<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
FILING BY:
MIPS TECHNOLOGIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total fee paid:
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
MIPS TECHNOLOGIES, INC.
1225 CHARLESTON ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
, 1999
Dear Stockholder:
You are cordially invited to attend a Special Meeting of stockholders of
MIPS Technologies, Inc., a Delaware corporation ("MIPS Technologies"), to be
held on , , 1999 at commencing at , local
time.
At the Special Meeting, you will be asked to consider and vote upon a
proposed recapitalization of MIPS Technologies, including the approval and
adoption of certain changes to MIPS Technologies' certificate of incorporation
and by-laws, pursuant to which each issued and outstanding share of MIPS
Technologies common stock will be redesignated as one share of newly created and
issued Class A common stock of MIPS Technologies. Immediately upon the
consummation of the recapitalization, Silicon Graphics, Inc., a Delaware
corporation ("Silicon Graphics") and the holder of approximately 85% of the
outstanding common stock of MIPS Technologies, will exchange each share of Class
A common stock it owns for one share of newly created and issued Class B common
stock of MIPS Technologies. Following the recapitalization (if approved),
holders of the Class A common stock, voting separately as a class, will be
entitled to elect 20% of MIPS Technologies' Board of Directors, and in no event
less than one director, and Silicon Graphics, as holder of all of the Class B
common stock, will be entitled to elect the remaining directors. The
accompanying Proxy Statement presents the details of the proposed
recapitalization.
The MIPS Technologies Board of Directors believes that the recapitalization
is fair to, and in the best interests of, MIPS Technologies and its stockholders
and has unanimously approved the recapitalization. Prior to the Board's
approval, a specially constituted committee of the MIPS Technologies Board of
Directors, composed of its two independent directors (the "Special Committee"),
determined that the recapitalization is fair to MIPS Technologies and its public
stockholders and recommended the recapitalization to the MIPS Technologies Board
of Directors. THE SPECIAL COMMITTEE AND THE MIPS TECHNOLOGIES BOARD OF DIRECTORS
HAVE UNANIMOUSLY APPROVED THE RECAPITALIZATION AND RECOMMEND THAT YOU VOTE FOR
ITS APPROVAL AND ADOPTION.
YOUR PARTICIPATION AND VOTE IS IMPORTANT. THE RECAPITALIZATION WILL NOT BE
EFFECTED WITHOUT THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE OUTSTANDING
COMMON STOCK HELD BY MIPS TECHNOLOGIES' PUBLIC STOCKHOLDERS (THE STOCKHOLDERS OF
MIPS TECHNOLOGIES OTHER THAN SILICON GRAPHICS), PRESENT AND VOTING AT THE
SPECIAL MEETING.
FOR FURTHER INFORMATION REGARDING THE RECAPITALIZATION, I URGE THAT YOU
CAREFULLY READ THE ACCOMPANYING PROXY STATEMENT, DATED , 1999, AND,
SPECIFICALLY, THE SECTIONS ENTITLED "THE RECAPITALIZATION--REASONS FOR THE
RECAPITALIZATION; RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE MIPS BOARD OF
DIRECTORS" BEGINNING ON PAGE 16. If you have more questions about the
recapitalization or would like additional copies of the accompanying Proxy
Statement, you should contact: Kevin C. Eichler, Chief Financial Officer of MIPS
Technologies, 1225 Charleston Road, Mountain View, California, 94043; telephone:
(650) 567-5000. Even if you plan to attend the Special Meeting in person, please
complete, sign, date and promptly return the enclosed proxy card in the enclosed
postage-prepaid envelope. This will not limit your right to attend or vote at
the Special Meeting.
Sincerely,
John E. Bourgoin
CHIEF EXECUTIVE OFFICER
AND PRESIDENT
The accompanying Proxy Statement is dated , 1999 and is first
being mailed to stockholders on or about , 1999.
<PAGE>
MIPS TECHNOLOGIES, INC.
1225 CHARLESTON ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1999
To the Stockholders of
MIPS TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of MIPS
Technologies, Inc., a Delaware corporation ("MIPS Technologies"), will be held
on , , 1999, at commencing at , local time,
for the following purposes:
1. To consider and vote upon a proposal (the "Recapitalization Proposal")
to recapitalize the authorized capital stock of MIPS Technologies,
including (a) the approval and adoption of the proposed amended and
restated certificate of incorporation (the "Amended Certificate of
Incorporation") and the proposed amended and restated by-laws of MIPS
Technologies (the "Amended By-laws") pursuant to which each issued and
outstanding share of MIPS Technologies common stock will be redesignated
as one share of newly created and issued Class A common stock of MIPS
Technologies and (b) the exchange by Silicon Graphics, Inc. ("Silicon
Graphics"), upon the consummation of the recapitalization, of each share
of Class A common stock it will own for one share of newly created and
issued Class B common stock of MIPS Technologies; and
2. To transact such other business as may properly be brought before the
special meeting or any adjournment or postponement of the special
meeting.
Copies of the forms of the Amended Certificate of Incorporation and the
Amended By-laws, which will define certain of the rights of the Class A and
Class B common stock if the recapitalization is approved, are attached as Annex
A and Annex B, respectively, to the accompanying Proxy Statement. In addition,
MIPS Technologies and Silicon Graphics will enter into an Exchange Agreement if
the recapitalization is approved by MIPS Technologies' public stockholders. The
form of the Exchange Agreement is attached as Annex C to the accompanying Proxy
Statement.
Stockholders of record at the close of business on , 1999 are
entitled to notice of, and to vote at, the special meeting and any adjournment
or postponement of the special meeting. A complete list of stockholders entitled
to vote at the special meeting will be available for inspection by any
stockholder for any purpose germane to the special meeting for 10 days prior to
the special meeting during ordinary business hours at MIPS Technologies'
headquarters located at 1225 Charleston Road, Mountain View, California 94043.
All stockholders are cordially invited to attend the meeting in person.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. THIS WILL NOT LIMIT YOUR RIGHT TO
ATTEND OR VOTE AT THE SPECIAL MEETING.
By Order of the Board of Directors,
Sandy Creighton
SECRETARY
Mountain View, California
, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. DO
NOT SEND ANY STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY................................ 1
The Company.......................... 1
Relationship with Silicon Graphics... 1
The Recapitalization................. 2
The Exchange Agreement............... 5
The Special Meeting.................. 7
COMPARISON OF CURRENT AND PROPOSED
PROVISIONS OF MIPS TECHNOLOGIES
CERTIFICATE OF INCORPORATION......... 8
THE SPECIAL MEETING.................... 12
General; Date, Time and Place........ 12
Purposes of the Special Meeting...... 12
Recommendation of the MIPS Board and
Special Committee.................. 12
Stockholders Entitled to Vote; Vote
Required........................... 12
Proxies.............................. 13
THE RECAPITALIZATION................... 15
Background of the Recapitalization... 15
Reasons for the Recapitalization;
Recommendation of the Special
Committee and the MIPS Board of
Directors.......................... 17
Effect of the Recapitalization....... 19
The MIPS Board of Directors Following
the Recapitalization............... 22
Interests of Certain Persons in the
Recapitalization................... 22
Certain Federal Income Tax
Consequences....................... 22
Nasdaq Approvals..................... 23
Federal Securities Laws
Consequences....................... 23
No Appraisal Rights.................. 23
THE EXCHANGE AGREEMENT................. 24
Exchange of Class A Shares for Class
B Shares by Silicon Graphics....... 24
Silicon Graphics' Obligation to
Purchase New MIPS Common Stock..... 24
Tax Indemnification Agreement........ 25
Required Exchange of Class B Shares
for Class A Shares................. 25
Indemnification and Expenses......... 26
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS........... 27
MIPS TECHNOLOGIES...................... 28
The Company.......................... 28
Stock Ownership of Certain Beneficial
Owners and Management.............. 28
Relationship with Silicon Graphics... 29
MARKET PRICE AND DIVIDEND
INFORMATION.......................... 31
Market Prices........................ 31
Dividends............................ 31
DESCRIPTION OF MIPS CAPITAL STOCK PRIOR
TO AND FOLLOWING THE
RECAPITALIZATION..................... 32
Authorized Capital Stock............. 32
Common Stock......................... 32
Preferred Stock...................... 36
Corporate Opportunities.............. 36
Certificate of Incorporation and
By-law Provisions That May Have an
Anti-Takeover Effect............... 38
Section 203 of Delaware General
Corporation Law.................... 40
Limitation of Liability.............. 41
Listing.............................. 41
Transfer Agent and Registrar......... 41
STOCKHOLDER PROPOSALS.................. 42
EXPERTS................................ 42
WHERE YOU CAN FIND MORE INFORMATION.... 42
LIST OF DEFINED TERMS.................. 44
</TABLE>
<TABLE>
<S> <C>
Annex A -- Form of Amended and Restated
Certificate of Incorporation
Annex B -- Form of Amended and Restated
By-laws
Annex C -- Form of Exchange Agreement
</TABLE>
i
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SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE
RECAPITALIZATION FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF
THE RECAPITALIZATION, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE
DOCUMENTS TO WHICH WE HAVE REFERRED YOU. SEE "WHERE YOU CAN FIND MORE
INFORMATION" (PAGE 42). THE PROPOSED AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF MIPS TECHNOLOGIES, THE AMENDED AND RESTATED BY-LAWS OF MIPS
TECHNOLOGIES AND THE FORM OF EXCHANGE AGREEMENT ARE ATTACHED AS ANNEX A, ANNEX B
AND ANNEX C TO THIS DOCUMENT. WE ENCOURAGE YOU TO READ THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION, AMENDED AND RESTATED BY-LAWS AND THE EXCHANGE
AGREEMENT, BECAUSE THEY ARE THE LEGAL DOCUMENTS THAT WILL GOVERN SOME OF THE
RIGHTS OF THE CLASS A AND CLASS B COMMON STOCK IF THE RECAPITALIZATION IS
APPROVED. FOR THE LOCATION OF DEFINITIONS OF CAPITALIZED TERMS USED IN THIS
DOCUMENT, PLEASE SEE "LIST OF DEFINED TERMS" (PAGE 44).
THE COMPANY
MIPS Technologies, Inc.
1225 Charleston Road
Mountain View, California 94043
MIPS Technologies is a leader in the design and licensing of
high-performance, 32- and 64-bit RISC processor intellectual property and core
technology for the digital consumer and embedded systems markets. MIPS
Technologies and its licensees offer a variety of standard, custom, semi-custom
and application specific processors. MIPS Technologies licenses its intellectual
property to semiconductor manufacturing and fabless design companies, as well as
system original equipment manufacturers. MIPS Technologies' licensees include,
among others, NEC Corporation, Broadcom Corporation, Toshiba Corporation, LSI
Logic Corporation, Philips Electronics N.V., Integrated Device Technology, NKK
Corporation and Quantum Effect Design, Inc.
On July 6, 1998, MIPS Technologies completed an initial public offering of
5,500,000 shares of common stock, of which 4,250,000 shares were sold by Silicon
Graphics, Inc. and the remainder were sold by MIPS Technologies. Presently,
Silicon Graphics owns approximately 85% of MIPS Technologies' outstanding common
stock. Prior to its initial public offering, MIPS Technologies was a wholly
owned subsidiary of Silicon Graphics, and MIPS Technologies' business was
conducted by Silicon Graphics primarily through its MIPS Technologies Group, a
division of Silicon Graphics.
RELATIONSHIP WITH SILICON GRAPHICS
As the beneficial owner of approximately 85% of the outstanding MIPS common
stock, Silicon Graphics presently has the ability to direct the election of all
of the members of the board of directors of MIPS Technologies and to exercise a
controlling influence over MIPS Technologies' business and affairs. Currently,
the seven member Board of Directors of MIPS Technologies is composed of four
employees of Silicon Graphics, the chief executive officer of MIPS Technologies,
and two independent directors.
In connection with MIPS Technologies' initial public offering and the
separation of the businesses of MIPS Technologies and Silicon Graphics at that
time, MIPS Technologies and Silicon Graphics entered into certain agreements
governing various interim and ongoing relationships between them. Among these
agreements is a corporate agreement, which includes, among other things,
provisions granting Silicon Graphics registration rights with respect to the
MIPS common stock it holds, as well as the right to purchase additional shares
of capital stock of MIPS Technologies under certain circumstances. In addition,
MIPS Technologies' current certificate of incorporation includes certain
provisions regarding the allocation of business opportunities that may be
suitable for both MIPS Technologies and Silicon Graphics.
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THE RECAPITALIZATION
BACKGROUND
Although it has not formulated definitive plans to do so, Silicon Graphics
has recently announced its intention to divest its interest in MIPS Technologies
by September 2000. Silicon Graphics expects that such a divestiture will include
a distribution of a significant portion of its interest in MIPS Technologies to
the stockholders of Silicon Graphics in a transaction intended to qualify
generally as a tax-free distribution under the Internal Revenue Code of 1986, as
amended. Unless certain requirements are met, Silicon Graphics would incur
significant taxable gain if such a distribution to its stockholders were
taxable. In addition, such a distribution generally would be taxable to Silicon
Graphics' stockholders.
To effect a distribution that would be tax-free to Silicon Graphics and its
stockholders, current tax law requires, among other things, that Silicon
Graphics own, at the time of such a distribution, capital stock of MIPS
Technologies representing at least 80% of the voting power of MIPS Technologies,
and that Silicon Graphics distribute all of such stock to its stockholders in a
single transaction. Consequently, to effect a tax-free distribution if the
recapitalization is not effected, Silicon Graphics would be required to
distribute not less than 29.8 million shares of MIPS Technologies common stock
(80% of the shares currently issued and outstanding) in a single transaction. If
the recapitalization is effected, Silicon Graphics could reduce its economic
interest in MIPS Technologies below 80% through secondary market sales and other
transactions while preserving its ability to effect a tax-free distribution.
If the recapitalization is approved, Silicon Graphics intends to sell a
portion of the MIPS Technologies common stock it owns in underwritten public
offerings and other transactions during 1999, subject to prevailing market and
other conditions. Silicon Graphics is not obligated, and will not become
obligated as a result of the recapitalization, to effect any sale or disposition
of the MIPS Technologies common stock it owns in multiple transactions or
otherwise. There can be no assurance that any such sales or distributions will
occur. If the recapitalization is not effected, Silicon Graphics expects to
continue to hold all of the MIPS Technologies common stock it presently owns,
although it is under no contractual obligation to do so other than pursuant to
an agreement entered into in connection with MIPS Technologies' initial public
offering in which Silicon Graphics agreed not to sell or dispose of any shares
of MIPS Technologies common stock prior to June 30, 1999 without the consent of
the representative of the underwriters of such offering.
The proposed changes to MIPS Technologies' certificate of incorporation and
by-laws as described in this document are designed to permit an orderly,
multi-step divestiture of Silicon Graphics' interest in MIPS Technologies, while
preserving Silicon Graphics' ability to effect a tax-free distribution of its
investment in MIPS Technologies, and reflect only those changes that MIPS
Technologies believes are appropriate to achieve this result.
