software,
including, without limitation, source code, operating systems and
specifications, data, data bases, files, documentation and other materials
related thereto, data and documentation, (h) trade secrets and
confidential, technical or business information (including ideas, formulas,
compositions, inventions, and conceptions of inventions whether patentable
or unpatentable and whether or not reduced to practice), (i) whether or not
confidential, technology (including know-how and show-how), manufacturing
and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing and business data, pricing
and cost information, business and marketing plans and customer and
supplier lists and information, (j) copies and tangible embodiments of all
the foregoing, in whatever form or medium, (k) all rights to obtain and
rights to apply for patents, and to register trademarks and copyrights, and
(l) all rights to sue and recover and retain damages and costs and
attorneys' fees for present and past infringement of any of the
Intellectual Property rights hereinabove set out.
"Inventory" means all inventory, merchandise, finished goods, and raw
---------
materials, packaging, supplies, works-in-progress and other personal
property related exclusively to the Company Business, maintained, held or
stored by or for Silicon Graphics on the date hereof and any prepaid
deposits for any of the same.
4
<PAGE>
"Liabilities" means any and all losses, claims, charges, debts,
-----------
demands, Actions, causes of Action, suits, damages, obligations, payments,
costs and expenses, accounts, bonds, indemnities and similar obligations,
covenants, contracts, agreements, promises, guarantees and other
liabilities, including all contractual obligations, whether absolute or
contingent, matured or not matured, liquidated or unliquidated, accrued or
not accrued, known or unknown, whenever arising, and including those
arising under any law, rule, regulation, Action, threatened or contemplated
Action (including the costs and expenses of demands, assessments,
judgments, settlements and compromises relating thereto and attorneys' fees
and any and all costs and expenses (including allocated costs of in-house
counsel and other personnel), whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or
threatened or contemplated Actions), order or consent decree of any
Governmental Authority or any award of any arbitrator or mediator of any
kind, and those arising under any contract, commitment or undertaking,
including those arising under this Agreement or any Ancillary Agreement, in
each case, whether or not recorded or reflected or required to be recorded
or reflected on the books and records or financial statements of any
Person.
"Licensed Intellectual Property" means all Intellectual Property
------------------------------
licensed or sublicensed by Silicon Graphics from a third party.
"Management Services Agreement" means the Management Services
-----------------------------
Agreement dated the date hereof between the Company and Silicon Graphics
regarding the provision of certain services by the Company from Silicon
Graphics, as such agreement may be amended from time to time.
"Mediation Demand Date" has the meaning set forth in Section 7.3.
---------------------
"Mediation Demand Notice" has the meaning set forth in Section 7.3.
-----------------------
["New Credit Facility" means __________________.]
--------------------
"Owned Intellectual Property" means all Intellectual Property in and
---------------------------
to which Silicon Graphics or the Company holds, or has a right to hold,
right, title and interest.
"Person" means an individual, a general or limited partnership, a
------
corporation, a trust, a joint venture, an unincorporated organization, a
limited liability entity, any other entity and any Governmental Authority.
"Policy" has the meaning specified in Section 5.5(a).
------
"Prospectus" means each preliminary, final or supplemental prospectus
----------
forming a part of the Registration Statement.
5
<PAGE>
"Receivables" means any and all accounts receivable, notes and other
-----------
amounts receivable from third parties, including, without limitation,
customers and employees, arising exclusively from the conduct of the
Company Business before the date hereof, whether or not in the ordinary
course, together with any unpaid financing charges accrued thereon.
"Registration Statement" means the registration statement on
----------------------
Registration Statement on Form S-1 filed by the Company with the Commission
to effect the registration of the Common Stock pursuant to the Securities
Act, as such registration statement may be amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Separation" has the meaning specified in the second recital of this
----------
Agreement.
"Separation Date" means the date determined by the Board of Directors
---------------
of Silicon Graphics as the date on which the Separation shall be effected,
which is contemplated to occur on or about June 1, 1998.
"SGI Group" means Silicon Graphics and each Person (other than the
---------
Company and its subsidiaries) that is an Affiliate of Silicon Graphics
immediately after the Closing Date.
"Silicon Graphics Liabilities" means (i) all Liabilities of Silicon
----------------------------
Graphics and the SGI Group under this Agreement or any other Ancillary
Agreements, (ii) all Liabilities of Silicon Graphics and the SGI Group
arising after the Closing Date, (iii) any liabilities for Taxes as for
which the Company is entitled to indemnification from Silicon Graphics
pursuant to the Tax Sharing Agreement and (iv) [Other].
"Tangible Personal Property" means all machinery, equipment, tools,
--------------------------
supplies, furniture, fixtures, personalty, vehicles and other tangible
personal property used or held for use by Silicon Graphics or any member of
the SGI Group in the conduct of the Company Business.
"Tax" or "Taxes" shall have the meaning given to such term in the Tax
--- -----
Sharing Agreement.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of
---------------------
the date hereof between Silicon Graphics and the Company providing for
certain tax related matters, as such agreement may be amended from time to
time.
"Technology Agreement" means the Technology Agreement dated as of the
--------------------
date hereof between Silicon Graphics and the Company providing for certain
intellectual property matters, as such agreement may be amended from time
to time.
6
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"Trademark Agreement" means the Trademark Agreement dated as of the
-------------------
date hereof between Silicon Graphics and the Company providing for certain
trademark matters, as such agreement may be amended from time to time.
Unless otherwise specified, any reference to any "subsidiary" or
"subsidiaries" of Silicon Graphics shall not include the Company.
ARTICLE II
TRANSFER OF ASSETS AND
ASSUMPTION OF LIABILITIES
Section 2.1. Transfer of Assets. (a) Silicon Graphics hereby assigns,
------------------
transfers, conveys and delivers to the Company as of the Closing Date, and
agrees to cause each of its subsidiaries to assign, transfer, convey and deliver
to the Company as of the Closing Date, and the Company hereby accepts from
Silicon Graphics and such subsidiaries as of the Closing Date, all of Silicon
Graphics' and such subsidiaries' respective right, title and interest in or
under the following (the "Company Assets"):
--------------
(i) all Tangible Personal Property, including, without limitation, the
Tangible Personal Property listed on Schedule 2.1(a)(i);
(ii) all Inventory, including, without limitation, the Inventory
listed on Schedule 2.1(a)(ii);
(iii) all Receivables, including, without limitation, all Receivables
listed on Schedule 2.1(a)(iii);
(iv) all books of account, general, financial and tax records,
invoices, shipping records, supplier lists, correspondence and other
documents, records and files exclusively relating to the Company Business,
and all personnel records of persons employed by Silicon Graphics that
become employees of the Company as of the Separation Date or thereafter;
(v) the goodwill of Silicon Graphics exclusively relating to the
Company Business;
(vi) all of the Owned Intellectual Property and the Licensed
Intellectual Property that is to be transferred pursuant to the agreements
listed on Schedule 2.1(a)(vi) to the extent provided therein;
(vii) all of the Company Contracts;
7
<PAGE>
(viii) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind (including rights to insurance
proceeds and rights under and pursuant to all warranties, representations
and guarantees made by suppliers of products, materials or equipment, or
components thereof), pertaining to, arising out of, and enuring to the
benefit of Silicon Graphics which relate exclusively to the Company
Business;
(ix) all sales and promotional literature, customer lists and other
sales-related materials owned, used, associated with or employed by Silicon
Graphics relating exclusively to the Company Business, including, without
limitation, the materials listed on Schedule 2.1(a)(ix);
(x) all municipal, state and federal franchises, permits, licenses,
agreements, waivers, exemptions, approvals and authorizations held or used
by Silicon Graphics in connection with, or required for, the Company
Business, to the extent transferable, including, without limitation, the
permits listed on Schedule 2.1(a)(x);
(xi) any assets reflected in the Company Balance Sheet as "Assets" of
the Company, subject to any dispositions of such assets subsequent to the
date of the Company Balance Sheet; and
(xii) any and all other assets, rights and claims of every kind and
nature held immediately prior to the Closing Date by Silicon Graphics and
used primarily in the Company Business. The intention of this clause (xii)
is only to rectify any inadvertent omission of transfer or conveyance of
any asset, right or claim that, had the parties hereto given specific
consideration to such asset, right or claim as of the date hereof, would
have otherwise been classified as a Company Asset. No asset, right or
claim shall be deemed a Company Asset solely as a result of this clause
(xii) if such asset, right or claim is within the category or type of
asset, right or claim expressly covered by the subject matter of an
Ancillary Agreement. In addition, no asset, right or claim shall be deemed
a Company Asset solely as a result of this clause (xii) unless a claim with
respect thereto is made by the Company on or prior to the [first]
anniversary of the Closing Date.
Notwithstanding the foregoing, the Company Assets shall not in any event
include the Excluded Assets referred to in Section 2.1(b) below.
(b) For the purposes of this Agreement, "Excluded Assets" shall mean: (i)
---------------
the assets, rights and claims listed or described on Schedule 2.1(b)(i); and
(ii) any and all assets, rights and claims that are expressly contemplated by
this Agreement or any Ancillary Agreement (or the Exhibits and Schedules hereto
or thereto) as assets, rights or claim to be retained by Silicon Graphics.
8
<PAGE>
Section 2.2. Assignment and Assumption of Liabilities. (a) Except as set
----------------------------------------
forth in one or more of the Ancillary Agreements, from and after the Closing
Date, the Company hereby assumes and agrees faithfully to pay, perform and
fulfill all obligations under the following in accordance with their respective
terms (the "Company Liabilities"):
-------------------
(i) any and all Liabilities that are expressly contemplated by this
Agreement or any Ancillary Agreement (or the Schedules hereto or thereto)
as Liabilities to be assumed by the Company, and all agreements,
obligations and Liabilities of the Company under this Agreement or any of
the Ancillary Agreements;
(ii) all Liabilities (other than Taxes based on, or measured by
reference to, net income), including any employee-related Liabilities,
primarily relating to, arising out of or resulting from:
(A) the operation of the Company Business, as conducted at any
time prior to, on or after the Closing Date (including any Liability
relating to, arising out of or resulting from any act or failure to
act by any director, officer, employee, agent or representative
(whether or not such act or failure to act is or was within such
Person's authority));
(B) the operation of any business conducted by the Company or any
of its subsidiaries at any time after the Closing Date (including any
Liability relating to, arising out of or resulting from any act or
failure to act by any director, officer, employee, agent or
representative (whether or not such act or failure to act is or was
within such Person's authority)); and
(C) any Company Assets; and
(iii) all Liabilities reflected as "Liabilities" or obligations of the
Company in the Company Balance Sheet, subject to any discharge of such
Liabilities subsequent to the date of the Company Balance Sheet.
Notwithstanding the foregoing, the Company Liabilities shall not in any
event include the Excluded Liabilities referred to in Section 2.2(b) below.
(b) For the purposes of this Agreement, "Excluded Liabilities" shall mean
--------------------
(i) the Liabilities listed or described on Schedule 2.2(b)(i); (ii) any and all
Liabilities that are expressly contemplated by this Agreement or any Ancillary
Agreement (or Schedules hereto or thereto) as Liabilities to be retained or
assumed by Silicon Graphics or any member of the SGI Group; and (iii) all
agreements and obligations of any member of the SGI Group under this Agreement
or any of the Ancillary Agreements.
9
<PAGE>
(c) The Company shall be responsible for all Company Liabilities,
regardless of when or where such Liabilities arose or arise, or whether the
facts on which they are based occurred prior to or subsequent to the date
hereof, regardless of where or against whom such Liabilities are asserted or
determined (including any Company Liabilities arising out of claims made by
Silicon Graphics' or the Company's respective directors, officers, employees,
agents or Affiliates) or whether asserted or determined prior to the date
hereof, and regardless of whether arising from or alleged to arise from
negligence, recklessness, violation of law, fraud or misrepresentation by
Silicon Graphics or the Company or any of their respective directors, officers,
employees, agents or Affiliates.
Section 2.3. Transfers Not Effected On or Prior to the Closing Date. To
------------------------------------------------------
the extent any transfers contemplated by this Article II shall not have been
fully effected on or prior to the Closing Date, Silicon Graphics and the Company
shall cooperate to effect such transfers as promptly as possible following the
Closing Date. Nothing herein shall be deemed to require the transfer of any
assets or the assignment or assumption of any Liabilities that by their terms or
by operation of law cannot be so transferred, assigned or assumed; provided,
however, that any such asset shall be deemed a Company Asset for purposes of
determining whether any Liability is a Company Liability; and provided, further,
that Silicon Graphics and the Company and their respective Affiliates shall
cooperate in seeking to obtain any necessary Consents for the transfer of all
assets and the assignment or assumption of all Liabilities as contemplated by
this Article II. In the event that any transfer of assets or assignment or
assumption of Liabilities contemplated by this Article II has not been
consummated effective as of the Closing Date, (i) the party retaining such
assets shall thereafter hold such assets in trust for the use and benefit of the
party entitled thereto (at the expense of the party entitled thereto); and (ii)
the party retaining such Liabilities shall thereafter hold such Liabilities for
the account of the party assuming such Liability or to whom such Liability is to
be assigned pursuant hereto, and in each such case shall take such other actions
as may be reasonably required in order to place the parties, insofar as
reasonably possible, in the same position as would have existed had such asset
been transferred, or such Liability been assigned or assumed as contemplated
hereby. As and when any such asset or Liability becomes transferable,
assignable or assumable, as the case may be, such transfer, assignment or
assumption, as the case may be, shall be effected forthwith. Silicon Graphics
and the Company agree that, as of the Closing Date, each party hereto shall be
deemed to have acquired complete and sole beneficial ownership over all of the
assets, together with all of the rights, powers and privileges incidental
thereto, that such party is entitled to acquire pursuant to the terms of this
Agreement.
Section 2.4. No Representations or Warranties; Consents. (a) Each of the
------------------------------------------
parties hereto understands and agrees that no party hereto is, in this
Agreement, any Ancillary Agreement or any other agreement or document
contemplated by this Agreement, any Ancillary Agreement or otherwise,
representing or warranting in any way as to the value or freedom from
encumbrance of, or any other matter concerning, any assets of such party, or as
to the legal sufficiency to convey title to an asset transferred pursuant to
this Agreement or any Ancillary Agreement, including, without limitation, any
conveyancing or assumption instruments. It is also agreed and
10
<PAGE>
understood that there are no warranties whatsoever, express or implied, given by
either party to this Agreement, as to the condition, quality, merchantability or
fitness of any of the assets, businesses or other rights transferred or retained
by the parties, as the case may be, and all such assets, businesses and other
rights shall be "as is, where is" and "with all faults" (provided that the
absence of warranties given by the parties shall not negate the allocation of
Liabilities under this Agreement and shall have no effect on any manufacturers,
sellers, or other third party warranties that are intended to be transferred
with such assets), and the Company shall bear the economic and legal risks that
any conveyance shall prove to be insufficient to vest in it good and marketable
title, free and clear of any security interest, pledge, lien, charge, claim,
option, right to acquire, covenant, condition, restriction on transfer or other
encumbrance of any nature whatsoever.
(b) Each party hereto understands and agrees that no party hereto is, in
this Agreement, any Ancillary Agreement or any other agreement or document
contemplated by this Agreement, any Ancillary Agreement or otherwise,
representing or warranting in any way that the obtaining of any Consents, the
execution and delivery of any amendatory agreements and the taking of any
filings or applications contemplated by this Agreement will satisfy the
provisions of any or all applicable laws or judgments or other instruments or
agreements relating to such assets.
Notwithstanding the foregoing, the parties shall use their good faith
efforts to obtain all Consents (including such Consents as may be required by
any Governmental Authority), to enter into all reasonable amendatory agreements
and to make all filings and applications contemplated by this Agreement, and
shall take all such further actions as shall be deemed reasonably necessary to
preserve for each of Silicon Graphics and the Company, to the greatest extent
reasonably feasible, consistent with this Agreement, the economic and
operational benefits of the allocation of assets and liabilities provided for in
this Agreement. In case at any time after the Closing Date any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each party to this Agreement shall take all
such necessary or desirable action, provided that any financial cost shall be
borne by the party receiving the benefit of the action.
Section 2.5. Documents Relating to Transfer of Assets and Assignment and
-----------------------------------------------------------
Assumption of Liabilities. In connection with the transfer or the Company
- -------------------------
Assets pursuant to Section 2.1 of this Agreement and the assignment and
assumption of the Company Liabilities pursuant to Section 2.2 of this Agreement,
simultaneously with the execution and delivery hereof or as promptly as
practicable thereafter, (i) Silicon Graphics shall execute and deliver such
bills of sale, deeds, stock powers, certificates of title, assignments of
contracts and other instruments or transfer, conveyance and assignment as and to
the extent necessary to evidence the transfer, conveyance and assignment of all
of Silicon Graphics' right, title and interest in and to the Company Assets to
the Company and (ii) the Company shall execute and deliver to Silicon Graphics
such bills of sale, certificates of title, assumptions of contracts and other
instruments or assumption as may be necessary to evidence the valid and
effective assumption of the Company Liabilities by the Company.
11
<PAGE>
Section 2.6. Termination of Agreements. (a) Except as set forth in
-------------------------
Section 2.6(b), in furtherance of the releases and other provisions of Section
4.1 hereof, the Company, on the one hand, and Silicon Graphics, on the other
hand, hereby terminate, effective as of the Closing Date, any and all
agreements, arrangements, commitments or understandings, whether or not in
writing, between the Company and Silicon Graphics; provided, however, that to
the extent any such agreement, arrangement, commitment or understanding is
inconsistent with any Ancillary Agreement, such termination shall be effective
as of the date of the effectiveness of the applicable Ancillary Agreement. No
such terminated agreement, arrangement, commitment or understanding (including
any provision thereof which purports to survive termination) shall be of any
further force or effect after the Closing Date (or, to the extent contemplated
by the proviso to the immediately preceding sentence, after the effective date
of the applicable Ancillary Agreement). Each party shall, at the reasonable
request of the other party, take, or cause to be taken, such other actions as
may be necessary to effect the foregoing.
(b) The provisions of Section 2.6(a) shall not apply to any of the
following agreements, arrangements, commitments or understandings (or any of the
provisions thereof): (i) this Agreement and the Ancillary Agreements (and each
other agreement or instrument expressly contemplated by this Agreement or any
Ancillary Agreement), (ii) any agreements, arrangements, commitments or
understandings to which any Person other than the parties hereto or their
respective Affiliates is a party, (iii) any intercompany accounts payable or
accounts receivable accrued as of the Closing Date that are reflected in the
books and records of the parties or otherwise documented in writing in
accordance with past practices, and (iv) any other agreements, arrangements,
commitments or understandings that this Agreement or any Ancillary Agreement
expressly contemplates will survive the Closing Date, including those listed or
described on Schedule 2.6(b).
ARTICLE III
THE SEPARATION AND THE INITIAL PUBLIC OFFERING
Section 3.1. Cooperation Prior to the Separation. (a) Transactions prior
-----------------------------------
to the Initial Public Offering. (i) Subject to the conditions specified in
Section 3.3, Silicon Graphics and the Company shall use their reasonable best
efforts to consummate the Initial Public Offering. Such actions shall include,
but not necessarily be limited to, those specified in this Section 3.1.
(ii) The Company shall file the Registration Statement, and such
amendments or supplements thereto, as may be necessary in order to cause
the same to become and remain effective as required by law or by the
Underwriters, including, but not limited to, filing such amendments to the
Registration Statement as may be required by the Underwriting Agreement,
the Commission or federal, state or foreign securities laws. Silicon
Graphics and the Company shall also cooperate in preparing, filing with the
Commission and causing to become effective a registration statement
registering the
12
<PAGE>
Common Stock under the Exchange Act, and any registration statements or
amendments thereof which are required to reflect the establishment of, or
amendments to, any employee benefit and other plans necessary or
appropriate in connection with the Initial Public Offering and the
Separation or the other transactions contemplated by this Agreement and the
Ancillary Agreements.
(iii) The Company shall enter into the Underwriting Agreement, in form
and substance reasonably satisfactory to the Company and shall comply with
its obligations thereunder.
(iv) Silicon Graphics and the Company shall consult with each other
and the Underwriters regarding the timing, pricing and other material
matters with respect to the Initial Public Offering.
(v) The Company shall use its reasonable best efforts to take all such
action as may be necessary or appropriate under state securities and blue
sky laws of the United States (and any comparable laws under any foreign
jurisdictions) in connection with the Initial Public Offering.
(vi) The Company shall prepare, file and use reasonable best efforts
to seek to make effective, a listing application for quotation of the
Common Stock issued in the Initial Public Offering in the Nasdaq National
Market, subject to official notice of issuance.
(vii) The Company shall participate in the preparation of materials
and presentations as the Underwriters shall deem necessary or desirable.
(viii) The Company shall pay the costs and expenses set forth in
Section 8.2.
(b) Proceeds of the Initial Public Offering. The Initial Public Offering
will include both a primary offering of Common Stock by the Company and a
secondary offering of Common Stock by Silicon Graphics of its shares of Common
Stock. The Company will retain the net proceeds of the primary offering and
Silicon Graphics will retain the net proceeds of the secondary offering.
Section 3.2. Conduct of Company Business Pending Separation. Prior to
----------------------------------------------
the Separation Date, the Company Business shall be operated by Silicon Graphics
and its subsidiaries and the Company for the sole benefit of Silicon Graphics.
Section 3.3. Silicon Graphics Board Action; Conditions Precedent to the
----------------------------------------------------------
Separation. Silicon Graphics' Board of Directors shall, in its discretion,
- ----------
establish any appropriate procedures in connection with the Separation. In no
event shall the Separation occur unless the following conditions shall, unless
waived by Silicon Graphics in its sole discretion, have been satisfied:
13
<PAGE>
(a) All necessary regulatory approvals and Consents shall have been
received;
(b) The Registration Statement shall have been filed and declared effective
by the Commission, and there shall be no stop-order in effect with respect
thereto;
[ (c) The [New Credit Facility] shall have been executed and delivered;]
(d) The actions and filings with regard to state securities and blue sky
laws of the United States (and any comparable laws under any foreign
jurisdictions) described in Section 3.1 shall have been taken and, where
applicable, have become effective or been accepted;
(e) The Company's Board of Directors, as named in the Registration
Statement, shall have been elected by Silicon Graphics, as sole stockholder of
the Company, and the Company Certificate and Company Bylaws shall be in effect;
(f) The Company and Silicon Graphics shall have entered into the
Underwriting Agreement and all conditions to the obligations of the Company and
the Underwriters shall have been satisfied or waived;
(g) The Common Stock shall have been approved for quotation in the Nasdaq
National Market, subject to official notice of issuance;
(h) Silicon Graphics' Board of Directors shall have formally approved the
Separation and shall not have abandoned, deferred or modified the Separation at
any time prior to the Closing Date;
(i) The transactions contemplated by Sections 2.1 and 2.2 and Article V
shall have been consummated in all material respects and each of the Ancillary
Agreements, in form and substance satisfactory to Silicon Graphics, shall have
been executed by the parties thereto and each of the transactions contemplated
by the Ancillary Agreements to be consummated on or prior to the Separation Date
shall have been consummated;
(j) No preliminary or permanent injunction or other order, decree or ruling
issued by a court of competent jurisdiction or by a government, regulatory or
administrative agency or commission, and no statute, rule, regulation or
executive order promulgated or enacted by any Governmental Authority, shall be
in effect preventing the consummation of the Separation or the Initial Public
Offering or any of the other transactions contemplated by this Agreement or any
Ancillary Agreement shall be in effect;
14
<PAGE>
(k) Silicon Graphics shall have been released from any liabilities,
guarantees or other obligations with respect to any indebtedness or otherwise of
the Company or its subsidiaries; provided, that the satisfaction of such
conditions shall not create any obligation on the part of Silicon Graphics to
effect the Separation or in any way limit Silicon Graphics' power of termination
set forth in Section 8.1 or alter the consequences of any such termination from
those specified in such Section;
(l) Silicon Graphics shall be satisfied in its sole discretion that it will
own at least 80.1% of the outstanding Common Stock following the Initial Public
Offering on a fully diluted basis, after giving effect to the issuance of any
shares of restricted stock or employee stock options to any employees and
consultants of the Company, and all other conditions to permit any subsequent
distribution of the Common Stock to Silicon Graphics' shareholders to qualify as
a tax-free distribution to Silicon Graphics, the Company and Silicon Graphics'
shareholders shall, to the extent applicable as of the time of the Initial
Public Offering, be satisfied and there shall be no event or condition that is
likely to cause any of such conditions not to be satisfied as of the time of the
Separation or thereafter;
(m) Such other actions as the parties hereto may, based upon the advice of
counsel, reasonably request to be taken prior to the Separation and the Initial
Public Offering in order to assure the successful completion of the Separation
and the Initial Public Offering and the other transactions contemplated by this
Agreement shall have been taken; and
(n) This Agreement shall not have been terminated.
ARTICLE IV
INDEMNIFICATION
Section 4.1. Release of Claims. (a) Except as provided in Section
-----------------
4.1(c), effective as of the Closing Date, the Company does hereby, for itself
and its Affiliates (other than any member of the SGI Group), successors and
assigns, and all Persons who at any time prior to the Closing Date have been
shareholders, directors, officers, agents or employees of the Company and its
Affiliates (other than any member of the SGI Group) (in each case, in their
respective capacities as such), remise, release and forever discharge Silicon
Graphics and each member of the SGI Group, their respective successors and
assigns, and all Persons who at any time prior to the Closing Date have been
shareholders, directors, officers, agents or employees of Silicon Graphics or
any member of the SGI Group (in each case, in their respective capacities as
such), and their respective heirs, executors, administrators, successors and
assigns, from any and all Liabilities whatsoever, whether at law or in equity
(including any right of contribution), whether arising under any contract or
agreement, by operation of law or otherwise, existing or arising from any facts
or events occurring or failing to occur or alleged to have occurred or to have
failed to occur or any conditions existing or alleged to have existed on or
before the Closing Date, including in connection with the transactions and all
other activities to implement the Separation and the Initial Public Offering.
15
<PAGE>
(b) Except as provided in Section 4.1(c), effective as of the Closing Date,
Silicon Graphics does hereby, for itself and each member of the SGI Group,
successors and assigns, and all Persons who at any time prior to the Closing
Date have been shareholders, directors, officers, agents or employees of Silicon
Graphics or any member of the SGI Group (in each case, in their respective
capacities as such), remise, release and forever discharge the Company and its
subsidiaries, their respective successors and assigns, and all Persons who at
any time prior to the Closing Date have been shareholders, directors, officers,
agents or employees of the Company or any of its subsidiaries (in each case, in
their respective capacities as such), and their respective heirs, executors,
administrators, successors and assigns, from any and all Liabilities whatsoever,
whether at law or in equity (including any right of contribution), whether
arising under any contract or agreement, by operation of law or otherwise,
existing or arising from any facts or events occurring or failing to occur or
alleged to have occurred or to have failed to occur or any conditions existing
or alleged to have existed on or before the Closing Date, including in
connection with the transactions and all other activities to implement the
Separation and the Initial Public Offering.
(c) Nothing contained in Section 4.1(a) or (b) shall impair any right of
any Person to enforce this Agreement, any Ancillary Agreement or any agreements,
arrangements, commitments or understandings that are specified in Section 2.6(b)
or the applicable Schedules thereto not to terminate as of the Closing Date, in
each case in accordance with its terms. Nothing contained in Section 4.1(a) and
(b) shall release any Person from:
(i) Any Liability provided in or resulting from any agreement between
the Company and any member of the SGI Group that is specified in Section
2.6(b) or the applicable Schedules thereto as not to terminate as of the
Closing Date, or any other Liability specified in Schedule 2.6(b) as not to
terminate as of the Closing Date;
(ii) Any Liability, contingent or otherwise, assumed, transferred or
assigned to such Person in accordance with, or any other Liability of any
Person under, this Agreement or any Ancillary Agreement;
(iii) Any Liability for the sale, lease or receipt of goods, property
or services purchased, obtained or used in the ordinary course of business
by the Company from any member of the SGI Group or by any member of the SGI
Group from the Company;
(iv) Any Liability that the parties may have with respect to
indemnification or contribution pursuant to this Agreement for claims
brought against the parties by third Persons, which Liability shall be
governed by the provisions of this Article IV and, if applicable, the
appropriate provisions of the Ancillary Agreements; or
16
<PAGE>
(v) Any Liability the release of which would result in the release of
any Person other than a Person released pursuant to this Section 4.1;
provided that the parties agree not to bring suit or permit any of their
subsidiaries to bring suit against any Person with respect to any Liability
to the extent that such Person would be released with respect to such
Liability by this Section 4.1 but for the provision of this clause (v).
(d) The Company shall not make, and shall not permit any of its
subsidiaries to make, any claim or demand or commence any Action asserting any
claim or demand, including any claim of contribution or indemnification, against
Silicon Graphics or any member of the SGI Group or any other Person released
pursuant to Section 4.1(a), with respect to any Liabilities released pursuant to
Section 4.1(a). Silicon Graphics shall not make, and shall not permit any
member of the SGI Group to make, any claim or demand or commence any Action
asserting any claim or demand, including any claim of contribution or
indemnification, against the Company or any of its subsidiaries or any other
Person released pursuant to Section 4.1(b), with respect to any Liabilities
released pursuant to Section 4.1(b).
(e) It is the intention of each of Silicon Graphics and the Company by
virtue of the provisions of this Section 4.1 to provide for a full and complete
release and discharge of all Liabilities existing or arising from all acts and
events occurring or failing to occur or alleged to have occurred or failed to
occur and all conditions existing or alleged to have existed on or before the
Closing Date, between or among the Company or any of its subsidiaries, on the
one hand, and Silicon Graphics or any member of the SGI Group, on the other hand
(including any contractual agreements or arrangements existing or alleged to
exist between or among such Persons on or before the Closing Date), except as
expressly set forth in Section 4.1(c). At any time, at the request of any other
party, each party shall execute and deliver, or shall cause such other
appropriate Persons to execute and deliver, releases reflecting the provisions
hereof.
Section 4.2. Indemnification by the Company. Except as provided in
------------------------------
Section 4.5 and except as otherwise expressly provided in any of the Ancillary
Agreements, from and after the Closing Date, the Company shall indemnify, defend
and hold harmless Silicon Graphics, each member of the SGI Group and each of
their respective directors, officers and employees and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"SGI Indemnitees") from and against any and all Liabilities of the SGI
- -----------------
Indemnitees relating to, arising out of or resulting from any of the following
items (without duplication):
(a) The failure of the Company or any other Person to pay, perform or
otherwise promptly discharge any Company Liability or Company Contract in
accordance with their respective terms, whether prior to or after the Closing
Date or the date hereof;
(b) The Company Business, any Company Liability or any Company Contract;
(c) Any breach by the Company or any of its subsidiaries of this Agreement
or any of the Ancillary Agreements; and
17
<PAGE>
(d) Any untrue statement or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, with respect
to all information contained in the Registration Statement or Prospectus.
Section 4.3. Indemnification by Silicon Graphics. Except as provided in
-----------------------------------
Section 4.5 and except as otherwise expressly provided in any of the Ancillary
Agreements, from and after the Closing Date, Silicon Graphics shall indemnify,
defend and hold harmless the Company and each of its subsidiaries and each of
their respective directors, officers and employees and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"Company Indemnitees") from and against any and all Liabilities of the Company
- --------------------
Indemnitees relating to, arising out of or resulting from any of the following
items (without duplication):
(a) The failure of Silicon Graphics or any other member of the SGI Group or
any other Person to pay, perform or otherwise promptly discharge any Liability
of the SGI Group other than the Company Liabilities in accordance with its
terms, whether prior to or after the Closing Date or the date hereof;
(b) Any Liability of any member of the SGI Group other than the Company
Liabilities; and
(c) Any breach by Silicon Graphics or any member of the SGI Group of this
Agreement or any of the Ancillary Agreements.
Section 4.4. Notice and Payment of Claims. If any SGI Indemnitee or
----------------------------
Company Indemnitee (the "Indemnified Party") determines that it is or may be
-----------------
entitled to indemnification under this Article IV (other than in connection with
any Action subject to Section 4.5), the Indemnified Party shall deliver to the
person from whom such indemnification is sought (the "Indemnifying Party"), a
------------------
written notice specifying, to the extent reasonably practicable, the basis for
its claim for indemnification and the amount for which the Indemnified Party
reasonably believes it is entitled to be indemnified. After the Indemnifying
Party shall have been notified of the amount for which the Indemnified Party
seeks indemnification, the Indemnifying Party shall, within 30 days after
receipt of such notice, either (i) pay the Indemnified Party such amount in cash
or other immediately available funds (or reach agreement with the Indemnified
Party as to a mutually agreeable alternative payment schedule) or (ii) object to
the claim for indemnification or the amount thereof by giving the Indemnified
Party written notice setting forth the grounds therefor. Any objection shall be
resolved in accordance with Article VII. If the Indemnifying Party does not
give such notice within such 30 day period, the Indemnifying Party shall be
deemed to have acknowledged its liability for such claim and the Indemnified
Party may exercise any and all of its rights under applicable law to collect
such amount.
18
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Section 4.5. Notice and Defense of Third-Party Claims. Promptly
----------------------------------------
following the earlier of (A) receipt of written notice of the commencement by a
third party of any Action against or otherwise involving any Indemnified Party
or (B) receipt of written information from a third party alleging the existence
of a claim against an Indemnified Party, in either case, with respect to which
indemnification may be sought pursuant to this Agreement (a "Third-Party
-----------
Claim"), the Indemnified Party shall give the Indemnifying Party prompt written
notice thereof. Failure of the Indemnified Party to give notice as provided in
this Section 4.5 shall not relieve the Indemnifying Party of its obligations
under this Agreement, except to the extent that the Indemnifying Party is
prejudiced by such failure to give notice. Such notice shall describe the
Third-Party Claim in reasonable detail.
(a) Within 30 days after receipt of such notice, the Indemnifying Party may
by giving written notice thereof to the Indemnified Party, (i) elect to assume
the defense of such Third-Party Claim at its sole cost and expense or (ii)
object to the claim of indemnification for such Third-Party Claim setting forth
the grounds therefor. Any objection shall be resolved in accordance with
Article VII. If the Indemnifying Party does not within such 30 day period give
the Indemnified Party such notice, the Indemnifying Party shall be deemed to
have acknowledged its liability for such Third-Party Claim.
(b) Any defense of a Third-Party Claim as to which the Indemnifying Party
has elected to assume the defense shall be conducted by counsel employed by the
Indemnifying Party and reasonably satisfactory to Silicon Graphics in the case
of SGI Indemnitees and the Company in the case of Company Indemnitees. The
Indemnified Party shall have the right to participate in such proceedings and to
be represented by counsel of its own choosing at the Indemnified Party's sole
cost and expense; provided that if the defendants or parties against which
relief is sought in any such claim include both the Indemnifying Party and one
or more Indemnified Parties and, in the reasonable judgment of Silicon Graphics
in the case of SGI Indemnitees and the Company in the case of Company
Indemnitees, a conflict of interest between such Indemnified Parties and such
Indemnifying Party exists in respect of such claim, such Indemnified Parties
shall have the right to employ one firm of counsel selected by Silicon Graphics
for SGI Indemnitees or the Company for Company Indemnitees and in that event the
reasonable fees and expenses of such separate counsel (but not more than one
separate counsel reasonably satisfactory to the Indemnifying Party) shall be
paid by such Indemnifying Party.
(c) If the Indemnifying Party assumes the defense of a Third-Party Claim,
the Indemnifying Party may settle or compromise the claim without the prior
written consent of the Indemnified Party; provided that without the prior
written consent of Silicon Graphics in the case of SGI Indemnitees and the
Company in the case of Company Indemnitees, the Indemnifying Party may not agree
to any such settlement unless as a condition to such settlement the Indemnified
Party receives a written release from any and all liability relating to such
Third-Party Claim and such settlement or compromise does not include any remedy
or relief to be applied to or against the Indemnified Party, other than monetary
damages for which the Indemnifying Party shall be responsible hereunder.
19
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(d) If the Indemnifying Party does not assume the defense of a Third-Party
Claim for which it has acknowledged liability for indemnification under this
Article IV, Silicon Graphics in the case of SGI Indemnitees and the Company in
the case of Company Indemnitees may pursue the defense of such Third-Party Claim
and choose one firm of counsel in connection therewith. The Indemnifying Party
is required to reimburse Silicon Graphics or the Company, as the case may be, on
a current basis for its reasonable expenses of investigation, reasonable
attorney's fees and reasonable out-of-pocket expenses incurred by Silicon
Graphics in the case of SGI Indemnitees and the Company in the case of Company
Indemnitees in defending against such Third-Party Claim and the Indemnifying
Party shall be bound by the result obtained with respect thereto, provided that
the Indemnifying Party shall not be liable for any settlement effected without
the consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
(e) The Indemnifying Party shall pay to the Indemnified Party in cash the
amount for which the Indemnified Party is entitled to be indemnified (if any) no
later than the later of (i) the date on which the Indemnified Party makes any
payment in satisfaction (partial or otherwise) of the Third-Party Claim or (ii)
the date on which such Indemnifying Party's objection, if any, to its
responsibility for indemnification under this Article IV has been resolved
pursuant to Article VII or by settlement or compromise or the final
nonappealable judgment of a court of competent jurisdiction.
Section 4.6. Insurance Proceeds. The amount that any Indemnifying
-------------------
Party is or may be required to pay to any Indemnified Party pursuant to this
Article IV shall be reduced (including, without limitation, retroactively) by
any insurance proceeds or other amounts actually recovered by or on behalf of
such Indemnified Parties in reduction of the related Liability. If an
Indemnified Party shall have received the payment required by this Agreement
from an Indemnifying Party in respect of a Liability and shall subsequently
actually receive insurance proceeds, or other amounts in respect of such
Liability as specified above, then such Indemnified Party shall pay to such
Indemnifying Party a sum equal to the amount of such insurance proceeds or other
amounts actually received after deducting therefrom all of the Indemnifying
Party's costs and expenses associated with such Liability.
Section 4.7. Contribution. If the indemnification provided for in this
------------
Article IV is unavailable to an Indemnified Party in respect of any Liability
arising out of or related to information contained in or omitted from the
Registration Statement, then the Company Indemnitees, or SGI Indemnitees, as the
case may be, in lieu of indemnifying the SGI Indemnitees or Company Indemnitees,
as the case may be, shall contribute to the amount paid or payable by the SGI
Indemnitees or SGI Indemnitees, as the case may be, as a result of such
Liability in such proportion as is appropriate to reflect the relative fault of
the Company, on the one hand, and Silicon Graphics, on the other hand, in
connection with the statements or omissions which resulted in such Liability.
The relative fault of the Company Indemnitees on the one hand and of the SGI
Indemnitees on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
20
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omission or alleged omission to state a material fact relates to information
concerning the Company on the one hand or Silicon Graphics on the other hand.
Section 4.8. Subrogation. In the event of payment by an Indemnifying
-----------
Party to any Indemnified Party in connection with any Third-Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the first place of
such Indemnified Party as to any events or circumstances in respect of which
such Indemnified Party may have any right or claim relating to such Third-Party
Claim. Such Indemnified Party shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right or claim.
Section 4.9. No Third-Party Beneficiaries. This Article IV shall inure
----------------------------
to the benefit of, and be enforceable by Silicon Graphics, the SGI Indemnitees,
the Company and the Company Indemnitees and their respective successors and
permitted assigns. The indemnification provided for by this Article IV shall
not inure to the benefit of any other third party or parties and shall not
relieve any insurer who would otherwise be obligated to pay any claim of the
responsibility with respect thereto or, solely by virtue of the indemnification
provisions hereof, provide any subrogation rights with respect thereto and each
party agrees to waive such rights against the other to the fullest extent
permitted.
1. Section 4.10. Remedies Cumulative. The remedies provided in this Article
-------------------
IV shall be cumulative and shall not preclude assertion by any Indemnified
Party of any other rights or the seeking of any and all other remedies
against an Indemnifying Party. The procedures set forth in this Article
IV, however, shall be the exclusive procedures governing any indemnity
action brought under this Article IV or otherwise relating to Liabilities.
Section 4.11. Survival of Indemnities. The rights and obligations of
-----------------------
each of Silicon Graphics and the Company and their respective Indemnitees under
this Article IV shall survive the sale or other transfer by it of any assets or
businesses or the assignment by it of any Liabilities.
Section 4.12. After-Tax Indemnification Payments. Except as otherwise
----------------------------------
expressly provided herein or in an Ancillary Agreement, indemnification payments
made by either party under this Article shall give effect to, and be reduced by
the value of, any and all applicable deductions, losses, credits, offsets or
other items for Federal, state or other tax purposes attributable to the payment
of the indemnified liability by the Indemnified Party.
21
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ARTICLE V
CERTAIN ADDITIONAL MATTERS
Section 5.1. Ancillary Agreements. On or prior to the Closing Date,
--------------------
Silicon Graphics and the Company shall execute and deliver the Ancillary
Agreements.
Section 5.2. Company Officers and Board of Directors. On or prior to the
---------------------------------------
Closing Date, Silicon Graphics shall take and shall cause the Company to take
all actions necessary to appoint as officers and directors of the Company those
persons named in the Registration Statement to constitute the officers and
directors of the Company on the Closing Date.
Section 5.3. The Company Certificate of Incorporation and Bylaws. Prior
---------------------------------------------------
to the Closing Date, Silicon Graphics shall take all action necessary to cause
the Company Certificate and Company Bylaws to be amended and restated
substantially in the form attached to the Registration Statement as exhibits
thereto.
[Section 5.4. New Credit Facility.
--------------------
(a) Prior to the Closing Date, Silicon Graphics and the Company shall take
all necessary action to obtain the [the New Credit Facility.]]
(b) Prior to the Separation Date, the Company and its subsidiaries shall
take all necessary action to release Silicon Graphics from any liabilities,
guarantees, or other obligations with respect to indebtedness or other
obligations of the Company or its subsidiaries, other than the obligations
hereunder or under the Ancillary Agreements, provided, that the satisfaction of
such conditions shall not create any obligation on the part of Silicon Graphics
to effect the Separation or in any way limit Silicon Graphics' power of
termination set forth in Section 8.1 or alter the consequences of any such
termination from those specified in such Section.
Section 5.5. Insurance Policies and Claims Administration. (a)
--------------------------------------------
Maintenance of Insurance Coverage Prior to Closing Date. Silicon Graphics and
the Company shall use reasonable efforts to maintain in full force and effect at
all times up to and including the Closing Date its current property and casualty
insurance programs, including, without limitation, primary and excess general
liability, automobile, workers' compensation, property and crime insurance
policies (collectively, the "Policies" and individually, a "Policy"). Silicon
-------- ------
Graphics and its subsidiaries shall retain with respect to any Covered Claims as
set forth on Schedule 5.5(a) relating to periods prior to the Closing Date all
of their respective rights, benefits and privileges, if any, under such
Policies. To the extent not already provided for by the terms of a Policy,
Silicon Graphics shall use reasonable efforts to cause the Company and its
subsidiaries, as appropriate, to be named as additional insureds under such
Policy in respect of Covered Claims arising or relating to periods prior to the
Closing Date; provided, however, that nothing contained herein shall be
construed to require Silicon
22
<PAGE>
Graphics or any of its subsidiaries to pay any additional premium or other
charges in respect to, or waive or otherwise limit any of its rights, benefits
or privileges under, any such Policy to effect the naming of the Company and its
subsidiaries as such additional insureds.
(b) Company Responsible for Establishing Insurance Coverage On and After
Closing Date. Commencing on and as of the Closing Date, the Company and each of
its subsidiaries shall be responsible for establishing and maintaining its own
separate insurance programs (including, without limitation, primary and excess
general liability, automobile, workers, compensation, property, director and
officer liability, fire, crime, surety and other similar insurance policies) for
activities and claims relating to any period on or after the Closing Date
involving the Company or any of its subsidiaries. Notwithstanding any other
agreement or understanding to the contrary, except as set forth in Section
5.5(c) with respect to claims administration and financial administration of the
Policies, neither Silicon Graphics nor any of its subsidiaries shall have any
responsibility for or obligation to the Company or its subsidiaries relating to
liability and casualty insurance matters for any period, whether prior to, at or
after the Closing Date.
(c) Administration and Procedure. (i) The Company or a subsidiary of the
Company, as appropriate, shall be responsible for the claims administration and
financial administration of all Policies for Covered Claims relating to the
assets, ownership or operation prior to the Closing Date of the Company
Business; provided, however, that such retention by the Company of the Policies
and the responsibility for claims administration and financial administration of
the Policies are in no way intended to limit, inhibit or preclude any right to
insurance coverage for any Covered Claims under the Policies by Silicon
Graphics. The Company or a subsidiary thereof, as appropriate, shall be
responsible for all administrative and financial matters relating to insurance
policies established and maintained by the Company and its subsidiaries for
claims relating to any period on or after the Closing Date involving the Company
or any of its subsidiaries.
(ii) The Company shall notify Silicon Graphics of any Covered Claim
relating to the Company or a subsidiary thereof under one or more of the
Policies relating to a period prior to the Closing Date, and the Company
agrees to cooperate and coordinate with Silicon Graphics concerning any
strategy Silicon Graphics may reasonably elect to pursue to secure coverage
and payment for such Covered Claim by the appropriate insurance carrier.
Notwithstanding anything contained herein, in any other agreement or
applicable Policy or any understanding to the contrary, the Company or an
appropriate subsidiary thereof assumes responsibility for, and shall pay to
the appropriate insurance carriers or otherwise, any premiums,
retrospectively-rated premiums, defense costs, indemnity payments,
deductibles, retentions or other charges, as appropriate (collectively,
"Insurance Charges"), whenever arising, which shall become due and payable
------------------
under the terms and conditions of any applicable Policy in respect of any
liabilities, losses, claims, actions or occurrences, whenever arising or
becoming known, involving or relating to any of the assets, businesses,
operations or
23
<PAGE>
liabilities of the Company or any of its subsidiaries, to the extent set
forth in Section 5.5(a) and any such charges that relate to the period
after the Closing Date. To the extent that the terms of any applicable
Policy provide that Silicon Graphics or a subsidiary thereof, as
appropriate, shall have an obligation to pay or guarantee the payment of
any Insurance Charges, Silicon Graphics or such subsidiary shall be
entitled to demand that the Company or a subsidiary thereof make such
payment directly to the person or entity entitled thereto. In connection
with any such demand, Silicon Graphics shall submit to the Company or a
subsidiary thereof a copy of any invoice received by Silicon Graphics or a
subsidiary pertaining to such Insurance Charges, together with appropriate
supporting documentation, if available. In the event that the Company or
its subsidiary fails to pay any Insurance Charges when due and payable,
whether at the request of the party entitled to payment or upon demand by
Silicon Graphics or a subsidiary of Silicon Graphics, Silicon Graphics or a
subsidiary of Silicon Graphics may (but shall not be required to) pay such
Insurance Charges for and on behalf of the Company or its subsidiary and,
thereafter, the Company or its subsidiary shall forthwith reimburse Silicon
Graphics or such subsidiary of Silicon Graphics for such payment.
ARTICLE VI
ACCESS TO INFORMATION
Section 6.1. Provision of Corporate Records. Each of Silicon Graphics
------------------------------
and the Company shall arrange as soon as practicable following the Closing Date
for the provision to the other of existing corporate governance documents (e.g.
minute books, stock registers, stock certificates, documents of title, etc.) in
its possession relating to the other or to its business and affairs.
Section 6.2. Access to Information. From and after the Closing Date,
----------------------
each of Silicon Graphics and the Company shall afford the other, including its
accountants, counsel and other designated representatives, reasonable access
(including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
all records, books, contracts, instruments, computer data and other data and
information in such party's possession relating to the business and affairs of
the other (other than data and information subject to an attorney/client or
other privilege), insofar as such access is reasonably required by the other
party including, without limitation, for audit, accounting and litigation
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations.
Section 6.3. Litigation Cooperation. Each of Silicon Graphics and the
----------------------
Company shall use reasonable efforts to make available to the other, upon
written request, its officers, directors, employees and agents as witnesses to
the extent that such persons may reasonably be
24
<PAGE>
required in connection with any legal, administrative or other proceedings
arising out of the business of the other prior to the Closing Date in which the
requesting party may from time to time be involved.
Section 6.4. Reimbursement. Each party providing witnesses under Section
-------------
6.3 to the other shall be entitled to receive from the party for whom the
witness is provided, upon the presentation of invoices therefor, payment for all
out-of-pocket costs and expenses as may be reasonably incurred in providing such
witnesses.
Section 6.5. Retention of Records. Except as otherwise required by law
--------------------
or agreed to in writing, each party shall, and shall cause each of its
respective subsidiaries to, retain all information relating to the other party's
business in accordance with such party's written record retention policy or, if
no such policy exists, the past practice of such party. Notwithstanding the
foregoing, any party may destroy or otherwise dispose of any information at any
time, provided that, prior to such destruction or disposal, (i) such party shall
provide no less than 30 days prior written notice to the other party, specifying
the information proposed to be destroyed or disposed of and (ii) if the
recipient of such notice shall request in writing prior to the scheduled date
for such destruction or disposal that any of the information proposed to be
destroyed or disposed of be delivered to such requesting party, the party
proposing the destruction or disposal shall promptly arrange for the delivery of
such of the information as was requested at the expense of the requesting party.
Section 6.6. Confidentiality. Subject to Section 6.7, each party and
---------------
each of its subsidiaries shall hold and shall cause its respective directors,
officers, employees, agents, consultants and advisors to hold, in strict
confidence, unless compelled to disclose by judicial or administrative process
or, in the opinion of its counsel, by other requirements of law, all information
(other than any such information relating solely to the business or affairs of
such party) concerning the other party (except to the extent that such
information can be shown to have been (i) in the public domain through no fault
of such party, (ii) later lawfully acquired on a non-confidential basis from
other sources by the party to which it was furnished, (iii) independently
generated without reference to any proprietary or confidential information of
the other party, or (iv) information that may be disclosed pursuant to any
Ancillary Agreement). Neither party shall release or disclose any such
information to any other person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors who shall be advised of and
agree to comply with the provisions of this Section 6.6; provided, that with
respect to the matters identified on Schedule 6.6 hereof, no information may be
disclosed by either party under any circumstance without the prior written
consent of the other party hereto.
Section 6.7. Protective Arrangements. In the event that any party hereto
-----------------------
(or any of its subsidiaries) either determines on the advice of its counsel that
it is required to disclose any information pursuant to applicable law or
receives any demand under lawful process or from any Governmental Authority to
disclose or provide information of any other party hereto (or
25
<PAGE>
any of its subsidiaries) that is subject to the confidentiality provisions
hereof, such party shall notify the other party prior to disclosing or providing
such information and shall cooperate at the expense of the requesting party in
seeking any reasonable protective arrangements requested by such other party.
Subject to the foregoing, the Person that received such request may thereafter
disclose or provide information to the extent required by such law (as so
advised by counsel) or by lawful process or such Governmental Authority.
Section 6.8. Mail. After the Closing Date, each of Silicon Graphics and
----
the Company may receive mail, telegrams, packages and other communications
property belonging to the other. Accordingly, at all times after the Closing
Date, each of Silicon Graphics and the Company authorizes the other to receive
and open all mail, telegrams, packages and other communications received by it
and not unambiguously intended for the other party or any of the other party's
officers or directors specifically in their capacities as such, and to retain
the same to the extent that they relate to the business of the receiving party
or, to the extent that they do not relate to the business of the receiving party
and do relate to the business of the other party, or to the extent that they
relate to both businesses, the receiving party shall promptly contact the other
party by telephone for delivery instructions and such mail, telegrams, packages
or other communications (or, in case the same relate to both businesses, copies
thereof) shall promptly be forwarded to the other party in accordance with its
delivery instructions. The foregoing provisions of this Section 6.8 shall
constitute full authorization to the postal authorities, all telegraph and
courier companies and all other persons to make deliveries to Silicon Graphics
or the Company, as the case may be, addressed to either of them or to any of
their officers or directors specifically in their capacities as such. The
provisions of this Section 6.8 are not intended to and shall not be deemed to
constitute an authorization by either Silicon Graphics or the Company to permit
the other to accept service of process on its behalf, and neither party is or
shall be deemed to be the agent of the other for service of process purposes or
for any other purpose.
ARTICLE VII
DISPUTE RESOLUTION
Section 7.1. Agreement to Mediate. Except as otherwise specifically
--------------------
provided in any Ancillary Agreement, the procedures for discussion, negotiation
and mediation set forth in this Article VII shall apply to all disputes,
controversies or claims (whether sounding in contract, tort or otherwise) that
may arise out of or relate to, or arise under or in connection with this
Agreement or any Ancillary Agreement, or the transactions contemplated hereby or
thereby (including all actions taken in furtherance of the transactions
contemplated hereby or thereby on or prior to the date hereof), or the
commercial or economic relationship of the parties relating hereto or thereto,
between Silicon Graphics and its subsidiaries and the Company and its
subsidiaries.
26
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Section 7.2. Escalation. It is the intent of the parties to use their
----------
respective reasonable best efforts to resolve expeditiously any dispute,
controversy or claim between or among them with respect to the matters covered
hereby that may arise from time to time on a mutually acceptable negotiated
basis. In furtherance of the foregoing, any party involved in a dispute,
controversy or claim may deliver a notice (an "Escalation Notice") demanding an
-----------------
in person meeting involving representatives of the parties at a senior level of
management of the parties (or if the parties agree, of the appropriate strategic
business unit or division within such entity). A copy of any such Escalation
Notice shall be given to the General Counsel, or like officer or official, of
each party involved in the dispute, controversy or claim (which copy shall state
that it is an Escalation Notice pursuant to this Agreement). Any agenda,
location or procedures for such discussions or negotiations between the parties
may be established by the parties from time to time; provided, however, that the
parties shall use their reasonable best efforts to meet within 30 days of the
Escalation Notice.
Section 7.3. Demand for Mediation. At any time after the first to occur
--------------------
of (i) the date of the meeting actually held pursuant to the applicable
Escalation Notice or (ii) 90 days after the delivery of an Escalation Notice (as
applicable, the "Mediation Demand Date"), any party involved in the dispute,
---------------------
controversy or claim (regardless of whether such party delivered the Escalation
Notice) may make a written demand (the "Mediation Demand Notice") that the
-----------------------
dispute be submitted to mediation. Any opinion expressed by the mediator shall
not be binding on the parties, nor shall any opinion expressed by the mediator
be admissible in any subsequent proceedings. The mediator may be chosen from a
list of mediators previously selected by the parties or by other agreement of
the parties. Costs of the mediation shall be borne equally by the parties
involved in the matter, except that each party shall be responsible for its own
attorney's fees and other costs and expenses. The site of the mediation shall
be Mountain View, California, unless otherwise agreed by the parties. No party
may assert that the failure to resolve any matter during any discussions or
negotiations, the course of conduct during the discussions or negotiations or
the failure to agree on a mutually acceptable time, agenda, location or
procedures for the meeting, in each case, as contemplated by Section 7.2, is a
prerequisite to a demand for meditation under Section 7.3.
Section 7.4. Certain Additional Matters. (a) Either party may apply to
--------------------------
any court having jurisdiction and seek injunctive relief so as to maintain the
status quo until such time as the mediation is concluded or the controversy is
otherwise resolved.
(b) Except as required by law, the parties shall hold, and shall cause
their respective officers, directors, employees, agents and other
representatives to hold, the existence, content and result of mediation in
confidence in accordance with the provisions of Article VI. Each of the parties
shall request that any mediator comply with such confidentiality requirement.
(c) Notwithstanding anything herein to the contrary, in the event that any
party determines in good faith that the amount in controversy in any dispute,
controversy or claim (or any series of related disputes, controversies or
claims) under this Agreement or any
27
<PAGE>
Ancillary Agreement is, or is reasonably likely to be, in excess of $30 million,
the provisions of Section 7.3 shall not apply and any party may elect, in lieu
of mediation, to commence an Action with respect to such dispute, controversy or
claim (or such series of related disputes, controversies or claims) in any court
of competent jurisdiction.
Section 7.5. Continuity of Service and Performance. Unless otherwise
-------------------------------------
agreed in writing, the parties will continue to provide service and honor all
other commitments under this Agreement and each Ancillary Agreement during the
course of dispute resolution pursuant to the provisions of this Article VII with
respect to all matters not subject to such dispute, controversy or claim.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Termination. This Agreement may be terminated and the
-----------
Separation and/or the Initial Public Offering may be deferred, modified or
abandoned at any time prior to the Closing Date by and in the sole discretion of
the Board of Directors of Silicon Graphics without the approval of the Company.
In the event of such termination, no party hereto (or any of its respective
directors or officers) shall have any liability to any other party pursuant to
this Agreement.
Section 8.2. Expenses. (a) Except as specifically provided in this
--------
Agreement or in an Ancillary Agreement, all costs and expenses incurred in
connection with the interpretation, execution, delivery and implementation of
this Agreement and with the consummation of the transactions contemplated by
this Agreement shall be paid by the party incurring the expense. The
determination of who has incurred an expense shall be made by the Chief
Financial Officer of Silicon Graphics, which determination shall be binding and
final upon each of the parties hereto and not subject to further review.
(b) Underwriting commissions and discounts attributable to the shares of
Common Stock sold by each of the parties hereto in the Initial Public Offering
shall be paid by the party selling such share.
(c) It is understood and agreed that the Company and Silicon Graphics shall
pay the legal, filing, accounting, printing and other out-of-pocket expenditures
in connection with (i) the preparation, printing and filing of the Registration
Statement and (ii) sale of the shares of Common Stock in the Initial Public
Offering, including, without limitation, third party costs, fees and expenses
relating to the Initial Public Offering, all of the reimbursable expenses of the
Underwriters pursuant to the Underwriting Agreement, and all of the costs of
producing, printing, mailing and otherwise distributing the Prospectus, in the
same proportion as the number of shares of Common Stock sold by each of them in
the Initial Public Offering bears to
28
<PAGE>
the total number of shares sold in the Initial Public Offering (in each case
exclusive of any over-allotment option of the Underwriters under the
Underwriting Agreement).
[(d) All expenses incurred in connection with obtaining the New Credit
Facility shall be paid by the Company.]
Section 8.3. Notices. All notices and communications under this
-------
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been duly given when received addressed as follows:
If to Silicon Graphics, to:
2011 N. Shoreline Blvd.
Mountain View, California 94043
Attn: Director, Corporate Legal Services
Telecopy Number:
If to the Company, to:
Mountain View, California 94043
Attn: General Counsel
Telecopy Number:
Any party may, by written notice so delivered to the other party, change
the address to which delivery of any notice shall thereafter be made.
Section 8.4. Amendment and Waiver. This Agreement may not be altered or
--------------------
amended, nor may rights hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver.
No waiver of any terms, provision or condition of or failure to exercise or
delay in exercising any rights or remedies under this Agreement, in any one or
more instances shall be deemed to be, or construed as, a further or continuing
waiver of any such term, provision, condition, right or remedy or as a waiver of
any other term, provision or condition of this Agreement.
Section 8.5. Counterparts. This Agreement may be executed in one or more
------------
counterparts each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same Agreement.
Section 8.6. Governing Law; Jurisdiction; Forum. This Agreement shall be
----------------------------------
construed in accordance with, and governed by, the laws of the State of
California, without regard to the conflicts of law rules of such state. Each
party hereto expressly submits and consents in advance to the non-exclusive
jurisdiction of the State and Federal courts sitting in the City of
29
<PAGE>
San Francisco, State of California, in any Action between the parties arising
under this Agreement or under any Ancillary Agreement, and hereby waives any
claim that any such state or federal court is an inconvenient or improper forum.
Section 8.7. Entire Agreement. This Agreement including the schedules
----------------
hereto, together with the Ancillary Agreements, constitute the entire
understanding of the parties hereto with respect to the subject matter hereof,
superseding all negotiations, prior discussions and prior agreements and
understandings relating to such subject matter. To the extent that the
provisions of this Agreement are inconsistent with the provisions of any
Ancillary Agreements, the provisions of such Ancillary Agreement shall prevail.
Section 8.8. Parties in Interest. Neither of the parties hereto may
-------------------
assign its rights or delegate any of its duties under this Agreement without the
prior written consent of each other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Nothing contained in this Agreement, express
or implied, is intended to confer any benefits, rights or remedies upon any
person or entity other than Silicon Graphics and the Company, and Silicon
Graphics Indemnitees and Company Indemnitees under Article IV hereof.
Section 8.9. Tax Sharing Agreement. Notwithstanding any other provision
---------------------
of this Agreement to the contrary, any and all matters relating to Taxes shall
be exclusively governed by the Tax Sharing Agreement.
Section 8.10. Further Assurances and Consents. In addition to the
-------------------------------
actions specifically provided for elsewhere in this Agreement, each of the
parties hereto will use its reasonable efforts to (i) execute and deliver such
further instruments and documents and take such other actions as any other party
may reasonably request in order to effectuate the purposes of this Agreement and
to carry out the terms hereof and (ii) take, or cause to be taken, all actions,
and to do, or cause to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements or otherwise to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, using its reasonable efforts to obtain any
Consents and to make any filings and applications necessary or desirable in
order to consummate the transactions contemplated by this Agreement; provided
that no party hereto shall be obligated to pay any consideration therefor
(except for filing fees and other similar charges) to any third party from whom
such Consents and amendments are requested or to take any action or omit to take
any action if the taking of or the omission to take such action would be
unreasonably burdensome to the party or its business.
Section 8.11. Exhibits and Schedules. The Exhibits and Schedules shall
----------------------
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
30
<PAGE>
Section 8.12. Legal Enforceability. Any provision of this Agreement
--------------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
Section 8.13. Titles and Headings. Titles and headings to Sections
-------------------
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the day and year first above written.
SILICON GRAPHICS, INC.
By:__________________
Name:
Title:
MIPS TECHNOLOGIES, INC.
By:____________________
Name:
Title:
32
<PAGE>
SCHEDULE 1.1(a)
---------------
COMPANY CONTRACTS
-----------------
The detailed list of Company Contracts, including the appropriate
contracts with NEC Corporation, Toshiba Corporation, LSI Logic Corporation,
Philips Electronics N.V., Integrated Device Technology, NKK Corporation, Quantum
Effect Design, Inc. and Nintendo Co. Ltd., will be specifically agreed to by the
parties on or before the Closing Date.
<PAGE>
SCHEDULE 2.1(a)(i)
------------------
TANGIBLE PERSONAL PROPERTY
--------------------------
The detailed list of Tangible Personal Property will be specifically
agreed to by the parties on or before the Closing Date.
<PAGE>
SCHEDULE 2.1(a)(ii)
-------------------
INVENTORY
---------
The detailed list of Inventory will be specifically agreed to by the
parties on or before the Closing Date.
<PAGE>
SCHEDULE 2.1(a)(iii)
--------------------
RECEIVABLES
-----------
The detailed list of Receivables will be specifically agreed to by the
parties on or before the Closing Date.
<PAGE>
SCHEDULE 2.1(a)(iv)
-------------------
INTELLECTUAL PROPERTY AGREEMENTS
--------------------------------
Technology Agreement.
Trademark Agreement.
<PAGE>
SCHEDULE 2.1(a)(ix)
-------------------
SALES AND PROMOTIONAL MATERIAL
------------------------------
The detailed list of Sales and Promotional Material will be specifically
agreed to by the parties on or before the Closing Date.
<PAGE>
SCHEDULE 2.1(a)(x)
------------------
GOVERNMENTAL APPROVALS
----------------------
The detailed list of Government Approvals will be specifically agreed
to by the parties on or before the Closing Date.
<PAGE>
SCHEDULE 2.1(b)(i)
------------------
EXCLUDED ASSETS
---------------
The detailed list of Excluded Assets will be specifically agreed to by
the parties on or before the Closing Date.
<PAGE>
SCHEDULE 2.2(b)(i)
------------------
EXCLUDED LIABILITIES
--------------------
The detailed list of Excluded Liabilities will be specifically agreed to
by the parties on or before the Closing Date.
<PAGE>
SCHEDULE 2.6(b)
---------------
AGREEMENTS NOT TO TERMINATE
---------------------------
The detailed list of agreements not to terminate will be specifically
agreed to by the parties on or before the Closing Date.
<PAGE>
SCHEDULE 5.5(a)
---------------
COVERED CLAIMS
--------------
The detailed list of Covered Claims will be specifically agreed to by
the parties on or before the Closing Date.
<PAGE>
SCHEDULE 6.6
------------
NON-DISCLOSURE CONFIDENTIAL INFORMATION
---------------------------------------
The detailed list of non-disclosure confidential information will be
agreed to by the parties on or before the Closing Date.
<PAGE>
EXHIBIT 10.5
TECHNOLOGY AGREEMENT
This Technology Agreement ("Agreement") is made, entered into, and to be
effective as of the Closing Date (as defined below) ("Effective Date") by and
between Silicon Graphics, Inc., a Delaware corporation ("SGI") and MIPS
Technologies, Inc., a Delaware corporation ("MIPS").
RECITALS
WHEREAS, the Board of Directors of Silicon Graphics has determined that it
is in the best interests of Silicon Graphics and its shareholders to separate
the MIPS Business from Silicon Graphics' other operations;
WHEREAS, as part of the foregoing, SGI and MIPS have entered into a
Separation Agreement of even date herewith (the "Separation Agreement");
WHEREAS the parties desire to enter into this ancillary agreement pursuant
to which SGI will assign and license certain intellectual property to MIPS, and
MIPS will license back certain rights to SGI.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements, provisions and convenants contained in this Agreement, the parties
hereby agree as follows:
1. DEFINITIONS
1.1. "Affiliates" means shall mean any corporation or other entity that is
----------
directly or indirectly controlling, controlled by or under common
control with a party. For the purpose of this definition, "control"
shall mean the direct or indirect ownership of more than fifty percent
(50%) of the capital stock of the subject entity entitled to vote in
the election of directors (or, in the case of an entity that is not a
corporation, interests entitled to vote in the election of the
corresponding managing authority). For the purposes of this
Agreement, the term "Affiliate" shall not include MIPS where the term
Affiliates is used in connection with a period of time after the
Closing Date.
1.2. "Capture Period" means the period starting on the Closing Date and
--------------
ending on the later of (i) three years from the Closing Date, or (ii)
the date when SGI's owns less than 50% of the capital stock of MIPS.
1.3. "Closing Date" means the date of the closing of MIPS's initial public
------------
offering.
1.4. "Intellectual Property Rights" means (i) all Patents; (ii) all
----------------------------
copyrights in both published works and unpublished works, all
registrations and applications therefor and all associated moral
rights (collectively "Copyrights"); (iii) all rights in mask works
(collectively "Maskworks"); and (iv) all know-how, trade secrets,
<PAGE>
confidential information, customer lists, software, technical
information, data, process technology, plans, drawings, and blue
prints (collectively "Trade Secrets") whether arising under the laws
of the United States or any other state, country or jurisdiction.
1.5. "MIPS Capture Period Patents" means all patents and patent
---------------------------
applications filed by MIPS that have a first effective filing date
during the Capture Period.
1.6. "MIPS Field of Use" means any CPU, ASSP and ASIC which implements
-----------------
under license from MIPS, the MIPS ISA or derivative thereof that is
substantially compatible with the MIPS ISA.