In addition, if the recapitalization is approved, MIPS Technologies and
Silicon Graphics will enter into the exchange agreement, which will govern
certain of the terms of the recapitalization.
REASONS FOR THE RECAPITALIZATION
A specially constituted committee of the MIPS board of directors, consisting
of MIPS Technologies' two independent directors, unanimously determined that the
recapitalization was fair to MIPS Technologies and its public stockholders, and
recommended the recapitalization to the full board of directors of MIPS
Technologies for approval. The board of directors of MIPS Technologies
unanimously determined that the recapitalization is in the best interests of
MIPS Technologies and its stockholders. In reaching their decisions to approve
the recapitalization, the special committee and the board of directors of MIPS
Technologies considered a number of factors, including the following:
- the belief that the recapitalization may encourage Silicon Graphics to
divest its controlling interest in MIPS Technologies sooner than it
otherwise might by providing
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Silicon Graphics with additional flexibility with respect to its
investment in MIPS Technologies and the ability to consummate a tax and
market efficient distribution of the shares of MIPS Technologies common
stock it owns;
- the potential benefits to MIPS Technologies' public stockholders of an
orderly, multi-step increase in the public float of MIPS Technologies
stock, which is expected to increase investor interest and enhance trading
efficiencies and liquidity in MIPS Technologies' common stock;
- the potential benefits of the divestiture by Silicon Graphics of its
interest in MIPS Technologies in multiple transactions, which is expected
to be less disruptive on the trading market for MIPS Technologies' common
stock than if Silicon Graphics divested its entire present interest in
MIPS Technologies in a single transaction;
- the ability of MIPS Technologies' public stockholders to elect 20% of its
board of directors, and in no event less than one director, following the
recapitalization compared to such stockholders' present inability to elect
any directors in light of Silicon Graphics' control;
- the terms of the recapitalization which require that, following a tax-free
distribution, a person or group of persons acting in concert holding 10%
or more of the Class B common stock must own at least an equal percentage
of the Class A common stock in order to exercise its Class B common stock
voting rights;
- the automatic conversion and exchange features of the recapitalization
which are designed, in part, to shorten the period of time following a
tax-free distribution during which MIPS Technologies must continue to have
a dual class capital structure; and
- the "sunset" provisions designed to ensure that Silicon Graphics retains
control of the board of directors of MIPS Technologies only if it has a
substantial economic interest in MIPS Technologies.
In addition, the special committee and the board of directors of MIPS
Technologies also considered and balanced against the potential benefits of the
recapitalization a number of potentially negative factors, including the
following:
- the potential effect that the dual class capital structure may have on the
trading price and liquidity of the Class A common stock;
- the potential impact of the dual class capital structure on MIPS
Technologies' corporate governance and control issues; and
- the potential impact of the recapitalization on MIPS Technologies'
financial flexibility, including as a result of limitations on MIPS
Technologies' ability to issue additional shares of its common stock
following a tax-free distribution.
To review the reasons for the recapitalization in greater detail, see pages
17 and 18.
EFFECT OF THE RECAPITALIZATION
MIPS Technologies currently has a single class of common stock outstanding,
and each share of existing common stock is entitled to one vote in all matters
submitted to a vote of stockholders, including the election of directors. If the
recapitalization is approved, each share of MIPS Technologies common stock
(including each share of MIPS Technologies common stock owned by Silicon
Graphics) will be redesignated as one share of newly created and issued Class A
common stock. Immediately upon consummation of the recapitalization and pursuant
to the exchange agreement, Silicon Graphics will exchange each share of Class A
common stock it owns for one share of newly created and issued Class B common
stock.
If the recapitalization is approved, the holders of the Class A common
stock, voting separately as a class, will be entitled to elect 20% of the
members of board of directors of MIPS Technologies, and in no event less than
one director, and the holders of the Class B common stock will be entitled to
elect the remaining directors. After a tax-free distribution, a person or group
of persons acting in concert holding 10% or more of the Class B common stock
must own at least an equal percentage of the Class A common stock to exercise
its Class B common stock voting rights.
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The Class A common stock and the Class B common stock will have
substantially identical rights and preferences in all other respects, including
with respect to all other matters submitted to a vote of stockholders (except as
otherwise required by law) and with respect to dividend rights and rights upon
liquidation.
CONVERSION AND EXCHANGE OF CLASS B COMMON STOCK
Prior to a tax-free distribution by Silicon Graphics of its interest in MIPS
Technologies, shares of Class B common stock transferred to any entity, other
than Silicon Graphics or its subsidiaries, will automatically convert into
shares of Class A common stock on a one-for-one basis. After a tax-free
distribution, shares of Class B common stock will not be converted upon transfer
by the holder thereof, but will only be converted into shares of Class A common
stock under the circumstances and subject to the terms of the proposed amended
and restated certificate of incorporation of MIPS Technologies.
At any time following a tax-free distribution by Silicon Graphics of its
interest in MIPS Technologies, pursuant to the proposed amended and restated
certificate of incorporation of MIPS Technologies, MIPS Technologies may
exchange all, but not less than all, of the outstanding shares of Class B common
stock for shares of Class A common stock on a one-for-one basis. This exchange
provision will have no further force or effect if its inclusion in the amended
and restated certificate of incorporation would have a material adverse effect
on Silicon Graphics' ability to timely obtain a favorable ruling from the
Internal Revenue Service regarding the tax-free status of the distribution of
Silicon Graphics' interest in MIPS Technologies to its stockholders. Pursuant to
a tax indemnification agreement which will be entered into by MIPS Technologies
and Silicon Graphics at the time of a tax-free distribution, Silicon Graphics
may limit MIPS Technologies' ability to undertake such an exchange.
Under current tax law, it is uncertain whether the automatic conversion
provisions or the exchange provision discussed above would have a material
adverse effect on Silicon Graphics' ability to timely obtain an Internal Revenue
Service tax ruling that the distribution would be tax-free.
In the event that prior to a tax-free distribution by Silicon Graphics, the
Internal Revenue Code of 1986, as amended, is amended to require, among other
things, that Silicon Graphics own, at the time of such a distribution, at least
80% of the value of the capital stock of MIPS Technologies, Silicon Graphics
will exchange each share of Class B common stock it owns for one share of Class
A common stock.
THE MIPS BOARD OF DIRECTORS FOLLOWING THE RECAPITALIZATION
If the recapitalization is approved, the MIPS board of directors will
continue to have seven members and will consist of one Class A director and six
Class B directors. The holders of Class A common stock will be entitled to elect
one Class A director at MIPS Technologies' 1999 annual meeting of stockholders,
and the Class A director so elected will hold office until the expiration of his
or her initial term at the annual meeting of stockholders in 2002.
RECOMMENDATION OF THE SPECIAL COMMITTEE AND THE MIPS BOARD OF DIRECTORS
The special committee and the board of directors of MIPS Technologies each
have unanimously approved the recapitalization and each unanimously recommends
that you vote in favor of the approval and adoption of the recapitalization.
FEDERAL INCOME TAX CONSEQUENCES
Implementation of the recapitalization will be tax-free for federal income
tax purposes to MIPS Technologies and its stockholders based upon the facts and
law as of the date of this document.
STOCK EXCHANGE QUOTATION
MIPS Technologies is in the process of obtaining the necessary approvals and
waivers from The Nasdaq Stock Market, Inc. in order to effect the
recapitalization.
MIPS Technologies will apply to The Nasdaq Stock Market to redesignate the
existing common stock as Class A common stock. In the event of a tax-free
distribution, MIPS Technologies expects that the Class B common stock will be
quoted on the Nasdaq National Market or on such other exchange on which the
Class A common stock may then be listed or quoted.
NO APPRAISAL RIGHTS
You have no right to an appraisal of the value of your shares in connection
with the recapitalization.
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THE EXCHANGE AGREEMENT
IF THE RECAPITALIZATION IS APPROVED BY THE PUBLIC STOCKHOLDERS OF MIPS
TECHNOLOGIES, MIPS TECHNOLOGIES AND SILICON GRAPHICS WILL ENTER INTO AN EXCHANGE
AGREEMENT, WHICH WILL GOVERN SOME OF THE TERMS OF THE RECAPITALIZATION. WE
ENCOURAGE YOU TO READ THE EXCHANGE AGREEMENT, A FORM OF WHICH IS ATTACHED TO
THIS DOCUMENT AS ANNEX C, IN ITS ENTIRETY.
EXCHANGE OF CLASS A SHARES FOR CLASS B SHARES BY SILICON GRAPHICS
Immediately after the amended and restated certificate of incorporation
becomes effective, each share of Class A common stock beneficially owned by
Silicon Graphics and its affiliates will be exchanged for one share of Class B
common stock.
INDEMNIFICATION AND EXPENSES
Silicon Graphics will indemnify and hold harmless MIPS Technologies and its
affiliates, officers, directors and employees from and against any and all
liabilities, losses, damages, claims and costs (including attorneys' fees)
arising out of or resulting from any claim of any third party to the extent
arising out of the recapitalization or any distribution of Silicon Graphics'
interest in MIPS Technologies.
Pursuant to the exchange agreement, Silicon Graphics will agree to pay
certain expenses incurred by MIPS Technologies in connection with the
recapitalization and tax-free distribution, including the fees of the financial
advisor to the special committee, certain budgeted legal fees and other
reasonable out-of-pocket expenses.
TAX INDEMNIFICATION AGREEMENT
The exchange agreement will also contain a covenant obligating MIPS
Technologies and Silicon Graphics to enter into a tax indemnification agreement
prior to a tax-free distribution by Silicon Graphics of its interest in MIPS
Technologies. Pursuant to the tax indemnification agreement, MIPS Technologies
will indemnify Silicon Graphics against all taxes imposed on Silicon Graphics
under section 355(e) of the Internal Revenue Code as a result of the issuance by
MIPS Technologies of its capital stock in an acquisition or in a public or
private offering during the 30 months following a tax-free distribution or as a
result of certain other actions by MIPS Technologies, in each case subject to
certain exceptions. These limitations on the issuance of shares of MIPS
Technologies' capital stock could have a negative impact on MIPS Technologies'
financial flexibility following a tax-free distribution. Additional information
regarding the tax indemnification agreement can be found on page 25.
SILICON GRAPHICS' OBLIGATION TO PURCHASE MIPS COMMON STOCK
If Silicon Graphics has not disposed of its entire interest in MIPS
Technologies prior to December 31, 2000, on the last day of each quarter
beginning with the quarter ending December 31, 2000 (whether through a tax-free
distribution or otherwise), Silicon Graphics will become obligated to purchase a
pre-determined number of shares of MIPS Technologies common stock within the 30
day period immediately following the public announcement of financial results
for such quarter. At its option, Silicon Graphics may satisfy this obligation by
purchasing shares of Class B common stock from MIPS Technologies or by
purchasing shares of issued and outstanding Class A common stock from a third
party. Silicon Graphics' obligation to make such purchases will end on the last
day of the fiscal quarter immediately preceding the disposition by Silicon
Graphics of its interest in MIPS Technologies and may be terminated upon the
exchange by Silicon Graphics of its Class B shares for Class A shares following
a change in tax law.
Silicon Graphics will not be required to purchase such shares of MIPS
Technologies common stock if and to the extent that the independent directors
and chief executive officer of MIPS Technologies unanimously determine that such
purchase is not in the interests of MIPS Technologies and its public
stockholders. In addition, Silicon Graphics' obligations under this provision of
the exchange agreement will be subject to the terms of the exchange agreement as
discussed in this document.
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Additional information regarding Silicon Graphics' obligation to purchase
shares of MIPS Technologies common stock can be found on pages 24 and 25.
REQUIRED EXCHANGE OF SHARES BY SILICON GRAPHICS
The exchange agreement will also provide that Silicon Graphics will be
required to exchange all of its shares of Class B common stock for shares of
Class A common stock if, prior to a tax-free distribution, there is a change in
federal income tax law that would apply to Silicon Graphics which provides that
in a tax-free spin-off of a subsidiary, the distributing company must hold not
less than 80% of the value of all or a portion of the subsidiary's stock
immediately prior to such spin-off.
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THE SPECIAL MEETING
PURPOSE OF THE SPECIAL MEETING
The purpose of the special meeting is to consider and vote upon:
- a proposal to recapitalize the authorized capital stock of MIPS
Technologies, including the proposed amended and restated certificate of
incorporation and amended and restated by-laws of MIPS Technologies and
the exchange by Silicon Graphics of each share of Class A common stock it
will own for one share of Class B common stock; and
- such other business as may properly be brought before the special meeting.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting will be held on , , 1999, at ,
commencing at , local time.
STOCKHOLDERS ENTITLED TO VOTE AT THE SPECIAL MEETING; VOTE REQUIRED
Under Delaware law and MIPS Technologies' current certificate of
incorporation, Silicon Graphics, as beneficial owner of approximately 85% of the
MIPS Technologies common stock, has the ability to approve the recapitalization
(including approval of the proposed amended and restated certificate of
incorporation and amended and restated by-laws of MIPS Technologies) without the
consent of any other stockholder of MIPS Technologies. Silicon Graphics intends
to vote in favor of the recapitalization proposal.
However, although not required by law or MIPS Technologies' current
certificate of incorporation, the board of directors of MIPS Technologies has
determined that its stockholders, other than Silicon Graphics and its
affiliates, will also have a separate vote on the recapitalization. Accordingly,
the recapitalization will not be effected without the affirmative vote of at
least a majority of the outstanding common stock, present and voting at the
special meeting, held by stockholders of MIPS Technologies other than Silicon
Graphics and its affiliates.
INTERESTS OF CERTAIN PERSONS/STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
OF MIPS
In determining how to vote at the special meeting, you should be aware that
certain officers and directors of MIPS Technologies are also officers and/or
stockholders of Silicon Graphics and, therefore, may have interests in the
recapitalization that are different from your own.
To review these interests in greater detail, see page 22.
SURRENDER OF CERTIFICATES
After the recapitalization, your shares of MIPS common stock will be
automatically redesignated as shares of Class A common stock. You will not need
to exchange your stock certificates representing shares of MIPS common stock for
certificates representing shares of Class A common stock. YOU SHOULD NOT SEND
ANY STOCK CERTIFICATES AT THIS TIME.
MARKET PRICES OF THE COMMON STOCK
The MIPS Technologies common stock has been quoted on the Nasdaq National
Market under the symbol "MIPS" since June 30, 1998. On January 13, 1999, the
last full trading day prior to the public announcement of the recapitalization
proposal, the last reported sale price per share of the existing common stock on
the Nasdaq National Market was $32.25. On January 28, 1999, the most recent
practicable date prior to the printing of this document, the last reported sale
price of the MIPS Technologies common stock on the Nasdaq National Market was
$36 per share. You should read the table on page 29 of this document which
presents the range of high and low sales prices per share for the MIPS common
stock during each of the calendar quarters since MIPS Technologies' initial
public offering.