1.7. "MIPS ISA" shall mean the instruction set architectures for MIPS
--------
Processor Components first developed by, for or with substantial
participation by MIPS including without limitation the MIPS I, MIPS
II, MIPS III, MIPS IV, MIPS V and successor instruction set
architectures or extensions thereto.
1.8. "MIPS Processor Know-How" means the know-how listed on Exhibit E.
-----------------------
1.9. "MIPS Patents" means the Patents listed on Exhibit A.
------------
1.10. "MIPS Processor Components" means a component of a processor within
-------------------------
the MIPS Field of Use designed by, for, or with substantial
participation by MIPS.
1.11. "MIPS Tools" means the Tools listed on Exhibit D.
----------
1.12. "Non-Patent IP Rights" means Trade Secrets, Maskworks, and
--------------------
Copyrights.
1.13. "Patents" means all classes or types of patents, utility models and
-------
design patents (including, without limitation, originals, divisions,
continuations, continuations-in-part, extensions or reissues), patent
applications and disclosures for these classes or types of patent
rights in all countries of the world (collectively "Patent Rights").
1.14. "SGI Compiler & Software Technology" means the know-how listed on
----------------------------------
Exhibit F.
1.15. "SGI Compiler & Software Patents" means the Patents listed on
-------------------------------
Exhibit F.
1.16. "SGI Capture Period Patents" only those patents and patent
--------------------------
applications filed by SGI that have a first effective filing date
during the Capture Period and constitute inventions arising from
improvements to the technology listed on Exhibit G.
1.17. "SGI Designed Products" means products based on designs developed
---------------------
by, for or with substantial participation by SGI or its Affiliates
which (i) do not substantially implement a MIPS ISA other than in
connection with a MIPS R10K processor
2
<PAGE>
implementation or enhanced derivatives thereof, or (ii) are in the
SGI Field of Use.
1.18. "SGI Exclusive Field of Use" means the field of use outside the MIPS
--------------------------
Field of Use.
1.19. "SGI Field of Use" means standalone desktop computers, workstations,
----------------
servers, mainframes, and minicomputers.
1.20. "SGI Group" means SGI and its Affiliates.
---------
1.21. "SGI Processor Know-How" means the know-how listed on Exhibit B.
----------------------
1.22. "SGI Processor Patents" mean the Patents listed on Exhibit B.
---------------------
1.23. "SGI Tools" means the Tools listed on Exhibit C.
---------
1.24. "SGI Tool Patents" means the Patents listed on Exhibit C.
----------------
1.25. "Sole SGI Tools" means the Tools listed on Exhibit C.1.
--------------
1.26. "Tools" means architectural verification tools, architectural
-----
modeling tools, design verification tools, and operating system
tools. Tools do not include Compiler & Software Technology.
2. MIPS TECHNOLOGY
2.1. Assignment to MIPS. SGI hereby sells, conveys, assigns and transfers
-------------------
to MIPS, and MIPS hereby accepts, all of SGI's right, title and
interest in and to the intellectual property and materials listed
below ("Assigned IP") together with all ancillary rights thereto,
including without limitation, the right to sue and recover damages for
past, present and future infringements and to fully and entirely stand
in the place of SGI in all matters related thereto. Upon MIPS's
reasonable request, SGI agrees to take further action and to execute
such additional documents (at MIPS's expense) as may be necessary to
perfect MIPS's title in and to the Assigned IP. Assigned IP
specifically includes and is limited to:
o MIPS Patents (as listed on Exhibit A);
o MIPS Processor Know-How (as listed on Exhibit E); and
o MIPS Tools (as listed on Exhibit D).
2.2. Processor Technology License to SGI. MIPS hereby grants to the SGI
-----------------------------------
Group, a non-exclusive, royalty-free, fully-paid, worldwide license,
under MIPS's Intellectual Property Rights in the MIPS Patents (as
listed on Exhibit A) and MIPS Processor Know-How (as listed on Exhibit
E) to:
3
<PAGE>
(a) make, have made, use, import, sell and otherwise dispose of
products, and practice any method or process in the
manufacture of products;
(b) use, modify, distribute, reproduce, display, and perform any
copyrighted or copyrightable work or Maskwork;
(c) sublicense such rights to third parties only in connection
with SGI Designed Products.
(d) In addition, the license set forth in this Section 2.2 shall
be an exclusive license within the SGI Exclusive Field of
Use, subject to any licenses granted by MIPS prior to the
Effective Date of this Agreement. This license shall be
reduced to a non-exclusive license only in the event the SGI
Group: (i) ceases to license, market, sell or otherwise
dispose of products that infringe, or practice any method or
process that infringes, any MIPS Patent or MIPS Processor
Know-How, and (ii) ceases to use the MIPS Processor Know-
How.
2.3. Tools License to SGI. MIPS hereby grants to the SGI Group, a non-
--------------------
exclusive, royalty-free, fully-paid, worldwide license, under MIPS's
Non-Patent IP Rights in the MIPS Tools (as listed on Exhibit D) to:
(a) make, have made, use, import, sell and otherwise dispose of
products, and practice any method or process in the
manufacture of products; and
(b) use, modify, distribute, reproduce, display, and perform any
copyrighted or copyrightable work.
(c) except for those Tools identified in Exhibit D as "Not
Sublicensable," sublicense the rights set forth in this
Section 2.3 to third parties in binary code format; provided
that those Tools that are identified on Exhibit D as "Source
Code Sublicensable" may be licensed by the SGI Group in
source code format.
2.4. Right to Retain Information. For the purposes of enjoying the rights
---------------------------
granted under this Section 2, SGI shall have the right to retain
copies of all materials included in and associated with the Assigned
IP.
3. SGI TECHNOLOGY
3.1. Processor Technology License to MIPS. SGI hereby grants to MIPS, a
------------------------------------
non-exclusive, royalty-free, fully-paid, worldwide license, within the
MIPS Field of
4
<PAGE>
Use, under SGI's Intellectual Property Rights in the SGI Processor
Patents and SGI Processor Know-How (as listed on Exhibit B) to:
(a) make, have made, use, import, sell and otherwise dispose of
MIPS Processor Components, and practice any method or
process in the manufacture of MIPS Processor Components; and
(b) use, modify, distribute, reproduce, display, and perform any
copyrighted or copyrightable work or Maskwork only in
connection with the use, development, manufacture, or
distribution of MIPS Processor Components.
(c) sublicense the rights granted in Section 3.1(a) and 3.1(b)
above to third parties.
3.2. Tools License to MIPS. SGI hereby grants to MIPS, a non-exclusive,
---------------------
royalty-free, fully-paid, worldwide license, within the MIPS Field of
Use, under SGI's Intellectual Property Rights in the SGI Tools Patents
and SGI Tools (as listed on Exhibit C) to:
(a) make, have made, use, import, sell and otherwise dispose of
MIPS Processor Components, and practice any method or
process in the manufacture of MIPS Processor Components; and
(b) use, modify, distribute, reproduce, display, and perform any
copyrighted or copyrightable work or Maskwork only in
connection with the use, development, manufacture, or
distribution of MIPS Processor Components.
(c) sublicense to third parties, only in binary format, those
SGI Tools specifically identified in Exhibit C as
"Sublicensable"; provided that those SGI Tools specifically
identified in Exhibit C as "Source Code Licensable" may be
sublicensed by MIPS in source code format.
(d) The above license shall be a sole license with respect to
the Sole SGI Tools, subject to any licenses granted by SGI
prior to the Effective Date of this Agreement. This license
shall be reduced to a non-exclusive license with respect to
any Sole SGI Tool in the event MIPS ceases to license,
market, sell or otherwise dispose of MIPS Processor
Components that use such Sole SGI Tool.
3.3. Compiler & Software Technology License to MIPS. SGI hereby grants to
----------------------------------------------
MIPS, a non-exclusive, royalty-free, fully-paid, worldwide license,
within the MIPS Field of Use, under SGI's Intellectual Property Rights
in the SGI Compiler & Software Technology and SGI Compiler & Software
Patents (as listed on Exhibit F) to:
5
<PAGE>
(a) use, modify, and reproduce (for internal use only) the SGI
Compiler & Software Technology only in connection with the
development of MIPS Processor Components;
(b) Under the SGI Compiler & Software Patents to make, have
made, use, import, sell and otherwise dispose of MIPS
Processor Components, and practice any method or process in
the manufacture of MIPS Processor Components; and
(c) MIPS shall have the right to sublicense only that SGI
Compiler & Software Technology and those SGI Compiler &
Software Patents identified in Exhibit F as "Sublicensable"
to third parties. All such sublicenses of SGI Compiler &
Software Technology shall be in binary format only; provided
that that SGI Compiler & Software Technology specifically
identified in Exhibit F as "Source Code Licensable" may be
sublicensed by MIPS in source code format.
3.4. No Foundry Rights. MIPS understands and acknowledges that the
-----------------
licenses granted under Sections 3.2 and 3.3 are intended to cover only
MIPS Processor Components and are not intended to cover foundry
activities that MIPS may undertake on behalf of third parties.
3.5. Third Party Rights. MIPS understand that some the technology and
------------------
materials assigned or licensed to MIPS hereunder contains third party
technology. MIPS agrees that: (i) SGI's obligations and MIPS's
licenses under this Section 3 are subject in all cases to any
restrictions, limitations or obligations contained in agreements
entered into between SGI and third parties, (ii) MIPS shall be solely
responsible for obtaining such licenses or consents, (iii) MIPS agrees
that in the event any third party licenses or consents are required,
MIPS will obtain such third party licenses, and MIPS will undertake
all efforts necessary to protect SGI's rights and meet SGI's
obligations under agreements with third parties to the extent such
rights and obligations are affected by this Agreement.
4. FUTURE TECHNOLOGY
4.1. MIPS Capture Period Patents. MIPS hereby grants to the SGI Group, a
---------------------------
non-exclusive, royalty-free, fully-paid, worldwide license, including
the right to sublicense, under the MIPS Capture Period Patents to
make, have made, use, import, sell and otherwise dispose of SGI
Designed Products, and practice any method or process in the
manufacture of SGI Designed Products.
4.2. SGI Capture Period Patents. SGI hereby grants to MIPS, a non-
--------------------------
exclusive, royalty-free, fully-paid, worldwide license, including the
right to sublicense, within the MIPS Field of Use, under the SGI
Capture Period Patents to make, have made, use, import, sell and
otherwise dispose of MIPS Processor Components, and
6
<PAGE>
practice any method or process in the manufacture of MIPS Processor
Components.
4.3. Improvements to SGI Tools and MIPS ISA.
--------------------------------------
4.3.1. License. MIPS hereby grants to the SGI Group, a non-
-------
exclusive, royalty-free, fully-paid, worldwide license under
MIPS's Non-Patent IP Rights to any improvements or other
changes made by MIPS to the SGI Tools licensed to MIPS, the
SGI Compiler & Software Technology, or to the MIPS ISA ("MIPS
Improvements") during the Capture Period, including the right
to:
(i) make, have made, use, import, sell and otherwise
dispose of products, and practice any method or process
in the manufacture of products; and
(ii) to use, modify, distribute, reproduce, display, and
perform any copyrighted or copyrightable work.
4.3.2. Conditions. Any licenses granted pursuant to Section 4.3.1
----------
and any obligation to provide materials relating to MIPS
Improvements shall be subject to any third party obligations
of MIPS with respect to any such MIPS Improvements. MIPS shall
deliver all MIPS Improvements to SGI when MIPS makes such MIPS
Improvements generally available to MIPS customers and
licensees or upon SGI's reasonable written request provided
that SGI may request MIPS Improvements no more once in any six
(6) month period. MIPS shall deliver the applicable changes to
software source code and any reasonably available supporting
documentation.
4.3.3. Additional License. Upon the SGI Group's request, MIPS shall
------------------
license to the SGI Group under commercially favorable terms,
any MIPS Improvements or other MIPS technology or designs it
makes available to its customers or third parties, not already
licensed hereunder. MIPS shall deliver all such technology
when MIPS makes such it generally available to MIPS customers
and licensees or upon SGI's reasonable written request
provided that SGI may make such request no more once in any
six (6) month period. MIPS shall deliver the applicable
changes to software source code and any reasonably available
supporting documentation.
5. DISCLAIMER
5.1. No Implications. Nothing contained in this Agreement shall be
---------------
construed as:
7
<PAGE>
5.1.1. A representation or warranty by either of the parties to this
Agreement as to the validity, enforceability or scope of any
class or type of Intellectual Property Rights;
5.1.2. A warranty or representation that anything made, used sold or
otherwise disposed of under any assignment or license set
forth in this Agreement is or will be free from infringement
of any third party Intellectual Property Rights other than
those which are assigned or licensed hereunder;
5.1.3. Except as explicitly set forth in Section 9, an agreement to
bring or prosecute or any grant of a right to bring or
prosecute actions or suits against third parties for
infringement;
5.1.4. Requiring either party to obtain the right to license to the
other, third party technology contained in any know-how,
software or other materials licensed, assigned or provided
hereunder. The parties agree that the receiving party shall be
solely responsible for obtaining any necessary third party
licenses;
5.1.5. Except as expressly set forth herein, requiring a party to
furnish or disclose technical information, know-how,
improvements, support or other information or assistance to
the other party; or
5.1.6. Conferring by implication, estoppel or otherwise, upon either
party licensed hereunder, any license or other right under any
Intellectual Property Rights except the assignments, licenses
and rights expressly granted hereunder regardless of whether
such Intellectual Property Rights are dominant or subordinate
to the rights granted hereunder.
5.2. No Warranties. EACH PARTY HEREBY DISCLAIMS ANY EXPRESS OR IMPLIED
-------------
WARRANTIES WITH RESPECT TO THE INTELLECTUAL PROPERTY RIGHTS OR RELATED
MATERIALS LICENSED HEREUNDER, INCLUDING WITHOUT LIMITATION THE
WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENT OR FITNESS FOR A
PARTICULAR PURPOSE.
6. CONFIDENTIALITY
6.1. Obligation. MIPS and SGI each acknowledges that by reason of its
----------
relationship with the other party, it has and will have access to
certain information and materials that is confidential and of
substantial value to the other party ("Confidential Information"),
which value would be impaired if such information were disclosed to
third parties. Each party agrees that, except as specifically
authorized hereunder, it will not use in any way for its own account
or the account of any third party, nor disclose to any third party,
any such Confidential Information, and will take every reasonable
precaution to protect the
8
<PAGE>
confidentiality of such information which shall in no event be less
than the industry standard and shall include: entering into non-
disclosure agreements with third parties prior to disclosing any
Confidential Information that the other party grants permission to
disclose, entering into employment agreements with all employees
requiring employees to protect Confidential Information, providing to
employees access to Confidential Information on a need to know basis
only, password protect servers and files that contain Confidential
Information, restricting access to confidential information by third
parties (including contractors), storing Confidential Information in
locked files or rooms. Upon request by a party, the other party will
advise the requesting party whether or not it considers any particular
information or materials to be Confidential Information.
6.2. Transfer of Information. MIPS acknowledges that (i) all technical
-----------------------
information, know-how, software, or other materials (excluding non-
technical business materials) transferred by MIPS from SGI are listed
on Exhibits to this Agreement, (ii) information in electronic format
was transferred to clean servers and only information set forth in
Exhibits to this Agreement or otherwise authorized in writing by an
SGI officer was transferred to such servers, and (iii) MIPS has no
access to the SGI Group's servers as of the Closing Date or as
mutually agreed. MIPS agrees to promptly return or destroy all copies
of any unauthorized SGI Confidential Information in its possession or
control. MIPS agrees that SGI, during the Capture Period, shall have
the right to audit MIPS's servers, files, and premises to ensure
compliance with this Section 6. In the event SGI discovers
unauthorized use of SGI Confidential Information, MIPS shall pay the
cost of the audit and shall use its best efforts to correct such
unauthorized use, including without limitation, obtaining a license to
use such information, destroying or returning such information, and
ceasing to license or distribute products or materials that contain
such information.
6.3. Exceptions. The foregoing restrictions will not apply to information
----------
that (i) has become publicly known through no wrongful act of the
receiving party; (ii) has been rightfully received from a third party
authorized to make such disclosure without restriction; (iii) has been
independently developed by the receiving party after the Closing Date
of this Agreement; (iv) has been approved for release by written
authorization of the disclosing party, or (v) is required by law or
regulation to be disclosed; provided, however, that the receiving has
provided written notice to the disclosing party promptly to enable
disclosing party to seek a protective order or otherwise prevent
disclosure of Confidential Information.
6.4. Term. The obligations of each party pursuant to this Section 6 with
----
respect to Confidential Information shall continue in full force and
effect for a period of ten (10) years after the Effective Date of this
Agreement; provided that if the disclosing party requests an
additional ten (10) year period for maintaining the confidentiality of
any specified Confidential Information, the obligations under
9
<PAGE>
this Section 6 shall continue with respect to such Confidential
Information for an additional ten (10) years.
6.5. Injunctive Relief. Each party acknowledges that any breach of any of
-----------------
its obligations under this Section 6 may cause irreparable harm and
significant injury to the disclosing party to an extent that may be
extremely difficult to measure. Accordingly, the receiving party
agrees that the disclosing party will have, in addition to any other
rights or remedies available to it at law or in equity, the right to
seek injunctive relief to enjoin any breach of this Section 6.
7. TERM AND TERMINATION
7.1. Term. This Agreement and the rights and licenses granted hereunder
----
shall become effective on the Effective Date and shall continue in
effect, unless terminated as provided below, until the latter of: (i)
expiration, revocation, invalidation or abandonment of the last Patent
licensed hereunder, or (ii) the parties cease to use the Non-Patent IP
Rights.
7.2. Termination
-----------
7.2.1 Termination for Bankruptcy. Either party may terminate this
--------------------------
Agreement effective immediately and without liability upon written
notice to the other party if any one of the following event occurs:
(a) he other party files a voluntary petition in bankruptcy or
otherwise seeks protection seeks protection under any law
for the protection of debtors;
(b) A proceeding is instituted against the other party under any
provision of any bankruptcy laws which is not dismissed
within ninety (90) days;
(c) Any adjudication that the other party is bankrupt or
insolvent;
(d) A court assumes jurisdiction of all or a substantial portion
of the assets of the other party under a reorganization law;
(e) A trustee or receiver is appointed by a court for all or a
substantial portion of the assets of the other party;
(f) The other party becomes insolvent, ceases or suspends
business;
(g) The other party makes an assignment of the majority of its
assets for the benefit of its creditor; or
10
<PAGE>
(h) The other party admits in writing its inability to pay its
debts as they become due.
7.2.2. Termination for Breach. If MIPS materially breaches any
----------------------
material term or condition of this Agreement, then upon forty-
five (45) days written notice to MIPS specifying the default
("Notice of Default"), SGI may terminate or suspend this
Agreement, without liability, unless the default reasonably
requires more than forty-five (45) days to correct and MIPS has
begun substantial corrective actions to remedy the default and
is diligently pursuing such actions, in which event, MIPS shall
have so much time as is reasonably necessary to cure such
default.
7.3. Effect of Termination. (a) In the event of termination pursuant to
---------------------
Section 7.2 above, the party terminating the Agreement pursuant to
Section 7.2 above shall retain all licenses and rights granted to it
under this Agreement for the term of the Agreement, and all licenses
granted to the other party shall terminate subject to any sublicenses
previously granted, and (b) the following sections shall survive any
termination or expiration of the Agreement: Sections 2.1, 2.4, 5, 6,
7, 8, 9 and 10.
8. ASSIGNMENT AND CHANGE OF CONTROL
8.1. Assignment. This Agreement is personal to MIPS and the Agreement or
----------
any right or obligation under it may not be assigned by MIPS without
the prior written consent of SGI (except for a Change of Control as
defined below). SGI may freely assign this Agreement provided that in
such case, the licenses granted to SGI under Section 2.2 above shall
be limited to the SGI Field of Use unless otherwise agreed to by MIPS
in writing. Any purported assignment, except as explicitly permitted
herein, shall be deemed a breach of this Agreement and shall be null
and void. This Agreement shall be binding upon and inure to the
benefit of the parties and their permitted successors and assigns.
8.2. Change of Control.
-----------------
8.2.1. MIPS. Except where SGI's sale of MIPS capital stock to a
----
third party results in a Change of Control, in the event more
than fifty (50%) of the outstanding shares or securities
(representing the right to vote for the election of directors
or other managing authority) of MIPS becomes owned or
controlled directly or indirectly by a third party ("Change of
Control"), MIPS shall promptly give notice to SGI of such
Change of Control. Upon such Change of Control the licenses
granted to MIPS pursuant to Section 3 above shall immediately
terminate except that in the event after such Change of
Control, MIPS is kept by the acquirer as an intact and
independent business unit recognizable as the same business
unit that existed prior to the Change of Control, then: (i)
MIPS's licenses shall be restricted to the MIPS business unit
only and not the acquirer's
11
<PAGE>
other business units, and (ii) SGI's licenses under Section 4
above shall be limited to Patents obtained or filed, and
improvements developed, by MIPS only and not the acquirer's
other business units. If MIPS is not maintained as a
independent business unit as set forth above then: (i) SGI's
licenses under Section 4 above shall apply to all Patents
obtained or filed, and improvements developed, by the acquirer
or any of its business units, and (ii) MIPS license will
terminate, provided that in the event there is a pre-existing
license agreement between SGI and the acquirer, the licenses
shall continue within the scope of such preexisting licenses
subject to the payment of any royalties due SGI under such pre-
existing agreement.
8.2.2. SGI. In the event more than fifty (50%) of the outstanding
---
shares or securities (representing the right to vote for the
election of directors or other managing authority) of SGI
becomes owned or controlled directly or indirectly by a third
party the licenses granted to SGI pursuant to Section 2.2 above
shall be limited to use only within the SGI Field of Use.
8.3. MIPS understands that SGI may divest some or all of its assets in the
future; and MIPS agrees to grant such new entity a non-exclusive
license similar in scope and on similar terms and conditions upon
SGI's written request.
9. INFRINGEMENT ACTIONS
9.1. Infringement Actions within SGI's Field of Use. For so long as the
----------------------------------------------
licenses granted to SGI under the MIPS Patents under Section 2.2 above
remain exclusive, MIPS agrees that SGI can bring suit, without MIPS's
consent, against any third party infringing the MIPS Patents within
the SGI Exclusive Field of Use. MIPS agrees, at SGI's expense, to
make available at reasonable times and under appropriate conditions
all relevant personnel, records, papers, information, samples,
specimens and other similar materials in its possession. MIPS agrees
to provide, at SGI's expense, all cooperation reasonably necessary or
useful to allow SGI to litigate or settle such suit, including without
limitation, becoming party to the suit.
9.2. Request to Bring Suit. In the event a Party reasonably believes that
---------------------
a third party infringes one or more of the patents licensed to it
pursuant to this Agreement, it may request that the other party
("Patent Owner") bring an infringement action against such third party
infringer. Upon receiving such request, the Patent Owner shall use
its reasonable efforts to file such claim unless the Patent Owner can
demonstrate that it is not commercially reasonable for it to do so.
The requesting party shall reimburse Patent Owner for all costs and
expenses associated with filing, litigating and settling such claim.
12
<PAGE>
10. GENERAL
10.1. All Other Technology. The parties agree that the technical
--------------------
materials and Intellectual Property Rights assigned or licensed to
MIPS are limited to those expressly provided for hereunder. All other
technology, materials and information (excluding non-technical
business materials) under SGI's control shall, as between the
parties, be owned exclusively by SGI, and MIPS shall have no rights
or interest in such technology, materials and information unless
expressly provided in the Trademark Agreement or the Separation
Agreement. MIPS shall not remove any tangible materials embodying
such Intellectual Property Rights or information from SGI's premises
other than those listed on the Exhibits attached to this Agreement.
10.2. Confidentiality of Agreement. Each party agrees that the terms and
----------------------------
conditions of this Agreement shall be treated as confidential
information and that neither party will disclose the terms or
conditions to any third party without the prior written consent of
the other party, provided, however, that each party may disclose the
terms and conditions of this Agreement, to the extent necessary:
(a) as required by any court or other governmental body;
(b) as otherwise required by law;
(c) to legal counsel of the parties, accountants, and other
professional advisors;
(d) in confidence, to banks, investors and other financing sources
and their advisors;
(e) in connection with the enforcement of this Agreement or rights
under this Agreement; or
(f) in confidence, in connection with an actual or prospective merger
or acquisition or similar transaction
With respect to disclosure required by a court order, the disclosing party
shall provide prior notification of such impending disclosure to the non-
disclosing party. All reasonable efforts to preserve the confidentiality of the
terms of this Agreement shall be expended by the disclosing party in complying
with such an order, including obtaining a protective order to the extent
reasonably possible. The parties shall cooperate in preparing and releasing an
announcement or other form of publicity, if any, relating to this Agreement.
10.3. Export Controls. Each party understands and acknowledges that
---------------
certain technology licensed or assigned hereunder is subject to
regulation by agencies of
13
<PAGE>
the U.S. government, including the U.S. Department of Commerce, which
prohibit export or diversion of certain products and technology to
certain countries. Each party warrants that it will comply in all
respects with the export restrictions applicable to any materials or
technology provided hereunder and will otherwise comply with the
Export Administration Regulations or other United States laws and
regulations in effect from time to time.
10.4. Other General Terms. The terms and conditions set forth in Sections
-------------------
7, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, and 8.13
of the Separation Agreement are hereby incorporated by reference.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the date set forth above.
MIPS Technologies, Inc. Silicon Graphics, Inc.
By:____________________________ By:____________________________
Signature Signature
Name:__________________________ Name:__________________________
Print or Type Print or Type
Title:_________________________ Title:_________________________
Date:__________________________ Date:__________________________
14
<PAGE>
EXHIBIT A
MIPS PATENTS
Certain patents currently owned by SGI that are related to the MIPS ISA and MIPS
architecture and which will be assigned to MIPS hereunder. The detailed list of
patents will be specifically agreed to by the parties on or before the Closing
Date.
15
<PAGE>
EXHIBIT B
SGI PROCESSOR KNOW-HOW AND SGI PROCESSOR PATENTS
SGI Processor Patents
- ---------------------
Certain patents owned by SGI that are related to the MIPS ISA and MIPS
architecture which will be licensed to MIPS hereunder. The detailed list of
patents will be specifically agreed to by the parties on or before the Closing
Date.
SGI Processor Know-How
- ----------------------
Certain know-how related to the MIPS ISA and MIPS architecture which will be
licensed to MIPS hereunder. The detailed list of know-how will be specifically
agreed to by the parties on or before the Closing Date.
16
<PAGE>
EXHIBIT C
SGI TOOLS AND SGI TOOL PATENTS
C.1 Sole SGI Tools
--------------
Certain architectural verification tools, architectural modeling tools, design
verification tools, and operating system tools owned by SGI which will be
licensed to MIPS hereunder under a sole license. The detailed list of Sole SGI
Tools will be specifically agreed to by the parties on or before the Closing
Date.
C.2 SGI Tools
---------
Certain architectural verification tools, architectural modeling tools, design
verification tools, and operating system tools owned by SGI which will be
licensed to MIPS hereunder under a non-exclusive license. The detailed list of
SGI Tools will be specifically agreed to by the parties on or before the Closing
Date.
C.3 SGI Tool Patents
----------------
Certain patents owned by SGI which relate to architectural verification tools,
architectural modeling tools, design verification tools, and operating system
tools, and which will be licensed to MIPS hereunder under a non-exclusive
license. The detailed list of SGI Tool Patents will be specifically agreed to
by the parties on or before the Closing Date.
17
<PAGE>
EXHIBIT D
MIPS TOOLS
Certain architectural verification tools, architectural modeling tools, design
verification tools, and operating system tools currently owned by SGI which will
be assigned to MIPS hereunder. The detailed list of MIPS Tools will be
specifically agreed to by the parties on or before the Closing Date. The list
will also specifically identify those MIPS Tools that are not sublicensable, and
those MIPS Tools which may be sublicensed in source code format, by SGI under
SGI's license to the MIPS Tools.
18
<PAGE>
EXHIBIT E
MIPS MICROPROCESSOR KNOW-HOW
Certain know-how related to the MIPS ISA and MIPS architecture currently owned
by SGI which will be assigned to MIPS hereunder. The detailed list of know-how
will be specifically agreed to by the parties on or before the Closing Date.
19
<PAGE>
EXHIBIT F
SGI COMPILER & SOFTWARE TECHNOLOGY
AND SGI COMPILER & SOFTWARE PATENTS
SGI Compiler & Software Technology
- ----------------------------------
Certain compiler software and tools, and other software owned by SGI which will
be licensed to MIPS hereunder. The detailed list of SGI Compiler & Software
Technology will be specifically agreed to by the parties on or before the
Closing Date.
SGI Compiler & Software Patents
- -------------------------------
Certain patents owned by SGI relating to compiler technology which will be
licensed to MIPS hereunder. The detailed list of SGI Compiler & Software
Patents will be specifically agreed to by the parties on or before the Closing
Date.
20
<PAGE>
EXHIBIT G
SGI CAPTURE PERIOD PATENTS
Certain technology to which improvements may be made by SGI, in its sole
discretion. The detailed list of such technology will be specifically agreed to
by the parties on or before the Closing Date.
21
<PAGE>
EXHIBIT 10.6
TRADEMARK AGREEMENT
TRADEMARK AGREEMENT ("Agreement") dated as of _____, 1998 by and between
Silicon Graphics, Inc., a Delaware corporation ("SGI"), and MIPS Technologies
---
Inc., a Delaware corporation (together with its successors and permitted
assigns, "MIPS").
----
RECITALS
WHEREAS, the Board of Directors of SGI has determined that it is in the
best interests of SGI and its shareholders to separate the Company Business from
SGI's other operations;
WHEREAS, as part of the foregoing, SGI and MIPS have entered into a
Separation Agreement, dated on even date herewith (the "Separation Agreement"),
--------------------
which provides, among other things, for the Separation of the Company Business
from SGI's other operations, the Initial Public Offering, and the execution and
delivery of certain ancillary agreements to facilitate and provide for the
foregoing; and
WHEREAS, the parties desire to enter into this ancillary agreement pursuant
to which SGI will assign certain trademark and trademark-related rights to MIPS,
and MIPS will license back certain rights to SGI.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements, provisions and covenants contained in this Agreement, the parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1. "Affiliates" means shall mean any corporation or other entity that is
----------
directly or indirectly controlling, controlled by or under common
control with a party. For the purpose of this definition, "control"
shall mean the direct or indirect ownership of more than fifty percent
(50%) of the capital stock of the subject entity entitled to vote in
the election of directors (or, in the case of an entity that is not a
corporation, interests entitled to vote in the election of the
corresponding managing authority). For the purposes of this
Agreement, the term "Affiliate" shall not include MIPS where the term
Affiliates is used in connection with a period of time after the
Closing Date.
1.2 "Closing Date" means the date of the closing of MIPS's initial
------------
public offering.
1.3 "Licensed Product" means a product that is designed by or for the
----------------
SGI Group that is substantially compatible with the MIPS ISA or is
capable of operating in conjunction with a MIPS processor.
<PAGE>
1.4 "MIPS ISA" shall mean the instruction set architectures for MIPS
--------
Processor Components first developed by, for or with substantial
participation by MIPS including without limitation the MIPS I, MIPS
II, MIPS III, MIPS IV, MIPS V and successor instruction set
architectures.
1.5 "MIPS Marks" means all Trademarks listed on Exhibit A.
----------
1.6 "SGI Group" means SGI and its Affiliates.
---------
1.7 "Trademark Rights" means trademarks, service marks, trade dress,
----------------
logos, trade names and corporate names, whether or not registered,
including all common law rights, and registrations and applications
for registration thereof, including but not limited to, all marks
registered with the United States Patent and Trademark Office, the
Trademark Offices of the States and Territories of the United States
of America, and the Trademark Offices of other nations throughout the
world, and all rights provided by multinational treaties or
conventions.
1.8 The following terms shall have the meanings set forth for the
corresponding defined terms in the Separation Agreement: Initial
-------
Public Offering, Company Business, and Separation.
--------------- ---------------- ----------
ARTICLE 2
ASSIGNMENT OF THE MIPS MARKS
2.1. Assignment to MIPS. SGI hereby assigns and conveys to MIPS, and MIPS
------------------
hereby accepts and receives, all of SGI's right, title and interest in and to
the MIPS Marks and related goodwill throughout the world. These rights shall
include, but shall not be limited to, all rights to use, copy, modify and
exploit the MIPS Marks; the right to exclude others from using the MIPS Marks;
the right to license, assign, convey, and pledge the MIPS Marks to others; the
right to sue others and to collect damages for past, present and future
infringements of the MIPS Marks; the right to create derivatives of the MIPS
Marks and to retain full ownership of such derivatives; the right to file and
prosecute applications to protect the Trademark Rights in the MIPS Marks,
together with all priority rights, under any existing or future international
convention, union, agreement, act or treaty.
2.2. Further Acts. SGI agrees to, upon MIPS's reasonable request and at
------------
MIPS's expense, to execute and deliver to MIPS or its legal representative all
papers, instruments or affidavits required to apply for, obtain, maintain, issue
and enforce the Trademark Rights in the MIPS Marks. SGI hereby requests that
the United States Patent and Trademark Office and the corresponding offices in
all state, local and foreign jurisdictions issue to MIPS all registrations for
the Trademark Rights in the MIPS Marks.
ARTICLE 3
LICENSE OF THE MIPS MARKS
<PAGE>
3.1 Grant of License. MIPS hereby grants to the SGI Group, and the SGI
----------------
Group hereby accepts and receives, a paid-up, royalty-free, non-exclusive,
worldwide right and license, including with right to sublicense, to use the MIPS
Marks on or in connection with the sale, license, lease or rental of Licensed
Products.
3.2 Ownership of the Marks. The SGI Group acknowledges that MIPS owns
----------------------
each of the MIPS Marks and all of the worldwide rights in and to the MIPS Marks.
The SGI Group further acknowledges that any and all goodwill arising from the
SGI Group's use of the MIPS Marks shall inure solely to the benefit of MIPS, and
the SGI Group shall not assert any claim to such goodwill. The SGI Group agrees
that nothing in this Agreement shall give the SGI Group any right, title or
interest in the MIPS Marks other than the right to use the MIPS Marks in
accordance with this Agreement and the SGI Group agrees that it will not attack
the title of MIPS to the MIPS Marks or attack the validity of this Agreement.
The SGI Group agrees that it shall not file nor cause the filing of any
applications to register any mark identical or similar to the MIPS Marks
throughout the world, and upon MIPS's request, the SGI Group shall immediately
transfer all of its right, title and interest in such applications or
registrations to MIPS.
3.3 Quality Control. The SGI Group shall use the MIPS Marks consistent
---------------
with the form shown in Exhibit A, or as otherwise reasonably requested by MIPS.
The SGI Group shall use the MIPS Marks in a manner that is consistent with, and
does not detract from, the goodwill associated with the MIPS Marks. The SGI
Group agrees to cooperate with MIPS in maintaining MIPS's control of the nature
and quality of the goods with which the MIPS Marks are used.
ARTICLE 4
TERM AND TERMINATION
4.1 Term. Unless earlier terminated pursuant to Section 4.2, this
----
Agreement shall terminate when the SGI Group ceases to use the Trademark Rights
license hereunder.
4.2 Termination. MIPS shall have the right to terminate this Agreement
-----------
effective immediately upon SGI's receipt of written notice from MIPS in the
event of any affirmative act of insolvency by SGI, or upon the appointment of
any receiver or trustee to take possession of the properties of SGI or upon the
winding-up, sale, consolidation, merger or any sequestration by governmental
authority of SGI, or upon any material breach of any of the duties and
obligations of SGI under this Agreement.
4.3 Effects of and Procedure on Termination. Upon expiration or
---------------------------------------
termination of this Agreement, the SGI Group agrees to discontinue all use of
the MIPS Marks provided that the SGI Group and its sublicenses may sell, rent,
lease or license any Licensed Product stock on hand. The parties acknowledge
and agree that all rights in the MIPS Marks and the goodwill connected therewith
shall remain the property of MIPS upon expiration or termination of this
Agreement.
<PAGE>
ARTICLE 5
MISCELLANEOUS
5.1 Incorporation of the Separation Agreement. In addition to the
-----------------------------------------
definitions in Section 1.8, the following terms of the Separation Agreement are
incorporated by reference as if fully set forth herein:
Section 2.4 No Representations or Warranties; Consents
Article IV Indemnification
Article VII Dispute Resolution
Section 8.2 Expenses
Section 8.3 Notices
Section 8.4 Amendment and Waiver
Section 8.5 Counterparts
Section 8.6 Governing Law; Jurisdiction; Forum
Section 8.7 Entire Agreement
Section 8.8 Parties in Interest
Section 8.9 Tax Sharing Agreement
Section 8.10 Further Assurances and Consents
Section 8.11 Exhibits and Schedules
Section 8.12 Legal Enforceability
Section 8.13 Titles and Headings
5.2 Relationship of the Parties. This Agreement does not constitute and
---------------------------
shall not be construed as constituting a partnership or joint venture or grant
of a franchise between MIPS and SGI.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the day and year first written above.
SILICON GRAPHICS, INC.
[Name]
[Title]
MIPS TECHNOLOGIES INC.
[Name]
[Title]
<PAGE>
EXHIBIT 10.7.1
[XXXXXX]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
JOINT DEVELOPMENT AND LICENSE AGREEMENT
This JOINT DEVELOPMENT AND LICENSE AGREEMENT is made the 20/th/ day of August,
1993, among Nintendo Co., Ltd., a Japan corporation having a place of business
at 60 Fukuine Kamitakamatsu-cho, Higashiyama-ku, Kyoto 605, Japan ("NCL"),
Nintendo of America Inc., a Washington corporation, having a place of business
at 4820 150/th/ Avenue NE, Redmond, WA 98052 ("NOA") (NCL and NOA are
collectively referred to as "Company"), Silicon Graphics, Inc., a Delaware
corporation and MIPS Technologies, Inc., a Delaware corporation, both of which
have a place of business at 2011 North Shoreline Blvd., Mountain View, CA 94039-
7311 (collectively, "SGI").
WHEREAS, SGI (i) is in the business of designing, manufacturing and marketing
computer graphics workstation, server, subsystem, board level, and
microprocessor products, including accessories, options and software therefor,
and (ii) possesses expertise and owns proprietary rights relating to its
products, including, but not limited to, copyrights, know-how, inventions, trade
secrets, patents, patent applications and the like;
WHEREAS, Company (i) is in the business of: developing, manufacturing and
distributing high quality entertainment systems, including the Nintendo
Entertainment System(R), the Super Nintendo Entertainment System(R), the
Famicom(TM), the Super Famicom(TM), and the Game Boy(R) compact video game
system, and (ii) possesses expertise and owns proprietary rights relating to its
products, including, but not limited to, copyrights, know-how, inventions, trade
secrets, patents, patent applications and the like; and
WHEREAS, the parties desire to conduct joint development of products which will
incorporate certain existing technology of SGI, and new technology to be jointly
developed by the parties;
NOW, THEREFORE, in furtherance of the foregoing, and in consideration of the
mutual covenants set forth below, Company and SGI hereby agree as follows:
1. DEFINITIONS
1.1 "ACCESSORY" means a peripheral device which mechanically or
electrically connects to the Consumer Hardware to enhance the application
software. Examples of an Accessory include, but are not limited to: a
specialized joystick, head-mounted display or a CD ROM player.
1.2 "AFFILIATE" means any Person that directly or indirectly controls, is
controlled by, or is under common control with another Person.
1.3 "AGREEMENT" means this Joint Development and License Agreement.
1.4 "BACKGROUND TECHNOLOGY" means all Technology which (i) is under the
Control of SGI, (ii) was developed by SGI prior to the Effective Date or is
under development by SGI as of the Effective Date, and (iii) is implemented into
the design of one or more Company Products, including but not limited to, the
Technology specified in Attachment A to this Agreement.
1.5 "COIN OPERATED HARDWARE" means a dedicated screen and speaker which
are fully integrated so as to compromise a single physical unit or multiple
physical units, when such hardware (i) remains free-standing and stationary
during play, (ii) requires the player to insert coins, paper currency, credit
cards or tokens in a metering device to initiate Video Game play or non-Video
Game applications, (iii) is otherwise designed for installation at arcades or
other retail or commercial establishments, and (iv) has a wholesale price of
less than U.S. $30,000.00.
1.6 "COIN OPERATED SOFTWARE" means Video Game and Non-Video Game software
applications for use with the Coin-Operated Hardware.
1.7 "COMPANY" means NOA and NCL.
1.8 "COMPANY PRODUCTS" means the following products manufactured by or
on behalf of Company and/or the Licensees and sold by Company and/or the
Licensees, to the extent that they incorporate or are based upon some or all of
the Background Technology and/or the Developed Technology: (i) the Consumer
Hardware, (ii) the Packaged Software (and the application software stored
therein), (iii) Accessories, (iv) Coin Operated Hardware and (v) Coin Operated
Software.
1.9 "COMPANY TECHNOLOGY" means technology which (i) was developed by
Company prior to the Effective Date or is under development by Company as of the
Effective Date, or (ii) is otherwise independently developed or owned by
Company. In this Section 1.9, "technology" means technical information, data
and processes, whether tangible or intangible, including, without limitation,
any and all techniques, discoveries, inventions, copyrights, mask works, net
lists, know-how, patents (including any extension, reissue, continuation or
renewal patents), patent applications, mask work or copyright applications,
inventor certificates, trade secrets, designs, drawings, specifications,
software programs (including source code and object code), microcode, operating
and instruction manuals, magnetic tapes, methods of production, and other
proprietary information.
1.10 "CONSUMER HARDWARE" means stand-alone electronic hardware for consumer
use consisting of a microprocessor and other components which are collectively
designed, manufactured, distributed, sold, and marketed, at the time of market
introduction, primarily for the playing of Video Games in conjunction with
player input transmitted by "control pads" consisting of directional buttons or
switches, and/or joysticks,
Page 1 of 16
<PAGE>
optical light guns, accelerator sensors, or other peripheral devices, which may
be manipulated by the thumbs and/or one or two fingers of each hand of the
player, or by the foot, hand, head, or body of the player. Consumer Hardware
generates the visual and aural output of Video Games, or other software
applications, by means of a hard-wire interface or connection with a television
set or other output display. Based on market information currently available,
examples of Consumer Hardware currently include, but are not limited to, the
following: the Nintendo Entertainment System; the Sega Game Gear, the Nintendo
Game Boy System, the Super Nintendo Entertainment System; the Sega Genesis;
Atari Jaguar; and the Interactive Multiplayer sold under license from 3DO
Company. The Consumer Hardware may be used for software applications other than
playing Video Games.
1.11 "CONTROL" means, in the case of Background Technology, the possession
by either party of the right to grant licenses or sublicenses to, or otherwise
distribute, Background Technology without (i) violating the terms of any
agreement or other arrangement with, or the rights of, any third party, or any
binding laws or regulations, and (ii) such grant or the exercise of rights
thereunder giving rise to the payment of royalties, fees or other consideration
to a third party (except for payments between a party and its Affiliates).
"Control" means, in the case of a corporation or other legal entity, the
ownership or the right to vote in the corporation sufficient to elect a majority
of the corporation's board of directors.
1.12 "COORDINATOR" means a qualified representative of a party designated
by such party as project coordinator, to be responsible for supervising and
coordinating the implementation of the Development Plan hereunder.
1.13 "DEVELOPED TECHNOLOGY" means the Technology developed specifically for
purposes of this Agreement and delivered by SGI to Company in the course of the
Development Plan, whether or not patentable or registrable, which is conceived
or first actually reduced to practice solely by a party, or jointly by the
parties, under the Development Plan, as listed in Attachment B (Developed
Technology). Developed Technology shall not include any of the Background
Technology, regardless of whether such Background Technology is implemented or
incorporated into Developed Technology. Developed Technology shall not include
Company Technology.
1.14 "DEVELOPMENT PLAN" means the plan for the research and development of
the Developed Technology conducted under the terms and conditions of this
Agreement, as mutually agreed in writing by SGI and Company.
1.15 "EFFECTIVE PLAN" means the date first set forth above, on which date
the term of this Agreement shall commence.
1.16 "FILING" means the submission of any documentation, application,
filing, registration or the like required to perfect or, with respect to
copyright registrations, to enforce, the parties' interest in the Developed
Technology under statutory intellectual property rights protection mechanisms,
including, without limitation, any correspondence or other communication with
any patent or copyright office or other governmental entities with respect
thereto.
1.17 "LICENSED BACKGROUND TECHNOLOGY" means Background Technology
implemented in the Developed Technology, but only to the extent that such
Background Technology is not Purchasable Background Technology.
1.18 "LICENSEE" means a third party licensed by Company to use, design,
manufacture, market, distribute and/or sell Packaged Software, Accessories, Coin
Operated Hardware, and/or Coin Operated Software.
1.19 "PACKAGED SOFTWARE" means the form by which the application software
(Video Game and non-Video Game software) used in connection with the Consumer
Hardware is distributed to consumers, including but without limitation, by semi-
conductor, magnetic, optical media and/or similar method of distribution.
Packaged Software shall exclude: (i) application software transmitted
electronically and (ii) upgrades to system software that is embedded in the
Consumer Hardware.
1.20 "PERSON" means a corporation, partnership, trust, association,
government authority, educational institution, individual or other legal entity.
1.21 "PURCHASABLE BACKGROUND TECHNOLOGY" means equipment, software and
components that SGI and/or SGI licensees make generally available to third
parties and for which separate price quotes are included in price lists,
including INDY computer systems, MIPS(R) microprocessors and MIPS(R) compilers.
1.22 "SGI" means Silicon Graphics, Inc., and MIPS Technologies, Inc.
1.23 "TECHNOLOGY" means technical information, data and processes, whether
tangible or intangible, including, without limitation, any and all techniques,
discoveries, inventions, copyrights, mask works, net lists, know-how, patents
(including any extension, reissue, continuation or renewal patents), patent
applications, mask work or copyright applications, inventor certificates, trade
secrets, designs, drawings, specifications, schematics, software programs
(including source and object codes), microcode, operating and instructional
manuals, magnetic tapes, methods of production and any other proprietary
information. Technology is either Background Technology or Developed
Technology.
1.24 "THEME PARK APPLICATION SYSTEM" means an entertainment device or
system that has audio and/or visual stimulation capability and (i) which has a
cost to an operator of more than U.S. $30,000.00, and (ii) is located at a theme
park, amusement park, carnival entertainment center, retail or commercial
establishment.
1.25 "VIDEO GAME" means any aurally- and visually-oriented interactive
application game software, consisting of an independently marketed and packaged
unit of Packaged Software (or such unit of the Packaged Software when packaged
and
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sold together with a unit of the Consumer Hardware). "Video Games" may be
played by one or more players at a time; may coordinate graphics with fanciful
tunes or thematically significant music, along with incidental sound effects;
may feature special effects; may be designated to keep score, record milestones,
or otherwise track the progress or achievement of the players in terms of
numbers or with respect to the fictional narrative of the game environment; and
are intended to amuse and entertain. Examples of Video Games include: Tetris and
Super Mario Bros. 3, both of which are distributed for play on the Nintendo
Entertainment System; Sonic the Hedgehog II, distributed for play on the Sega
Genesis Video Game System; Street Fighter II and NCAA Basketball, both of which
are distributed for play on the Super Nintendo Entertainment System.
2. ATTACHMENTS.
2.1 This Agreement includes the following attachments:
a. Attachment A (Background Technology), which sets forth and
------------
describes the Background Technology provided hereunder;
b. Attachment B (Developed Technology), which sets forth and
------------
describes the Technology to be developed hereunder;
c. Attachment C (Development Funding and royalties), which sets forth
------------
the development funding and royalties payable by Company to SGI
pursuant to this Agreement;
d. Attachment D (Competitive Companies), which sets forth the
------------
companies referred to in Section 6.4
e. Attachment E (Minimums for Exclusivity), which sets forth the
------------
royalties payable by Company as a condition to continued
exclusivity under Section 6.4.
All attachments listed in this Section 2 are incorporated into and form a part
of this Agreement.
3. SCOPE OF AGREEMENT
3.1 SCOPE. This Agreement sets forth the terms and conditions under which
(i) the parties shall conduct joint research and development of the Developed
Technology, (ii) Company will obtain a license to use the Licensed Background
Technology and the Developed Technology and (iii) SGI will arrange to fulfill
Company's requirements for Purchasable Background Technology.
3.2 LIMITED RIGHTS. Each party hereby acknowledges and agrees that the
scope of the relationship between the parties shall be limited to the purposes
and activities set forth herein, and that the rights and obligations of the
parties with respect to each other shall be limited to those provided in this
Agreement. Neither party has the authority to assume or create any obligation
or responsibility in the name of the other party except as specifically
authorized herein, or as authorized after the Effective Date hereof by the
mutual written agreement of the parties.
4. DEVELOPMENT ACTIVITIES.
4.1 NAMING A COORDINATOR. SGI shall designate a Coordinator to Company in
writing within fifteen (15) days after the Effective Date. Company hereby
designates Genyo Takeda as its Coordinator.
4.2 TECHNICAL AND FEASIBILITY REVIEW. Beginning on the Effective Date and
thereafter through January 31, 1994, (i) Company shall have the right to
evaluate the Background Technology and evaluate its suitability for the
development of and use in Consumer Hardware and Coin Operated Hardware, (ii)
Company and SGI will agree on a Development Plan, including the schedule for the
development of Company's Consumer Hardware and Coin Operated Hardware
incorporating the Developed Technology, the allocation of responsibility between
the parties, and the deliverables to be provided by each party to the other, and
(iii) Company and SGI will agree on the budget for the Development Plan. SGI
shall deliver a budget to Company for SGI's completion of its work under the
Development Plan that: (a) is stated as a flat fee (or fixed fee) for completion
of SGI's work under the Development Plan and represents SGI's good faith
calculation of its actual costs to complete its work under the Development Plan,
and (b) provides reasonable detail regarding such anticipated actual costs.
Provided SGI meets the foregoing conditions, and provided the budget is for U.S.
XXXXXXXX or less, Company shall accept the budget. This Agreement shall
terminate automatically if: (a) Company, in its sole discretion, desires to
terminate this Agreement and gives notice of its desire to terminate to SGI on
or before January 31, 1994, or (b) if Company and SGI do not agree in writing on
the Development Plan and the budget therefor on or before January 31, 1994;
provided, however, both parties are obligated to negotiate in good faith the
details of the Development Plan and budget. If this Agreement terminates on or
before January 31, 1994, then neither party shall have any further obligations
to the other under this Agreement, including the provisions of Section 7.0.
From the Effective Date through January 31, 1994, SGI shall facilitate Company's
evaluation of the Background Technology by (i) providing Company with a list of
patents pending and issued relating to the Background Technology, (ii) if
Company so requests, providing Company with copies of patent applications
pending and issued relating to the Background Technology; (iii) if Company so
requests, meeting and conferring with Company's patent counsel regarding such
patent information; and (iv) providing Company with such other information
reasonably requested by Company regarding the intellectual property rights of
SGI relating to the Background Technology.
4.3 DEVELOPMENT PLAN REVISIONS. At any time following the agreement of
SGI and Company on the Development Plan pursuant to Section 4.2, upon the mutual
written agreement of the parties, deliverable items and tasks may be
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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modified in, added to, or deleted from, the Development Plan, and equitable
adjustments made to the fees payable by Company to SGI under this Agreement and
the schedule for completion of the development of the Developed Technology. SGI
shall have no obligation to implement any changes to the Development Plan, and
Company shall have no obligation to pay any additional fees to SGI on account of
any such changes, unless SGI and Company have agreed in writing on any such
changes to the Development Plan, the associated fees and/or development
schedule.
4.4 DESIGN AND DEVELOPMENT ACTIVITIES. The parties shall use reasonable
efforts to conduct the research, experimentation, development and implementation
work necessary to complete the design and development of the Developed
Technology, substantially in accordance with the Development Plan Except as
otherwise provided in the Development Plan, neither party shall subcontract or
otherwise delegate the performance of the design and development services
required hereunder to any third party in amounts which, in the aggregate, exceed
Two Hundred Fifty Thousand Dollars ($250,000.00) without the prior written
approval of the other party, which approval shall not be unreasonably withheld
or delayed. To the extent that any planned procedures or development milestones
are not completed on schedule, the Coordinators shall determine whether a
rescheduling of such procedures or milestones is reasonably possible, or whether
alternative procedures or milestones should be implemented.
4.5 MEETINGS BETWEEN COORDINATORS. After the Effective Date and through
January 31, 1994, SGI shall make its Coordinator and other representatives
available from time to time for meetings (including meetings in Japan, subject
to availability) and/or telephone conferences with Company's Coordinator and
other Company representatives to assist Company with the technical and
feasibility review described in Section 4.2. Beginning on the first Monday
after the first full week following February 1, 1994, and monthly thereafter or
at such other intervals as SGI and Company may agree upon in writing during the
implementation of the Development Plan, the Coordinators shall meet at mutually
acceptable times and locations, or make contact via telephone, to discuss the
results of the Development Plan and activities which have transpired since the
previous meeting.
4.6 DEVELOPMENT TOOLS FOR LICENSEES. In connection with the Company
Products, Company shall endorse SGI computer systems and development tools as
the systems and development tools of choice to be used by Licensees. At a later
time, SGI and Company will meet and confer and agree in writing on whether SGI
will distribute such computer system and development tools directly to Licensees
or whether Company will acquire such systems and tools and distribute them to
Licensees. SGI and Company will mutually agree on how and when development
specifications are provided to the Licensees.
4.7 COMPANY PRODUCT INTRODUCTIONS. Company shall have the sole discretion
to decide whether, when and how to sell Company Products. If Company does not
make first commercial sales of Consumer Hardware incorporating Developed
Technology before XXXXXX The preceding date presumes SGI's timely performance of
each and every aspect of the Development Plan. If SGI is untimely in performance
under the Development Plan, such date shall be considered to be extended for a
period equivalent to the period of SGI's delay in its performance under the
Development Plan. Company presently contemplates that the Consumer Hardware
should have a suggested retail price of less than U.S. $250 to be successful,
but that such suggested retail price may change.
5. BACKGROUND TECHNOLOGY
5.1 DEVELOPMENT AND EMBEDDED BACKGROUND TECHNOLOGY LICENSES. SGI hereby
grants to Company, and Company hereby accepts, (i) a nontransferable, royalty-
free temporary license to use the Licensed Background Technology only to the
extent necessary to permit Company to participate in the Development Plan and
only for so long as the parties are developing the Developed Technology pursuant
to the Development Plan, and (ii) a worldwide, royalty-bearing license to use
the Licensed Background Technology only to the extent specifically implemented
in the Developed Technology for purposes of the design, manufacture, use, sale
and distribution of Company Products. Except as specifically provided in this
Agreement, nothing in this Agreement shall authorize or entitle Company to
manufacture any products using the Background Technology, and no implied
licenses to use or to sublicense the Background Technology are granted under
this Agreement by implication, estoppel or otherwise. Subject to the written
agreement of Company and SGI on the compensation payable by Company to SGI,
Company shall also have the right to acquire from SGI a nonexclusive license to
use the Licensed Background Technology in connection with the design,
manufacture, use and sale of Theme Park Application Systems.
5.2 COMPANY SUBLICENSES. Company shall have the right to grant
nonexclusive sublicenses to Licensees to XXXXXX in connection with the design,
manufacture use, sale and/or distribution of Packaged Software, Accessories,
Coin Operated Software and/or Coin Operated Hardware, provided that all such
sublicenses shall be in writing and shall be pursuant to a form of agreement
incorporating license grant and proprietary rights provisions approved in
writing by SGI, whose approval shall not be unreasonably withheld.
5.3 SUPPLY OF PRODUCTS INCORPORATING PURCHASABLE BACKGROUND TECHNOLOGY.
To the extent that Company and/or
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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Licensees require equipment, software and/or components (including standard
and/or customized MIPS microprocessors) incorporating the Purchasable Background
Technology for purposes of the design, manufacture, use, sale or distribution of
Company Products, SGI shall arrange for the supply by SGI and/or its licensees
of the requirements of Company and such Licensees for such SGI equipment and/or
components on SGI's or SGI's licensees' standard commercial terms and
conditions, as modified and agreed to by the Company and SGI or the applicable
SGI licensee.
5.4 MANUFACTURE OF COMPANY PRODUCTS. Company is free to choose, negotiate
the price with, and direct the work of manufacturers of any Application Specific
Integrated Circuits ("ASICs") incorporated in the Company Products, subject to
the manufacturer's ability to use necessary design rules and process technology,
and to the manufacturer(s) agreement to protect SGI's intellectual property,
XXXXXX Company is free to choose, negotiate the price with, and direct the work
of, all of the manufacturers of all other components of Company Products.
6. RIGHTS IN DEVELOPED TECHNOLOGY
6.1 XXXXXX
6.2 COOPERATION OF THE PARTIES IN FILINGS. The parties shall cooperate in
Filings, and Company shall bear all out-of-pocket expenses with respect thereto.
All Filings will be made at a time when appropriate during the development or
after the completion of an item of Developed Technology XXXXXX Company shall
have the primary administrative responsibility for Filings, and Company shall
bear all filing and attorneys' fees incurred in connection therewith. As used
herein, "administrative responsibility" means the physical preparation of any
documents required for a Filing, and the submission thereof to the appropriate
governmental entity. If SGI has not yet received a proposed Filing from Company
on an item of Developed Technology, and SGI believes that a Filing should be
made with respect thereto, SGI may submit a written request to Company that
Company proceed with the preparation of such Filing, provided, however, that
Company may, at its sole discretion, proceed or decline to proceed with the
preparation of such Filing. If Company declines to prepare and submit a Filing,
SGI may proceed with the preparation and submission of such Filing at SGI's
expense. In either case, a party preparing a Filing shall submit such Filing to
the other party for its review and approval prior to any submission to any
governmental entity. A Filing shall be deemed accepted by the receiving party if
the receiving party does not provided a written notice of rejection to the
submitting party within thirty (30) days after the submitting party's notice
thereof. If a party rejects a Filing, it shall include with its rejection notice
a detailed description of its reason(s) for rejection, and shall make specific
suggestions as to any modifications which it believes should be made to the form
or content of such Filing prior to submission. If the submitting party believes
that the modifications suggested by the receiving party are inappropriate, the
submitting party's Coordinator shall contact the receiving party's Coordinator,
and the Coordinators shall arrange and hold a meeting or discussion between
appropriate representatives of the parties, at a mutually agreeable time and
place, in order to determine a mutually acceptable form, content and time for
the proposed Filing. Each party shall provide the other with copies of any
correspondence, materials or other communications submitted to or received from
a governmental entity or a third party relating to any Filing.
6.3 FURTHER COOPERATION. Each party will take all steps necessary to
XXXXXX and to establish, evidence, maintain, defend and enforce the intellectual
property rights therein. Without charge to the other party, each party shall
give the other party all reasonable assistance in obtaining such proprietary
rights protection and in preparing and prosecuting any patent, copyright, mask
work or other filing or application made by the other party, provided that such
assistance does not require any out-of-pocket expenditure by the party providing
such assistance. Each party shall cause to be executed assignments and all other
instruments and documents as the other party may consider necessary or
appropriate to carry out the intent of this Section 6.3.
6.4 EXCLUSIVITY. The licenses hereby granted by SGI to Company shall be
non-exclusive, except as provided in this Section 6.4, which is subject to
Sections 4.7 and 7.6:
a. Competitive Companies. XXXXXX The "Competitive Companies" are
the companies listed in Attachment D and any Affiliate of any of such companies,
or any successor of such companies (e.g. by way of merger, consolidation,
reorganization, transfer of assets or otherwise). Nothing in the preceding
sentence shall restrict SGI's direct or indirect sale of the Purchasable
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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Background Technology to the Competitive Companies.
b. Developed Technology. XXXXXX
c. Substantially Similar Developed Technology. XXXXXX
d. For purposes of Sections 6.4 and 6.5, XXXXXX
6.5 EXCEPTIONS TO COMPANY EXCLUSIVITY Notwithstanding the provisions of
Section 6.4(b), SGI shall itself be permitted to sell equipment or hardware that
incorporates the Developed Technology if: XXXXXX Except as explicitly provided
to the contrary in this Agreement, SGI shall have no obligation to restrict, or
to attempt to restrict the use or disposition by SGI customers or equipment,
software or components sold or licensed directly or indirectly from SGI.
6.6 THIRD PARTY SOFTWARE. The parties acknowledge that (a) they do not
currently contemplate that the Developed Technology will incorporate any third
party software, and (b) neither SGI nor Company shall incorporate any third
party software into the Developed Technology unless the parties have previously
agreed in writing on the incorporation of such software into the Developed
Technology and the allocation of responsibility for any associated royalties or
license fees.
7. PAYMENTS
7.1 DEVELOPMENT FUNDING. Provided that this Agreement does not terminate
on or before January 31, 1994, as provided in Section 4.2, during the twenty-
four (24) month period after the Effective Date, NCL shall pay (or at NCL's
election, it shall direct NOA to pay) to SGI the development funding agreed upon
pursuant to Section 4.2, which shall consist of development fees and prepaid
royalties, in the proportions provided in Attachment C. Company shall make the
initial payment specified in Attachment C within five (5) days of the Effective
Date as the initial nonrefundable installment of such development fees. The
balance shall be paid in six (6) equal, non-refundable quarterly installments
beginning on February 1, 1994, and every three (3) months thereafter.
7.2 ROYALTIES. NCL shall pay (or at NCL's election, it shall direct NOA
to pay) to SGI royalties on net sales (gross shipments less returns) of Company
Products as provided in Attachment C. If Company plans to distribute
application software for Consumer Hardware incorporating Developed Technology
XXXXXX, Company and SGI shall agree in writing on royalties payable by
Company for such software as a condition to the XXXXXX distribution of such
software by Company or any Licensee.
7.3 ACCRUALS. All royalties payable by Company under Section 7.2 shall
accrue as follows: (i) for Consumer Hardware, Packaged Software, and Coin
Operated Hardware sold by NCL or any of its Affiliates, the sale shall occur
when NCL or such Affiliate sells the Consumer Hardware, Packaged Software, or
Coin Operated Hardware to its distributor or retailer, (ii) for Packaged
Software manufactured by NCL and sold by Licensees, the sale occurs when the
Packaged Software is sold by NCL to such Licensees, (iii) for Packaged Software
manufactured by Licensees and sold by the Licensees, the sale occurs when the
Packaged Software is sold by the Licensees to their distributors or retailers,
(iv) for Coin Operated Hardware sold by Licensees, the sale shall occur when the
Coin Operated Hardware is sold by the Licensees to its distributors or
retailers. For purposes of this Section 7.3, a product shall be considered
"sold" upon the earlier of the seller's shipment of or invoice for that product.
7.4 QUARTERLY PAYMENTS AND STATEMENTS. Within thirty (30) days after the
end of each calendar quarter during the term of this Agreement, NCL shall pay
(or at NCL's election it shall direct NOA to pay) to SGI all royalties that have
accrued during that quarter pursuant to Section 7.3. Each such payment shall be
accompanied by a written statement, certified to be accurate by an officer of
Company, showing the total net sales for Coin Operated Hardware, Consumer
Hardware and Packaged Software, broken down by Company Product categories, the
royalties payable by Company, and such additional
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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information as SGI may reasonably request regarding the sale of Company
Products.
7.5 RECORDS AND AUDITS. During the term of this Agreement and for a
period of two (2) years following any expiration or termination of this
Agreement, Company shall maintain full and complete records in sufficient detail
to permit SGI to verify the accuracy of payment and statements submitted by
Company pursuant to Section 7.4. Upon reasonable notice, and no more frequently
than once in any calendar year, SGI or its certified public accountants shall
have the right to audit Company's records for the purpose of verifying the
accuracy of payments made by Company under Section 7.4. All such audits shall be
at SGI's expense, unless the audit reveals an underpayment by Company of five
percent (5%) or more in any royalty period, in which case Company shall
reimburse SGI the reasonable and documented costs of the audit. Company shall
promptly pay to SGI all underpayments disclosed by the audit, together with
interest on all overdue amounts equal to one percent (1%) per month.
7.6 MINIMUMS FOR EXCLUSIVITY. As a condition to the continuation of
Company's rights under Section 6.4, Company shall have had royalties accrued as
provided for in Section 7.3 in an amount equal to the minimum royalties set
forth in Attachment E (provided Company thereafter makes payment of such
royalties to SGI in accordance with Section 7.4). XXXXXX
7.7 TAXES AND THE LIKE. Any payments made hereunder are net and exclusive
of all taxes, insurance, shipping and other charges. Company agrees to pay or
reimburse SGI for all sales, use, value added, or other taxes, duties,
importation fees or assessments with respect to this Agreement (excluding only
taxes based on the payee's net income), or shall supply appropriate tax
exemption certificates in form satisfactory to the taxing authority. The
development fees and advance royalties payable under Section 7.1 shall be
exclusive of all withholding taxes imposed by the laws of Japan. NCL shall be
entitled to withhold and deduct from royalties payable under Section 7.2
withholding taxes imposed by the laws of Japan on the remission of royalties to
the United States, provided that Company shall claim the benefits of the Treaty
on the Avoidance of Double Taxation between Japan and the United States, and
shall provide SGI with certificates of such withholding.
8. PROPRIETARY AND CONFIDENTIAL INFORMATION
8.1 CONFIDENTIALITY OF BACKGROUND TECHNOLOGY. Company acknowledges SGI's
representation that the Background Technology constitutes the valuable
proprietary and confidentiality information of SGI, and agrees to (i) retain in
confidence the Background Technology, (ii) restrict the use of and access to the
Background Technology to its employees to whom disclosure is necessary in
connection with the license granted in this Agreement and to authorized
sublicensees and subcontractors, (iii) appropriately bind each employee to whom
any such disclosure is made to hold the Background Technology in confidence, and
(iv) not sell, lease transfer or otherwise disclose the Background Technology to
any third party except in accordance with Section 5.0, provided, however, that
Company may disclose the Background Technology to its agents or consultants
under the terms and conditions of a signed, written confidential disclosure
agreement with terms and conditions which prohibit disclosure to other parties,
and which are otherwise at least as restrictive as the terms of subsections (i)-
(iii) of this Section 8.1. Without limiting the foregoing, Company agrees that
it will treat the Background Technology with at least the same degree of care as
it would its own highly proprietary information.
8.2 NO TRANSFER OF INTELLECTUAL PROPERTY. No right, title or interest in
or to the intellectual property in any Background Technology or any copies,
derivations or any portion of the Background Technology is transferred to
Company under this Agreement and/or as a result of Company's use of SGI's
Background Technology under any circumstances whatsoever. SGI is and shall
remain the sole and exclusive owner of the Background Technology. Company shall
remain the exclusive owner of all rights in the Company Technology.
8.3 NO TRANSFER OF RIGHTS IN TRADEMARKS. Nothing herein shall grant
either party any right, title or interest in the trade names, trademarks,
service marks, words, symbols, or other marks used, adopted or owned by the
other party (or of any third party from whom such party has acquired license
rights) from time to time, either alone or in association with other words or
names. Each party shall be free to unilaterally adopt and use trademarks for
use in conjunction with its marketing, distribution, licensing and sale of
products, provided that such trademarks do not infringe trademarks owned by the
other party.