7
<PAGE>
COMPARISON OF CURRENT AND PROPOSED PROVISIONS
OF MIPS TECHNOLOGIES CERTIFICATE OF INCORPORATION
THE FOLLOWING IS A GENERAL DESCRIPTION OF CERTAIN PROVISIONS OF THE CURRENT
MIPS TECHNOLOGIES' CERTIFICATE OF INCORPORATION AND THE SAME PROVISIONS AS THEY
WILL BE AMENDED PURSUANT TO THE TERMS OF THE RECAPITALIZATION. WE ENCOURAGE YOU
TO REVIEW THE PROPOSED AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND
AMENDED AND RESTATED BY-LAWS ATTACHED TO THIS DOCUMENT AS ANNEX A AND ANNEX B.
<TABLE>
<CAPTION>
MIPS TECHNOLOGIES CERTIFICATE OF INCORPORATION
<S> <C> <C>
CURRENT PROVISION PROPOSED PROVISION
------------------------------------ ------------------------------------------------
AUTHORIZED CAPITAL
STOCK................. 200,000,000 shares authorized: 300,000,000 shares authorized:
COMMON STOCK............ - 150,000,000 shares of common stock - 150,000,000 shares of Class A common stock
- 100,000,000 shares of Class B common stock
PREFERRED STOCK......... - 50,000,000 shares of preferred - 50,000,000 shares of preferred stock, issuable
stock, issuable in series in series
VOTING RIGHTS
ELECTION OF
DIRECTORS............. Each share of common stock is - Holders of Class A common stock, voting as a
entitled to one vote in the election separate class, will be entitled to elect 20%
of directors and all shares of of MIPS Technologies' directors, and in no
common stock vote together as a event less than one director.
single class.
- Holders of Class B common stock, voting as a
separate class, will be entitled to elect the
remaining MIPS Technologies directors.
ALL OTHER MATTERS....... Each share of common stock is Each share of Class A common stock and Class B
entitled to one vote in all other common stock is entitled to one vote, voting
matters submitted to a vote of together as a single class, in all other matters
stockholders. submitted to a vote of stockholders (except as
otherwise required by law). After a tax-free
distribution, a holder of 10% or more of the
Class B common stock must own at least an equal
percentage of the Class A common stock to
exercise their Class B common stock voting
rights.
DIVIDENDS............... Holders of common stock are entitled Holders of Class A common stock and Class B
to such dividends as may be declared common stock will share, equally on a per share
by the board of directors of MIPS basis, in all dividends declared by the board of
Technologies. directors of MIPS Technologies; provided that
with respect to dividends payable in MIPS
Technologies common stock, holders of shares of
Class A common stock will only receive such
dividends in
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
MIPS TECHNOLOGIES CERTIFICATE OF INCORPORATION
CURRENT PROVISION PROPOSED PROVISION
------------------------------------ ------------------------------------------------
<S> <C> <C>
shares of Class A common stock and holders of
shares of Class B common stock will only receive
such dividends in shares of Class B common
stock. The number of shares of Class A common
stock and Class B common stock so paid or
distributed will be equal in number on a per
share basis.
CONVERSION.............. The common stock is not presently Shares of Class B common stock are convertible
convertible. into shares of Class A common stock upon the
occurrence of certain events, including:
- Automatically upon the transfer of shares of
Class B common stock to a person, other than
Silicon Graphics or one of its subsidiaries,
prior to a tax-free distribution.
- Automatically if, prior to a tax-free
distribution, another entity acquires more
than 50% of the voting power of Silicon
Graphics.
- Automatically if, prior to a tax-free
distribution, Silicon Graphics owns less than
50% of the outstanding shares of MIPS
Technologies common stock, unless the
independent directors and chief executive
officer of MIPS Technologies determine that
such automatic conversion is not in the
interests of MIPS Technologies or its public
stockholders,
- Automatically if, prior to a tax-free
distribution, Silicon Graphics owns less than
30% of the outstanding shares of MIPS
Technologies common stock.
- Automatically if another entity acquires MIPS
Technologies, provided such automatic
conversion would not have a material adverse
effect on Silicon Graphics' ability to timely
obtain a favorable ruling from the Internal
Revenue Service that the distribution of its
interest in MIPS Technologies to its
stockholders would be tax-free.
- Automatically on the fifth anniversary of a
tax-free distribution, provided such automatic
conversion would not have a material adverse
effect on Silicon Graphics' ability to timely
obtain a favorable ruling from the Internal
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
MIPS TECHNOLOGIES CERTIFICATE OF INCORPORATION
CURRENT PROVISION PROPOSED PROVISION
------------------------------------ ------------------------------------------------
<S> <C> <C>
Revenue Service that the distribution would be
tax-free.
Under current tax law, it is uncertain whether
the last two automatic conversion provisions
described above would have a material adverse
effect on Silicon Graphics' ability to timely
obtain an Internal Revenue Service tax ruling
that a distribution of Silicon Graphics'
interest in MIPS Technologies to its
stockholders would be tax-free.
EXCHANGE................ The common stock is not presently MIPS Technologies may exchange all (but not less
exchangeable. than all) of the Class B common stock for Class
A common stock at any time following a tax-free
distribution, provided, however, that this
provision will have no further force or effect
if its inclusion in the amended and restated
certificate of incorporation would have a
material adverse effect on Silicon Graphics'
ability to timely obtain a favorable ruling from
the Internal Revenue Service that such
distribution would be tax-free. Pursuant to a
tax indemnification agreement which will be
entered into by MIPS Technologies and Silicon
Graphics at the time of such distribution,
Silicon Graphics may limit MIPS Technologies'
ability to undertake such an exchange.
Under current tax law, it is uncertain whether
this exchange provision would have a material
adverse effect on Silicon Graphics' ability to
timely obtain an Internal Revenue Service tax
ruling that a distribution of Silicon Graphics'
interest in MIPS Technologies to its
stockholders would be tax-free.
MERGERS AND
REORGANIZATIONS....... All shares of common stock are All shares of Class A common stock and Class B
entitled to receive the same kind common stock are entitled to receive equally on
and amount of consideration in the a per share basis the same kind and amount of
event of any merger, reorganization consideration in the event of any merger,
or consolidation of MIPS reorganization or consolidation of MIPS
Technologies with any other company. Technologies with any other company; provided,
however, that, in the event that the shares of
Class B common stock have not been converted
into or
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
MIPS TECHNOLOGIES CERTIFICATE OF INCORPORATION
CURRENT PROVISION PROPOSED PROVISION
------------------------------------ ------------------------------------------------
<S> <C> <C>
exchanged for shares of Class A common stock, in
connection with a merger, reorganization or
consolidation of MIPS Technologies in which all
or substantially all of the common stock of MIPS
Technologies will be exchanged for stock of
another entity and the transaction is required
to be accounted for by the
"pooling-of-interests" method, the holders of
Class A common stock and Class B common stock
will be entitled to receive shares of stock of
the acquiring entity based on the relative fair
value of a share of the Class A common stock and
a share of Class B common stock as of the
announcement date for such transaction.
LIQUIDATION............. All shares of common stock are All shares of Class A common stock and Class B
entitled to receive, pro rata, all common stock are entitled to receive equally on
assets of MIPS Technologies a per share basis all assets of MIPS
available for distribution to Technologies available for distribution to
stockholders. stockholders.
CORPORATE
OPPORTUNITIES......... Provisions allocating business No change if the recapitalization is
opportunities that may be suitable consummated.
for both MIPS Technologies and
Silicon Graphics.
</TABLE>
11
<PAGE>
THE SPECIAL MEETING
GENERAL; DATE, TIME AND PLACE
This Proxy Statement is being furnished by the Board of Directors (the "MIPS
Board of Directors") of MIPS Technologies, Inc. ("MIPS Technologies") to holders
of common stock, par value $0.001 per share, of MIPS Technologies (the "Existing
Common Stock") in connection with the solicitation of proxies by the MIPS Board
of Directors for use at the Special Meeting of MIPS Technologies stockholders
(the "Special Meeting") to be held on , 1999 at , commencing
at , local time, and at any adjournment or postponement thereof.
This Proxy Statement and the accompanying form of proxy are first being
mailed to stockholders of MIPS Technologies on or about , , 1999.
PURPOSES OF THE SPECIAL MEETING
At the Special Meeting, holders of shares of Existing Common Stock will be
asked to consider and vote upon (i) a proposal (the "Recapitalization Proposal")
to approve and adopt the recapitalization of MIPS Technologies, including (a)
the approval and adoption of the proposed Amended and Restated Certificate of
Incorporation of MIPS Technologies (the "Amended Certificate of Incorporation")
and the proposed Amended and Restated By-laws of MIPS Technologies (the "Amended
By-laws"), pursuant to which each share of Existing Common Stock, including such
shares held by Silicon Graphics, Inc. ("Silicon Graphics") and its affiliates,
will be redesignated as one share of newly created and issued Class A common
stock, par value $0.001 per share (the "Class A Common Stock"), of MIPS
Technologies, and (b) the exchange by Silicon Graphics of each share of Class A
Common Stock it will own for one share of newly created and issued Class B
common stock, par value $0.001 per share (the "Class B Common Stock" and,
together with the Class A Common Stock, the "New MIPS Common Stock"), of MIPS
Technologies immediately upon the consummation of the recapitalization and
pursuant to the Exchange Agreement (as defined below) (the "Recapitalization"),
and (ii) such other matters as may properly be brought before the Special
Meeting or any adjournment or postponement thereof.
RECOMMENDATION OF THE MIPS BOARD AND SPECIAL COMMITTEE
The MIPS Board of Directors unanimously determined that the Recapitalization
is fair to, and in the best interests of, MIPS Technologies and its stockholders
and has unanimously approved the Recapitalization. Prior to the MIPS Board of
Directors' approval, a specially constituted committee of the MIPS Board of
Directors, comprised of certain non-management directors who are not affiliated
with Silicon Graphics (the "Special Committee"), determined that the
Recapitalization is fair to MIPS Technologies and its public stockholders, and
recommended the Recapitalization to the MIPS Board of Directors. THE SPECIAL
COMMITTEE AND THE MIPS BOARD OF DIRECTORS HAVE UNANIMOUSLY APPROVED THE
RECAPITALIZATION AND RECOMMEND THAT YOU VOTE FOR ITS APPROVAL AND ADOPTION.
STOCKHOLDERS ENTITLED TO VOTE; VOTE REQUIRED
The MIPS Board of Directors has fixed the close of business on ,
1999 as the record date for the determination of the holders of Existing Common
Stock entitled to notice of and to vote at the Special Meeting (the "Record
Date"). Accordingly, only holders of record of Existing Common Stock on the
Record Date will be entitled to notice of, and to vote at, the Special Meeting.
As of the Record Date, there were outstanding and entitled to vote shares
of Existing Common Stock (constituting all of the voting stock of MIPS
Technologies), which shares were held by approximately holders of record. Each
holder of record of shares of Existing Common Stock on the Record Date is
entitled to one vote per share, which may be cast either in person or by
properly executed proxy, at the Special Meeting. A complete list of stockholders
entitled to vote at the Special Meeting will be available for inspection by any
stockholder for any purpose germane to the Special Meeting for 10 days prior to
the Special Meeting
12
<PAGE>
during ordinary business hours at MIPS Technologies' headquarters located at
1225 Charleston Road, Mountain View, California 94043. The presence, in person
or by properly executed proxy, of the holders of a majority of the outstanding
shares of Existing Common Stock entitled to vote at the Special Meeting is
necessary to constitute a quorum at the Special Meeting. Silicon Graphics
intends to be present at the Special Meeting; therefore a quorum will be
present.
Based on its ownership of approximately 85% of the currently outstanding
shares of Existing Common Stock, Silicon Graphics has the voting power to adopt
and approve the Recapitalization Proposal without the vote of any other
stockholder of MIPS Technologies. Silicon Graphics intends to vote all of the
shares of Existing Common Stock it owns in favor of the Recapitalization
Proposal.
However, even though not required by law or the current Certificate of
Incorporation of MIPS Technologies (the "Existing Certificate of
Incorporation"), the MIPS Board of Directors has determined that in light of
Silicon Graphics' control of MIPS Technologies, it is appropriate for the public
stockholders of MIPS Technologies (i.e., holders of Existing Common Stock other
than Silicon Graphics and its affiliates) (the "MIPS Public Stockholders") to
have a separate vote on the Recapitalization Proposal. Accordingly, the
Recapitalization Proposal will not be adopted without the approval of the
holders of at least a majority of Existing Common Stock held by the MIPS Public
Stockholders present and voting on the Recapitalization Proposal at the Special
Meeting.
Shares of Existing Common Stock represented in person or by proxy will be
counted for the purpose of determining whether a quorum is present at the
Special Meeting. Shares which abstain from voting, and shares held by a broker
nominee in "street name" which indicates on a proxy that it does not have
discretionary authority to vote as to a particular matter, will be treated as
shares that are present and entitled to vote at the Special Meeting for purposes
of determining whether a quorum exists, but will not be considered as votes cast
and, accordingly, will have no effect on the outcome of the vote with respect to
the Recapitalization Proposal.
PROXIES
This Proxy Statement is being furnished to MIPS Technologies stockholders in
connection with the solicitation of proxies by, and on behalf of, the MIPS Board
of Directors for use at the Special Meeting, and is accompanied by a form of
proxy.
All shares of Existing Common Stock which are entitled to vote and are
represented at the Special Meeting by properly executed proxies received prior
to or at the Special Meeting, and not revoked, will be voted at such Special
Meeting in accordance with the instructions indicated on such proxies. If no
instructions are indicated (other than in the case of broker non-votes), such
proxies will be voted for approval and adoption of the Recapitalization
Proposal.
If any other matters are properly presented at the Special Meeting for
consideration, including, among other things, consideration of a motion to
adjourn such Special Meeting to another time and/or place (including, without
limitation, for the purposes of soliciting additional proxies), the persons
named in the enclosed forms of proxy and acting thereunder will have discretion
to vote on such matters in accordance with their judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of MIPS Technologies, at or before the taking of the vote at
the Special Meeting, a written notice of revocation bearing a later date than
the proxy, (ii) duly executing a later dated proxy relating to the same shares
and delivering it to MIPS Technologies before the taking of the vote at the
Special Meeting or (iii) attending the Special Meeting and voting in person
(although attendance at the Special Meeting will not in and of itself constitute
a revocation of the proxy). Any written notice of revocation or subsequent proxy
should be sent to MIPS Technologies, Inc.,
13
<PAGE>
1225 Charleston Road, Mountain View, California 94043, Attention: Secretary, or
hand delivered to the Secretary of MIPS Technologies at or before the taking of
the vote at the Special Meeting.