8.4 PROPRIETARY RIGHTS NOTICES. Company shall not remove from, cover over
or prevent from being displayed the notices of SGI's copyright, trade secrets
and proprietary rights notices printed on the Background Technology, affixed to
the media or containers of the Background Technology or the Developed
Technology, embedded in the Background Technology, displayed by the Background
Technology during use, or printed on materials comprising the Background
Technology. Company acknowledges that the existence of such notice(s) does not
mean that the Background Technology or the trade secrets and proprietary
information therein have been published or otherwise made public.
8.5 NO DISCLOSURE OF AGREEMENT. Neither party shall disclose the terms
and conditions or existence of this Agreement without
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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the prior written approval of the other party, except as may be required by law
or regulation.
8.6 EXCLUSIONS. Neither party shall have any obligation as to information
of the other party or technology, which may include Background Technology, that
(i) is known to the receiving party at the time of disclosure; or (ii) is
independently developed by the receiving party; or (iii) becomes known to the
receiving party from another source without confidentiality restriction on
subsequent disclosure or use; or (iv) is or becomes part of the public domain
through no wrongful act of the receiving party; or (v) is disclosed pursuant to
any judicial or governmental request, requirement or order; provided that the
receiving party takes reasonable steps to give the disclosing party sufficient
prior notice in order to contest such request, requirement or order; or (vi) is
furnished to a third party by the disclosing party without a similar
confidentiality restriction on such third party.
8.7 INJUNCTIVE RELIEF. Each party acknowledges and agrees that in the
event of an unauthorized use, reproduction, distribution or disclosure of any
confidential information or data contained in the technology of the other party,
an adequate remedy at law may not be available, and therefore, injunctive or
other equitable relief would be appropriate to restrain such use, reproduction,
distribution or disclosure, threatened or actual
8.8 RESIDUALS. Notwithstanding any provision of this Section 8.0 or any
other provision of this Agreement to the contrary, neither party shall be
prohibited from, or be subject to liability for, using for any purpose the
"residuals" from the activities conducted in furtherance of the Development Plan
and from the use of or access to information or materials developed or received
hereunder, including, without limitation, any Technology. For purposes of this
Section 8.8, "residuals" means the know-how, techniques, ideas and other
intangible information that remain within the general knowledge and experience
of personnel who have participated in such activities and used or had access to
such information or materials.
9. WARRANTIES AND EXCLUSIONS
9.1 "AS IS." SGI PROVIDES THE BACKGROUND TECHNOLOGY TO COMPANY ON AN "AS-
IS" BASIS ONLY, AND DOES NOT WARRANT OR REPRESENT THAT THE OPERATION OF THE
BACKGROUND TECHNOLOGY WILL BE UNINTERRUPTED OR ERROR FREE, THAT ANY DEFECTS IN
THE BACKGROUND TECHNOLOGY ARE CORRECTABLE OR WILL BE CORRECTED, OR THAT THE USE
THEREOF WILL BE FREE FROM CLAIMS OF INFRINGEMENT.
9.2 WARRANTY EXCLUSION. NEITHER PARTY PROVIDES ANY WARRANTY WHATSOEVER TO
THE OTHER PARTY WITH RESPECT TO THE DEVELOPED TECHNOLOGY. Nothing contained in
this Agreement shall be construed as a warranty or representation by either
party that any manufacture, use, sale, lease or other disposition of the
Developed Technology will be free from infringement of any patent or other
proprietary right of any third party.
9.3 REPRESENTATIONS AND WARRANTIES.
a. By Company. Company represents and warrants to SGI as follows:
(i) This Agreement has been duly executed and delivered by
Company and is the valid and binding obligation of Company enforceable in
accordance with its terms. No approval or consent of any foreign, federal,
state, county, local, or other governmental or regulatory body, and no approval
or consent of any other Person is required in connection with the execution and
delivery by Company of this Agreement and the consummation and performance by
Company of the transactions contemplated hereby; and
(ii) The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated hereby will not result in
a material breach or violation of or constitute (or with notice or lapse of time
or both would constitute) a default under: [1] the Articles of Incorporation,
any amendments to it, or the bylaws of Company; [2] any instrument, contract, or
other agreement to which Company is a party or by or to which Company or any of
its assets or properties is bound or subject; or [3] any order, judgment,
injunction, award, or decree of any court, arbitrator or governmental or
regulatory body against or binding upon or applicable to Company or upon the
securities, properties, and businesses of Company.
b. By SGI. SGI represents and warrants to Company as follows:
(i) This Agreement has been duly executed and delivered by SGI
and is the valid and binding obligation of SGI enforceable in accordance with
its terms. No approval or consent of any foreign, federal, state, county, local,
or other governmental or regulatory body, and no approval or consent of any
other Person is required in connection with the execution and delivery by SGI of
this Agreement and the consummation and performance by SGI of the transactions
contemplated hereby; and
(ii) The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated hereby will not result in
a material breach or violation of or constitute (or with notice or lapse of time
or both would constitute) a default under: [1] the Articles of Incorporation,
any amendments to it, or the bylaws of SGI; [2] any instrument, contract, or
other agreement to which SGI is a party or by or to which SGI or any of its
assets or properties is bound or subject; or [3] any order, judgment,
injunction, award, or decree of any court, arbitrator or governmental or
regulatory body against or binding upon or applicable to SGI or upon the
securities, properties, and businesses of SGI.
(iii) As of the Effective Date, no action, suit, or proceeding is
currently pending before any court or governmental or regulatory body claiming
that the Background Technology infringes or misappropriates the intellectual
property rights of any third party.
Page 8 of 16
<PAGE>
9.4 DISCLAIMER. THE FOREGOING WARRANTIES ARE IN LIEU OF, AND EACH PARTY
DISCLAIMS, ANY OTHER WARRANTIES, EXPRESS, IMPLIED OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE AND NONINFRINGEMENT.
9.5 SGI INTELLECTUAL PROPERTY INDEMNIFICATION. SGI will defend,
indemnify, and hold harmless Company and its Affiliates, directors, officers,
employees and agents against any claim, suit or proceeding alleging that the
XXXXXX infringes or misappropriates any U.S. XXXXXX copyright, mask work, trade
secret, patent or other intellectual property, proprietary or contract rights of
any third party and against any damages or liability resulting from such claim,
suite or proceeding, including, without limitation, reasonable attorneys' fees
and other costs and expenses, provided that (i) Company gives SGI notice of the
claim, suit or proceeding promptly after commencement thereof (or, if later,
promptly after Company learns that such claim, suit or proceeding relates to
XXXXXX), (ii) SGI may not settle any claim, suit or proceeding without the
prior, written consent of Company which consent shall not be unreasonably
withheld, provided that if Company refuses to consent to settlement acceptable
to the plaintiff(s) and proposed by SGI to Company, SGI's total liability under
this Section 9.5 shall be limited to the amount of the proposed settlement and
attorney's fees incurred as of the date of SGI's request for Company's consent,
and (iii) Company provides SGI with all reasonable assistance requested by SGI
in connection with the defense and/or resolution of any such claim, suit or
proceeding, at SGI's expense. Notwithstanding the defense obligation of SGI
under this Section 9.5, Company shall have the right, at its own expense, to
appoint its own counsel to participate in any claim, suit or proceeding, and SGI
shall cooperate with Company and such counsel. If there is a final determination
of infringement or misappropriation, SGI shall, at its option, use reasonable
efforts to, (i) replace or modify any component of XXXXXX with a functionally
equivalent noninfringing component that conforms to the requirements of this
Agreement, or (ii) obtain a license for Company to use such XXXXXX.
Notwithstanding the foregoing, SGI shall have no liability for a claim, suit or
proceeding to the extent based on (a) modification of XXXXXX by or for Company
(other than by SGI), or (b) Company's use of the XXXXXX with Accessories not
supplied by SGI, or (c) Company's use of a version of the XXXXXX that was not at
the time of use the most recent version provided by SGI to Company. For purposes
of this Section 9.5, XXXXXX SGI'S LIABILITY UNDER THIS SECTION 9.5 SHALL IN NO
EVENT EXCEED XXXXXX.
9.6 COMPANY INTELLECTUAL PROPERTY INDEMNIFICATION. Company will defend,
indemnify, and hold harmless SGI and its Affiliates, directors, officers,
employees and agents against any claim, suit or proceeding alleging that the
XXXXXX infringes or misappropriates any U.S. XXXXXX copyright, mask work, trade
secret, patent or other intellectual property, proprietary or contract rights of
any third party and against any damages or liability resulting from such claim,
suite or proceeding, including, without limitation, reasonable attorneys' fees
and other costs and expenses, provided that (i) SGI gives Company notice of the
claim, suit or proceeding promptly after commencement thereof (or, if later,
promptly after SGI learns that such claim, suit or proceeding relates to
XXXXXX), (ii) SGI gives Company sole authority to defend and/or resolve any such
claim, suit or proceeding or the portion thereof relating to the XXXXXX and
(iii) SGI provides Company with all reasonable assistance requested by Company
in connection with the defense and/or resolution of any such claim, suit or
proceeding, at Company's expense. Notwithstanding the defense obligation of
Company under this Section 9.6, SGI shall have the right, at its own expense, to
appoint its own counsel to participate in any claim, suit or proceeding, and
Company shall cooperate with SGI and such counsel. Notwithstanding the
foregoing, Company shall have no liability for a claim, suit or proceeding to
the extent based on (a) modification of the XXXXXX or (b) SGI's use of the
XXXXXX with equipment or components not supplied by Company. For purposes of
this Section 9.6, XXXXXX COMPANY'S LIABILITY UNDER THIS SECTION 9.6 SHALL IN NO
EVENT EXCEED XXXXXX.
10.0 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES OF
ANY KIND, (INCLUDING WITHOUT LIMITATION LOSS OF PROFIT OR DATA) WHETHER OR NOT
ADVISED OF THE POSSIBILITY OF SUCH LOSS, HOWEVER CAUSED, WHETHER FOR BREACH OR
REPUDIATION OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, INABILITY TO USE THE
BACKGROUND OR DEVELOPED TECHNOLOGY, OR OTHERWISE. IN NO EVENT SHALL
[XXXXXX]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
Page 9 of 16
<PAGE>
THE AGGREGATE LIABILITY OF EITHER PARTY TO THE OTHER EXCEED XXXXXX. THE
ESSENTIAL PURPOSE OF THIS PROVISION IS TO LIMIT THE POTENTIAL LIABILITY OF THE
PARTIES ARISING OUT OF THIS AGREEMENT AND/OR LICENSE.
11. TERM; TERMINATION.
11.1 TERM. This Agreement shall commence on the Effective Date, and shall
expire ten (10) years from the date of Company's first commercial shipment of a
Coin Operated Hardware or Consumer Hardware incorporating Developed Technology,
whichever is first, provided, however, that (i) the development stage of this
Agreement shall expire in accordance with the Development Plan, (ii) this
Agreement may be terminated earlier in accordance with Section 4.2, and (iii)
this Agreement may be terminated earlier in accordance with Section 11.2.
Company shall have the right to renew this Agreement for an additional five-year
period; provided (i) that, during the initial term of this Agreement, Company
has paid royalties to SGI in the amount set forth on Attachment E; and (ii) that
Company and SGI agree on royalty rates applicable to such five (5)-year term
(Company and SGI agree to negotiate such royalties in good faith).
11.2 TERMINATION FOR BREACH. If either party materially breaches any of
its obligations under this Agreement, upon sixty (60) days written notice
specifying such breach in detail, the notifying party may terminate this
Agreement, and all rights or licenses granted by the notifying party to the
breaching party hereunder, unless the breach specified in such notice has been
cured during the sixty (60) day period, or unless the breaching party is making
diligent efforts to cure a breach that is not reasonably susceptible of cure
within sixty (60) days. Notwithstanding the foregoing, Company shall be
obligated to cure any breach of any monetary obligations to SGI within thirty
(30) days of its receipt of notice of the breach. In the event of a termination
for breach, all licenses in Background Technology granted to the notifying party
hereunder prior to the effective date of such termination shall continue in full
force and effect.
11.3 EFFECT OF TERMINATION. In any event of termination under Section
11.2, the nonbreaching party shall be entitled to retain any Developed
Technology which it has received or developed to the date of such termination,
and all sublicenses granted by either party prior to the date of such
termination shall remain in effect.
11.4 SURVIVAL. The rights and obligations of the parties under Sections
6.1 XXXXXX, 8.0 (PROPRIETARY AND CONFIDENTIAL INFORMATION), 9.0 (WARRANTIES AND
EXCLUSIONS), 10.0 (LIMITATION OF LIABILITY), 11.2, 11.3, 11.4, 12.0, and 13.1
shall survive and continue after any termination or expiration of this Agreement
or termination of any license or rights under this Agreement, for any reason
whatsoever.
12. EXPORT. Notwithstanding any rights, license or privileges specified in
this Agreement, each party agrees that it will not export any technology
provided by the other party hereunder or jointly developed hereunder, or any
part thereof, either directly or indirectly, without first obtaining any
required licenses to so export from the United States Government, and further
agrees that it will comply with all laws, rules and regulations applicable to
the export or reexport of such technology.
13. GENERAL.
13.1 GOVERNING LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of California, excluding its choice of law
rules. Company hereby consents to the jurisdiction of the federal courts
located in the Northern District of California over any dispute between SGI and
Company arising out of or in connection with this Agreement, and waives any
other venue to which it may be entitled by virtue of domicile or otherwise.
13.2 SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall for any reason be held to be unenforceable in any respect
under any federal or state law, such unenforceability shall not affect any other
provision, but this Agreement shall then be construed as if such unenforceable
provision or provisions had never been contained herein, provided that in such
event the parties agree to negotiate in good faith substitute enforceable
provisions which most nearly effect the parties original intent in entering into
this Agreement.
13.3 ASSIGNMENT. Except as specifically provided to the contrary in this
Agreement, this Agreement and the licenses granted hereunder are to a specific
entity or legal person, and all rights hereunder are not assignable nor are the
obligations imposed delegable by either party without the prior written consent
of the other party which shall not be unreasonably withheld.
[XXXXXX]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
Page 10 of 16
<PAGE>
13.4 MODIFICATION. This Agreement may be modified only by a writing signed
by each party.
13.5 NONWAIVER. The failure of either party to enforce at any time any of
the provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce any such provisions.
13.6 NO AGENCY. This is a development and license agreement; no agency,
partnership, joint venture or other relationship is created hereby, and neither
party has any authority of any kind to bind the other party in any respect
whatsoever.
13.7 FORCE MAJEURE. Except for Company's obligations under Section 7
above, notwithstanding anything else in this Agreement, no default, delay or
failure to perform on the part of either party shall be considered a breach of
this Agreement, if such default, delay, or failure to perform is shown to be due
entirely to causes beyond the reasonable control of the party charged with a
default, including, but not limited to, causes such as strikes, lockouts or
other labor disputes, riots, civil disturbances, actions or inactions of
governmental authorities or suppliers, epidemics, war, embargoes, severe
weather, fire, earthquakes, acts of God or the public enemy, nuclear disasters,
or default of a common carrier.
13.8 NOTICES. All notices, reports, statements and approvals ("Notices")
which either party is required or permitted to give under this Agreement shall
be sufficiently given when the same shall be: (a) personally served or delivered
to the party entitled to such Notice; or (b) deposited, postage prepaid, with a
guaranteed international or domestic air courier service, addressed to the
person and address stated herein, or to such other person or address as may be
provided in a written notice by either party to the other; or (c) when
transmitted by facsimile with an original sent concurrently by first class mail
(or guaranteed international or domestic air courier service), addressed to the
person, facsimile number, and address stated above, or to such other person,
address or facsimile number as may be provided in a written notice by either
party to the other. Notice shall be deemed effective upon the earlier of actual
receipt or three (3) business days after mailing or transmittal.
THIS SPACE INTENTIONALLY LEFT BLANK; AGREEMENT CONTINUES ON NEXT PAGE.
13.9 SECTION HEADINGS AND CAPTIONS. The parties agree that the Section or
paragraph headings and captions used in this Agreement are for reference
purposes only and shall not be used in the interpretation of this Agreement.
13.10 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be an original instrument, but all of
which shall constitute one and the same agreement. A facsimile signature shall
have the same force and effect as an original signature.
13.11 ENTIRE AGREEMENT. This Agreement supersedes all proposals oral or
written, all negotiations, conversations or discussions between the parties
relating to this Agreement and all past course of dealing or industry custom,
including the Nondisclosure Agreement between Company and SGI. It is expressly
understood and agreed that, because the parties hereto, no usage of trade or
other regular practice or method of dealing, either within the computer
industry, the software industry or between the parties hereto shall be used to
modify, interpret, supplement or alter in any manner the express terms of this
Agreement or any part hereof.
SGI: COMPANY:
SILICON GRAPHICS, INC. NINTENDO CO., LTD.
By: /s/ Wei Yen By: /s/ Mr. Hiroshi Yamauchi
----------------------------- -----------------------------------
Name: Wei Yen Mr. Hiroshi Yamauchi, President
---------------------------
Title: Senior Vice President
--------------------------
MIPS TECHNOLOGIES, INC. NINTENDO OF AMERICA INC.
By: /s/ Wei Yen By: /s/ Mr. Minoru Arakawa
----------------------------- -----------------------------------
Name: Wei Yen Mr. Minoru Arakawa, President
---------------------------
Title: President
--------------------------
[XXXXXX]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
Page 11 of 16
<PAGE>
ATTACHMENT A
BACKGROUND TECHNOLOGY
"Background Technology" means the MIPS Multimedia Engine, including the MIPS
microprocessor architecture and instruction set, graphics library, video library
and audio library, and SGI and MIPS API and ABI and any other Technology (a)
developed prior to the Effective Date of (b) under development at SGI as of the
Effective Date and supplied by SGI to Company in connection with the development
of the Company Products.
Page 12 of 16
<PAGE>
ATTACHMENT B
DEVELOPED TECHNOLOGY
"Developed Technology" means XXXXXX
[XXXXXX]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
Page 13 of 16
<PAGE>
ATTACHMENT C
DEVELOPMENT FUNDING AND ROYALTIES
DEVELOPMENT FUNDING: To be agreed pursuant to Section 4.2
ADVANCE AGAINST ROYALTIES:
XXXXXX of the development funding paid to SGI, up to US$XXXXXXXX
pursuant to Sections 4.2 and 7.1, shall be deemed an advance against
royalties. All development funding in excess of US$XXXXXXXX paid to
SGI pursuant to Sections 4.2 and 7.1 shall be deemed an advance
against royalties.
INITIAL PAYMENT: $XXXXXXXX (such initial payment shall be considered all
development fees, and not an advance against royalties).
ROYALTIES:
a) XXXXXXXX for each Coin Operated Hardware incorporating Developed
Technology sold by Company or Licensee;
b) XXXXXXXX for each of the first XXXXXXXX units of Consumer Hardware
incorporating Developed Technology sold by Company; and
c) XXXXXXXX for each Packaged Software sold by Company or a Licensee for
use on a Consumer Hardware incorporating Developed Technology.
XXXXXX
[XXXXXX]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
Page 14 of 16
<PAGE>
ATTACHMENT D
COMPETITIVE COMPANIES
1. XXXXXX
2. XXXXXX
3. XXXXXX
4. XXXXXX
[XXXXXX]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
Page 15 of 16
<PAGE>
ATTACHMENT E
MINIMUMS FOR EXCLUSIVITY
<TABLE>
<CAPTION>
MINIMUM ROYALTIES PER YEAR
YEAR (IN MILLIONS)
- ---- -------------
<S> <C>
2* XXXXXXXX
3 XXXXXXXX
4 XXXXXXXX
5 XXXXXXXX
6 XXXXXXXX
7 XXXXXXXX
8 XXXXXXXX
9 XXXXXXXX
10 XXXXXXXX
</TABLE>
. Ends 24 months after the date of first sale of the Consumer Hardware
incorporating Developed Technology.
[XXXXXX]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
Page 16 of 16
<PAGE>
EXHIBIT 10.7.2
CONFIDENTIAL
[XXXXXX]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
FIRST ADDENDUM TO
JOINT DEVELOPMENT AND LICENSE AGREEMENT
THIS IS A FIRST ADDENDUM TO THAT CERTAIN JOINT DEVELOPMENT AND LICENSE AGREEMENT
DATED AUGUST 20, 1993, (the "Original Agreement") among Nintendo Co., Ltd.
("NCL"), Nintendo of America Inc. ("NOA")(NCL and NOA are collectively referred
to as "Company"), Silicon Graphics, Inc., and MIPS Technologies, Inc.
(collectively referred to as "SGI").
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions. The definitions in the Original Agreement are hereby
-----------
incorporated by reference in this FIRST ADDENDUM.
2. Budget. SGI has advised the Company that the budget for SGI's work under the
------
Development Plan is XXXXXX (the "Budget"). The Budget represents SGI's good
faith calculation of its actual costs to complete its work under the Development
Plan which includes, but is not limited to, SGI's costs of personnel resources,
equipment costs for experimentation, development and CAD tools. The Budget is
stated as a flat fee (fixed fee) for the completion of SGI's work under the
Development Plan. Company hereby accepts the Budget and shall make payment to
SGI in accordance with Schedule B. SGI acknowledges that the Company has already
paid XXXXXXX of the Budget.
3. Development Plan. The parties agree to the Development Plan set forth on
----------------
Schedule A. The parties acknowledge that Section 4.4 of the Original Agreement
requires that the parties use "reasonable efforts" to develop the Developed
Technology substantially in accordance with the Development Plan attached as
Schedule A, or any revised Development Plan agreed upon by the parties,
including any applicable target dates.
Except as set forth herein, the Original Agreement is hereby ratified and
confirmed.
NINTENDO CO., LTD. NINTENDO OF AMERICA INC.
By: /s/ Mr. Hiroshi Yamauchi By: /s/ Mr. Minoru Arakawa
_________________ ________________________
Mr. Hiroshi Yamauchi Mr. Minoru Arakawa
President President
February 4, 1994 February 5th, 1994
SILICON GRAPHICS, INC. MIPS TECHNOLOGIES, INC.
By /s/ Wei Yen By: /s/ Wei Yen
____________________ ______________________
Name: Wei Yen Name: Wei Yen
Title: Senior Vice President Title: Chairman of the Board
February 4 , 1994 February 4 , 1994
Attachments: Schedules A, A-1, and B.
<PAGE>
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(7 pages of Schedule A have been redacted)
(4 pages of Schedule A1 have been redacted)
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
DEVELOPMENT FEE ADVANCE TOTAL TO BE PAID
ROYALTY ON
<S> <C> <C> <C>
1. XXXXXX XXXXXX XXXXXX Already Paid
2. XXXXXX XXXXXX XXXXXX February 8, 1994
3. XXXXXX XXXXXX XXXXXX May 1, 1994
4. XXXXXX XXXXXX XXXXXX August 1, 1994
5. XXXXXX XXXXXX XXXXXX November 1, 1994
6. XXXXXX XXXXXX XXXXXX February 1, 1995
7. XXXXXX XXXXXX XXXXXX May 1, 1995
------ ------ ------
TOTAL: XXXXXX XXXXXX* XXXXXX
</TABLE>
*NCL will make XXXXXX withholding on the advance royalty, so only XXXXXX will
be received by SGI.
[XXXXXX]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
EXHIBIT 10.7.3
[XXXXXX]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
SECOND ADDENDUM TO
JOINT DEVELOPMENT AND LICENSE AGREEMENT
THIS SECOND ADDENDUM TO JOINT DEVELOPMENT AND LICENSE AGREEMENT is made as of
the _____ day of February, 1996 (the "Effective Date"), among Nintendo Co., Ltd.
("NCL"), Nintendo of America Inc. ("NOA") (NCL and NOA are referred to
collectively as "Company"), Silicon Graphics, Inc., and MIPS Technologies, Inc.
(collectively referred to as "SGI").
BACKGROUND
Company and SGI are parties to a "Joint Development and License Agreement",
dated August 20, 1993, as supplemented by the "First Addendum to Joint
Development and License Agreement", dated February 5, 1994 (collectively, the
"Agreement"). Company and SGI have agreed to enter into this Second Addendum as
it relates to the XXXXXX of certain patents rights, as described herein.
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions.
-----------
(a) Unless otherwise defined in this Second Addendum, all capitalized
words used in this Second Addendum shall have the meanings set forth in the
Agreement.
(b) Section 1.8. "COMPANY PRODUCTS" is hereby revised to add the phrase
"and/or Foreground Technology" immediately after the term "Developed
Technology."
(c) Section 1.16, "FILING" is hereby revised to add the phrase "or
Foreground Technology" immediately after the term "Developed Technology."
(d) The last sentence of Section 1.23, "TECHNOLOGY", is hereby revised to
read as follows:
Technology is either Background Technology, Developed Technology or
Foreground Technology.
(e) A new Section 1.26 is hereby added to the Agreement as follows:
1.26 "FOREGROUND TECHNOLOGY" means XXXXXX
(f) A new Section 1.27 is hereby added to the Agreement as follows:
1.27 "COPROCESSOR COMMAND SET" means XXXXXX
(g) A new Section 1.28 is hereby added to the Agreement as follows:
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
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1.28 "MICROCODE/LIBRARIES" means XXXXXX
(h) A new Section 1.29 is hereby added to the Agreement as follows:
1.29 "PATENT" means letters patent issued under laws of the
United States, reissue patents, divisional patents, reexamination
patents, continuations, continuations-in-part and the foreign
counterparts of any of the foregoing.
(i) A new Section 1.30 is hereby added to the Agreement as follows:
1.30 "CROSS LICENSE" means an agreement between either party to
this Agreement and a third party, other than a Licensee, effective
prior to the Effective Date of this Second Addendum. pursuant to which
such party and the third party grant each other licenses to patents
developed or acquired during the term of such agreement, which
licenses are granted in settlement of infringement claims.
(j) A new Section 1.31 is hereby added to the Agreement as follows:
1.31 "COPROCESSOR MICROINSTRUCTION SET" means XXXXXX
(k) A new Section 1.32 is hereby added to the Agreement as follows:
1.32 "COPROCESSOR" means the Application Specific Integrated
Circuit developed by SGI pursuant to Schedule A for incorporation in
the Consumer Hardware.
(I) A new Section 1.33 is hereby added to the Agreement as follows:
1.33 "DEVELOPER'S MANUAL" shall mean all versions of the
Nintendo 64 Developer's Manual, covering the topics listed in Schedule
D, developed and delivered by SGI to Company pursuant to this
Agreement.
(m) A new Section 1.34 is hereby added to the Agreement as follows:
1.34 "DEVELOPMENT ENVIRONMENT" shall mean all versions of the
software listed in Schedule D, developed and delivered by SGI to
Company pursuant to this Agreement for use by Packaged Software
developers.
(n) A new Section 1.35 is hereby added to the Agreement as follows:
1.35 "MASK WORK" means the layout of the Coprocessor.
2. A new Schedule C, as attached to this Second Addendum, is hereby added to
the Agreement.
3. A new Schedule D, as attached to this Second Addendum, is hereby added to
the Agreement.
4. The following is hereby added to the end of Section 6.2 of the Agreement:
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<PAGE>
SGI and Company shall use reasonable efforts to pursue and to prosecute
Filings applicable to the invention identified as "Invention 2" in Schedule
C, which the parties acknowledge is directed primarily to the protection of
Developed Technology. As provided in this Section 6.2, Company shall have
the administrative responsibility for such Filings.
5. Confidentiality. New Sections 8.9, 8.10 and 8.11, which the parties agree
---------------
shall be effective as of the effective date of the Agreement, are hereby added
to the Agreement as follows:
8.9 CONFIDENTIALITY OF COMPANY TECHNOLOGY. SGI acknowledges
Company's representation that the Company Technology constitutes the
valuable proprietary and confidential information of Company, and
agrees to (i) retain in confidence the Company Technology, (ii)
restrict the use of and access to the Company Technology to its
employees to whom disclosure is necessary in connection with this
Agreement, and to authorized subcontractors, (iii) appropriately bind
each employee to whom any such disclosure is made to hold the Company
Technology in confidence, and (iv) not to sell, lease, transfer or
otherwise disclose the Company Technology to any third party except as
permitted by this Agreement, provided, however, that SGI may disclose
the Company Technology to its agents and consultants; if necessary or
appropriate in furtherance of SGI's development work under this
Agreement, under the terms and conditions of a signed, written
confidential disclosure agreement with terms and conditions which
prohibit disclosure to other parties, and which are otherwise at least
as restrictive as the terms of subsections (i)-(iii) of this Section
8.9. Without limiting the foregoing, SGI agrees that it will treat the
Company Technology with at least the same degree of care as it would
its own highly proprietary information.
8.10 CONFIDENTIALITY OF FOREGROUND TECHNOLOGY. SGI and Company
acknowledge that the Foreground Technology constitutes their valuable
and proprietary information. Except to the extent that any Foreground
Technology is described in any Patent, and except as otherwise agreed
in writing by the parties, each of SGI and Company agrees to (i)
retain in confidence the Foreground Technology, (ii) restrict the use
of and access to the Foreground Technology to its employees to whom
disclosure is necessary or permitted in connection with the exercise
of their rights in the Foreground Technology as provided in this
Agreement, and to authorized licensees and subcontractors, (iii)
appropriately bind each employee to whom any such disclosure is made
to hold the Foreground Technology in confidence, and (iv) not sell,
lease, transfer or otherwise disclose the Foreground Technology to any
third party except to licensees permitted by this Agreement and to its
agents or consultants under the terms and conditions of a signed,
written confidential disclosure agreement with terms and conditions
which prohibit disclosure to other parties, and which are otherwise at
least as restrictive as the terms of subsections (i)-(iii) of this
Section 8.10. Without limiting the foregoing, SGI agrees that it will
treat the Foreground Technology with at least the same degree of care
as it would its own highly proprietary information.
8.11 CONFIDENTIALITY OF DEVELOPED TECHNOLOGY. SGI and Company
acknowledge that the Developed Technology constitutes their valuable
and proprietary information. Except to the extent that any Developed
Technology is described in any Patent, and except as otherwise agreed
in writing by the parties, each of SGI and Company agrees to (i)
retain in confidence the Developed Technology, (ii) restrict the use
of and access to the Developed Technology to its employees to whom
disclosure is necessary or permitted in connection with the exercise
of their rights in the Developed Technology as provided in this
Agreement, and to authorized licensees and subcontractors, (iii)
appropriately bind each employee to whom any such disclosure is made
to hold the Developed Technology in confidence, and (iv) not sell,
lease, transfer or otherwise disclose the Developed Technology to any
third party except to licensees
Page 3
<PAGE>
permitted by this Agreement and to its agents or consultants under
the terms and conditions of a signed, written confidential
disclosure agreement with terms and conditions which prohibit
disclosure to other parties, and which are otherwise at least as
restrictive as the terms of subsections (i)-(iii) of this Section
8.11. Without limiting the foregoing, SGI agrees that it will treat
the Developed Technology with at least the same degree of care as it
would its own highly proprietary information.
6. The following is hereby added to the end of Section 9.3(b) of the
Agreement:
As of the effective date of this Second Addendum, SGI represents and
warrants to Company that, to the best of SGI's actual knowledge, SGI
has provided Company with a copy of (i) all patent applications
filed by SGI whose claims would be infringed by the unauthorized
manufacture, use or sale of the Consumer Hardware and/or the
Packaged Software incorporating those components of the Consumer
Hardware and/or the Packaged Software developed by SGI pursuant to
this Agreement; and (ii) all patent applications currently being
prepared by SGI whose claims, as currently drafted, would be
infringed by the unauthorized manufacture, use or sale of Consumer
Hardware and/or the Packaged Software incorporating those components
of the Consumer Hardware and/or the Packaged Software developed by
SGI pursuant to this Agreement. If, subsequent to the effective date
of this Second Addendum, SGI learns of any such patent application
or if any such claim is added to any such application, SGI shall
promptly notify Company.
7. Intellectual Property Indemnity. Sections 9.5 and 9.6 of the Agreement are
-------------------------------
hereby deleted in their entirety and replaced with the following:
9.5 SGI INTELLECTUAL PROPERTY INDEMNIFICATION. SGI will defend,
indemnify, and hold harmless Company and its Affiliates, directors,
officers, employees and agents against any claim, suit or proceeding
alleging that the XXXXXX or use thereof infringes or misappropriates
any U.S. XXXXXX copyright, mask work, trade secret, patent or other
intellectual property, proprietary or contract rights of any third
party and against any damages or liability resulting from such
claim, suit or proceeding, including, without limitation, reasonable
attorneys' fees and other costs and expenses, provided that (i)
Company gives SGI notice of the claim, suit or proceeding promptly
after commencement thereof (or, if later, promptly after Company
learns that such claim, suit or proceeding relates to XXXXXX), (ii)
SGI may not settle any claim, suit or proceeding without the prior,
written consent of Company which consent shall not be unreasonably
withheld, provided that if Company refuses to consent to settlement
acceptable to the plaintiff(s) and proposed by SGI to Company, SGI's
total liability under this Section 9.5 shall be limited to the
amount of the proposed settlement and attorney's fees incurred as of
the date of SGI's request for Company's consent, and (iii) Company
provides SGI with all reasonable assistance requested by SGI in
connection with the defense and/or resolution of any such claim,
suit or proceeding, at SGI's expense. Notwithstanding the defense
obligation of SGI under this Section 9.5, Company shall have the
right, at its own expense, to appoint its own counsel to participate
in any claim, suit or proceeding, and SGI shall cooperate with
Company and such counsel. If there is a final determination of
infringement or misappropriation, SGI shall, at its option, use
reasonable efforts to, (i) replace or modify any component of XXXXXX
with a functionally equivalent noninfringing component that conforms
to the requirements of this Agreement, or (ii) obtain a license for
Company to use XXXXXX Notwithstanding the foregoing, SGI shall have
no liability for a claim, suit or proceeding to the extent based on
(a) modification of XXXXXX
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by or for Company (other than by SGI), or (b) Company's use of the
XXXXXX with Accessories not supplied by SGI, or (c) Company's use of a
version of the XXXXXX that was not at the time of use the most recent
version provided by SGI to Company. For purposes of this Section 9.5,
XXXXXX SGI'S LIABILITY UNDER THIS SECTION 9.5 SHALL IN NO EVENT EXCEED
XXXXXX
9.6 COMPANY INTELLECTUAL PROPERTY INDEMNIFICATION. Company will
defend, indemnify, and hold harmless SGI and its Affiliates,
directors, officers, employees and agents against any claim, suit or
proceeding alleging that the XXXXXX or use thereof infringes or
misappropriates any U.S. XXXXXX copyright, mask work, trade secret,
patent or other intellectual property, proprietary or contract rights
of any third party and against any damages or liability resulting from
such claim, suit or proceeding, including, without limitation,
reasonable attorneys' fees and other costs and expenses, provided that
(i) SGI gives Company notice of the claim, suit or proceeding promptly
after commencement thereof (or, if later, promptly after SGI learns
that such claim, suit or proceeding relates to XXXXXX), (ii) SGI gives
Company sole authority to defend and/or resolve any such claim, suit
or proceeding or the portion thereof relating to XXXXXX and (iii)
SGI provides Company with all reasonable assistance requested by
Company in connection with the defense and/or resolution of any such
claim, suit or proceeding, at Company's expense. Notwithstanding the
defense obligation of Company under this Section 9.6, SGI shall have
the right, at its own expense, to appoint its own counsel to
participate in any claim, suit or proceeding, and Company shall
cooperate with SGI and such counsel. Notwithstanding the foregoing,
Company shall have no liability for a claim, suit or proceeding to the
extent based on (a) modification of the XXXXXX or (b) SGI's use of
the XXXXXX with equipment or components not supplied by Company. For
purposes of this Section 9.6, XXXXXX COMPANY'S LIABILITY UNDER THIS
SECTION 9.6 SHALL IN NO EVENT EXCEED XXXXXX
8. Rights in Foreground Technology. A new Article 14.0 is hereby added to the
-------------------------------
Agreement as follows:
14.0 RIGHTS IN FOREGROUND TECHNOLOGY.
14.1 XXXXXX
XXXXXX
14.2 SGI RIGHTS IN FOREGROUND TECHNOLOGY. XXXXXX
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XXXXXX SGI's rights in the Foreground Technology shall survive the
expiration or termination of this Agreement and shall continue until
the expiration of the last Patent to expire that would be infringed by
the manufacture, use or sale of any Foreground Technology.
14.3 COMPANY RIGHTS IN FOREGROUND TECHNOLOGY. XXXXXX Company
agrees that Company shall only have (a) the worldwide, nontransferable
(except to Company's authorized subcontractors) right to use the
Foreground Technology only in combination with the Licensed Background
Technology and the Developed Technology for purposes of the design,
manufacture, use, sale and/or distribution of Company Products, and
(b) the worldwide right to grant nonexclusive licenses to Licensees to
use the Foreground Technology, only in combination with the Licensed
Background Technology and the Developed Technology, for purposes of
the design, manufacture, use, sale and/or distribution of Packaged
Software, Accessories, Coin Operated Software and/or Coin Operated
Hardware. All such licenses shall be in writing and shall be pursuant
to a form of agreement incorporating license grant and proprietary
rights provisions approved in writing by SGI, which approval shall not
be unreasonably withheld. Company shall have no obligation to obtain
the consent of SGI, or to account to or to share proceeds with SGI, on
account of such licensing or use of the Foreground Technology as
permitted in this Section 14.3. Company's rights in the Foreground
Technology shall commence as of the effective date of this Second
Addendum and shall survive the expiration of the term of this
Agreement and shall continue until the expiration of the last Patent
to expire that would be infringed by the unauthorized manufacture, use
or sale of any Foreground Technology. If the parties succeed in
obtaining Patents XXXXXX, and which would be infringed by the
manufacture, use or sale of any Foreground Technology, SGI will not
assert a claim against Company or a Licensee for infringement of any
such Patent on account of Company's or a Licensee's manufacture, use
or sale of such Foreground Technology in products other than Company
Products; provided, however, that SGI reserves the right to assert a
claim against Company for breach of this Agreement if Company
manufactures, uses, sells or licenses any products other than Company
Products which use Foreground Technology.
14.4 COOPERATION OF THE PARTIES IN FILINGS. The parties shall
use reasonable efforts to pursue and prosecute Filings applicable to
the Foreground Technology. All Filings applicable to the Foreground
Technology will be made at a time when appropriate during the
development or after completion of the Foreground Technology XXXXXX.
Company shall have the primary administrative responsibility for
Filings with respect to the Foreground Technology, and the parties
will cooperate with respect to Filings on the Foreground Technology
(including with respect to claim amendments). Silicon Graphics will
bear all fees and out-of-pocket expenses payable to Sterne, Kessler,
Goldstein and Fox in connection therewith, and Company shall bear all
other filing fees, attorneys' fees and out-of-pocket expenses incurred
in connection therewith. As used herein, "administrative
responsibility" means the preparation of any documents required for a
Filing, and the submission thereof to the appropriate governmental
entity. If SGI has not yet received a proposed Filing from Company on
an item of Foreground Technology, and SGI believes that a Filing
should be made with respect thereto, SGI may submit a written request
to Company that Company proceed with the preparation of such Filing,
provided, however, that Company may, in its sole discretion, proceed
or decline to proceed with the preparation of such Filing. If Company
declines to prepare and submit a Filing on an item of Foreground
Technology, SGI may proceed with the preparation and submission of
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<PAGE>
such Filing at SGI's expense. In either case. a party preparing a
Filing shall submit such Filing to the other party for its review and
approval prior to any submission to any governmental entity. A Filing
shall be deemed accepted by the receiving party if the receiving party
does not provide written notice of rejection to the submitting party
within thirty (30) (or such shorter period as the parties may agree
upon) days after the submitting party's notice thereof. If a party
rejects a Filing, it shall include with its rejection notice a
detailed description of its reason(s) for rejection, and shall make
specific suggestions as to any modifications which it believes should
be made to the form or content of such Filing prior to submission. If
the submitting party believes that the modifications suggested by the
receiving party are inappropriate, the submitting party's Coordinator
shall contact the receiving party's Coordinator, and the Coordinators
shall arrange and hold a meeting or discussion between appropriate
representatives of the parties, at a mutually acceptable time and
place, to determine a mutually acceptable form, content and time for
the proposed Filing. Each party shall provide the other with copies of
any correspondence, materials or communications submitted to or
received from a governmental entity or a third party relating to any
Filing. SGI will provide such information regarding the Background
Technology, Foreground Technology and Developed Technology as Company
may reasonably request for purposes of permitting Company and its
advisors to evaluate actual or potential infringement claims directed
at Company Products. Nothing in this Section 14.4 shall be interpreted
to expand SGI's obligations under Section 9.5.
14.5 ENFORCEMENT OF RIGHTS IN FOREGROUND TECHNOLOGY. Before
initiating any action against an alleged infringer of any rights in
the Foreground Technology, each party (the "Enforcing Party") shall
contact the other party to confirm that the alleged infringer has not
been granted a license to use the Foreground Technology by the other
party or has not purchased from the other party products whose use
would entitle the alleged infringer to use the Foreground Technology.
If the alleged infringer has not obtained such a license or purchased
such products, the Enforcing Party shall have the right, without
further consent of the other party, to take such steps as it chooses,
in its sole discretion, to enforce its rights XXXXXX and the other
party shall provide such reasonable assistance as the Enforcing Party
may request in connection therewith, provided either that such
assistance does not require any out-of-pocket expenditures by the
other party or that the Enforcing Party agrees to reimburse any such
out-of-pocket expenses incurred by the other party. The Enforcing
Party shall be entitled to retain all amounts recovered from the
alleged infringer in connection with the litigation and/or settlement
of any such action. The Enforcing Party shall defend, indemnify and
hold harmless the other party and its Affiliates from and against any
claim, suit or proceeding initiated against the other party by any
alleged infringer in connection with or in response to actions
initiated against the alleged infringer by the Enforcing Party,
provided that (i) the other party gives the Enforcing Party notice of
the claim, suit or proceeding promptly after commencement thereof,
(ii) the other party gives the Enforcing Party sole authority to
defend and/or resolve any such claim, suit or proceeding, and (iii)
the other party gives the Enforcing Party all reasonable assistance
requested by the Enforcing Party in connection with the defense and/or
settlement of the claim, suit or proceeding, at the Enforcing Party's
expense.
14.6 MICROCODE/LIBRARIES, COPROCESSOR COMMAND SET, COPROCESSOR
MICROINSTRUCTION SET, AND MASK WORK. SGI will deliver to Company the
Microcode/Libraries, in source code and object code forms, the
Microcode/Libraries development environment, and documentation of the
Coprocessor Command Set and the Coprocessor Microinstruction Set, at a
time to be mutually agreed upon in writing by SGI and Company. SGI and
Company acknowledge and agree that XXXXXX
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(d) all Developed Technology incorporated in the Microcode/Libraries,
Coprocessor Command Set, Coprocessor Microinstruction Set, and the
Mask Work shall be subject to the provisions of Sections 6.4 and 6.5
applicable to the Developed Technology. XXXXXX
14.7 FOREGROUND TECHNOLOGY CROSS LICENSES. XXXXXX neither
party shall have the right to license the Foreground Technology to a
third party pursuant to a Cross License unless it obtains the prior,
written agreement of the other party to this Agreement.
14.8 LIMITATIONS ON SGI'S USE OF DEVELOPED TECHNOLOGY. In
addition to the provisions of Sections 6.4 and 6.5, XXXXXX
14.9 XXXXXX
14.10 SOFTWARE DEVELOPMENT BY COMPANY AND LICENSEES. As an
owner of the copyrights in the Microcode/Libraries and the Coprocessor
Microinstruction Set, the Developer's Manual and the Development
Environment Company shall have the right to develop, reproduce
and distribute derivative works thereof, and to grant Licensees the
right to develop, reproduce and distribute derivative works thereof.
SGI makes no claim of rights in any portions of such derivative
work(s) developed by Company and/or any Licensee.
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9. Warranty Exclusion. Section 9.2. "Warranty Exclusion"s shall be amended to
------------------
insert the phrase "or Foreground Technology" immediately following the phrase
"Developed Technology", wherever it appears in such section.
10. Limitation of Liability. Article 10.0 is hereby revised to read as follows:
-----------------------
10.0 LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL
OR INDIRECT DAMAGES OF ANY KIND (INCLUDING WITHOUT LIMITATION LOSS OF
PROFIT OR DATA) WHETHER OR NOT ADVISED OF THE POSSIBILITY OF SUCH
LOSS, HOWEVER CAUSED, WHETHER FOR BREACH OR REPUDIATION OF CONTRACT,
BREACH OF WARRANTY, NEGLIGENCE, INABILITY TO USE THE BACKGROUND
TECHNOLOGY, THE FOREGROUND TECHNOLOGY, OR OTHERWISE. IN NO EVENT SHALL
THE AGGREGATE LIABILITY OF EITHER PARTY TO THE OTHER EXCEED XXXXXX.
THE ESSENTIAL PURPOSE OF THIS PROVISION IS TO LIMIT THE POTENTIAL
LIABILITY OF THE PARTIES ARISING OUT OF THIS AGREEMENT.
11. Survival of Obligations. Section 11.4 is hereby revised to add the
-----------------------
provisions of Article 14.0 to the list of provisions setting forth rights and
obligations of the parties that survive termination of the Agreement.
12. Effect of Addendum. Except as amended and supplemented by this Second
------------------
Addendum, the Agreement remains in effect pursuant to its terms, and is hereby
ratified and confirmed.
IN WITNESS WHEREOF, the parties have executed this Second Addendum as of the
date first written above.
NINTENDO CO., LTD. NINTENDO OF AMERICA INC.
By: /s/ (illegible) By: /s/ (illegible)
--------------------------- ---------------------------
Title: Senior Managing Director Title: Executive Vice President
February 20, 1996
SILICON GRAPHICS, INC. MIPS TECHNOLOGIES, INC.
By: /s/ (illegible) By: /s/ (illegible)
------------------------------ ---------------------------
Title: President & Chief Title: President
Operating Officer
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SCHEDULE C
Invention l XXXXXX
Invention 2 XXXXXX
Invention 3 XXXXXX
Invention 4 XXXXXX
Invention 5 XXXXXX
Invention 6 XXXXXX
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SCHEDULE D
Developer's Manual covers the following topics:
XXXXXX
Development Environment consists of:
XXXXXX
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EXHIBIT 10.7.4
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
FOURTH ADDENDUM TO
JOINT DEVELOPMENT AND LICENSE AGREEMENT
Nintendo Co., Ltd. ("NCL"), Nintendo of America Inc. ("NOA") (NCL and NOA
are referred to collectively as "Company"); and Silicon Graphics, Inc. and MIPS
Technologies, Inc. (Collectively referred to as "SGI"), have agreed to enter
into this Fourth Addendum to Joint Development and License Agreement, which
modifies the "Joint Development and License Agreement" dated August 20, 1993, as
supplemented by the "First Addendum to Joint Development and License Agreement"
dated February 5, 1994; the "Second Addendum to Joint Development and License
Agreement" dated February 21, 1996; and the "Third Addendum to Joint Development
and License Agreement" dated June 12, 1996 (collectively, the "Agreement").
1. Section 14.6 of the Agreement is modified as it relates to ownership
of certain rights in the Mask Work by adding underlined words and deleting
certain stricken-out words as indicated below:
14.6 Microcode/Libraries, Coprocessor Command Set, Coprocessor
Microinstruction Set, and Mask Work. SGI will deliver to Company the
Microcode/Libraries, in source code and object code forms, the
Microcode/Libraries development environment, and documentation of the
Coprocessor Command Set and the Coprocessor Microinstruction Set, at a time to
be mutually agreed upon in writing by SGI and Company. SGI and Company
acknowledge and agree that (a) xxxxxxxxxxxxxxxx and (d) all Development
Technology incorporated in the Microcode/Libraries, Coprocessor Command Set,
Coprocessor Microinstruction set, and the Mask Work shall be subject to the
provisions of Section 6.4 and 6.5 applicable to the Developed Technology.
Company hereby grants to SGI a paid-up, nonexclusive, irrevocable, worldwide
license to duplicate, distribute, modify, enhance, sublicense and otherwise use
or exploit the Microcode/Libraries, the Coprocessor Command Set, the Coprocessor
Microinstruction Set, the Mask Work and the Development Environment; subject
only to the provisions of Sections 6.4, 6.5, 14.8 and 14.9.
2. Company and SGI further agree that this Fourth Addendum is effective
retroactively as of February 21, 1996 (the "Effective Date").
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Fourth Addendum as of
June _________, 1998.
NINTENDO CO., LTD. NINTENDO OF AMERICA, INC.
By ______________________ By ___________________
Title __________________ Title_________________
SILICON GRAPHICS, INC. MIPS TECHNOLOGIES, INC.
By ______________________ By ___________________
Title __________________ Title_________________
<PAGE>
EXHIBIT 10.8
MIPS TECHNOLOGIES, INC.
1998 LONG-TERM INCENTIVE PLAN
<PAGE>
S&S DRAFT 06/12/98
MIPS TECHNOLOGIES, INC.
1998 LONG-TERM INCENTIVE PLAN
1. PURPOSES
The purposes of the Plan are to (a) promote the long-term success of
the Company and to increase stockholder value by providing Eligible Individuals
and Consultants with incentives to contribute to the long-term growth and
profitability of the Company and (b) assist the Company in attracting, retaining
and motivating highly qualified individuals. The Plan permits the Committee to
make Awards which constitute "qualified performance-based compensation" for
purposes of Section 162(m) of the Code.
2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as
follows:
"Administrator" means the individual or individuals to whom the
Committee delegates authority under the Plan in accordance with Section
3(d).
"Award" means an award made pursuant to the terms of the Plan to an
Eligible Individual in the form of Stock Options, Stock Appreciation
Rights, Stock Awards, Restricted Stock, Performance Units or Other Awards.
"Award Document" means a written document approved in accordance with
Section 3 which sets forth the terms and conditions of the Award to the
Participant. An Award Document may be in the form of (i) an agreement
between the Company which is executed by an officer on behalf of the
Company and is signed by the Participant or (ii) a certificate issued by
the Company which is executed by an officer on behalf of the Company but
does not require the signature of the Participant.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and the
applicable rulings and regulations (including any proposed regulations)
thereunder.
"Committee" means the Compensation Committee of the Board, any
successor committee thereto or any other committee appointed from time to
time by the Board to
<PAGE>
2
administer the Plan. The Committee shall consist of at least two
individuals and shall serve at the pleasure of the Board.
"Common Stock" means the common stock, par value $0.001 per share, of
the Company.
"Company" means MIPS Technologies, Inc., a Delaware corporation.
"Consultant" means any person, including an advisor, engaged by the
Company to render services and who is compensated for such services;
provided, however, that the term Consultant shall not include a non-
employee director of the Board.
"Eligible Individuals" means the individuals described in Section 6
who are eligible for Awards under the Plan.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the applicable rulings and regulations thereunder.
"Fair Market Value" means, with respect to a share of Common Stock,
the fair market value thereof as of the relevant date of determination, as
determined in accordance with a valuation methodology approved by the
Committee. In the absence of any alternative valuation methodology
approved by the Committee, the Fair Market Value of a share of Common Stock
shall equal the average of the highest and the lowest quoted selling price
of a share of Common Stock as reported on the composite tape for securities
listed on the Nasdaq-National Market, or such other national securities
exchange as may be designated by the Committee, or, in the event that the
Common Stock is not listed for trading on a national securities exchange
but is quoted on an automated system, on such automated system, in any such
case on the valuation date (or, if there were no sales on the valuation
date, the average of the highest and the lowest quoted selling prices as
reported on said composite tape or automated system for the most recent day
during which a sale occurred).
"Incentive Stock Option" means a Stock Option which is an "incentive
stock option" within the meaning of Section 422 of the Code and designated
by the Committee as an Incentive Stock Option in an Award Document.
"Nonqualified Stock Option" means a Stock Option which is not an
Incentive Stock Option.
"Other Award" means any other form of award authorized under Section
13 of the Plan.
<PAGE>
3
"Participant" means an Eligible Individual to whom an Award has been
granted under the Plan.
"Performance Unit" means a performance unit granted to an Eligible
Individual pursuant to Section 12 hereof which is subject to performance
criteria.
"Plan" means this MIPS Technologies, Inc.1998 Long-Term Incentive Plan
as described herein.
"Restricted Stock" means Common Stock granted to an Eligible
Individual pursuant to Section 11 hereof which is subject to restrictions.
"Restoration Option" means a Stock Option that is awarded upon the
exercise of a Stock Option earlier awarded under the Plan (an "Underlying
Option") for which the exercise price is paid in whole or in part by
tendering shares of Common Stock previously owned by the Participant, where
such Restoration Option (i) covers a number of shares of Common Stock no
greater than the number of previously owned shares tendered in payment of
the exercise price of the Underlying Option plus the number of shares
withheld to pay taxes arising upon such exercise, (ii) the expiration date
of the Restoration Option is no later than the expiration date of the
Underlying Option and (iii) the exercise price per share of the Restoration
Option is no less than the Fair Market Value per share of Common Stock on
the date of exercise of the Underlying Option.
"Stock Appreciation Right" means a right to receive all or some
portion of the appreciation on shares of Common Stock granted to an
Eligible Individual pursuant to Section 9 hereof.
"Stock Award" means a share of Common Stock granted to an Eligible
Individual for no consideration other than the provision of services or
offer for sale to an Eligible Employee at a purchase price determined by
the Committee, in either case pursuant to Section 10 hereof.
"Stock Option" means an Award to purchase shares of Common Stock
granted to an Eligible Individual pursuant to Section 8 hereof, which Award
may be either an Incentive Stock Option or a Nonqualified Stock Option.
"Substitute Award" means an Award granted upon assumption of, or in
substitution for, outstanding awards previously granted by a company or
other entity in connection with a corporate transaction, such as a merger,
combination, consolidation or acquisition of property or stock.
<PAGE>
4
3. ADMINISTRATION OF THE PLAN
(a) Power and Authority of the Committee. The Plan shall be
administered by the Committee, which shall have full power and authority,
subject to the express provisions hereof:
(i) to select Participants from the Eligible Individuals;
(ii) to make Awards in accordance with the Plan;
(iii) to determine the number of shares of Common Stock subject to
each Award or the cash amount payable in connection with an Award;
(iv) to determine the terms and conditions of each Award, including,
without limitation, those related to vesting, forfeiture, payment and
exercisability, and the effect, if any, of a Participant's termination of
employment with the Company, and including the authority to amend the terms
and conditions of an Award after the granting thereof to a Participant in a
manner that is not, without the consent of the Participant, prejudicial to
the rights of such Participant in such Award;
(v) to specify and approve the provisions of the Award Documents
delivered to Participants in connection with their Awards;
(vi) to construe and interpret any Award Document delivered under
the Plan;
(vii) to prescribe, amend and rescind rules and procedures relating
to the Plan;
(viii) to vary the terms of Awards to take account of tax,
securities law and other regulatory requirements of foreign jurisdictions;
(ix) subject to the provisions of the Plan and subject to such
additional limitations and restrictions as the Committee may impose, to
delegate to one or more officers of the Company some or all of its
authority under the Plan;
(x) to employ such legal counsel, independent auditors and
consultants as it deems desirable for the administration of the Plan and to
rely upon any opinion or computation received therefrom; and
(xi) to make all other determinations and to formulate such
procedures as may be necessary or advisable for the administration of the
Plan.
<PAGE>
5
(b) Plan Construction and Interpretation. The Committee shall have
full power and authority, subject to the express provisions hereof, to construe
and interpret the Plan.
(c) Determinations of Committee Final and Binding. All
determinations by the Committee in carrying out and administering the Plan and
in construing and interpreting the Plan shall be final, binding and conclusive
for all purposes and upon all persons interested herein.
(d) Delegation of Authority. The Committee may, but need not, from
time to time delegate some or all of its authority under the Plan to an
Administrator consisting of one or more members of the Committee or of one or
more officers of the Company; provided, however, that the Committee may not
delegate its authority (i) to make Awards to Eligible Individuals who are
officers of the Company who are delegated authority by the Committee hereunder,
or (ii) under Sections 3(b) and 16 of the Plan. Any delegation hereunder shall
be subject to the restrictions and limits that the Committee specifies at the
time of such delegation or thereafter. Nothing in the Plan shall be construed
as obligating the Committee to delegate authority to an Administrator, and the
Committee may at any time rescind the authority delegated to an Administrator
appointed hereunder or appoint a new Administrator. At all times, the
Administrator appointed under this Section 3(d) shall serve in such capacity at
the pleasure of the Committee. Any action undertaken by the Administrator in
accordance with the Committee's delegation of authority shall have the same
force and effect as if undertaken directly by the Committee, and any reference
in the Plan to the Committee shall, to the extent consistent with the terms and
limitations of such delegation, be deemed to include a reference to the
Administrator.
(e) Liability of Committee. No member of the Committee shall be
liable for any action nor determination made in good faith, and the members of
the Committee shall be entitled to indemnification and reimbursement in the
manner provided in the Company's certificate of incorporation as it may be
amended from time to time. In the performance of its responsibilities with
respect to the Plan, the Committee shall be entitled to rely upon information
and advice furnished by the Company's officers, the Company's accountants, the
Company's counsel and any other party the Committee deems necessary, and no
member of the Committee shall be liable for any action taken or not taken in
reliance upon any such advice.
(f) Action by the Board. Anything in the Plan to the contrary
notwithstanding, any authority or responsibility which, under the terms of the
Plan, may be exercised by the Committee may alternatively be exercised by the
Board.
<PAGE>
6
4. EFFECTIVE DATE AND TERM
The Plan shall become effective upon its adoption by the Board subject
to its approval by the stockholders of the Company. Prior to such stockholder
approval, the Committee may grant Awards conditioned on stockholder approval.
If such stockholder approval is not obtained at or before the first annual
meeting of stockholders to occur after the adoption of the Plan by the Board
(including any adjournment or adjournments thereof), the Plan and any Awards
made thereunder shall terminate ab initio and be of no further force and effect.
In no event shall any Awards be made under the Plan after the [fifth]
anniversary of the date of stockholder approval.
5. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
(a) General. Subject to adjustment as provided in Section 15(b)
hereof, the number of shares of Common Stock that may be issued pursuant to
Awards under the Plan (the "Section 5 Limit") shall not exceed, in the
aggregate, 6,600,000. Shares issued under this Plan may be either authorized
but unissued shares, treasury shares or any combination thereof.
(b) Rules Applicable to Determining Shares Available for Issuance.
For purposes of determining the number of shares of Common Stock that remain
available for issuance, the following shares shall be added back to the Section
5 Limit and again be available for Awards:
(i) The number of shares tendered to pay the exercise price of a
Stock Option or other Award; and
(ii) The number of shares withheld from any Award to satisfy a
Participant's tax withholding obligations or, if applicable, to pay
the exercise price of a Stock Option or other Award.
In addition, any shares issued underlying Substitute Awards shall not
be counted against the Section 5 Limit and shall not be subject to Section 5(c)
below.
(c) Special Limits. Anything to the contrary in Section 5(a) above
notwithstanding, but subject to Section 15(b) below, the following special
limits shall apply to shares of Common Stock available for Awards under the
Plan:
(i) The maximum number of shares that may be issued in the form of
Stock Awards, or issued upon settlement of Restricted Stock or Other
Awards, shall equal
<PAGE>
7
[800,000] shares, of which no more than a number of shares equal to [10%]
of the Section 5 Limit shall be in the form of Other Awards, provided,
however, that any such Stock Awards, Restricted Stock or Other Awards that
are issued in lieu of cash compensation that otherwise would be paid to a
Participant, or in satisfaction of any other obligation owed by the Company
to a Participant, shall not be counted against such limitation; and
(ii) The maximum number of shares of Common Stock that may be
subject to Stock Options or Stock Appreciation Rights granted to any
Eligible Individual in any fiscal year of the Company shall equal 198,000
shares plus any shares which were available under this Section 5(c)(ii) for
Awards of Stock Options or Stock Appreciation Rights to such Eligible
Individual in any prior fiscal year but which were not covered by such
Awards.
(iii) The maximum number of Performance Units that may be granted
to any Eligible Individual in any fiscal year of the Company shall equal
198,000 units plus any Performance Units which were available under this
Section 5(c)(iii) for Awards of Performance Units to such Eligible
Individual in any prior fiscal year but which were not covered by such
Awards
6. ELIGIBLE INDIVIDUALS
Awards may be granted by the Committee to Eligible Individuals who are
officers or other key employees of the Company or Consultants; provided,
however, that Consultants shall not be eligible to receive Incentive Stock
Options. Members of the Committee will not be eligible to receive Awards under
the Plan. An individual's status as an Administrator will not, by itself,
affect his or her eligibility to participate in the Plan.
7. AWARDS IN GENERAL
(a) Types of Award and Award Document. Awards under the Plan may
consist of Stock Options, Stock Appreciation Rights, Stock Awards, Restricted
Stock, Performance Stock or Other Awards. Any Award described in Sections 8
through 13 of the Plan may be granted singly or in combination or in tandem with
any other Award, as the Committee may determine. Awards may be made in
combination with, in replacement of, or as alternatives to grants of rights
under any other employee compensation plan of the Company, including the plan of
any acquired entity, or may be granted in satisfaction of the Company's
obligations under any such plan.
<PAGE>
8
(b) Terms Set Forth in Award Document. The terms and provisions of an
Award shall be set forth in a written Award Document approved by the Committee
and delivered or made available to the Participant as soon as administratively
practicable following the date of such Award. The vesting, exercisability,
payment and other restrictions applicable to an Award (which may include,
without limitation, restrictions on transferability or provision for mandatory
resale to the Company) shall be determined by the Committee and set forth in the
applicable Award Document. Notwithstanding the foregoing, the Committee may
accelerate (i) the vesting or payment of any Award, (ii) the lapse of
restrictions on any Award or (iii) the date on which any Stock Option, Stock
Appreciation Right or Other Award first becomes exercisable.
(c) Termination of Employment and Change in Control. The Committee
shall also have full authority to determine and specify in the applicable Award
Document the effect, if any, that a Participant's termination of employment for
any reason will have on the vesting, exercisability, payment or lapse of
restrictions applicable to an Award. The date of a Participant's termination of
employment for any reason shall be determined in the sole discretion of the
Committee. Similarly, the Committee shall have full authority to determine the
effect, if any, of a change in control of the Company on the vesting,
exercisability, payment or lapse of restrictions applicable to an Award, which
effect may be specified in the applicable Award Document or determined at a
subsequent time.
(d) Dividends and Dividend Equivalents. The Committee may provide
Participants with the right to receive dividends or payments equivalent to
dividends or interest with respect to an outstanding Awards, which payments can
either be paid currently or deemed to have been reinvested in shares of Common
Stock, and can be made in Common Stock, cash or a combination thereof, as the
Committee shall determine.
8. STOCK OPTIONS
(a) Terms of Stock Options Generally. A Stock Option shall entitle
the Participant to whom the Stock Option was granted to purchase a specified
number of shares of Common Stock during a specified period at a price that is
determined in accordance with Section 8(b) below. Stock Options may be either
Nonqualified Stock Options or Incentive Stock Options. The Committee will fix
the vesting and exercisability conditions applicable to a Stock Option, provided
that no Stock Option shall vest sooner than ten months from the date of grant
(subject to early vesting, if so provided by the Committee, upon death,
disability, termination of employment or change in control of the Company)[, but
provided further that such minimum vesting period shall not apply to any
Restoration Option].
<PAGE>
9
(b) Exercise Price. The exercise price per share of Common Stock
purchasable under a Stock Option shall be fixed by the Committee at the time of
grant or, alternatively, shall be determined by a method specified by the
Committee at the time of grant; provided, however, that the exercise price per
share shall be no less than 100% of the Fair Market Value per share on the date
of grant (or if the exercise price is not fixed on the date of grant, then on
such date as the exercise price is fixed); and provided further that, except as
provided in Section 15(b) below, the exercise price per share of Common Stock
applicable to a Stock Option may not be adjusted or amended, including by means
of amendment, cancellation or the replacement of such Stock Option with a
subsequently awarded Stock Option. Notwithstanding the foregoing, the exercise
price per share of a Stock Option that is a Substitute Award may be less than
the Fair Market Value per share on the date of award, provided that the excess
of:
(i) the aggregate Fair Market Value (as of the date such Substitute
Award is granted) of the shares of Common Stock subject to the
Substitute Award, over
(ii) the aggregate exercise price thereof,
does not exceed the excess of:
(iii) the aggregate fair market value (as of the time immediately
preceding the transaction giving rise to the Substitute Award, such
fair market value to be determined by the Committee) of the shares of
the predecessor entity that were subject to the award assumed or
substituted for by the Company, over
(iv) the aggregate exercise price of such shares.
(c) Option Term. The term of each Stock Option shall be fixed by the
Committee and shall not exceed ten years from the date of grant.
(d) Incentive Stock Options. Each Stock Option granted pursuant to
the Plan shall be designated at the time of grant as either an Incentive Stock
Option or as a Nonqualified Stock Option. No Incentive Stock Option may be
issued pursuant to the Plan to any individual who, at the time the Stock Option
is granted, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries, unless
(A) the exercise price determined as of the date of grant is at least 110% of
the Fair Market Value on the date of grant of the shares of Common Stock subject
to such Stock Option, and (B) the Incentive Stock Option is not exercisable more
than five years from the date of grant thereof. No Incentive Stock Option may
be granted under the Plan after the tenth anniversary of the Effective Date.
<PAGE>
10
(e) Method of Exercise. Subject to the provisions of the applicable
Award Document, the exercise price of a Stock Option may be paid in cash or
previously owned shares or a combination thereof and, if the applicable Award
Document so provides, in whole or in part through the withholding of shares
subject to the Stock Option with a value equal to the exercise price. In
accordance with the rules and procedures established by the Committee for this
purpose, the Stock Option may also be exercised through a "cashless exercise"
procedure approved by the Committee involving a broker or dealer approved by the
Committee, that affords Participants the opportunity to sell immediately some or
all of the shares underlying the exercised portion of the Stock Option in order
to generate sufficient cash to pay the Stock Option exercise price and/or to
satisfy withholding tax obligations related to the Stock Option.
9. STOCK APPRECIATION RIGHTS
(a) General. A Stock Appreciation Right shall entitle a Participant
to receive, upon satisfaction of the conditions to the payment specified in the
applicable Award Document, an amount equal to the excess, if any, of the Fair
Market Value on the exercise date of the number of shares of Common Stock for
which the Stock Appreciation Right is exercised, over the exercise price for
such Stock Appreciation Right specified in the applicable Award Document. The
exercise price per share of Common Stock covered by a Stock Appreciation Right
shall be fixed by the Committee at the time of grant or, alternatively, shall be
determined by a method specified by the Committee at the time of grant;
provided, however, that, except as provided in Section 9(b) below, the exercise
price per share shall be no less than 100% of the Fair Market Value per share on
the date of grant (or if the exercise price is not fixed on the date of grant,
then on such date as the exercise price is fixed); and provided further, that,
except as provided in Section 15(b) below, the exercise price per share of
Common Stock subject to a Stock Appreciation Right may not be adjusted or
amended, including by means of amendment, cancellation or the replacement of
such Stock Appreciation Right with a subsequently awarded Stock Appreciation
Right. Notwithstanding the foregoing, the exercise price per share of a Stock
Appreciation Right that is a Substitute Award may be less than the Fair Market
Value per share on the date of award, provided, that such exercise price is not
less than the minimum exercise price that would be permitted for an equivalent
Stock Option as determined in accordance with Section 8(b) above. At the sole
discretion of the Committee, payments to a Participant upon exercise of a Stock
Appreciation Right may be made in cash, in shares of Common Stock having an
aggregate Fair Market Value as of the date of exercise equal to such amount, or
in a combination of cash and shares of Common Stock having an aggregate value as
of the date of exercise equal to such amount. A Stock Appreciation Right may be
granted alone or in addition to other Awards, or in tandem with a Stock Option.