All expenses of MIPS Technologies' solicitation of proxies, and the cost of
preparing and mailing this Proxy Statement to MIPS Technologies stockholders,
will be paid by Silicon Graphics pursuant to the terms of the Exchange Agreement
(as defined below), which MIPS Technologies and Silicon Graphics will enter into
if the Recapitalization is approved by the MIPS Public Stockholders. See "The
Exchange Agreement--Indemnification and Expenses." In addition to solicitation
by use of the mails, proxies may be solicited from MIPS Technologies
stockholders by directors, officers and employees of MIPS Technologies in person
or by telephone, telegram or other means of communication. Such directors,
officers and employees will not be additionally compensated, but may be
reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation. MIPS Technologies has retained Innisfree to act as its information
agent to provide ministerial assistance in connection with the solicitation of
proxies for the Special Meeting. Innisfree will be paid a flat fee of
approximately $ , plus reimbursement of reasonable out-of-pocket expenses and
will be specifically instructed that it may not make any recommendation
regarding the approval or disapproval of any proposal to be voted on at the
Special Meeting. Arrangements will be made with brokerage houses, custodians,
nominees and fiduciaries for forwarding of proxy materials to beneficial owners
of shares held of record by such brokerage houses, custodians, nominees and
fiduciaries and for reimbursement of their reasonable expenses incurred in
connection therewith.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
14
<PAGE>
THE RECAPITALIZATION
BACKGROUND OF THE RECAPITALIZATION
GENERAL. On July 6, 1998, MIPS Technologies completed an initial public
offering (the "Offering") of 5,500,000 shares of Existing Common Stock. Of the
shares of Existing Common Stock sold in the Offering, 4,250,000 shares were sold
by Silicon Graphics and the remainder were sold by MIPS Technologies. Presently,
Silicon Graphics owns approximately 85% of the outstanding Existing Common
Stock. Prior to the Offering, MIPS Technologies was a wholly owned subsidiary of
Silicon Graphics, Inc. and MIPS Technologies' business was conducted by Silicon
Graphics primarily through its MIPS Group, a division of Silicon Graphics.
Although it has not formulated definitive plans to do so, Silicon Graphics
has recently announced its intention to divest its interest in MIPS Technologies
by September 30, 2000. Silicon Graphics expects that such a divestiture will
include a distribution of a significant portion of its interest in MIPS
Technologies to the stockholders of Silicon Graphics in a transaction intended
to generally qualify under Section 355 of the Internal Revenue Code of 1986, as
amended (the "Code") (a "Tax-Free Distribution"). Unless certain requirements
are met, Silicon Graphics would incur a significant taxable gain if such a
distribution to its stockholders were taxable. In addition, such a distribution
generally would be taxable to Silicon Graphics' stockholders. To effect a
Tax-Free Distribution for Silicon Graphics and its stockholders, current tax law
requires, among other things, that Silicon Graphics own, at the time of such a
transaction, capital stock of MIPS Technologies representing at least 80% of the
voting power of MIPS Technologies, and that Silicon Graphics distribute all of
such stock to its stockholders in a single transaction. Consequently, to effect
a Tax-Free Distribution if the Recapitalization is not effected, Silicon
Graphics would be required to distribute not less than 29.8 million shares of
Existing Common Stock (80% of the shares of Existing Common Stock currently
issued and outstanding) in a single transaction. If the Recapitalization is
effected, Silicon Graphics could reduce its economic interest in MIPS
Technologies below 80% through secondary market sales and other transactions,
while preserving its ability to effect a Tax-Free Distribution.
If the Recapitalization is approved, Silicon Graphics intends to sell a
portion of the New MIPS Common Stock it owns in underwritten public offerings
and other transactions during 1999, subject to prevailing market and other
conditions. However, Silicon Graphics is not obligated, and will not become
obligated as a result of the Recapitalization, to effect any sale or
distribution of the New MIPS Common Stock it owns in multiple transactions or
otherwise. There can be no assurance that any such sales or distributions will
occur. If the Recapitalization is not effected, Silicon Graphics expects to
continue to hold all of the Existing Common Stock it presently owns, although it
is under no contractual obligation to do so other than pursuant to a lock-up
agreement entered into in connection with the Offering in which Silicon Graphics
agreed not to sell or dispose of any shares of Existing Common Stock prior to
June 30, 1998 without the consent of the representative of the underwriters for
the Offering.
The proposed changes to the Existing Certificate of Incorporation and the
current By-laws of MIPS Technologies (the "Existing By-laws") as described in
this Proxy Statement are designed to permit an orderly, multi-step increase in
the number of shares of MIPS Technologies common stock that are publicly traded
while preserving the ability of Silicon Graphics to effect a Tax-Free
Distribution of its investment in MIPS Technologies, and reflect only those
changes that MIPS Technologies believes are appropriate to achieve this result.
Following a Tax-Free Distribution, it is expected that MIPS Technologies would
continue to have the dual class capital structure only for so long as may be
required for Silicon Graphics to maintain the tax-free status of the Tax-Free
Distribution.
THE SPECIAL COMMITTEE. On November 23, 1998, a special meeting of the MIPS
Board of Directors was held. Five of the seven members of the MIPS Board of
Directors were present, in person or telephonically. At the special meeting
William M. Kelly outlined the proposed terms of the Recapitalization and Silicon
Graphics' reasons for proceeding with the transaction. The MIPS Board of
Directors then approved the creation of a special committee of the MIPS Board of
Directors (the "Special Committee"),
15
<PAGE>
consisting of Anthony B. Holbrook and Fred M. Gibbons, the two directors of MIPS
Technologies who are not directors, officers or employees of Silicon Graphics or
officers or employees of MIPS Technologies. The Special Committee was authorized
to review, evaluate and consider whether the terms of the Recapitalization would
be fair to the MIPS Public Stockholders, and to make a recommendation to the
full MIPS Board of Directors with respect to the Recapitalization. The MIPS
Board of Directors also authorized the Special Committee to retain legal counsel
and other advisors as it deemed appropriate.
In late November 1998, the Special Committee retained an independent
financial advisor and independent legal counsel to assist the Special Committee
in its consideration of the proposed Recapitalization.
On December 7, 1998, the Special Committee met with representatives of its
financial advisor and legal counsel. During this meeting, the proposed terms of
the Recapitalization were summarized for the Special Committee. In addition, the
Special Committee's advisors made presentations on precedent transactions and
issues faced by companies with a dual class capital structure. The Special
Committee instructed its advisors to continue their analysis of the
Recapitalization, including the effect of a dual class capital structure on MIPS
Technologies and the tax issues related to a possible Tax-Free Distribution by
Silicon Graphics.
On December 11, 1998, the Special Committee again met with representatives
of its advisors. The independent financial advisor reviewed with the Special
Committee the historical trading information and capital structure of companies
which had consummated transactions which the financial advisor deemed similar to
the proposed Recapitalization and the relative trading values of the dual
classes of stock of such companies and other companies with dual classes of
stock. Representatives of the Special Committee's legal counsel reviewed the
possible effects of the Recapitalization and the dual class capital structure
with respect to the corporate governance and financial flexibility of MIPS
Technologies, as well as certain tax issues related to a possible Tax-Free
Distribution by Silicon Graphics. The Special Committee's legal counsel were
instructed to meet with counsel to Silicon Graphics to discuss the proposed
terms of the Recapitalization.
During the period from December 12 through December 14, 1998,
representatives of legal counsel for the Special Committee and Silicon Graphics
had numerous conference calls to discuss the proposed terms of the
Recapitalization.
On December 14, 1998, the Special Committee met with representatives of its
legal counsel to review certain accounting issues relating to the
Recapitalization. The Special Committee instructed its legal advisors to discuss
the Special Committee's concerns regarding the proposed terms of the
Recapitalization with Silicon Graphics and its advisors.
On December 17, 1998, MIPS Technologies, Silicon Graphics and their
respective legal counsel met to discuss the terms of the Recapitalization. A
representative from MIPS Technologies' independent accountant also was at this
meeting to address certain "pooling-of-interests" accounting issues.
At a meeting of the Special Committee held on December 18, 1998, legal
counsel to the Special Committee summarized the discussions from the meeting
held on December 17, 1998 with Silicon Graphics and its advisors. The Special
Committee instructed its legal counsel to present to Silicon Graphics and its
advisors certain revised terms of the Recapitalization intended to address,
among other things, the impact of a Tax-Free Distribution on the financial
flexibility of MIPS Technologies, including the limitations on MIPS
Technologies' ability to issue additional shares of New MIPS Common Stock, the
impact of the proposed dual class capital structure on corporate governance and
control issues and "pooling-of interests" accounting issues.
From December 18 through January 3, 1999, the legal advisors of the Special
Committee and Silicon Graphics had numerous meetings and conference calls to
negotiate the proposed terms of the Recapitalization.
16
<PAGE>
On January 4, 1999, the Special Committee held a meeting to review the
status of the negotiations with representatives of its legal counsel. The
Special Committee instructed its legal counsel to continue its negotiations with
Silicon Graphics.
During the period from January 4 through January 10, the Special Committee,
Silicon Graphics and their respective legal advisors, held numerous meetings and
conference calls to negotiate the final terms of the proposed Recapitalization.
On January 11, 1999, the Special Committee met with representatives of its
financial advisor and legal advisors. The legal advisors reviewed the principal
terms of Recapitalization. The financial advisor compared the final terms of the
Recapitalization with the terms of precedent transactions. After a full
discussion, the Special Committee determined that the terms of the
Recapitalization were fair to MIPS Technologies and the MIPS Public
Stockholders. The Special Committee then unanimously determined to recommend to
the MIPS Board of Directors that the Recapitalization be approved.
At a special meeting of the MIPS Board of Directors held on January 13,
1999, the MIPS Board of Directors unanimously determined that the
Recapitalization was fair to, and in the best interests of, MIPS Technologies
and its stockholders and recommended that its stockholders vote to approve and
adopt the Recapitalization.
REASONS FOR THE RECAPITALIZATION; RECOMMENDATION OF THE SPECIAL COMMITTEE AND
THE MIPS BOARD OF DIRECTORS
At a meeting held on January 11, 1999, the Special Committee unanimously
determined that the Recapitalization was fair to MIPS Technologies and the MIPS
Public Stockholders, and unanimously determined to recommend the
Recapitalization to the full MIPS Board of Directors. At a meeting held on
January 13, 1999, at which all of the directors of MIPS Technologies were
present, based on the unanimous recommendation of the Special Committee, the
MIPS Board of Directors unanimously approved and adopted the terms of the
Recapitalization, unanimously determined that the terms of the Recapitalization
are fair to, and in the best interests of, MIPS Technologies and its
stockholders, and unanimously determined to recommend to the MIPS Public
Stockholders that they vote to approve and adopt the Recapitalization.
THE SPECIAL COMMITTEE. In determining to recommend to the MIPS Board of
Directors that it approve and adopt the terms of the Recapitalization, and in
evaluating the fairness of the terms of the Recapitalization, the Special
Committee considered a number of potential benefits, including without
limitation, the following:
- the belief that the Recapitalization may encourage Silicon Graphics to
divest its controlling interest in MIPS Technologies sooner that it
otherwise might by providing Silicon Graphics with additional flexibility
with respect to its investment in MIPS Technologies and the ability to
consummate a tax and market efficient distribution of the shares of
Existing Common Stock that it owns;
- the potential benefits to the MIPS Public Stockholders of an orderly,
multi-step increase in the public float of MIPS Technologies common stock,
which is expected to increase investor interest and enhance trading
efficiencies and liquidity in MIPS Technologies common stock;
- the potential benefits of the divestiture by Silicon Graphics of its
interest in MIPS Technologies in multiple transactions, which is expected
to be less disruptive on the trading market for MIPS Technologies common
stock than if Silicon Graphics divested its entire present interest in
MIPS Technologies in a single transaction;
- the terms of the Recapitalization which provide the MIPS Public
Stockholders the right to elect 20% of the MIPS Board of Directors, but in
no event less than one director, following the Recapitalization, compared
with such stockholders' present inability to elect any directors of the
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MIPS Board of Directors in light of Silicon Graphics 85% ownership of the
outstanding Existing Common Stock;
- the terms of the Recapitalization which require that, after a Tax-Free
Distribution, a person or group of persons acting in concert holding 10%
or more of the outstanding shares of Class B Common Stock must own at
least an equal percentage of the outstanding shares of Class A Common
Stock in order to exercise its Class B Common Stock voting rights, which
are designed to ensure that a stockholder's voting rights in the election
of directors is not significantly disproportionate to its economic
interest in MIPS Technologies;
- the automatic conversion and exchange features of the Recapitalization
which are designed, in part, to provide MIPS Technologies with the
ability, if permitted under then existing tax law, to reduce the length of
time following a Tax-Free Distribution during which MIPS Technologies must
continue to have a dual class capital structure; and
- the 50% "sunset" provision designed to ensure that Silicon Graphics
retains control of the MIPS Board of Directors only if it has a
substantial economic interest in MIPS Technologies.
In reaching its determination that the Recapitalization is fair to MIPS
Technologies and the MIPS Public Stockholders, and to recommend to the MIPS
Board of Directors that it approve and adopt the terms of the Recapitalization,
the Special Committee also considered and balanced against the potential
benefits of the Recapitalization a number of factors, including, without
limitation:
- the potential effect of two classes of common stock on the trading price
and liquidity of the Class A Common Stock;
- the potential impact of the dual class capital structure on MIPS
Technologies' corporate governance and control issues; and
- the potential impact of a Tax-Free Distribution on MIPS Technologies'
financial flexibility, including as a result of limitations on MIPS
Technologies' ability to issue additional shares of New MIPS Common Stock.
After detailed consideration of these factors, the Special Committee concluded
that the Recapitalization is fair to MIPS Technologies and the MIPS Public
Stockholders.
THE BOARD OF DIRECTORS. The MIPS Board of Directors has considered the
unanimous recommendation of the Special Committee, as well as the factors
(enumerated above) considered by the Special Committee, and has unanimously
determined that the Recapitalization is fair to, and in the best interests of,
MIPS Technologies and its stockholders, has approved and adopted the terms of
the Recapitalization and recommends that the MIPS Public Stockholders vote to
approve and adopt the Recapitalization Proposal.
The foregoing discussion and factors considered by the Special Committee and
the MIPS Board of Directors addressed the material factors considered by the
Special Committee and the MIPS Board of Directors in their consideration of the
Recapitalization. The Special Committee and the MIPS Board of Directors did not
quantify or attach any particular weight to the various factors that it
considered in reaching its determination that the Recapitalization is advisable
and fair to MIPS Technologies and the MIPS Public Stockholders. Different
Special Committee and MIPS Board of Directors members may have assigned
different weights to different factors. In reaching its determination, the
Special Committee and the MIPS Board of Directors took the various factors into
account collectively. The Special Committee and the MIPS Board of Directors did
not perform a factor-by-factor analysis, but rather its determination was made
in consideration of all of the factors as a whole.
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<PAGE>
EFFECT OF THE RECAPITALIZATION
GENERAL. MIPS Technologies currently has a single class of common stock
outstanding, and each share of Existing Common Stock is entitled to one vote in
all matters submitted to a vote of stockholders, including the election of
directors. If the Recapitalization is adopted, each share of Existing Common
Stock will be redesignated as one share of Class A Common Stock. Immediately
thereafter and pursuant to the Exchange Agreement (the "Exchange Agreement")
which MIPS Technologies and Silicon Graphics will enter if the Recapitalization
is approved, Silicon Graphics will exchange each share of Class A Common Stock
it owns for one share of Class B Common Stock. See "The Exchange Agreement--
Exchange of Class A Shares for Class B Shares by Silicon Graphics." Immediately
following the Recapitalization, Silicon Graphics would continue to own
approximately 85% of the common equity of MIPS Technologies, consisting of
31,750,000 shares of Class B Common Stock, and the MIPS Public Stockholders
would continue to own approximately 15% of the common equity of MIPS
Technologies, consisting of 5,542,286 shares of Class A Common Stock.
VOTING RIGHTS. Pursuant to the terms of the Recapitalization, the current
share capital of MIPS Technologies will be converted into two classes of common
stock: (i) the Class A Common Stock, which will entitle the holders thereof to
vote, separately as a single class, for the election of 20% (rounded downward,
if necessary, to the nearest whole number) of the directors of MIPS
Technologies, but in no event less than one director (the "Class A Directors");
and (ii) the Class B Common Stock, which will entitle the holders thereof to
vote, separately as a class, for the election of the remaining directors of MIPS
Technologies (the "Class B Directors"). In the event that all outstanding shares
of Class B Common Stock are converted into or exchanged for shares of Class A
Common Stock, the Class A Common Stock will be the only class of common stock of
MIPS Technologies outstanding and the holders of the Class A Common Stock will
be entitled to elect 100% of the MIPS Board of Directors. References to the
number of directors on the MIPS Board of Directors will not include any
directors whom the holders of any Preferred Stock have the exclusive right to
elect.
The holders of Class A Common and Class B Common Stock will in all other
matters vote together as a single class, with each share of Class A Common Stock
and Class B Common Stock having one vote, except as required by law and except
with respect to any proposed amendment to the Amended Certificate of
Incorporation which would alter the special rights of the Class A Common Stock
or the Class B Common Stock, in which case the affected class shall also be
entitled to vote on such amendment separately as a class.
The Amended Certificate of Incorporation will also provide that, following a
Tax-Free Distribution, a person or group of persons acting in concert holding
10% or more of the outstanding shares of Class B Common Stock will be required
to own at least an equal percentage of the outstanding shares of Class A Common
Stock in order to exercise its Class B Common Stock voting rights. This
provision is designed to ensure that, following a Tax-Free Distribution and for
as long as the Class B Common Stock retains its special voting rights, a holder
of such shares will not have voting rights with respect to the MIPS Board of
Directors that are significantly disproportionate to its economic interest in
MIPS Technologies.
DIVIDENDS. Following the Recapitalization, the holders of Class A Common
Stock and the holders of Class B Common Stock will share equally, on a per-share
basis, all dividends and other distributions in cash, stock of any corporation
other than MIPS Technologies or property of MIPS Technologies as such dividend
or distribution is declared by the MIPS Board of Directors. In the case of
dividends or other distributions payable in New MIPS Common Stock, only shares
of Class A Common Stock will be paid with respect to shares of Class A Common
Stock and only shares of Class B Common Stock will be paid with respect to
shares of Class B Common Stock. The number of shares of Class A Common Stock and
Class B Common Stock so paid will be equal in number on a per-share basis.
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<PAGE>
COMMON STOCK OWNED BY SILICON GRAPHICS. Prior to a Tax-Free Distribution
and for so long as Silicon Graphics owns shares of Class B Common Stock, any
shares of Class A Common Stock acquired by Silicon Graphics or any of its
subsidiaries will automatically convert into Class B Common Stock, on a
one-for-one basis. Following a Tax-Free Distribution, if Silicon Graphics
acquires New MIPS Common Stock, Silicon Graphics may acquire and hold such
shares of New MIPS Common Stock as Class A Common Stock or Class B Common Stock,
as such shares were designated immediately prior to Silicon Graphics'
acquisition thereof.
CONVERSION. Following the Recapitalization and prior to a Tax-Free
Distribution, each share of Class B Common Stock transferred to any person or
entity other than Silicon Graphics or any of its subsidiaries will automatically
convert into one share of Class A Common Stock upon such transfer; provided,
however, that the shares of Class B Common Stock will not convert into shares of
Class A Common Stock in connection with a Tax-Free Distribution or upon transfer
by the holders of the Class B Common Stock to another party after a Tax-Free
Distribution. Immediately after the consummation of a Tax-Free Distribution,
Silicon Graphics' stockholders will be the holders of the Class B Common Stock.
If at any time prior to a Tax-Free Distribution the number of shares of
Class B Common Stock held by Silicon Graphics and/or its affiliates represents
less than 50% of the aggregate number of shares of New MIPS Common Stock then
outstanding, the Class B Common Stock will be automatically converted into
shares of Class A Common Stock; provided, however, that such automatic
conversion will not occur if the independent directors on the MIPS Board of
Directors and the Chief Executive Officer of MIPS Technologies unanimously
determine that such automatic conversion is not in the interests of MIPS
Technologies and the MIPS Public Stockholders. In any event, the Class B Common
Stock held by Silicon Graphics will automatically convert into Class A Common
Stock if the number of shares of Class B Common Stock held by Silicon Graphics
and/or its affiliates represents less than 30% of the aggregate number of shares
of New MIPS Common Stock then outstanding. These provisions are intended to
ensure that Silicon Graphics retains control of the MIPS Board of Directors only
if it has a substantial economic interest in MIPS Technologies. These automatic
conversion provisions will not apply following a Tax-Free Distribution.
In addition, prior to a Tax-Free Distribution and upon the closing of any
merger or consolidation involving Silicon Graphics or a tender offer for the
capital stock of Silicon Graphics, if the stockholders of Silicon Graphics
immediately prior to such transaction own less than 50% of the outstanding
shares of Silicon Graphics (or, if the capital stock of Silicon Graphics is
exchanged or converted in any such transaction for capital stock of another
corporation, such corporation) immediately after such transaction, each share of
Class B Common Stock held by Silicon Graphics or its successor will
automatically convert into one share of Class A Common Stock.
Following a Tax-Free Distribution, each share of Class B Common Stock will
be automatically converted into one share of Class A Common Stock on the fifth
anniversary of such Tax-Free Distribution unless, prior to such Tax-Free
Distribution, Silicon Graphics delivers to MIPS Technologies an opinion of
counsel, reasonably satisfactory to MIPS Technologies, to the effect that, based
in part on conversations with the IRS disclosed to MIPS Technologies, such
conversion would have a material adverse effect on the ability of Silicon
Graphics to timely obtain a favorable ruling from the Internal Revenue Service
(the "IRS") regarding the tax-free status of such Tax-Free Distribution. If such
an opinion is received, the approval of a conversion of Class B Common Stock to
Class A Common Stock will, subject to certain conditions, be submitted to a vote
of the holders of the Class A Common Stock and Class B Common Stock, voting
together as a single class, unless, prior to such Tax-Free Distribution, Silicon
Graphics delivers an opinion of counsel, reasonably satisfactory to MIPS
Technologies, to the effect that, based in part on conversations with the IRS
disclosed to MIPS Technologies, such conversion would have a material adverse
effect on the ability of Silicon Graphics to timely obtain a favorable ruling
from the IRS regarding the tax-free status of the Tax-Free Distribution. See
"Description of Capital Stock." Although Silicon Graphics has indicated its
intent to distribute a significant portion of its interest in MIPS Technologies
in a
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<PAGE>
future Tax-Free Distribution, it has not formulated definitive plans to do so
and there can be no assurance that Silicon Graphics will effect any such
Tax-Free Distribution whether or not the Recapitalization is adopted. Under
current law, it is uncertain whether this automatic conversion provision would
have a material adverse effect on Silicon Graphics' ability to timely obtain a
favorable ruling from the IRS regarding the tax-free status of the Tax-Free
Distribution.
Following the Recapitalization, if, pursuant to any merger, consolidation or
reorganization of MIPS Technologies with another entity, the stockholders of
MIPS Technologies immediately prior to such transaction will own less than 50%
of the outstanding stock of such other entity immediately after such
transaction, each share of Class B Common Stock will automatically convert into
one share of Class A Common Stock immediately prior to the effectiveness of such
transaction, unless, prior to a Tax-Free Distribution, Silicon Graphics delivers
an opinion of counsel, reasonably satisfactory to MIPS Technologies, to the
effect that, based in part on conversations with the IRS disclosed to MIPS
Technologies, such automatic conversion would have a material adverse effect on
the ability of Silicon Graphics to timely obtain a favorable ruling from the IRS
regarding the tax-free status of the Tax-Free Distribution. Under current law,
it is uncertain whether this automatic conversion provision would have a
material adverse effect on Silicon Graphics' ability to timely obtain a
favorable ruling from the IRS regarding the tax-free status of the Tax-Free
Distribution.
EXCHANGE. At any time following a Tax-Free Distribution, MIPS Technologies
may exchange all (but not less than all) of the outstanding shares of Class B
Common Stock for shares of Class A Common Stock on a one-for-one basis (the
"MIPS Exchange Right") unless, prior to a Tax-Free Distribution, Silicon
Graphics delivers to MIPS Technologies an opinion of counsel, reasonably
satisfactory to MIPS Technologies, to the effect that, based in part on
conversations with the IRS disclosed to MIPS Technologies, the inclusion of the
MIPS Exchange Right provision in the Amended Certificate of Incorporation would
have a material adverse effect on the ability of Silicon Graphics to timely
obtain a favorable ruling from the IRS regarding the tax-free status of the
Tax-Free Distribution. In addition, Silicon Graphics may limit MIPS
Technologies' ability to exercise the MIPS Exchange Right pursuant to the Tax
Agreement (as defined below) which will be entered into by MIPS Technologies and
Silicon Graphics prior to a Tax-Free Distribution. See "The Exchange
Agreement--Tax Indemnification Agreement." The MIPS Exchange Right is designed,
in part, to provide additional flexibility to MIPS Technologies to reduce, if
then existing tax laws so permit, the length of time following a Tax-Free
Distribution during which MIPS Technologies must continue to have the dual class
capital structure. Under current law, it is uncertain whether this automatic
conversion provision would have a material adverse effect on Silicon Graphics'
ability to timely obtain a favorable ruling from the IRS regarding the tax-free
status of the Tax-Free Distribution.
MERGER OR REORGANIZATION. The Amended Certificate of Incorporation will
provide that all shares of Class A Common Stock and Class B Common Stock are
entitled to receive, equally on a per share basis, the same kind and amount of
consideration in the event of any merger, consolidation or reorganization of
MIPS Technologies with any other Company; provided, however, that, in the event
that the shares of Class B Common Stock have not been converted into or
exchanged for shares of Class A Common Stock, (i) in any such transaction, the
holders of shares of Class A Common Stock and the holders of shares of Class B
Common Stock may receive different kinds of shares of stock if the only
difference in such shares is the inclusion of voting rights which maintain the
different voting rights of the holders of Class A Common Stock and holders of
Class B Common Stock with respect to the election of the applicable percentage
of the authorized number of directors on the MIPS Board of Directors as
described above and (ii) if all or substantially all of the New MIPS Common
Stock is exchanged for capital stock of another entity and such transaction is
required to be accounted for by the "pooling-of-interests" method, the holders
of shares of Class A Common Stock and the holders of shares of Class B Common
Stock shall receive shares of stock of the acquiring entity based on the
relative fair value of a share of Class A Common Stock and a share of Class B
Common Stock measured as of the announcement date for such
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<PAGE>
transaction. See "Description of MIPS Capital Stock Prior to and Following the
Recapitalization-- Common Stock--Merger or Reorganization."
THE MIPS BOARD OF DIRECTORS FOLLOWING THE RECAPITALIZATION
The MIPS Board of Directors presently consists of the following seven
members: John E. Bourgoin, the Chief Executive Officer and President of MIPS
Technologies; Dr. Forest Baskett, Kenneth L. Coleman, William M. Kelly and
Teruyasu Sekimoto, each of whom is an officer or employee of Silicon Graphics;
and Anthony B. Holbrook and Fred M. Gibbons, each of whom is an independent
director not affiliated with MIPS Technologies or Silicon Graphics. The MIPS
Board of Directors is divided into three classes of directors serving staggered
three-year terms, with Classes I and II having two directors each and Class III
having three directors. The terms of office of the directors presently expire as
follows: Messrs. Bourgoin and Coleman (the current class I directors) at the
annual meeting of stockholders in 1999, Messrs. Sekimoto and Gibbons (the
current Class II directors) at the annual meeting of stockholders in 2000, and
Dr. Baskett and Messrs. Kelly and Holbrook (the current Class III directors) at
the annual meeting of stockholders in 2001.
If the Recapitalization is approved, the MIPS Board of Directors will
continue to have seven members and will consist of one Class A Director and six
Class B Directors. In order to provide the holders of the Class A Common Stock
the opportunity to elect the Class A Director at the 1999 Annual Meeting of
Stockholders of MIPS Technologies, it is anticipated that the number of
directors in Class I will be increased by one and the Class A Director will be
included in Class I. In addition, the number of directors in Class III will be
decreased by one. It is expected that, prior to the 1999 Annual Meeting of
Stockholders, Mr. Holbrook will be appointed by the MIPS Board of Directors as
the initial Class A Director. The holders of the Class A Common Stock will be
entitled to elect one Class A Director at MIPS Technologies' 1999 Annual Meeting
of Stockholders of MIPS Technologies and the Class A Director so elected will
hold office until the expiration of his or her term at the Annual Meeting of
Stockholders of MIPS Technologies in 2002. In order to ensure that the holders
of the Class A Common Stock will at all times be entitled to elect at least one
director of MIPS Technologies, the Amended Certificate of Incorporation will
provide that the total number of directors must consist of at least five
persons. The Existing Certificate of Incorporation provides for a minimum of
only three directors.
INTERESTS OF CERTAIN PERSONS IN THE RECAPITALIZATION
In considering the recommendation of the Special Committee and the MIPS
Board of Directors, the stockholders of MIPS Technologies should be aware that
certain officers and directors of MIPS Technologies are also stockholders and/or
employees of Silicon Graphics and may have certain interests in the
Recapitalization that are different from, or in addition to, the interests of
the MIPS Public Stockholders.
OWNERSHIP OF EXISTING COMMON STOCK. As of December 31, 1998, the directors
and executive officers of MIPS Technologies beneficially owned an aggregate of
26,054 shares of Existing Common Stock, including shares that may be acquired
upon the exercise of outstanding stock options (or less than one percent of the
then outstanding shares of Existing Common Stock).
OWNERSHIP OF SILICON GRAPHICS COMMON STOCK. As of December 31, 1998, the
directors and executive officers of MIPS Technologies beneficially owned an
aggregate of shares of common stock par value $0.001 per shares (the "Silicon
Graphics Common Stock"), of Silicon Graphics, including shares that may be
acquired upon the exercise of outstanding stock options (or less than one
percent of the then outstanding shares of Silicon Graphics Common Stock).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Implementation of the Recapitalization will be tax-free for federal income
tax purposes to MIPS Technologies and its stockholders based upon the facts and
law as of the date of this Proxy Statement.
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NASDAQ APPROVALS
MIPS Technologies is in the process of obtaining the necessary approvals and
waivers from The Nasdaq Stock Market, Inc. ("Nasdaq") in order to effect the
Recapitalization.
In connection with the Recapitalization, application will be made to Nasdaq
to redesignate the Existing Common Stock as Class A Common Stock. In the event
of a Tax-Free Distribution, MIPS Technologies expects that the Class B Common
Stock also will be quoted on the Nasdaq National Market or on such other
exchange as the Class A Common Stock is then listed or quoted.