<PAGE>
11
(b) Stock Appreciation Rights in Tandem with Stock Options. A Stock
Appreciation Right granted in tandem with a Stock Option may be granted either
at the same time as such Stock Option or subsequent thereto. If granted in
tandem with a Stock Option, a Stock Appreciation Right shall cover the same
number of shares of Common Stock as covered by the Stock Option (or such lesser
number of shares as the Committee may determine) and shall be exercisable only
at such time or times and to the extent the related Stock Option shall be
exercisable, and shall have the same term and exercise price as the related
Stock Option (which, in the case of a Stock Appreciation Right granted after the
grant of the related Stock Option, may be less than the Fair Market Value per
share on the date of grant of the tandem Stock Appreciation Right). Upon
exercise of a Stock Appreciation Right granted in tandem with a Stock Option,
the related Stock Option shall be canceled automatically to the extent of the
number of shares covered by such exercise; conversely, if the related Stock
Option is exercised as to some or all of the shares covered by the tandem grant,
the tandem Stock Appreciation Right shall be canceled automatically to the
extent of the number of shares covered by the Stock Option exercise.
10. STOCK AWARDS
(a) General. A Stock Award shall consist of one or more shares of
Common Stock granted to a Participant for no consideration other than the
provision of services (or, if required by applicable law in the reasonable
judgment of the Company, for payment of the par value of such shares). Stock
Awards shall be subject to such restrictions (if any) on transfer or other
incidents of ownership for such periods of time, and shall be subject to such
conditions of vesting, as the Committee may determine and as shall be set forth
in the applicable Award Document.
(b) Distributions. Any shares of Common Stock or other securities of
the Company received by a Participant to whom a Stock Award has been granted as
a result of a stock distribution to holders of Common Stock or as a stock
dividend on Common Stock shall be subject to the same terms, conditions and
restrictions as such Stock Award.
11. RESTRICTED STOCK
(a) General An Award of Restricted Stock shall consist of a grant of
one or more shares of Common Stock to a Participant for no consideration other
than the provision of services or may be offered for sale to a Participant at a
purchase price determined by the Committee, subject to the terms and conditions
established by the Committee in connection with the Award and as set forth in
the applicable Award Document. Such shares of Common Stock shall be subject to
such restrictions on transfer or other incidents of ownership for such
<PAGE>
12
periods of time, and shall be subject to such conditions of vesting, as the
Committee may determine and as shall be set forth in the Award Document relating
to such stock. If shares of Common Stock are offered for sale under the Plan,
the purchase price shall be payable in cash, or, in the sole discretion of the
Committee and to the extent provided in any applicable Award Document, in shares
of Common Stock already owned by the Participant, for other consideration
acceptable to the Committee or in any combination of cash, shares of Common
Stock or such other consideration. Restricted Stock that is granted in respect
of individual or corporate performance shall vest no sooner than [one year] from
the date of grant, and Restricted Stock that is granted in connection with
hiring or retention arrangements between the Company and a Participant shall
vest no sooner than [three years] from the date of grant (subject, in either
such case, to early vesting, if so provided by the Committee, upon death,
disability, termination of employment or a change in control of the Company).
(b) Share Certificates; Rights and Privileges. At the time Restricted
Stock is granted or sold to a Participant, share certificates representing the
appropriate number of shares or Restricted Stock shall be registered in the name
of the Participant but shall be held by the Company in custody for the account
of such person. The certificates shall bear a legend restricting their
transferability as provided herein. Except for such restrictions on transfer or
other incidents of ownership as may be determined by the Committee and set forth
in the Award Document relating to an award or sale of Restricted Stock, a
Participant shall have the rights of a stockholder as to such Restricted Stock,
including the right to receive dividends and the right to vote in accordance
with the Company's certificate of incorporation.
(c) Distributions. Any shares of Common Stock or other securities of
the Company received by a Participant to whom Restricted Stock has been granted
or sold as a result of a stock distribution to holders of Common Stock or as a
stock dividend on Common Stock shall be subject to the same terms, conditions
and restrictions as such Restricted Stock.
12. PERFORMANCE UNITS
Performance Units may be granted as fixed or variable share- or
dollar-denominated units subject to such conditions of vesting and time of
payment as the Committee may determine and as shall be set forth in the
applicable Award Document relating to such Performance Units. Performance Units
may be paid in Common Stock upon the satisfaction of the applicable performance
criteria as described in the Award Document, cash or a combination of Common
Stock and cash, as the Committee may determine.
<PAGE>
13
13. OTHER AWARDS
The Committee shall have the authority to specify the terms and
provisions of other forms of equity-based or equity-related Awards not described
above which the Committee determines to be consistent with the purpose of the
Plan and the interests of the Company, which Awards may provide for cash
payments based in whole or in part on the value or future value of Common Stock,
for the acquisition or future acquisition of Common Stock, or any combination
thereof. Other Awards shall also include cash payments (including the cash
payment of dividend equivalents) under the Plan which may be based on one or
more criteria determined by the Committee which are unrelated to the value of
Common Stock and which may be granted in tandem with, or independent of, other
Awards under the Plan.
14. CERTAIN RESTRICTIONS
(a) Transfers. Unless the Committee determines otherwise, no Award
shall be transferable other than by will or by the laws of descent and
distribution or pursuant to a domestic relations order; provided, however, that
the Committee may, in its discretion and subject to such terms and conditions as
it shall specify, permit the transfer of an Award for no consideration to a
Participant's family members or to one or more trusts or partnerships
established in whole or in part for the benefit of one or more of such family
members (collectively, "Permitted Transferees"). Any Award transferred to a
Permitted Transferee shall be further transferable only by will or the laws of
descent and distribution or, for no consideration, to another Permitted
Transferee of the Participant. The Committee may in its discretion permit
transfers of Awards other than those contemplated by this Section 14.
(b) Exercise. During the lifetime of the Participant, a Stock Option,
Stock Appreciation Right or similar-type Other Award shall be exercisable only
by the Participant or by a Permitted Transferee to whom such Stock Option, Stock
Appreciation Right or Other Award has been transferred in accordance with
Section 14(a).
15. RECAPITALIZATION OR REORGANIZATION
(a) Authority of the Company and Stockholders. The existence of the
Plan, the Award Documents and the Awards granted hereunder shall not affect or
restrict in any way the right or power of the Company or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of options, warrants or
rights to purchase stock or of bonds, debentures, preferred or prior
<PAGE>
14
preference stocks whose rights are superior to or affect the Common Stock or the
rights thereof or which are convertible into or exchangeable for Common Stock,
or the dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
(b) Change in Capitalization. Notwithstanding any provision of the
Plan or any Award Document, the number and kind of shares authorized for
issuance under Section 5(a) above, including the maximum number of shares
available under the special limits provided for in Section 5(c) above, may be
equitably adjusted in the sole discretion of the Committee in the event of a
stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, extraordinary dividend, split-up, spin-off, combination, exchange
of shares, warrants or rights offering to purchase Common Stock at a price
substantially below Fair Market Value or other similar corporate event affecting
the Common Stock in order to preserve, but not increase, the benefits or
potential benefits intended to be made available under the Plan. In addition,
upon the occurrence of any of the foregoing events, the number of outstanding
Awards and the number and kind of shares subject to any outstanding Award and
the purchase price per share, if any, under any outstanding Award may be
equitably adjusted (including by payment of cash to a Participant) in the sole
discretion of the Committee in order to preserve the benefits or potential
benefits intended to be made available to Participants granted Awards. Such
adjustments shall be made by the Committee, whose determination as to what
adjustments shall be made, and the extent thereof, shall be final. Unless
otherwise determined by the Committee, such adjusted Awards shall be subject to
the same vesting schedule and restrictions to which the underlying Award is
subject.
16. AMENDMENTS; TERMINATION
The Board or Committee may at any time and from time to time alter,
amend, suspend or terminate the Plan in whole or in part; provided, however,
that any amendment which under the requirements of any applicable law or stock
exchange rule must be approved by the stockholders of the Company shall not be
effective unless and until such stockholder approval has been obtained in
compliance with such law or rule; and provided further that, except as
contemplated by Section 15(b) above, the Board or Committee may not, without the
approval of the Company's stockholders, increase the maximum number of shares
issuable under the Plan or reduce the exercise price of a Stock Option or Stock
Appreciation Right. No termination or amendment of the Plan may, without the
consent of the Participant to whom an Award has been granted, adversely affect
the rights of such Participant under such Award. Notwithstanding any provision
herein to the contrary, the Board or Committee shall have broad authority to
amend the Plan or any Award under the Plan to take into account changes in
applicable tax laws, securities laws, accounting rules and other applicable
state and federal laws.
<PAGE>
15
17. MISCELLANEOUS
(a) Tax Withholding. The Company may require any individual entitled
to receive a payment in respect of an Award to remit to the Company, prior to
such payment, an amount sufficient to satisfy any Federal, state or local tax
withholding requirements. The Company shall also have the right to deduct from
all cash payments made pursuant to or in connection with any Award any Federal,
state or local taxes required to be withheld with respect to such payments. In
addition, the Company may permit any individual to whom an Award has been made
to satisfy, in whole or in part, such obligation to remit taxes, by directing
the Company to withhold shares of Common Stock that would otherwise be received
by such individual upon settlement or exercise of such Award or by delivering to
the Company shares of Common Stock owned by the individual prior to exercising
the option, subject to such rules as the Committee may establish from time to
time. The value of any share of Common Stock to be withheld by the Company
pursuant to this Section 17(a) shall be the Fair Market Value on the date to be
used to determine the amount of tax to be withheld.
(b) No Right to Grants or Employment. No Eligible Individual or
Participant shall have any claim or right to receive grants of Awards under the
Plan. Nothing in the Plan or in any Award or Award Document shall confer upon
any employee of the Company any right to continued employment with the Company
or interfere in any way with the right of the Company to terminate the
employment of any of its employees at any time, with or without cause.
(c) Other Compensation. Nothing in this Plan shall preclude or limit
the ability of the Company to pay any compensation to a Participant under the
Company's other compensation and benefit plans and programs.
(d) Other Employee Benefit Plans. Payments received by a Participant
under any Award made pursuant to the Plan shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit plan
or similar arrangement provided by the Company, unless otherwise specifically
provided for under the terms of such plan or arrangement or by the Committee.
(e) Unfunded Plan. The Plan is intended to constitute an unfunded
plan for incentive compensation. Prior to the payment or settlement of any
Award, nothing contained herein shall give any Participant any rights that are
greater than those of a general creditor of the Company. In its sole
discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Common
Stock or payments in lieu thereof with respect to awards hereunder.
<PAGE>
16
(f) Securities Law Restrictions. The Committee may require each
Eligible Individual purchasing or acquiring shares of Common Stock pursuant to a
Stock Option or other Award under the Plan to represent to and agree with the
Company in writing that such Eligible Individual is acquiring the shares for
investment and not with a view to the distribution thereof. All certificates
for shares of Common Stock delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable
under the rules, regulations, and other requirements of the Securities and
Exchange Commission, any exchange upon which the Common Stock is then listed,
and any applicable federal or state securities law, and the Committee may cause
a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions. No shares of Common Stock shall be issued
hereunder unless the Company shall have determined that such issuance is in
compliance with, or pursuant to an exemption from, all applicable federal and
state securities laws.
(g) Compliance with Rule 16b-3. Notwithstanding anything contained in
the Plan or in any Award Document to the contrary, if the consummation of any
transaction under the Plan would result in the possible imposition of liability
on a Participant pursuant to Section 16(b) of the Exchange Act, the Committee
shall have the right, in its sole discretion, but shall not be obligated, to
defer such transaction or the effectiveness of such action to the extent
necessary to avoid such liability, but in no event for a period longer than six
months.
(h) Award Document. In the event of any conflict or inconsistency
between the Plan and any Award Document, the Plan shall govern, and the Award
Document shall be interpreted to minimize or eliminate any such conflict or
inconsistency.
(i) Expenses. The costs and expenses of administering the Plan shall
be borne by the Company.
(j) Application of Funds. The proceeds received from the Company from
the sale of Common Stock or other securities pursuant to Awards will be used for
general corporate purposes.
(k) Applicable Law. Except as to matters of federal law, the Plan and
all actions taken thereunder shall be governed by and construed in accordance
with the laws of the State of Delaware without giving effect to conflicts of law
principles.
<PAGE>
EXHIBIT 10.9
MIPS TECHNOLOGIES, INC.
EMPLOYEE STOCK PURCHASE PLAN
(Effective as of _________)
The following constitutes the provisions of the MIPS Technologies, Inc.
Employee Stock Purchase Plan.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through payroll deductions. It is believed that employee
participation in ownership of the Company on this basis will be to the mutual
benefit of the employees and the Company. It is the intention of the Company
that the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of
the Code. The provisions of the Plan shall, accordingly, be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.
2. DEFINITIONS.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, $0.001 par value, of the
Company.
"Company" means MIPS Technologies, Inc.
"Committee" means the committee appointed by and serving at the
pleasure of the Board to administer the Plan pursuant to Section 14.
"Compensation" means base pay, plus any amounts attributable to
overtime, shift premium, incentive compensation, bonuses and commissions
(exclusive of "spot bonuses" and any other such item specifically directed
for all Employees by the Board or a committee), designated by the Board,
but shall exclude severance pay, pay in lieu of vacations, back pay awards,
disability benefits, deferred compensation, or any other compensation
excluded in the discretion of the Board.
Compensation shall be determined before giving effect to any salary
reduction agreement pursuant to a qualified cash or deferred arrangement
within the meaning of Section 401(k) of the Code or to any similar
reduction agreement pursuant to any cafeteria plan (within the meaning of
Section 125 of the Code).
<PAGE>
2
"Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of a leave
of absence agreed to in writing by the Company, provided that such leave is
for a period of not more than 90 days or re-employment upon the expiration
of such leave is guaranteed by contract or statute.
"Designated Subsidiaries" means the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
"Employee" means any person, including an officer, who is customarily
employed for at least twenty (20) hours per week and more than five (5)
months in a calendar year by the Company or one of its Designated
Subsidiaries.
"Exercise Date" means the last business day of each Exercise Period in
an Offering Period.
"Exercise Period" means a six-month period commencing on an Offering
Date or on the first business day after any Exercise Date in an Offering
Period.
"Offering Date" means the first day of each Offering Period of the
Plan.
"Offering Period" means a period of twenty-four (24) months consisting
of four six-month Exercise Periods during which options granted pursuant to
the Plan may be exercised.
"Plan" means the MIPS Technologies, Inc. Employee Stock Purchase Plan.
"Subsidiary" means any corporation, domestic or foreign, in which the
Company owns, directly or indirectly, 50% or more of the voting shares.
3. ELIGIBILITY.
(a) Any person who is an Employee, as defined in paragraph 2, on the
Offering Date of a given Offering Period shall be eligible to participate in
such Offering Period under the Plan, subject to the requirements of paragraph
5(a) and the limitations imposed by Section 423(b) of the Code.
(b) Notwithstanding any provisions of the Plan to the contrary, no
Employee shall be granted an option under the Plan if (i) immediately after the
grant, such Employee (or any other person whose stock ownership would be
attributed to such Employee pursuant to Section 424(d) of the Code) would own
shares and/or hold outstanding options to purchase shares possessing five
percent (5%) or more of the total combined voting power or value of all
<PAGE>
3
classes of shares of the Company or of any subsidiary of the Company, or (ii)
the rate of withholding under such option would permit the employee's rights to
purchase shares under all employee stock purchase plans (described in Section
423 of the Code) of the Company and its subsidiaries to accrue (i.e., become
exercisable) at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of
fair market value of such shares (determined at the time such option is granted)
for each calendar year in which such option is outstanding at any time.
(c) Upon reemployment of a former Employee, such former Employee will
again be eligible to participate in the Plan, subject to the requirements of
Paragraph 5(a) and the limitations imposed by Section 423(b) of the Code.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on or about each January
1 and July 1. If the Company cannot make an offer under the Plan on or about any
January 1 or July 1 because of restrictions imposed by law, the Company may make
an offer as soon as practical after the expiration of such restrictions. The
Board shall have the power to change the duration of Offering Periods with
respect to future offerings without stockholder approval, if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions on the form
provided by the Company and filing it with the Company's payroll office not less
than 15 days prior to the Offering Date of the first Offering Period with
respect to which it is to be effective, unless a later time for filing the
subscription agreement is set for all eligible Employees with respect to such
Offering Period. Once enrolled, the Employee remains enrolled in each subsequent
Offering Period of the Plan at the designated payroll deduction unless the
Employee withdraws by providing the Company with a written Notice of Withdrawal
or files a new subscription agreement prior to the applicable Offering Date
changing the Employee's designated payroll deduction. An eligible Employee may
participate in only one Offering Period at a time.
(b) Payroll deductions for a participant shall commence with the first
payroll period following the Offering Date, or the first payroll following the
date of valid filing of the subscription agreement, whichever is later, and
shall end when terminated by the participant as provided in paragraph 10.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each payday during all
subsequent Offering
<PAGE>
4
Periods at a rate not exceeding ten percent (10%), or such other rate as may be
determined from time to time by the Board, of the Compensation which he or she
would otherwise receive on such payday without regard to deferral elections,
provided that the aggregate of such payroll deductions during any Offering
Period shall not exceed ten percent (10%), or such other percentage as may be
determined from time to time by the Board, of the aggregate Compensation which
he or she would otherwise have received during said Offering Period.
(b) All payroll deductions authorized by a participant shall be
credited to his or her account under the Plan. A participant may not make any
additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in paragraph 10, or may change the rate of his or her payroll
deductions during an Offering Period by completing and filing with the Company a
new authorization for payroll deduction, provided that the Board may, in its
discretion, impose reasonable and uniform restrictions on participants' ability
to change the rate of payroll deductions. The change in rate shall be effective
no later than fifteen (15) days following the Company's receipt of the new
authorization. A participant may decrease or increase the amount of his or her
payroll deductions as of the beginning of an Offering Period by completing and
filing with the Company, at least fifteen (15) days prior to the beginning of
such Offering Period, a new payroll deduction authorization.
(d) Notwithstanding the foregoing, to the extent necessary, but only
to such extent, to comply with Section 423(b)(8) of the Code and paragraph 3(b)
herein, a participant's payroll deductions may be automatically decreased to 0%
at such time during any Exercise Period which is scheduled to end in the current
calendar year that the aggregate of all payroll deductions accumulated with
respect to the applicable Offering Period and any other Offering Period ending
within the same calendar year equals $25,000. Payroll deductions shall
recommence at the rate provided in such participant's subscription agreement at
the beginning of the next succeeding Exercise Period, unless terminated by the
participant as provided in paragraph 10.
7. GRANT OF OPTION.
(a) On each Offering Date, each participant shall be granted an option
to purchase on each Exercise Date (at the per share option price) a number of
full shares of Common Stock arrived at by dividing such participant's total
payroll deductions to be accumulated prior to such Exercise Date and retained in
the participant's account as of the Exercise Date by the lower of (i) eighty-
five percent (85%) of the fair market value of a share of Common Stock at the
Offering Date, or (ii) eighty-five percent (85%) of the fair market value of a
share of Common Stock at the Exercise Date; provided, however, that the maximum
number of shares a participant may purchase during each Offering Period shall be
determined by (i) dividing
<PAGE>
5
$50,000 by the fair market value of a share of Common Stock on the Offering Date
or (ii) if less, by the "Maximum Cap" set for such Offering Period; and provided
further that such purchase shall be subject to the limitations set forth in
paragraphs 3(b) and 12 hereof. The "Maximum Cap" for each Offering Period shall
be the number of shares purchasable under the Plan during that Offering Period
with the maximum payroll deductions permitted by paragraph 6(a) hereof, based
upon the fair market value of a share of Common Stock at the beginning of the
Offering Period. The fair market value of a share of Common Stock shall be
determined as provided in paragraph 7(b) herein.
(b) The option price per share of such shares shall be the lower of:
(i) eighty-five percent (85%) of the fair market value of a share of Common
Stock at the Offering Date; or (ii) eighty-five percent (85%) of the fair market
value of a share of Common Stock at the Exercise Date. The fair market value of
a share of Common Stock on said dates shall be determined by the Board, based
upon such factors as the Board determines relevant; provided, however, that if
there is a public market for the Common Stock, the fair market value of a share
of Common Stock on a given date shall be the reported bid price for the Common
Stock as of such date; or, in the event that the Common Stock is listed on a
national securities exchange, the fair market value of a share of Common Stock
shall be an amount equal to the average of the high and low sales price of a
share of Common Stock on the exchange as of such date.
8. EXERCISE OF OPTION.
(a) Unless a participant withdraws from the Offering Period as
provided in paragraph 10, his or her option for the purchase of shares will be
exercised automatically at each Exercise Date, and the maximum number of full
shares subject to option will be purchased at the applicable option price with
the accumulated payroll deductions in his or her account. The shares purchased
upon exercise of an option hereunder shall be deemed to be transferred to the
participant on the Exercise Date.
(b) During his or her lifetime, a participant's option to purchase
shares hereunder is exercisable only by the participant.
(c) The Board may require, as a condition precedent to any purchase
under the Plan, appropriate arrangements with the participant for the
withholding of any applicable Federal, state, local or foreign withholding or
other taxes.
9. DELIVERY. As promptly as practicable after the Exercise Date of each
Offering Period, the Company shall arrange for the shares purchased upon
exercise of his or her option to be electronically credited to the participant's
designated brokerage account at one of the securities brokerage firms
participating in the Company's direct deposit program from time to time. Any
cash remaining to the credit of a participant's account under the Plan after a
purchase by him or her of shares at the Exercise Date of each Offering Period
which merely represents a fractional
<PAGE>
6
share shall be credited to the participant's account for the next subsequent
Offering Period; any additional cash shall be returned to said participant.
<PAGE>
7
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all, but not less than all, the payroll
deductions credited to his or her account under the Plan at any time prior to an
Exercise Date by giving written notice to the Company on a form provided for
such purpose. If the participant withdraws from the Offering Period, all of the
participant's payroll deductions credited to his or her account will be paid to
the participant as soon as practicable after receipt of the notice of withdrawal
and his or her option for the current Offering Period will be automatically
canceled, and no further payroll deductions for the purchase of shares will be
made during such Offering Period or subsequent Offering Periods, except pursuant
to a new subscription agreement filed in accordance with paragraph 6 hereof.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to an Exercise Date of an Offering Period for any reason,
including retirement or death, the payroll deductions accumulated in his or her
account will be returned to him or her as soon as practicable after such
termination or, in the case of death, to the person or persons entitled thereto
under paragraph 14, and his or her option will be automatically canceled.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during an
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan, and the payroll deductions credited
to his or her account will be returned to the participant and the option
canceled.
(d) A participant's withdrawal from an Offering Period will not have
any effect upon his or her eligibility to participate in a succeeding Offering
Period by executing and delivering to the Company a new payroll deduction form
or in any similar plan which may hereafter be adopted by the Company.
11. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. In the event that
the fair market value of the Common Stock is lower on the first day of an
Exercise Period (the "Subsequent Exercise Period") than it was on the first
Offering Date for that Offering Period (the "Initial Offering Period"), all
participants in the Plan on the first day of the Subsequent Exercise Period
shall be deemed to have withdrawn from the Initial Offering Period on the first
day of the Subsequent Exercise Period and to have enrolled as participants in a
new Offering Period which begins on or about that day. A participant may elect
to remain in the Initial Offering Period by filing a written statement declaring
such election with the Company prior to the time of the automatic change to the
new Offering Period.
12. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
<PAGE>
8
<PAGE>
9
13. STOCK.
(a) The maximum number of shares of the Common Stock which shall be
reserved for sale under the Plan shall be 600,000 shares, subject to adjustment
upon changes in capitalization of the Company as provided in paragraph 19. The
shares to be sold to participants in the Plan may be, at the election of the
Company, either treasury shares or shares authorized but unissued. If the total
number of shares which would otherwise be subject to options granted pursuant to
paragraph 7(a) hereof on the Offering Date of an Offering Period exceeds the
number of shares then available under the Plan (after deduction of all shares
for which options have been exercised or are then outstanding), the Company
shall make a pro rata allocation of the shares remaining available for option
grant in as uniform and equitable a manner as is practicable. In such event,
the Company shall give written notice of such reduction of the number of shares
subject to the option to each participant affected thereby and shall return any
excess funds accumulated in each participant's account as soon as practicable
after the affected Exercise Date of such Offering Period.
(b) A participant will have no interest or voting rights in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
credited electronically to a brokerage account in the name of the participant at
one of the brokerage firms participating from time to time in the Company's
direct deposit program.
14. ADMINISTRATION. The Plan shall be administered by the Board or the
Committee. The Board or the Committee shall have the authority to (i) make all
factual determinations in the administration or interpretation of the Plan, (ii)
establish administrative regulations to further the purpose of the Plan, and
(iii) take any other action desirable or necessary to interpret, construe or
implement properly the provisions of the Plan. The administration,
interpretation or application of the Plan by the Board or the Committee shall be
final, conclusive and binding upon all participants. Members of the Board or
the Committee who are eligible Employees are permitted to participate in the
Plan, provided that:
(a) Members of the Board who participate in the Plan may not vote on
any matter affecting the administration of the Plan or the grant of any option
pursuant to the Plan.
(b) If a Committee is established to administer the Plan, no member of
the Board who participates in the Plan may be a member of the Committee.
<PAGE>
10
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive shares and/or cash, if any, from the participant's account under
the Plan in the event of such participant's death at a time when cash or shares
are held for his or her account.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant in
the absence of a valid designation of a beneficiary who is living at the time of
such participant's death, the Company shall deliver such shares and/or cash to
the executor or administrator of the estate of the participant; or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may reasonably designate.
16. RIGHTS NOT TRANSFERABLE. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in paragraph 15 hereof) by the participant. Any
such attempt at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an election to
withdraw funds in accordance with paragraph 10.
17. USE OF FUNDS. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. REPORTS. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees as
soon as practicable following each Exercise Date. Such statements will set
forth the amounts of payroll deductions, the per share purchase price, the
number of shares purchased and the remaining cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the stockholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not yet been placed under option (collectively, the
"Reserves"), as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
<PAGE>
11
Stock resulting from a stock split, stock dividend, combination or
reclassification of the Common Stock or any other increase or decrease in the
number of shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to option.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock, including shares as to
which the option would not otherwise be exercisable. If the Board makes an
option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable, and the option will terminate upon the expiration of
such period.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
20. AMENDMENT OR TERMINATION. The Board may at any time and for any
reason terminate or amend the Plan. Except as provided in paragraph 19, no such
termination will affect options previously granted. Except as provided in
paragraph 19, no amendment may make any change in any option theretofore granted
which adversely affects the rights of any participant. In addition, to the
extent necessary, but only to such extent, to comply with Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, or with Section 423 of the Code (or
any successor rule or provision or any other applicable law or regulation), the
Company shall obtain stockholder approval of an amendment in such a manner and
to such a degree as so required.
21. NOTICES. All notices or other communications by a participant to the
Company in connection with the Plan shall be deemed to have been duly given when
received in the form
<PAGE>
12
specified by the Company at the location, or by the person, designated by the
Company for the receipt thereof. Notices given by means of the Company's [OnLine
HR system] will be deemed to be written notices under the Plan.
22. STOCKHOLDER APPROVAL. The Plan was adopted by the Board on
[__________, 1998] and approved by the shareholders of the Company on [________,
1998] in accordance with the requirements of Section 423(b)(2) of the Code.
23. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, if required by applicable
securities laws, the Company may require the participant for whose account the
option is being exercised to represent and warrant at the time of such exercise
that the shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
applicable provisions of law.
24. NO RIGHT TO EMPLOYMENT. Nothing shall confer upon any employee of the
Company any right to continued employment with the Company any right to
continued employment with the Company or interfere in any way with the right of
the Company to terminate the employment of any of its employees at any time,
with or without cause.
25. TERM OF PLAN. The Plan shall remain in effect until [__________ ,
2008], unless terminated earlier in accordance with Paragraph 20.
26. GOVERNING LAW. All rights and obligations under the Plan shall be
construed and interpreted in accordance with the laws of the State of Delaware,
without giving effect to principles of conflicts of laws.
<PAGE>
EXHIBIT 10.10
[LETTERHEAD OF SILICON GRAPHICS]
March 1, 1998
Mr. Lavi Lev
21771 Heber Way
Saratoga CA 95070
Re: Forgiveness of Loan
Dear Lavi;
This letter agreement is entered into as of March 1, 1998 ("Effective
Date") by and between Lavi A. Lev ("Employee") and Sarah Lev (collectively,
"Borrower") and Silicon Graphics, Inc. ("SGI") with regard to the forgiveness of
Borrower's obligations under that certain Promissory Note (Forgivable Loan)
dated January 9, 1997 ("Note") in the original principal sum of $400,000. As of
the Effective Date, the outstanding balance of principal under the Note is
$282,334.
Effective as of the Effective Date, SGI hereby forgives Borrower's
obligation to pay to SGI the principal sum of $282,334 under the Note. Such
forgiveness will be treated as compensation to Employee, and Borrower shall be
responsible for any individual tax liability associated with the forgiveness of
principal and any imputed interest; provided, however, that following SGI's
receipt of an original of this letter agreement signed by Borrower, SGI agrees
to pay to Employee the sum of One Hundred Fifty Thousand Dollars ($150,000) to
assist Borrower in paying such income tax liability. The foregoing payment by
SGI will be treated as compensation to Employee and subject to applicable tax
withholdings and payroll taxes. Borrower shall be responsible for any individual
tax liability resulting from such payment. As of the Effective Date, any
monthly housing allowance provided to Employee shall terminate.
If, on or before December 31, 2000, Employee shall terminate his
employment with SGI for any reason, SGI shall terminate Employee's employment
with SGI for cause, or Borrower shall be in default hereunder, then Borrower
shall immediately pay to SGI, in lawful money of the United States of America,
without abatement, demand, deduction, setoff or counterclaim, an amount equal to
(a) Eight Thousand Three Hundred Thirty-three and 33/100 Dollars ($8,333.33)
multiplied by (b) the number of calendar months from the date of such
termination of employment or default, as applicable, through December 31, 2000.
Payment for
1
<PAGE>
any partial month shall be prorated based upon a monthly payment of
Eight Thousand Three Hundred Thirty-three and 33/100 Dollars ($8,333.33) and a
thirty (30) day calendar month, and such prorated amount shall be added to the
amount calculated in the immediately preceding sentence.
Borrower's obligations under this letter agreement are secured by that
certain Pledge Agreement of even date herewith ("Pledge Agreement") encumbering
certain stock options to acquire SGI common stock and such other collateral
described therein.
SGI and Borrower acknowledge and agree that SGI intends to assign this
letter agreement to MIPS Technologies, Inc. ("MIPS") in connection with an
initial public offering of MIPS common stock, in which event all references
herein to SGI shall automatically be amended and modified to mean and refer to
MIPS, all obligations of SGI in connection with this letter agreement shall
automatically be assumed by MIPS, and SGI shall automatically be released from
any and all liability to Borrower in connection with this letter agreement.
Borrower shall execute such documents and instruments as may be requested by SGI
to evidence the foregoing within five (5) days following SGI's request therefor.
Borrower shall be in default under this letter agreement if Borrower
fails to timely pay any amount or perform any other obligation of Borrower under
this letter agreement, the Pledge Agreement of even date herewith, the
Promissory Note (Forgivable Loan) of even date herewith in the original
principal amount of $250,000, the Promissory Note (Balloon Loan) of even date
herewith in the original principal amount of $250,000, the Deed of Trust with
Assignment of Rents dated January 6, 1997, as amended, or any other agreement or
instrument now or hereafter executed by Borrower to evidence or secure the
performance of Borrower's obligations thereunder. In addition, Borrower shall be
in default under this letter agreement upon any breach by Employee under any
severance agreement or proprietary information/invention agreement with SGI
and/or MIPS, as applicable. The reference to SGI in the immediately preceding
sentence shall not be amended as a result of an assignment of this letter
agreement to MIPS. Upon any default by Borrower under this letter agreement, any
amount payable by Borrower hereunder shall thereafter bear simple interest at
the lesser of ten percent (10%) per annum or the maximum rate permitted by law.
SGI's failure to exercise any rights or remedies hereunder shall not constitute
a waiver of SGI's right to exercise the same with respect to any prior or
subsequent defaults.
If any provision of this letter agreement shall be invalid or
unenforceable for any reason, the same shall be ineffective, but the remainder
of this letter agreement shall not be affected thereby and shall remain in full
force and effect. This letter agreement supersedes any other agreements or
understandings between Borrower and SGI with regard to the forgiveness of the
Note. Time is of the essence of each and every obligation of Borrower hereunder.
Presentment and demand for payment, notice of dishonor, protest and notice of
protest are hereby waived by Borrower. None of the terms or provisions of this
letter agreement may be waived, altered, modified or amended except by a writing
signed by SGI and Borrower. The provisions of this letter agreement shall be
governed by California law. The covenants, terms and conditions
2
<PAGE>
hereof shall bind the heirs, successors and assigns of Borrower and shall insure
to the benefit of the successors and assigns of SGI.