FEDERAL SECURITIES LAWS CONSEQUENCES
All shares of Class A Common Stock received in the Recapitalization by
holders of the Existing Common Stock will be freely transferable, except that
shares of Class A Common Stock received by persons who are deemed to be
affiliates of MIPS Technologies may be resold by them only in transactions
permitted by the resale provision of Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), or otherwise in compliance with
(or pursuant to an exemption from) the registration requirements of the
Securities Act. Persons deemed to be affiliates of MIPS Technologies are those
individuals or entities that control, are controlled by, or are under common
control with, MIPS Technologies and generally include the executive officers and
directors of MIPS Technologies, as well as certain principal stockholders of
MIPS Technologies.
NO APPRAISAL RIGHTS
Holders of Existing Common Stock are not entitled to appraisal rights under
Section 262 of the General Corporation Law of the State of Delaware (the "DGCL")
in connection with the Recapitalization because the Recapitalization is not a
transaction for which appraisal rights are available under the DGCL.
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THE EXCHANGE AGREEMENT
IF THE RECAPITALIZATION IS APPROVED BY THE MIPS PUBLIC STOCKHOLDERS, MIPS
TECHNOLOGIES AND SILICON GRAPHICS WILL ENTER INTO THE EXCHANGE AGREEMENT, WHICH
WILL GOVERN CERTAIN OF THE TERMS OF THE RECAPITALIZATION. THE FOLLOWING IS A
SUMMARY OF THE MATERIAL TERMS OF THE EXCHANGE AGREEMENT, A FORM OF WHICH IS
ATTACHED TO THIS PROXY STATEMENT AS ANNEX C. THE FOLLOWING DOES NOT PROPOSE TO
BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FORM OF THE
EXCHANGE AGREEMENT ATTACHED AS ANNEX C.
EXCHANGE OF CLASS A SHARES FOR CLASS B SHARES BY SILICON GRAPHICS
Subject to the terms and conditions of the Exchange Agreement and in
accordance with the DGCL, immediately after the Effective Time (as defined
below), each share of Class A Common Stock beneficially owned by Silicon
Graphics and its affiliates will be exchanged for one share of Class B Common
Stock. The "Effective Time", for purposes of the Exchange Agreement, means the
time at which the Amended Certificate of Incorporation becomes effective under
the DGCL.
SILICON GRAPHICS' OBLIGATION TO PURCHASE NEW MIPS COMMON STOCK
Subject to terms and conditions of the Exchange Agreement, if Silicon
Graphics has not disposed of its entire interest in MIPS Technologies (whether
through a Tax-Free Distribution or otherwise) prior to December 31, 2000,
Silicon Graphics shall, on the last day of each fiscal quarter beginning on
December 31, 2000 and ending on the last day of the fiscal quarter immediately
preceding any such disposition, accrue an obligation to purchase the number of
shares of New MIPS Common Stock set forth below (the "Required Purchase
Amount"):
<TABLE>
<CAPTION>
QUARTER ENDING: REQUIRED PURCHASE AMOUNT
- ------------------------------------------------------------------- -------------------------
<S> <C>
December 31, 2000.................................................. 1,800,000
March 31, 2001..................................................... 1,700,000
June 30, 2001...................................................... 1,800,000
September 30, 2001................................................. 1,700,000
December 31, 2001.................................................. 1,800,000
March 31, 2002..................................................... 1,700,000
June 30, 2002...................................................... 1,700,000
September 30, 2002................................................. 2,000,000
December 31, 2002 and each quarter thereafter until a
distribution..................................................... 2,000,000
</TABLE>
Silicon Graphics shall make such purchase or purchases of shares of Common
Stock equal to the Required Purchase Amount prior to the date (the "Purchase
Date") which is thirty (30) days following the public announcement of financial
results for the applicable fiscal quarter. If, prior to the Purchase Date for
any Required Purchase Amount, MIPS Technologies notifies Silicon Graphics in
writing that the independent directors and the Chief Executive Officer of MIPS
Technologies have unanimously determined that the purchase of shares of New MIPS
Common Stock equal to the Required Purchase Amount is not in the interests of
MIPS Technologies and the MIPS Public Stockholders, then the Required Purchase
Amount for such quarterly period will be reduced by the number set forth in such
notice.
At its sole option, Silicon Graphics may satisfy its obligation to purchase
shares of New MIPS Common Stock equal to a Required Purchase Amount by
purchasing (i) newly issued shares of Class B Common Stock from MIPS
Technologies, (ii) issued and outstanding shares of Class A Common Stock in the
public market or otherwise from a third party or (iii) any combination of (i)
and (ii) above, in each case on or prior to the applicable Purchase Date. In
determining whether Silicon Graphics has satisfied its obligation to purchase
shares of New MIPS Common Stock equal to the Required Purchase Amount with
respect to a quarterly period, each share of Class A Common Stock purchased by
Silicon Graphics in the
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<PAGE>
public market or otherwise from a third party shall be counted as four shares of
New MIPS Common Stock purchased in satisfaction of the Required Purchase Amount
and each share of Class B Common Stock purchased by Silicon Graphics from the
Company shall be counted as one share of New MIPS Common Stock purchase in
satisfaction of the Required Purchase Amount, provided, however, that any shares
of Class A Common Stock purchased by Silicon Graphics in the public market or
otherwise from a third party shall only be applied in satisfaction of a Required
Purchase Amount one time. Silicon Graphics will have registration rights with
respect to the shares of New MIPS Common Stock it acquires in satisfaction of
the Required Purchase Amount. Silicon Graphics will not be obligated to purchase
the Required Purchase Amount for the quarter in which Silicon Graphics disposes
of its entire interest in MIPS Technologies (including through a Tax-Free
Distribution) or in which Silicon Graphics exchanges its shares of Class B
Common Stock for Class A Common Stock as a result of a Change in Tax Law (as
defined herein) and for each quarter thereafter.
Shares of Class B Common Stock may be purchased from MIPS Technologies at a
price per share equal to the average closing price of the Class A Common Stock
on the Nasdaq National Market for the last ten trading days of the quarter with
respect to which such obligation accrues.
TAX INDEMNIFICATION AGREEMENT
The Exchange Agreement will also contain a covenant obligating MIPS
Technologies and Silicon Graphics to enter into a Tax Indemnification Agreement
(the "Tax Agreement") prior to a Tax-Free Distribution. The Tax Agreement
generally will limit the ability of MIPS Technologies to undertake certain
actions after the Tax-Free Distribution that would cause the Tax-Free
Distribution to become taxable to Silicon Graphics and its stockholders. The Tax
Agreement generally will require MIPS Technologies to indemnify Silicon Graphics
from any taxes resulting from the failure of the Tax-Free Distribution to be
tax-free due to (i) the issuance of stock by MIPS Technologies in an acquisition
or private or public offering within the 30-month period following the Tax-Free
Distribution (the "Period") other than pursuant to (a) the exercise of
compensatory stock options or awards and (b) the issuance of up to a cumulative
amount of 10% of the outstanding stock of MIPS Technologies at the time of the
Tax-Free Distribution; (ii) MIPS Technologies' knowingly and voluntarily taking
any other action during the Period which it believes will more likely than not
result in the distribution becoming taxable; (iii) MIPS Technologies' breaching
any representations and covenants in the Tax Agreement; (iv) MIPS Technologies'
exchanging any shares of Class B Stock for Class A Stock, including pursuant to
the MIPS Exchange Right, during the five-year period following the Tax-Free
Distribution; or (v) MIPS Technologies' amending the voting rights with respect
to the Class B Stock or Class A Stock during the five-year period following the
Tax-Free Distribution. MIPS Technologies also will be required to indemnify
Silicon Graphics from any taxes resulting from the failure of the Tax-Free
Distribution to be tax-free due to an acquisition of MIPS Technologies.
Notwithstanding any of the above, MIPS Technologies generally will have no
obligation to indemnify Silicon Graphics if (x) a supplemental ruling to the
effect that such proposed action will not adversely affect the tax-free status
of the Tax-Free Distribution is obtained from the IRS, (y) Silicon Graphics
consents to such action or (z) MIPS Technologies delivers to Silicon Graphics an
opinion of nationally recognized tax counsel, reasonably satisfactory to Silicon
Graphics, that such action will not cause the Tax-Free Distribution to become
taxable. The limitations on the issuance of shares of MIPS Technologies' capital
stock discussed above could have a negative impact on MIPS Technologies'
financial flexibility following a Tax-Free Distribution.
The Tax Agreement will contain other customary provisions.
REQUIRED EXCHANGE OF CLASS B SHARES FOR CLASS A SHARES BY SILICON GRAPHICS
The Exchange Agreement will also provide that Silicon Graphics will be
required to exchange all of its shares of Class B Common Stock for shares of
Class A Common Stock if, prior to a Tax-Free Distribution, the Code is amended
(a "Change in Tax Law") to provide that in a tax-free spin-off of a subsidiary,
the
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distributing company must hold not less than 80% of the value of the
subsidiary's stock, and such Change in Tax Law would apply to a Tax-Free
Distribution by Silicon Graphics of its interest in MIPS Technologies.
INDEMNIFICATION AND EXPENSES
Silicon Graphics will indemnify and hold harmless MIPS Technologies and its
affiliates, officers, directors, employees, agents, successors and assigns from
and against any and all liabilities, losses, damages, claims, costs and
expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' and consultants' fees and expenses) actually suffered or
incurred by them, arising out of or resulting from any claim or cause of action
by any third party to the extent arising out of the Recapitalization or any
distribution of all of its interest in MIPS Technologies.
Pursuant to the Exchange Agreement, Silicon Graphics has agreed to reimburse
MIPS Technologies for the fees and expenses of legal counsel to the Special
Committee in connection with the Recapitalization and the Tax-Free Distribution,
whether or not the Recapitalization or the Tax-Free Distribution is consummated,
in an amount set forth in a budget to be agreed to between the parties. Silicon
Graphics has also agreed to reimburse MIPS Technologies for the reasonable fees
and expenses of the financial advisor to the Special Committee and all other
reasonable out-of-pocket expenses incurred by MIPS Technologies in connection
with the Recapitalization and the Tax-Free Distribution. Silicon Graphics will
be responsible for all of the fees, costs and expenses incurred by Silicon
Graphics in connection with the Recapitalization and Tax-Free Distribution.
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
In this document and in the documents incorporated herein by reference, we
make forward-looking statements that include assumptions as to events that may
occur following a Recapitalization, including sales and other dispositions by
Silicon Graphics of its interest in MIPS Technologies, as well as to how MIPS
Technologies may perform in the future. You will find many of these statements
in the following sections:
- "The Recapitalization--Reasons for the Recapitalization; Recommendation of
the Special Committee and the MIPS Board" beginning on page 16; and
- Under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Part II of MIPS Technologies'
Annual Report on Form 10-K for the fiscal year ended June 30, 1998, and in
Part I of MIPS Technologies' Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998, each of which is incorporated by reference in
this Proxy Statement.
Also, when we use words like "may," "may not," "believes," "does not
believe," "intends," "expects," "does not expect," "anticipates," "does not
anticipate" and similar expressions, we are making forward-looking statements.
Such statements should be viewed with caution.
Actual events or results could differ materially from the forward-looking
statements as a result of many factors, including, but not limited to,
fluctuations in the operating results of MIPS Technologies or Silicon Graphics
or significant changes in their respective businesses, prevailing market
conditions for the capital stock of MIPS Technologies and Silicon Graphics, any
shift in MIPS Technologies' or Silicon Graphics' strategic directions and
changes in tax or other laws relevant to the Recapitalization.
In addition, MIPS Technologies' stockholders should consider carefully the
information set forth under the captions "Business," "Legal Proceedings" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in MIPS Technologies' Annual Report on Form 10-K for the fiscal year
ended June 30, 1998 and under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in MIPS Technologies'
Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998. In making these forward-looking
statements in this document and in the documents that are incorporated by
reference, MIPS Technologies claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. MIPS Technologies does not assume any obligation to update these
forward-looking statements to reflect actual results, changes in assumptions or
changes in other factors affecting such forward-looking statements.
27
<PAGE>
MIPS TECHNOLOGIES
THE COMPANY
MIPS Technologies is a leader in the design and licensing of
high-performance 32- and 64-bit RISC processor intellectual property and core
technology for the digital consumer and embedded systems markets. MIPS
Technologies and its licensees offer a variety of standard, custom, semi-custom
and application specific processors. MIPS Technologies licenses its intellectual
property to semiconductor manufacturing and fabless design companies, as well as
system OEMs. To date, the MIPS RISC architecture has been used to create over 60
separate microprocessor products. These microprocessor products have a
cumulative installed base of over 100 million units and have been embedded into
a variety of products such as video games, color printers and handheld personal
computers. MIPS Technologies' semiconductor partners reported that approximately
47 million units based on the MIPS RISC architecture were shipped in fiscal year
1998.
MIPS Technologies' technology focuses on providing cost-effective and
high-performance microprocessor and related designs for high-volume embedded
applications. The MIPS RISC architecture is flexible and allows semiconductor
manufacturers to integrate their intellectual property with MIPS Technologies
designs to develop differentiated and innovative products for a variety of
embedded applications within demanding time-to-market requirements. The
advantages of the MIPS Technologies architecture relate primarily to scalability
of die size and performance. Products incorporating the MIPS Technologies
architecture range from disk drives using microprocessor cores with a die size
of less than two square millimeters to high-performance workstations using
microprocessors with a die size of 300 square millimeters. In addition, while
designed for high performance, the MIPS RISC-based architectures have been
incorporated in low-power applications such as the Philips Velo and the NEC
MobilePro handheld personal computers. The MIPS Technologies architecture is
designed around upward compatible instruction sets that enable manufacturers
developing products across a broad range of price/performance points to use
common support tools and software.
On July 6, 1998 MIPS Technologies completed the Offering. Prior to the
Offering, MIPS Technologies was a wholly owned subsidiary of Silicon Graphics.
In order to increase the focus of the MIPS Group on the design and development
of microprocessor applications dedicated to the embedded market, in December
1997, Silicon Graphics initiated a plan to separate the business of the MIPS
Group from its other operations. In April 1998, the Board of Directors of
Silicon Graphics approved a transaction, pursuant to which, Silicon Graphics
transferred to MIPS Technologies the assets and liabilities related to the
design and development of microprocessor intellectual property for embedded
market applications (the "Separation"). Prior to the Separation, MIPS
Technologies' business was conducted by Silicon Graphics primarily through its
MIPS Group, a division of Silicon Graphics. MIPS Technologies' predecessor, MIPS
Computer Systems, Inc., was founded in 1984 and was engaged in the design and
development of RISC microprocessors for the computer systems and embedded
markets.
MIPS Technologies was incorporated in Delaware in June 1992. MIPS
Technologies has its principal executive offices at 1225 Charleston Road,
Mountain View, California 94043-1353, and its telephone number at that address
is (650) 567-5000.
Additional information concerning MIPS Technologies is included in MIPS
Technologies' reports filed under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), portions of which are incorporated by reference in
this Proxy Statement. See "Where You Can Find More Information."