The agreements and obligations of SGI under this letter agreement are
expressly conditioned upon SGI's receipt of an original of this letter agreement
executed by Borrower. Accordingly, please sign this letter agreement in the
spaces provided below and return the same to me.
Sincerely,
Kirk Froggatt,
Vice President,
Human Resources
AGREED AND ACCEPTED:
_________________
LAVI A. LEV
_________________
SARAH LEV
3
<PAGE>
AMENDED AND RESTATED
PROMISSORY NOTE
SECURED BY PLEDGE AGREEMENT
(FORGIVABLE LOAN)
NOTICE: THIS PROMISSORY NOTE PROVIDES FOR A BALLOON PAYMENT.
$250,000.00 Mountain View, California
March 1, 1998
For value received, the undersigned, LAVI A. LEV ("Employee") and SARAH LEV
(collectively, "Borrower"), promise to pay to SILICON GRAPHICS, INC., a Delaware
corporation ("SGI"), or order, at 2011 N. Shoreline Boulevard, Mountain View,
California 94043-1389, or such other place as SGI may designate in writing from
time to time, in lawful money of the United States of America, without
abatement, demand, deduction, setoff or counterclaim, the principal sum of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00). This Promissory Note
shall bear no interest, except as provided in Paragraph 4 below.
1. Payments
--------
(a) All outstanding principal and accrued interest under this
Promissory Note shall be due and payable on the Due Date (as defined below).
Interest shall be computed based upon a three hundred sixty (360) day year and
thirty (30) day month. Every payment received by SGI with respect to this
Promissory Note shall be applied as follows: first, to the payment of any late
charges; second, to the payment of accrued but unpaid interest; and, third, to
the payment of the outstanding principal balance of this Promissory Note.
Borrower may prepay the principal amount outstanding under this Promissory Note
in whole or in part at any time without penalty.
(b) Notwithstanding subparagraph 1(a) to the contrary, so long as
Employee remains employed by SGI on a regular and full-time basis, and provided
that Borrower has paid to SGI all outstanding principal and accrued interest
under that certain Promissory Note of even date herewith in the original
principal amount of $250,000 on or before March 1, 2002, Borrower's obligation
to pay principal under this Promissory Note shall be forgiven as follows:
principal in the amount of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) shall be forgiven on March 1, 2002.
(c) Notwithstanding subparagraph 1(a) to the contrary, principal and
accrued interest under this Promissory Note shall be due and payable prior to
the Due Date to the extent of one hundred percent (100%) of the gross sales
proceeds payable to Borrower in connection with the sale of any Pledged
Collateral (as defined below); provided, however, that Borrower shall have the
right to exercise and/or sell Vested Shares (as defined in the Pledge Agreement)
to the
<PAGE>
extent of the Excess Value (as defined in the Pledge Agreement) and
receive all proceeds therefrom. Notwithstanding the preceding to the contrary,
if SGI's employment of Employee shall terminate or cease for any reason, whether
voluntary or involuntary, and whether with or without cause, or Borrower shall
be in default hereunder, principal and accrued interest under this Promissory
Note shall be due and payable to the extent of one hundred percent (100%) of the
gross sales proceeds payable to Borrower in connection with the sale of any such
Pledged Collateral. In no event shall the preceding sentence be deemed to limit
SGI's recourse or Borrower's liability under this Promissory Note. Nothing
herein shall be deemed to modify the terms of any severance agreement now or
hereafter entered into by Employee and SGI.
2. Due Date. The "Due Date" shall be the earlier of (i) the thirtieth
--------
(30th) day following the date of termination or cessation of SGI's employment of
Employee, whether voluntarily or involuntarily, and whether with or without
cause, or (ii) March 1, 2002.
3. Purpose of Loan. Borrower acknowledges and agrees that SGI is making
---------------
this loan to Borrower for purposes of modifying the terms of an existing loan
("Existing Loan") provided by SGI to Borrower in connection with Employee's
relocation to the area of SGI's corporate headquarters located in Mountain View,
California. Borrower represents and warrants to SGI that Borrower has used all
proceeds of the Existing Loan to purchase Borrower's principal residence located
at 21771 Heber Way, Saratoga, California ("Residence"). The Existing Loan is
evidenced by a Promissory Note dated January 9, 1997 in the original principal
amount of $500,000, Deed of Trust with Assignment of Rents dated January 6, 1997
and Pledge Agreement dated January 9, 1997 (collectively, "Existing Loan
Documents"). Concurrently with the execution and delivery by Borrower of this
Promissory Note and such other documents and instruments as may be required by
SGI to evidence the modification of the Existing Loan, SGI will cancel the
Existing Loan Documents.
4. Default. In the event that Borrower fails to timely pay any amount or
-------
perform any other obligation of Borrower under this Promissory Note, the Pledge
Agreement (as defined below), that certain Promissory Note of even date herewith
in the original principal sum of $250,000, that certain Deed of Trust with
Assignment of Rents dated January 6, 1997, as amended, securing Borrower's
obligations under the immediately preceding promissory note, that certain Letter
Agreement of even date herewith, or any other agreement or instrument now or
hereafter executed by Borrower to evidence or secure the performance of
Borrowers obligations thereunder (collectively, "Loan Documents"), SGI may, at
its option, declare all principal and accrued interest under this Promissory
Note immediately due and payable. In the event that SGI exercises this option,
or the principal balance of this Promissory Note otherwise becomes due and
payable, all principal then outstanding under this Promissory Note shall
thereafter bear simple interest at the lesser of ten percent (10%) per annum or
the maximum rate permitted by law. Failure to exercise this option shall not
constitute a waiver of SGI's right to exercise the same with respect to any
prior or subsequent defaults.
2
<PAGE>
5. Security. Borrower's obligations under this Promissory Note are
--------
secured by that certain Pledge Agreement of even date herewith ("Pledge
Agreement") encumbering certain stock options to acquire SGI common stock and
such other collateral described therein (collectively, "Pledged Collateral").
6. Attorneys' Fees. In the event any legal action or proceeding is
---------------
required to enforce or interpret any provision of this Promissory Note, Borrower
shall pay to SGI upon demand all costs of collection and reasonable attorneys'
fees incurred by SGI in connection therewith.
7. Tax Liability. Borrower acknowledges that, upon forgiveness of
-------------
Borrower's obligations under this Promissory Note pursuant to subparagraph 1(a)
above, SGI will provide to Borrower a one-time tax gross-up in connection with
the federal and state income tax liability of Borrower arising from such
forgiveness. Borrower agrees that this Promissory Note is personal to Borrower
and nontransferable, and is conditioned upon the future performance of
substantial services by Employee. Borrower certifies to SGI that Borrower
reasonably expects to itemize deductions for each year that principal is
outstanding under this Promissory Note.
8. Assignment to MIPS. Borrower acknowledges and agrees that this
------------------
Promissory Note and the Loan Documents may be assigned by SGI to MIPS
Technologies, Inc. ("MIPS"), in which event all references herein to SGI shall
automatically be amended and modified to mean and refer to MIPS, all obligations
of SGI in connection with this Promissory Note and Loan Documents shall
automatically be assumed by MIPS, and SGI shall automatically be released from
any and all liability to Borrower in connection with this Promissory Note and
the Loan Documents. Borrower shall execute such documents and instruments as may
be requested by SGI to evidence the foregoing within five (5) days following
SGI's request therefor.
9. Miscellaneous. If any provision of this Promissory Note shall be
-------------
invalid or unenforceable for any reason, the same shall be ineffective, but the
remainder of this Promissory Note shall not be affected thereby and shall remain
in full force and effect. Time is of the essence of each and every obligation
of Borrower hereunder. Presentment and demand for payment, notice of dishonor,
protest and notice of protest are hereby waived by Borrower. If the due date for
any payment under this Promissory Note falls on a Saturday, Sunday or legal
holiday, then such due date shall be extended to the next business day. None of
the terms or provisions of this Promissory Note may be waived, altered, modified
or amended except by a writing signed by SGI and Borrower. The provisions of
this Promissory Note shall be governed by California law. The covenants, terms
and conditions hereof shall bind the heirs, successors and assigns of Borrower
and shall inure to the benefit of the successors and assigns of SGI.
3
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of the date
first set forth above.
BORROWER:
__________________
LAVI A. LEV
__________________
SARAH LEV
4
<PAGE>
AMENDED AND RESTATED
PROMISSORY NOTE
SECURED BY DEED OF TRUST
(BALLOON LOAN)
NOTICE: THIS PROMISSORY NOTE PROVIDES FOR A BALLOON PAYMENT.
$250,000.00 Mountain View, California
March 1, 1998
For value received, the undersigned, LAVI A. LEV ("Employee") and SARAH LEV
(collectively, "Borrower"), promise to pay to SILICON GRAPHICS, INC., a Delaware
corporation ("SGI"), or order, at 2011 N. Shoreline Boulevard, Mountain View,
California 94043-1389, or such other place as SGI may designate in writing from
time to time, in lawful money of the United States of America, without
abatement, demand, deduction, setoff or counterclaim, the principal sum of Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), together with interest
thereon at the rate of seven and nineteen hundredths percent (7.19%) per annum,
compounded annually, until all principal, interest and other charges under this
Promissory Note are paid in full.
1. Outstanding Balance of Loan. As of the date first set forth above, the
---------------------------
outstanding balance of this Promissory Note consists of principal in the amount
of Two Hundred Fifty Thousand Dollars ($250,000) and accrued but unpaid interest
in the amount of Nineteen Thousand Seven Hundred Two and 07/100 Dollars
($19,702.07).
2. Payments. All outstanding principal and accrued interest under this
--------
Promissory Note shall be due and payable on the Due Date (as defined below).
Interest shall be computed based upon a three hundred sixty (360) day year and
thirty (30) day month. Every payment received by SGI with respect to this
Promissory Note shall be applied as follows: first, to the payment of any late
charges; second, to the payment of accrued but unpaid interest; and third, to
the payment of the outstanding principal balance of this Promissory Note.
Borrower may prepay the principal amount outstanding under this Promissory Note
in whole or in part at any time without penalty.
3. Due Date. The "Due Date" shall be the earlier of (i) the thirtieth
--------
(30th) day following the date of termination or cessation of SGI's employment of
Employee, whether voluntarily or involuntarily, and whether with or without
cause, (ii) the date that Borrower sells, leases, transfers or otherwise conveys
all or any interest in the Residence (as defined in Paragraph 3 below), or (iii)
March 1, 2002.
4. Purpose of Loan. Borrower acknowledges and agrees that SGI is making
---------------
this loan to Borrower for purposes of modifying the terms of an existing loan
("Existing Loan") provided
1
<PAGE>
by SGI to Borrower in connection with Employee's relocation to the area of SGI's
corporate headquarters located in Mountain View, California. Borrower represents
and warrants to SGI that Borrower has used all proceeds of the Existing Loan to
purchase Borrower's principal residence located at 21771 Heber Way, Saratoga,
California ("Residence"). The Existing Loan is evidenced by a Promissory Note
dated January 9, 1997 in the original principal amount of $500,000, Deed of
Trust with Assignment of Rents dated January 6, 1997 and Pledge Agreement dated
January 9, 1997 (collectively, "Existing Loan Documents"). Concurrently with the
execution and delivery by Borrower of this Promissory Note and such other
documents and instruments as may be required by SGI to evidence the modification
of the Existing Loan, SGI will cancel the Existing Loan Documents.
5. Default. In the event that Borrower fails to timely pay any amount or
-------
perform any other obligation of Borrower under this Promissory Note, the Deed of
Trust (as defined below), that certain Promissory Note of even date herewith in
the original principal sum of $250,000, that certain Letter Agreement of even
date herewith, that certain Pledge Agreement of even date herewith securing
Borrowers obligations under the immediately preceding promissory note and letter
agreement, or any other agreement or instrument now or hereafter executed by
Borrower to evidence or secure the performance of Borrower's obligations
thereunder (collectively, "Loan Documents"), SGI may, at its option, declare all
principal and accrued interest under this Promissory Note immediately due and
payable. In the event that SGI exercises this option, or the principal balance
of this Promissory Note otherwise becomes due and payable, all principal then
outstanding under this Promissory Note shall thereafter bear simple interest at
the lesser of ten percent (10%) per annum or the maximum rate permitted by law.
Failure to exercise this option shall not constitute a waiver of SGI's right to
exercise the same with respect to any prior or subsequent defaults.
6. Security. Borrower's obligations under this Promissory Note are
--------
secured by that certain Deed of Trust with Assignment of Rents dated January 6,
1997, as amended ("Deed of Trust"), encumbering the Residence, as more
particularly described in the Deed of Trust.
7. Due on Sale. The Deed of Trust provides as follows:
-----------
If the trustor shall sell, convey or alienate said property, or any
part thereof, or any interest therein, or shall be divested of his
title or any interest therein in any manner or way, whether
voluntarily or involuntarily, without the written consent of the
beneficiary being first had and obtained, beneficiary shall have the
right, at its option, except as prohibited by law, to declare any
indebtedness or obligations secured hereby, irrespective of the
maturity date specified in any not evidencing the same, immediately
due and payable.
8. Attorneys' Fees. In the event any legal action or proceeding is
---------------
required to
2
<PAGE>
enforce or interpret any provision of this Promissory Note, Borrower shall pay
to SGI upon demand all costs of collection and reasonable attorneys' fees
incurred by SGI in connection therewith.
9. Tax Liability. Borrower understands and agrees that any and all
-------------
income tax liability to Borrower resulting from this Promissory Note shall be
the sole responsibility of Borrower. Borrower agrees that this Promissory Note
is personal to Borrower and non-transferable, and is conditioned upon the future
performance of substantial services by Employee. Borrower certifies to SGI that
Borrower reasonably expects to itemize deductions for each year that principal
is outstanding under this Promissory Note.
10. Assignment to MIPS. Borrower acknowledges and agrees that this
------------------
Promissory Note and the Loan Documents may be assigned by SGI to MIPS
Technologies, Inc. ("MIPS"), in which event all references herein to SGI shall
automatically be amended and modified to mean and refer to MIPS, all obligations
of SGI in connection with this Promissory Note and Loan Documents shall
automatically be assumed by MIPS, and SGI shall automatically be released from
any and all liability to Borrower in connection with this Promissory Note and
the Loan Documents. Borrower shall execute such documents and instruments as may
be requested by SGI to evidence the foregoing within five (5) days following
SGI's request therefor.
11. Miscellaneous. If any provision of this Promissory Note shall be
-------------
invalid or unenforceable for any reason, the same shall be ineffective, but the
remainder of this Promissory Note shall not be affected thereby and shall remain
in full force and effect. Time is of the essence of each and every obligation of
Borrower hereunder. Presentment and demand for payment, notice of dishonor,
protest and notice of protest are hereby waived by Borrower. If the due date for
any payment under this Promissory Note falls on a Saturday, Sunday or legal
holiday, then such due date shall be extended to the next business day. None of
the terms or provisions of this Promissory Note may be waived, altered, modified
or amended except by a writing signed by SGI and Borrower. The provisions of
this Promissory Note shall be governed by California law. The covenants, terms
and conditions hereof shall bind the heirs, successors and assigns of Borrower
and shall insure to the benefit of the successors and assigns of SGI.
3
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of the date
first set forth above.
BORROWER:
_______________
LAVI A. LEV
_______________
SARAH LEV
4
<PAGE>
RECORDING REQUESTED BY AND
AFTER RECORDATION RETURN TO:
Silicon Graphics, Inc.
2011 N. Shoreline Blvd.
Mountain View CA 94043
MS 710
Attn: Ed Malysz
AMENDMENT TO DEED OF TRUST
This Amendment to Deed of Trust ("Amendment") is entered into as of
March 1, 1998 ("Effective Date") by and between LAVI A. LEV and SARAH LEV
(collectively, "Borrower") and SILICON GRAPHICS, INC., a Delaware corporation
("SGI").
RECITALS
--------
A. On January 9, 1997, SGI made a loan ("Loan") to Borrower in the
original stated principal amount of $900,000.00, as evidenced by that certain
Promissory Note dated January 9, 1997 ("Term Note") in the original stated
principal amount of $500,000, and that certain Promissory Note dated January 9,
1997 in the original principal amount of $400,000 ("Forgivable Note").
B. The Loan is secured by that certain Deed of Trust with Assignment of
Rents January 6, 1997 ("Deed of Trust") by and among Borrower, as trustor, First
American Title Insurance Company, as trustee, and SGI, as beneficiary, recorded
on January 10, 1997 as Document No. 13576543 in the Official Records of the
County Recorder of Santa Clara County, California, encumbering certain real
property located in the City of Saratoga, County of Santa Clara, State of
California, as more particularly described in Exhibit A attached hereto
("Property").
C. As of the Effective Date, Borrower's obligations under the Forgivable
Note have been forgiven, and the Term Note has been amended and restated by that
certain Amended and Restated Promissory Note (Balloon Loan) of even date
herewith in the original principal sum of Two Hundred Fifty Thousand Dollars
($250,000) and that certain Amended and Restated Promissory Note (Forgivable
Loan) of even date herewith in the original principal sum of Two Hundred Fifty
Thousand Dollars ($250,000).
D. The parties now desire to amend the Deed of Trust as described
hereinbelow:
1
<PAGE>
NOW, THEREFORE, SGI and Borrower agree as follows:
1. Amendment. As of the Effective Date, the Deed of Trust is hereby
---------
amended as follows:
(a) On page 1 of the Deed of Trust, the dollar amount "$900,000.00" is
hereby deleted and the dollar amount "$250,000.00" is substituted therefor.
(b) Paragraph 1 of the Addendum to Deed of Trust is hereby deleted in
its entirety and the following is substituted therefor:
The loan secured by the Deed of Trust is evidenced by that certain
Amended and Restated Promissory Note (Balloon Loan) dated March 1,
1997 in the original principal amount of Two Hundred Fifty Thousand
Dollars ($250,000), which promissory note provides for a balloon
payment of all principal and accrued interest on March 1, 2002.
(c) Paragraph 2 of the Addendum to Deed of Trust is hereby deleted in
its entirety.
(d) Borrower shall be in default under the Deed of Trust in the
event Borrower fails to perform any of its obligations under this Deed of Trust,
the promissory note referenced in Paragraph 1(b) above, that certain Promissory
Note (Forgivable Loan) of even date herewith in the original principal amount of
$250,000, that certain Pledge Agreement of even date herewith, that certain
Letter Agreement of even date herewith, or any other agreement or instrument
now or hereafter executed by Borrower to evidence or secure the performance of
Borrower's obligations thereunder.
2. Effect of Amendment. Except as modified herein, the Deed of Trust
-------------------
shall remain unmodified and continue in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
Effective Date.
BORROWER:
__________________
LAVI A. LEV
__________________
SARAH LEV
SGI:
SILICON GRAPHICS, INC.,
a Delaware corporation
By:____________________
Its:____________________
[ATTACH NOTARY ACKNOWLEDGMENTS]
3
<PAGE>
EXHIBIT A
The land referred to in this Deed of Trust is situated in the County of Santa
Clara, City of Saratoga, State of California, and is described as follows:
Lot 11, Tract No. 6781, Teerlink Ranch, Filed April 5, 1985, Map Book
541, Page 17, Santa Clara County Records, and as amended on that
certain map entitled "Amended Map of Tract 6781" filed for July 17,
1986, Map Book 562, Page 31, Santa Clara County Records.
APN: 503-31-101
Commonly Known As: 21771 Heber Way
Saratoga, California
Exh. A-1
<PAGE>
PLEDGE AGREEMENT
This Pledge Agreement ("Agreement") is made and entered into as of
this 1st day of March, 1998 ("Effective Date") by and between Silicon Graphics,
Inc., a Delaware corporation ("SGI"), and Lavi A. Lev ("Employee") and Sarah Lev
(collectively, "Pledgor").
RECITALS
--------
A. SGI has agreed to amend and restate an existing loan ("Existing Loan")
to Pledgor in the original principal sum of Five Hundred Thousand Dollars
($500,000).
B. The modification of the Existing Loan is evidenced, in part, by (i)
that certain Amended and Restated Promissory Note Secured by Pledge Agreement
(Forgivable Loan) of even date herewith ("Forgivable Note") in the original
principal amount of Two Hundred Fifty Thousand Dollars ($250,000), and (b) that
certain Letter Agreement of even date herewith.
C. This Pledge Agreement is intended to secure the performance of
Pledgor's obligations under the Forgivable Note and Letter Agreement.
D. SGI has granted or may hereafter grant to Pledgor certain stock
options for the purchase of shares of common stock of SGI pursuant to the terms
and conditions of that certain Incentive Stock Option Grant Agreement and/or
Non-qualified Stock Option Agreement, as the same may be amended from time to
time (collectively, "SGI Option Agreement"). Pledgor's stock options under the
SGI Option Agreement as of the Effective Date are more particularly set forth in
Exhibit A attached hereto.
E. MIPS Technologies, Inc. ("MIPS") may hereafter grant to Pledgor
certain stock options for the purchase of shares of common stock of MIPS
pursuant to the terms and conditions of one or more option agreements
(collectively, "MIPS Option Agreement"), subject to the satisfaction of certain
conditions set forth in that certain offer letter from MIPS to Lavi Lev dated
March 8, 1998, including obtaining appropriate authorization and approval of the
board of directors of MIPS, compliance with applicable federal and state
security laws and completing an initial public offering of the common stock of
MIPS.
F. Pledgor now desires to pledge all of its right's title and interest in
and to the Pledged Collateral (as defined below) to SGI upon the terms and
conditions set forth hereinbelow.
NOW, THEREFORE, Pledgor hereby covenants and agrees as follows:
1. Pledge of Collateral. Pledgor hereby pledges, assigns, grants and
--------------------
delivers to SGI a security interest in all of Pledgor's right, title and
interest in and to the following (collectively, "Pledged Collateral"):
1
<PAGE>
(a) The SGI Option Agreement, all options and shares of common stock
of SGI now or hereafter issued or issuable to Pledgor thereunder and all cash
and non-cash proceeds and substitutions thereof as security for the prompt
performance of Pledgor's obligations under the Forgivable Note and Letter
Agreement.
(b) The MIPS Option Agreement, all options and shares of common stock
of MIPS now or hereafter issued or issuable to Pledgor thereunder and all cash
and non-cash proceeds and substitutions thereof as security for the prompt
performance of Pledgor's obligations under the Forgivable Note and Letter
Agreement. Upon the grant of options to Pledgor under the MIPS Option Agreement
and the execution and delivery by Pledgor of all agreements, documents and
instruments required by MIPS in connection therewith, the security interest in
the SGI Option Agreement and common stock of SGI shall automatically terminate.
For purposes of this Agreement, "Option Agreement" shall mean the SGI
Option Agreement and/or MIPS Option Agreement, as applicable, and "Shares" shall
mean the shares of common stock of SGI and/or shares of common stock of MIPS, as
applicable.
2. Pledgor's Covenants. Pledgor hereby represents, warrants and
-------------------
covenants to SGI as follows:
(a) The Pledged Collateral is free and clear of any security
interests, liens, encumbrances or other interests other than this Agreement.
(b) Pledgor has full power and authority to create a lien on the
Pledged Collateral in favor of SGI and no disability or contractual obligation
exists which would prohibit Pledgor from pledging the Pledged Collateral
pursuant to this Agreement.
(c) Pledgor shall not sell, assign, or create or permit any claim to,
lien or encumbrance upon, or security interest in any of the Pledged Collateral,
and shall not permit Pledgor's rights in the Pledged Collateral to be reached by
attachment, levy or other judicial process.
(d) At SGI's request, Pledgor shall execute and acknowledge such
other documents and instruments which SGI deems necessary or desirable to
evidence, continue or preserve SGI's security interest in the Pledged Collateral
and/or to otherwise effect any of the terms of this Agreement.
The foregoing representations, warranties and covenants shall survive the
termination of this Agreement.
3. Payment of Proceeds.
-------------------
(a) One hundred percent (100%) of all monies or other proceeds
payable
2
<PAGE>
to Pledgor in connection with the sale or transfer of any Shares shall be
applied first to the payment of principal, accrued interest and other charges
then outstanding under the Forgivable Note; provided, however, that to the
extent that the fair market value (as determined pursuant to Section 5(a)(ii)
below) of Pledgor's vested and exercisable options and/or restricted stock
comprising the Shares (collectively, "Vested Shares") exceeds the sum of (i) the
amount of principal and accrued interest (if any) then outstanding under the
Forgivable Note plus (ii) the total contingent liability of Pledgor under the
Letter Agreement (such excess fair market value referred to herein as "Excess
Value"), Pledgor shall have the right to exercise and/or sell such Vested Shares
to the extent of such Excess Value and receive all proceeds therefrom. The
foregoing calculation shall be made for each transaction to be effected by
Pledgor with regard to any Vested Shares. Notwithstanding the preceding to the
contrary, if SGI's employment of Employee shall terminate or cease for any
reason, whether voluntary or involuntary, and whether with or without cause, or
Pledgor shall be in default hereunder, one hundred percent (100%) of all monies
or other proceeds payable to Pledgor in connection therewith shall be applied to
the payment of principal, accrued interest and other charges then outstanding
under the Forgivable Note. Further, if Employee shall terminate his employment
with SGI for any reason, SGI shall terminate Employee's employment with SGI for
cause, or Pledgor shall be in default hereunder, one hundred percent (100%) of
all monies or other proceeds payable to Pledgor in connection therewith shall be
applied to the payment of Pledgor's obligations under the Letter Agreement. Upon
Pledgor's payment to SGI of all principal, accrued interest and other charges
under the Forgivable Note and Letter Agreement (if applicable), the security
interest created under this Agreement shall automatically terminate, and SGI
shall promptly deliver to Pledgor all remaining Shares then held by SGI. Nothing
herein shall be deemed to modify the terms of any severance agreement now or
hereafter entered into by Employee and SGI.
(b) With respect to the concurrent exercise and disposition of Shares
by "Same Day Sale," Pledgor shall instruct Pledgor's stock broker ("Broker") to
pay directly to SGI from Broker's account an amount equal to the lesser of (i)
the gross proceeds from the sale of such Shares, less applicable commissions, to
the extent payable by Pledgor pursuant to subparagraph (a) above or (ii) the
amount of principal, accrued interest and other charges then outstanding under
the Forgivable Note and Letter Agreement (if applicable). SGI shall have no
obligation to deliver the Shares to Broker unless and until SGI receives written
confirmation from Broker that the foregoing payment shall be promptly made by
Broker to SGI.
(c) With respect to the exercise of Shares by "Cash Exercise," the
exercise price paid by Pledgor shall be applied to the payment of the exercise
price for such Shares, the applicable shares of SGI's common stock shall be
issued and deemed delivered to Pledgor, and SGI shall retain possession of such
shares until either (i) all principal, accrued interest and other charges under
the Forgivable Note and Letter Agreement (if applicable) have been paid in full,
in which event the security interest under this Agreement shall terminate as to
all of the Shares, or (ii) the applicable proceeds from the sale of such Shares
have been paid to SGI and applied to the payment of principal, accrued interest
and other charges then outstanding under the Forgivable
3
<PAGE>
Note and Letter Agreement (if applicable), in which event the security interest
under this Agreement shall terminate as to such Shares sold by Pledgor. If
Pledgor desires to sell any such Shares, Pledgor shall instruct Broker to pay
directly to SGI from Broker's account an amount equal to the lesser of (i) the
sales price of the Shares, less commissions, to the extent payable by Pledgor
pursuant to subparagraph (a) above or (ii) the amount of principal, accrued
interest and other charges then outstanding under the Forgivable Note and Letter
Agreement (if applicable). SGI shall have no obligation to deliver the Shares to
Pledgor or Broker unless and until SGI receives written confirmation from Broker
that the foregoing payment shall be promptly made by Broker to SGI.
(d) All instructions required to be submitted by Pledgor to Broker
shall be irrevocable and in writing, with a copy thereof delivered concurrently
to SGI. All proceeds paid for the Shares (less commissions) and otherwise
payable to SGI hereunder shall be deposited directly into the account of Broker
for payment to SGI. SGI's delivery of any Shares to Broker shall be for the sole
purpose of facilitating the sale of such Shares, and SGI's security interest
therein shall continue until Broker shall have paid to SGI all applicable sums
as required hereinabove.
4. Events of Default. Each of the following shall constitute an event of
-----------------
default ("Event of Default") hereunder:
(a) The failure by Pledgor to observe or perform any of the
provisions of this Agreement.
(b) Any default under the Forgivable Note, the Letter Agreement or
any other document or instrument evidencing the modification of the Existing
Loan.
(c) The inaccuracy or breach of any warranty, representation or
statement made or furnished to SGI by or on behalf of Pledgor.
(d) The assignment for the benefit of creditors or the commencement
of any proceeding under any bankruptcy or insolvency law by or against Pledgor.
(e) The seizure or attachment of, or a levy on all or any portion of
the Pledged Collateral.
5. SGI's Remedies Upon Default.
---------------------------
(a) Upon the occurrence of an Event of Default, SGI shall have the
right to:
(i) Declare all of the obligations and liabilities of Pledgor
under the Forgivable Note and Letter Agreement immediately due and payable.
4
<PAGE>
(ii) Repurchase all or part of the Shares from Pledgor for a
purchase price equal to the lesser of (i) the fair market value of such Shares
as of the date of the Event of Default, or (ii) the fair market value of such
Shares as of the date of repurchase. The fair market value of the Shares, as of
any date, shall be the closing price for a share of SGI's common stock as
reported in The Wall Street Journal or a similar readily available public
source. If no sales of Shares were made on such date, the fair market value of
the Shares shall be determined using the closing price of a Share as reported
for the preceding day on which a sale of Shares occurred. Notwithstanding the
foregoing, the fair market value of any stock options comprising Shares shall be
determined using the fair market value of SGI's common stock as of the
applicable date set forth above less the applicable exercise price under such
stock options and any costs incurred by SGI pursuant to subparagraph (b) below.
(iii) Exercise any and all rights of a secured party under the
Uniform Commercial Code of the State of California which SGI, in its sole
judgment, deems necessary or appropriate, including without limitation the right
to sell or otherwise dispose of all or any part of the Pledged Collateral.
(b) After the repurchase, sale or transfer of any of the Pledged
Collateral, SGI may deduct all reasonable attorneys' fees, brokerage commissions
and other expenses incurred by SGI in preserving, collecting, selling,
repurchasing and/or delivering the Pledged Collateral and for enforcing its
rights with respect to the Forgivable Note, the Letter Agreement and this
Agreement, and shall apply the residue of the proceeds to, or hold as a reserve
against, the Forgivable Note and Letter Agreement in such manner as SGI in its
reasonable discretion shall determine, and shall pay the balance, if any, to
Pledgor.
6. SGI's Duties. SGI shall have no duty or liability for the Pledged
------------
Collateral except for the exercise of reasonable care of the Pledged Collateral
while in the possession of SGI.
7. General Provisions.
------------------
(a) Successors and Assigns.
----------------------
(i) This Agreement shall bind and insure to the benefit of the
respective heirs, successors and permitted assigns of each of the parties;
provided, however, that neither this Agreement nor any rights hereunder may be
assigned by Pledgor without SGI's prior written consent, which consent may be
granted or withheld in SGI's sole discretion.
(ii) Pledgor acknowledges and agrees that this Agreement may be
assigned by SGI to MIPS, in which event all references therein to SGI shall
automatically be amended and modified to mean and refer to "MIPS," all
obligations of SGI in connection with this Agreement shall automatically be
assumed by MIPS, and SGI shall automatically be released from any and all
liability to Pledgor in connection with this Agreement. Pledgor shall execute
such
5
<PAGE>
documents and instruments as may be requested by SGI to evidence the foregoing
within five (5) days following SGI's request therefor.
(b) Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision. In case one
or more of the provisions contained in this Agreement shall for any reason be
held invalid, illegal or unenforceable in any respect, the invalidity,
illegality or unenforceability of that provision shall not affect any other
provision of this Agreement.
(c) Joint and Several Obligations. If Pledgor consists of more than
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one person, the obligations of Pledgor shall be the joint and several
obligations of all such persons. When the context and construction so require,
all words used in the singular herein shall be deemed to have been used in the
plural and the masculine shall include the feminine and neuter and vice versa.
(d) No Waiver. No delay or omission by SGI in exercising any right
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or remedy arising from any default of Pledgor shall be construed as a waiver of
such default or as an acquiescence therein, nor shall any single or partial
exercise thereof preclude any further exercise thereof. SGI may, at its option,
waive any of the conditions herein and any such waiver shall not be deemed the
waiver of SGI's rights hereunder. The waiver of any Event of Default shall not
be construed as any waiver of or acquiescence in or consent to any preceding or
subsequent Event of Default by Pledgor hereunder.
(e) Collection Costs. Pledgor shall promptly pay SGI all reasonable
----------------
attomeys' fees and all costs and other expenses paid or incurred by SGI in
enforcing or exercising its rights or remedies created by, connected with or
provided in this Agreement, and payment thereof shall be secured by the Pledged
Collateral.
(f) Substitute Security. Provided that Pledgor is not in default
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hereunder, Pledgor shall have the right to substitute this Pledge Agreement with
such other security and/or collateral acceptable to SGI for purposes of securing
Pledgor's obligations under the Forgivable Note and Letter Agreement. Such
security may include, without limitation, a dead of trust encumbering real
property owned by Pledgor, provided that Pledgor's equity therein is in excess
of one hundred ten percent (110%) of the sum of the outstanding balance of
principal and accrued interest under the Forgivable Note and contingent
liability under the Letter Agreement. Following SGI's approval of the security
and receipt of such agreements and instruments (in form acceptable to SGI)
executed by Pledgor to effect such substitute security, SGI shall release the
lien of this Pledge Agreement with regard to the Pledged Collateral or portion
thereof so substituted.
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the Effective
Date.
PLEDGOR:
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_________________
LAVI A. LEV
_________________
SARAH LEV
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