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 31, 1998
as to the beneficial ownership of Existing Common Stock by (i) each person known
to MIPS Technologies to own beneficially, as defined in Rule 13d-3 under the
Exchange Act, five percent or more of the outstanding shares of
28
<PAGE>
Existing Common Stock, based on MIPS Technologies' records, (ii) each director,
(iii) the Chief Executive Officer, (iv) the four other most highly compensated
executive officers as of June 30, 1998, and (v) all directors and persons
serving as executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME OF BENEFICIAL OWNER OWNED(1)(2) SHARES
- --------------------------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Silicon Graphics, Inc............................................................ 31,750,000 85%
2011 North Shoreline Boulevard
Mountain View, California 94043
John E. Bourgoin................................................................. 17,168 *
Lavi Lev......................................................................... 1,970 *
Kevin C. Eichler................................................................. 1,776 *
Derek Meyer...................................................................... 2,079 *
Sandy Creighton.................................................................. 1,776 *
Dr. Forest Baskett............................................................... -- --
Kenneth L. Coleman............................................................... 1,285 *
Fred M. Gibbons.................................................................. -- --
Anthony B. Holbrook.............................................................. -- --
William M. Kelly................................................................. -- --
Teruyasu Sekimoto................................................................ -- --
All executive officers and directors as a group (11 persons)..................... 26,054 *
</TABLE>
- ------------------------
* Less than 1%
(1) The inclusion herein of any shares as beneficially owned does not constitute
an admission of beneficial ownership of those shares.
(2) Does not include shares of common stock that may be acquired with respect to
the current offering period ending April 30, 1999 under MIPS Technologies'
Employee Stock Purchase Plan.
RELATIONSHIP WITH SILICON GRAPHICS
GENERAL. As a result of its beneficial ownership of approximately 85% of
the currently outstanding Existing Common Stock, Silicon Graphics presently has
the ability to direct the election of all of the members of the MIPS Board of
Directors and to exercise a controlling influence over the business and affairs
of MIPS Technologies. If the Recapitalization is adopted, the MIPS Public
Stockholders, by virtue of their ownership of all of the issued and outstanding
shares of Class A Common Stock, will be entitled to elect the Class A Directors,
and prior to a Tax-Free Distribution (unless the shares of Class B Common Stock
have been converted into or exchanged for shares of Class A Common Stock) or
other disposition by Silicon Graphics of its Class B Common Stock, Silicon
Graphics will be entitled to elect all of the Class B Directors. In addition, if
the Recapitalization is adopted, so long as Silicon Graphics owns more than 50%
of the New MIPS Common Stock, it will have the ability to remove the Class A
Directors for cause and the Class B Directors with or without cause. Silicon
Graphics presently has the ability to remove any and all directors with or
without cause. Finally, whether or not the Recapitalization is adopted, Silicon
Graphics will continue to have the ability to call special meetings of
stockholders and to effect stockholder action by written consent in lieu of a
meeting of stockholders. These rights currently are not available to MIPS Public
Stockholders, nor will they be after Silicon Graphics ceases to own in excess of
50% of the common equity of MIPS Technologies. See "Description of MIPS Capital
Stock Prior to and Following the Recapitalization--Certificate of Incorporation
and By-law Provisions That May Have an Anti-Takeover Effect."
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<PAGE>
CERTAIN AGREEMENTS. In connection with the Separation and the Offering,
MIPS Technologies and Silicon Graphics entered into various agreements intended
to define the relationship between them on a going forward basis. Because these
agreements were entered into at a time when MIPS Technologies was still a wholly
owned subsidiary of Silicon Graphics, they are not the result of arms-length
negotiations between the parties. These agreements include the following:
- MANAGEMENT SERVICES AGREEMENT, pursuant to which Silicon Graphics agreed
to provide certain services, including accounting, treasury, tax,
facilities and information services, to MIPS Technologies following the
Separation on a interim or transitional basis.
- TECHNOLOGY AGREEMENT, pursuant to which Silicon Graphics assigned or
licensed certain intellectual property rights to MIPS Technologies, and
MIPS Technologies licensed back to Silicon Graphics certain intellectual
property rights.
- TRADEMARK AGREEMENT, pursuant to which Silicon Graphics assigned or
licensed certain trademark and trademark-related rights to MIPS
Technologies, and MIPS Technologies licensed certain rights back to
Silicon Graphics.
- TAX SHARING AGREEMENT, under which MIPS Technologies and Silicon Graphics
have agreed, among other things, to make payments between them such that,
with respect to any period, the amount of taxes to be paid by MIPS
Technologies, subject to certain adjustments, will be determined as if
MIPS Technologies filed separate federal, state and local income tax
returns.
- FACILITIES LEASE ARRANGEMENTS, pursuant to which MIPS Technologies
subleases approximately 27,500 square feet of office space from Silicon
Graphics, with an option to increase to 55,000 square feet.
- CORPORATE AGREEMENT, pursuant to which (i) MIPS Technologies granted to
Silicon Graphics a continuing option to purchase, under certain
circumstances, additional shares of common stock and shares of non-voting
capital stock of MIPS Technologies, (ii) MIPS Technologies granted to
Silicon Graphics registration rights related to the common stock of MIPS
Technologies owned by Silicon Graphics and (iii) MIPS Technologies agreed
to refrain from engaging in certain actions for so long as Silicon
Graphics owns a majority of MIPS Technologies outstanding common stock.
Additional information concerning MIPS Technologies' relationship with
Silicon Graphics is included in certain documents filed by MIPS Technologies
under the Securities Act that are incorporated by reference in this Proxy
Statement. See "Where You Can Find More Information."
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<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
MARKET PRICES
The table below sets forth, for the calendar quarters indicated, the high
and low reported last sale prices per share of the Existing Common Stock on the
Nasdaq National Market.
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
<S> <C> <C>
HIGH LOW
--------- ---------
1998
Quarter ended June 30, 1998 (on June 30, 1998)(1)........................................... $ 15.125 $ 12.00
Quarter ended September 30, 1998............................................................ $ 23.75 $ 9.625
Quarter ended December 31, 1998............................................................. $ 32.00 $ 13.875
1999
Quarter ending March 31, 1999 (through January 28, 1999).................................... $ 28.25 $ 39.875
</TABLE>
- ------------------------
(1) On June 30, 1998, MIPS Technologies effected its initial public offering of
Existing Common Stock at $12.00 per share.
On January 13, 1998, the last full trading day prior to the public
announcement of the Recapitalization, the reported last sale price of Existing
Common Stock on the Nasdaq National Market was $32.25 per share.
On January 28, 1999, the most recent practicable date prior to the printing
of this Proxy Statement, the reported last sale price of Existing Common Stock
on the Nasdaq National Market was $36.00 per share.
MIPS STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
EXISTING COMMON STOCK.
DIVIDENDS
MIPS Technologies has not paid any dividends since its incorporation and
currently intends to retain any earnings to fund the development and growth of
its business, and therefore does not currently anticipate paying cash or stock
dividends on the Existing Common Stock, or the New MIPS Common Stock, if the
Recapitalization is adopted, in the foreseeable future. MIPS Technologies'
future dividend policy will be determined by the MIPS Board of Directors on the
basis of various factors, including MIPS Technologies' results of operations and
financial condition and any legal and contractual restrictions.
31
<PAGE>
DESCRIPTION OF MIPS CAPITAL STOCK PRIOR TO
AND FOLLOWING THE RECAPITALIZATION
If the Recapitalization is adopted, the Existing Certificate of
Incorporation will be amended. The following is a general description of the
relative rights of the holders of MIPS Technologies capital stock at the present
time and such rights if the Recapitalization is adopted.
AUTHORIZED CAPITAL STOCK
Upon the consummation of the Recapitalization, the authorized capital stock
of MIPS Technologies will consist of 300,000,000 shares, of which (i)
150,000,000 shares will be Class A Common Stock, par value $0.001 per share,
(ii) 100,000,000 shares will be Class B Common Stock, par value $0.001 per share
and (iii) 50,000,000 shares will be preferred stock, par value $0.001 per share
(the "Preferred Stock"), issuable in series. After giving effect to the
Recapitalization and the exchange by Silicon Graphics of its shares of Class A
Common Stock for shares of Class B Common Stock, there will be 5,542,286 shares
of Class A Common Stock outstanding and 31,750,000 shares of Class B Common
Stock outstanding.
At present, MIPS Technologies authorized capital stock consists of
150,000,000 shares of common stock, par value $0.001 per share, and 50,000,000
shares of Preferred Stock, par value $0.001 per share, issuable in series. As of
the Record Date, there were outstanding shares of Existing Common Stock
held by approximately holders of record.
COMMON STOCK
VOTING RIGHTS. Upon the consummation of the Recapitalization, with respect
to the election of directors to the MIPS Board of Directors, holders of Class A
Common Stock, voting separately as a class, will be entitled to elect 20% of the
directors on the MIPS Board of Directors (or, if such 20% is not a whole number,
then the next lower whole number of directors that is closest to 20% of such
membership, provided that in no event will there be less than one director
elected by the holders of the Class A Common Stock). Each share of Class A
Common Stock shall have one vote in the election of such directors.
The holders of the Class B Common Stock, voting separately as a class, will
be entitled to elect the remaining directors (other than directors elected by
the holders of Preferred Stock). Each share of Class B Common Stock will have
one vote in the election of such directors. References to the number of
directors on the MIPS Board of Directors will not include any directors whom the
holders of any Preferred Stock may have the exclusive right to elect.
If, at any time, all the outstanding shares of Class B Common Stock have
been converted into or exchanged for shares of Class A Common Stock, subject to
the rights of holders of Preferred Stock, the holders of the Class A Common
Stock, voting as a class, will be entitled to elect all the directors on the
MIPS Board of Directors.
The holders of Class A Common and Class B Common Stock will in all other
matters vote together as a single class, with each share of Class A Common Stock
and Class B Common Stock having one vote, except as required by law and except
with respect to any proposed amendment to the Amended Certificate of
Incorporation which would alter the special rights of the Class A Common Stock
or the Class B Common Stock, in which case the affected class shall also be
entitled to vote on such amendment separately as a class. Notwithstanding the
foregoing, the affirmative vote of the holders of a majority of the New MIPS
Common Stock, voting together as a single class, will be required to approve the
conversion, if not automatically converted pursuant to the terms of the Amended
Certificate of Incorporation, of the Class B Common Stock to Class A Common
Stock following a Tax-Free Distribution and the lapse of five years of the date
of such distribution.
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<PAGE>
Following a Tax-Free Distribution, for so long as any person or group of
persons acting in concert beneficially owns 10% or more of the outstanding
shares of Class B Common Stock, such person or group will not have any voting
powers in respect of such shares of Class B Common Stock or be entitled to
exercise any voting rights in any election of directors unless such person or
group is also the beneficial owner of at least an equivalent percentage of the
outstanding shares of Class A Common Stock.
At present, the holders of shares of Existing Common Stock are entitled to
one vote for each share on all matters voted on by MIPS Technologies'
stockholders, including elections of directors, and except as otherwise required
by law and subject to any voting rights granted to holders of any series of
Preferred Stock, the holders of such shares possess all the voting power.
The Existing Certificate of Incorporation does not, and the Amended
Certificate of Incorporation will not, provide for cumulative voting in the
election of directors.
DIVIDENDS. Upon the consummation of the Recapitalization and subject to the
rights of the holders of any series of Preferred Stock, the holders of Class A
Common Stock and the holders of Class B Common Stock will be entitled to receive
such dividends and other distributions in cash, stock of any corporation (other
than New MIPS Common Stock) or property of MIPS Technologies as may be declared
thereon from time to time by the MIPS Board of Directors from funds legally
available therefor. The holders of the New MIPS Common Stock will share equally
on a per share basis in all such dividends and other distributions; provided,
however, in the case of dividends or other distributions payable in, or
reclassifications involving, New MIPS Common Stock, including distributions
pursuant to stock splits or divisions of New MIPS Common Stock, only shares of
Class A Common Stock will be paid or distributed with respect to shares of Class
A Common Stock and only shares of Class B Common Stock will be paid or
distributed with respect to shares of Class B Common Stock. The number of shares
of Class A Common Stock and Class B Common Stock so paid or distributed will be
equal in number on a per share basis. In addition, MIPS Technologies may not
subdivide or combine shares of either class of New MIPS Common Stock without at
the same time proportionally subdividing or combining shares of the other class.
At present, subject to any preferential rights of any outstanding series of
Preferred Stock created by the MIPS Board of Directors from time to time, the
holders of shares of Existing Common Stock are entitled to such dividends as may
be declared from time to time by the Board of Directors from funds legally
available therefor.
COMMON STOCK OWNED BY SILICON GRAPHICS. Prior to a Tax-Free Distribution
and for so long as Silicon Graphics or any of its subsidiaries owns shares of
Class B Common Stock, any shares of Class A Common Stock acquired by Silicon
Graphics or any of its subsidiaries will automatically convert into Class B
Common Stock, on a one-for-one basis. Following a Tax-Free Distribution, if
Silicon Graphics acquires New MIPS Common Stock Silicon Graphics may acquire and
hold such shares of New MIPS Common Stock as Class A Common Stock or Class B
Common Stock, as such shares were designated immediately prior to Silicon
Graphics' acquisition thereof.
CONVERSION. Prior to a Tax-Free Distribution, any share of Class B Common
Stock transferred to a person, other than Silicon Graphics or any of its
subsidiaries, will automatically convert into one share of Class A Common Stock
upon such disposition. Shares of Class B Common Stock will not be automatically
converted into shares of Class A Common Stock (i) in any transfer effected in
connection with a distribution of shares of Class B Common Stock to stockholders
of Silicon Graphics in a transaction (including any distribution in exchange for
shares of capital stock or other securities of Silicon Graphics) intended to
qualify as a Tax-Free Distribution or (ii) in any transfer following a Tax-Free
Distribution. Following a Tax-Free Distribution, shares of Class B Common Stock
shall be transferable as Class B Common Stock, subject to applicable laws.
Shares of Class B Common Stock will automatically convert into shares of
Class A Common Stock on the fifth anniversary of the Tax-Free Distribution,
unless prior to such Tax-Free Distribution, Silicon
33
<PAGE>
Graphics delivers to MIPS Technologies an opinion of counsel, reasonably
satisfactory to MIPS Technologies, to the effect that, based in part on
conversations with the IRS disclosed to MIPS Technologies, such automatic
conversion would have a material adverse effect on the ability of Silicon
Graphics to timely obtain a favorable ruling from the IRS regarding the tax-free
status of such Tax-Free Distribution. If such an opinion is received, approval
of such conversion will be submitted to a vote of the holders of the Class A
Common Stock and the holders of Class B Common Stock as soon as practicable
after the fifth anniversary of the Tax-Free Distribution, unless prior to such
Tax-Free Distribution, Silicon Graphics delivers to MIPS Technologies an opinion
of counsel, reasonably satisfactory to MIPS Technologies, to the effect that,
based in part on conversations with the IRS disclosed to MIPS Technologies, such
vote would have a material adverse effect on the ability of Silicon Graphics to
timely obtain a favorable ruling from the IRS regarding the tax-free status of
such Tax-Free Distribution. Approval of such conversion will require the
affirmative vote of a majority of the shares of Class A Common Stock and Class B
Common Stock present and voting, voting together as a single class, with each
share entitled to one vote for such purpose. No assurance can be given that such
conversion would occur.
All shares of Class B Common Stock will automatically convert into Class A
Common Stock if, at any time prior to a Tax-Free Distribution, the aggregate
number of outstanding shares of Class B Common Stock beneficially owned by
Silicon Graphics and/or any of its subsidiaries is less than 50% of the
aggregate number of outstanding shares of New MIPS Common Stock; provided,
however, that such automatic conversion will not occur if, prior to the closing
of any transaction or the occurrence of any event which would reduce the
aggregate number of outstanding shares of Class B Common Stock owned by Silicon
Graphics and/or any of its subsidiaries to less than 50% of the aggregate number
of shares of New MIPS Common Stock then outstanding, the independent directors
of the Board of Directors and the Chief Executive Officer of MIPS Technologies
unanimously determine that such automatic conversion is not in the interests of
MIPS Technologies and the MIPS Public Stockholders. Upon the closing of any
subsequent transaction or the occurrence of any event which would further reduce
the percentage of the shares of New MIPS Common Stock then outstanding held by
Silicon Graphics, each share of Class B Common Stock will automatically convert
into one share of Class A Common Stock unless, prior to the closing of any such
transaction or the occurrence of any such event, the independent directors of
the MIPS Board of Directors and the Chief Executive Officer of MIPS Technologies
unanimously determine that such automatic conversion is not in the interests of
MIPS Technologies and the MIPS Public Stockholders. In any event, all shares of
Class B Common Stock will automatically convert into shares of Class A Common
Stock if the aggregate number of outstanding Class B Common Stock held by
Silicon Graphics and/or any of its affiliates is less than 30% of the aggregate
number of outstanding shares of New MIPS Common Stock.
In the case of any merger or consolidation of MIPS Technologies pursuant to
which all or substantially all of the capital stock of MIPS Technologies is
exchanged for the stock of another entity and the stockholders of MIPS
Technologies immediately prior to such merger or consolidation own less than 50%
of the outstanding shares of such other entity immediately after such merger or
consolidation, each share of Class B Common Stock will automatically convert
into one share of Class A Common Stock immediately prior to the effectiveness of
such merger or consolidation, unless, prior to a Tax-Free Distribution, Silicon
Graphics delivers to MIPS Technologies an opinion of counsel, reasonably
satisfactory to MIPS Technologies, to the effect that, based in part on
conversations with the IRS disclosed to MIPS Technologies, such automatic
conversion would have a material adverse effect on the ability of Silicon
Graphics to timely obtain a favorable ruling from the IRS regarding the tax-free
status of the Tax-Free Distribution.
Prior to a Tax-Free Distribution and upon the closing of a merger or
consolidation involving Silicon Graphics or a tender offer for shares of Silicon
Graphics capital stock, if the stockholders of Silicon Graphics immediately
prior to such merger, consolidation or tender offer own less than 50% of the
outstanding shares of Silicon Graphics (or, if the capital stock of Silicon
Graphics is exchanged or converted in any such transaction for capital stock of
another corporation, such corporation) immediately
34
<PAGE>
after such merger, consolidation or tender offer, each share of Class B Common
Stock held by Silicon Graphics or its successor will automatically convert into
one share of Class A Common Stock.
All conversions will be effected on a share-for-share basis. Shares of Class
A Common Stock are not convertible into shares of Class B Common Stock at any
time or under any circumstances.
Shares of Existing Common Stock have no conversion rights.
MERGER OR REORGANIZATION. Upon the consummation of the Recapitalization, in
the event of any merger, consolidation or reorganization of MIPS Technologies
with or into another entity in connection with which shares of New MIPS Common
Stock are converted into or exchangeable for shares of stock, other securities
or property (including cash), all holders of New MIPS Common Stock, regardless
of class, will be entitled to receive the same kind and amount of shares of
stock and other securities and property (including cash); provided, however,
that, in the event that the shares of Class B Common Stock have not been
converted into or exchanged for shares of Class A Common Stock, (i) in any such
transaction, the holders of shares of Class A Common Stock and the holders of
shares of Class B Common Stock may receive different kinds of shares of stock if
the only difference in such shares is the inclusion of voting rights which
maintain the different voting rights of the holders of Class A Common Stock and
holders of Class B Common Stock with respect to the election of the applicable
percentage of the authorized number of directors on the MIPS Board of Directors
as described above or (ii) if all or substantially all of the New MIPS Common
Stock is exchanged for capital stock of another entity and such transaction is
required to be accounted for as a "pooling-of-interests", the holders of shares
of Class A Common Stock and the holders of shares of Class B Common Stock shall
receive shares of stock in the acquiring entity based on the relative fair value
of a share of Class A Common Stock and a share of Class B Common Stock measured
as of the announcement date for such transaction.
At present, all shares of Existing Common Stock are entitled to receive the
same kind and amount of shares of stock and other securities and property
(including cash) in the event of any merger, consolidation or reorganization of
MIPS Technologies with and into another company.
EXCHANGE OF CLASS B COMMON STOCK. The Amended Certificate of Incorporation
will provide that, following a Tax-Free Distribution, MIPS Technologies may
exchange all, but not less than all, of the outstanding shares of Class B Common
Stock for shares of Class A Common Stock on a one-for-one basis, provided,
however, this provision will have no force or effect if, prior to such Tax-Free
Distribution, Silicon Graphics delivers to MIPS Technologies an opinion of
counsel, reasonably satisfactory to MIPS Technologies, to the effect that, based
in part on conversation with the IRS disclosed to MIPS Technologies, the
inclusion of this provision in the Amended Certificate of Incorporation would
have a material adverse effect on the ability of Silicon Graphics to timely
obtain a favorable ruling from the IRS regarding the tax-free status of the
Tax-Free Distribution. In addition, Silicon Graphics may limit MIPS
Technologies' ability to exercise this exchange right pursuant to the Tax
Agreement which will be entered into by MIPS Technologies and Silicon Graphics
prior to a Tax-Free Distribution. See "The Exchange Agreement--Tax
Indemnification Agreement."
Shares of Existing Common Stock are not subject to exchange at the option of
MIPS Technologies or otherwise.
LIQUIDATION. Upon the consummation of the Recapitalization, in the event of
any liquidation, dissolution or winding-up of MIPS Technologies, whether
voluntary or involuntary, after payment in full of the amounts required to be
paid to holders of Preferred Stock, if any, the remaining assets and funds of
MIPS Technologies will be distributed pro rata to the holders of the Class A
Common Stock and Class B Common Stock.
At present, subject to any preferential rights of any outstanding series of
Preferred Stock created by the MIPS Board of Directors from time to time, upon
the liquidation, dissolution or winding-up of MIPS
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<PAGE>
Technologies, the holders of shares of Existing Common Stock will be entitled to
receive, pro rata, all assets of MIPS Technologies available for distribution to
such holders.
OTHER RIGHTS. At present and upon the consummation of the Recapitalization,
no shares of Existing Common Stock are, and no shares of New MIPS Common Stock
will be, subject to redemption or have preemptive or preferential rights to
purchase additional shares of common stock of MIPS Technologies.
Upon consummation of the Recapitalization, all the outstanding shares of
Class A Common Stock and Class B Common Stock will be legally issued, fully paid
and nonassessable.
PREFERRED STOCK
The following provisions of the Existing Certificate of Incorporation
regarding the Preferred Stock will not be amended by the Amended Certificate of
Incorporation if the Recapitalization is consummated.
The Preferred Stock is issuable from time to time either as a class without
series or in one or more series and with such designation, rights, privileges,
restrictions and conditions for each class or series as shall be stated in the
resolutions providing for designation and issue of each such series adopted by
the MIPS Board of Directors. The MIPS Board of Directors is authorized by the
Existing Certificate of Incorporation to determine, among other things, the
voting, dividend, redemption, conversion and liquidation powers, rights and
preferences and the limitations thereon of such series. MIPS Technologies
believes that the ability of the MIPS Board of Directors to issue one or more
series of Preferred Stock will provide MIPS Technologies with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs that may arise. The authorized shares of Preferred Stock, as
well as shares of Existing Common Stock, or New MIPS Common Stock, as the case
may be, will be available for issuance without further action by MIPS
stockholders, unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which the MIPS Technologies
securities may be listed or traded.
Although the MIPS Board of Directors has no present plans to issue any
Preferred Stock, it could issue a series of Preferred Stock that could,
depending on the terms of such series, impede the completion of a merger, tender
offer or other takeover attempt. The MIPS Board of Directors will make any
determination to issue such shares based on its judgment as to the best
interests of MIPS Technologies and its stockholders. The MIPS Board of Directors
could issue Preferred Stock with voting and other rights that could adversely
effect the voting power of the holders of the Existing Common Stock, or New MIPS
Common Stock, as the case may be, and that could discourage an acquisition
attempt through which an acquiror may be able to change the composition of MIPS
Board of Directors, including a tender offer or other transaction that some, or
a majority, of MIPS Technologies stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock over
the then current market price of such stock.
CORPORATE OPPORTUNITIES
The following provisions regarding corporate opportunities, presently
contained in the Existing Certificate of Incorporation, will also be included in
the Amended Certificate of Incorporation if the Recapitalization is consummated.
Silicon Graphics will have no duty to refrain from engaging in the same or
similar activities or lines of business as MIPS Technologies, and neither
Silicon Graphics nor any officer or director thereof (except as provided below),
will be liable to MIPS Technologies or its stockholders for breach of any
fiduciary duty by reason of any such activities of Silicon Graphics. In the
event that Silicon Graphics acquires knowledge of a potential transaction or
matter which may be a corporate opportunity for both Silicon Graphics and MIPS
Technologies, Silicon Graphics will have no duty to communicate or offer such
corporate opportunity to MIPS Technologies and will not be liable to MIPS
Technologies or its stockholders for breach of any
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fiduciary duty as a stockholder of MIPS Technologies by reason of the fact that
Silicon Graphics pursues or acquires such corporate opportunity for itself,
directs such corporate opportunity to another person, or does not communicate
information regarding such corporate opportunity to MIPS Technologies.
In the event that a director or officer of MIPS Technologies who is also a
director or officer of Silicon Graphics acquires knowledge of a potential
transaction or matter which may be a corporate opportunity for both MIPS
Technologies and Silicon Graphics, such director or officer of MIPS Technologies
will have fully satisfied and fulfilled the fiduciary duty of such director or
officer to MIPS Technologies and its stockholders with respect to such corporate
opportunity if such director or officer acts in a manner consistent with the
following policy:
(i) a corporate opportunity offered to any person who is an officer of MIPS
Technologies, and who is also a director but not an officer of Silicon
Graphics, shall belong to MIPS Technologies;
(ii) a corporate opportunity offered to any person who is a director but not
an officer of MIPS Technologies, and who is also a director or officer
of Silicon Graphics, shall belong to MIPS Technologies if such
opportunity is expressly offered to such person in writing solely in
his or her capacity as a director of MIPS Technologies, and otherwise
shall belong to Silicon Graphics; and
(iii) a corporate opportunity offered to any person who is an officer of both
MIPS Technologies and Silicon Graphics shall belong to MIPS
Technologies if such opportunity is expressly offered to such person in
writing solely in his or her capacity as an officer of MIPS
Technologies, and otherwise shall belong to Silicon Graphics.
For purposes of the foregoing:
(i) a director of MIPS Technologies who is chairman of the MIPS Board of
Directors or of a committee thereof will not be deemed to be an officer
of MIPS Technologies by reason of holding such position (without regard
to whether such position is deemed an office of MIPS Technologies under
its by-laws), unless such person is a full-time employee of MIPS
Technologies; and
(ii) (a) the term "MIPS Technologies" will mean MIPS Technologies and all
corporations, partnerships, joint ventures, associations and other
entities in which MIPS Technologies beneficially owns (directly or
indirectly) fifty percent or more of the outstanding voting stock,
voting power, partnership interest or similar voting interests, and (b)
the term "Silicon Graphics" will mean Silicon Graphics, Inc. and all
corporations, partnerships, joint ventures, associations and other
entities (other than MIPS Technologies, defined in accordance with
clause (a) of this section (ii)) in which Silicon Graphics beneficially
owns (directly or indirectly) fifty percent or more of the outstanding
voting stock, voting power, partnership interests or similar voting
interests.
The foregoing provisions will expire on the date that Silicon Graphics
ceases to own beneficially Existing Common Stock representing at least 20% of
the total voting power of all classes of outstanding Existing Common Stock, or
New MIPS Common Stock, as the case may be, and no person who is a director or
officer of MIPS Technologies is also a director or officer of Silicon Graphics
or any of its subsidiaries (other than MIPS Technologies).
In addition to any vote of the stockholders required by the certificate of
incorporation of MIPS Technologies, until the time that Silicon Graphics ceases
to own beneficially Existing Common Stock, or New MIPS Common Stock, as the case
may be, representing at least 20% of the total voting power of all classes of
outstanding Existing Common Stock, or New MIPS Common Stock, as the case may be,
the affirmative vote of the holders of more than 80% of the total voting power
of all classes of outstanding Existing Common Stock, or New MIPS Common Stock,
as the case may be, shall be required to alter, amend or repeal in a manner
adverse to the interests of Silicon Graphics and its subsidiaries (other than
MIPS Technologies), or adopt any provision adverse to the interests of Silicon
Graphics and its subsidiaries (other than MIPS Technologies), or inconsistent
with, the corporate opportunity provisions described
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above. Accordingly, so long as Silicon Graphics beneficially owns Existing
Common Stock, or New MIPS Common Stock, as the case may be, representing at
least 20% of the total voting power of all classes of outstanding Existing
Common Stock, or New MIPS Common Stock, as the case may be, it can prevent any
such alteration, amendment, repeal or adoption.
Any person purchasing or otherwise acquiring common stock of MIPS
Technologies will be deemed to have notice of, and to have consented to, the
foregoing provisions regarding corporate opportunities.
CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS THAT MAY HAVE AN
ANTI-TAKEOVER EFFECT
Certain provisions of the certificate of incorporation and by-laws of MIPS
Technologies summarized below may be deemed to have an anti-takeover effect and
may delay, discourage or prevent a tender offer or takeover attempt that a
stockholder might consider to be in its best interest, including attempts that
might result in a premium being paid over the market price of the Common Stock.
BOARD OF DIRECTORS. Upon the consummation of the Recapitalization, the
Amended Certificate of Incorporation will provide that, subject to any rights of
holders of Preferred Stock to elect additional directors under specified
circumstances, the number of directors of MIPS Technologies will be not less
than five and not more than 10, with the exact number to be fixed from time to
time by resolution of the MIPS Board of Directors. The directors, other than
those who may be elected by the holders of Preferred Stock, will be classified,
with respect to the time for which they severally hold office, into three
classes, as nearly equal in number as possible; provided, however, that in the
event that there is only one Class A Director, such Class A Director shall be in
the class of directors whose initial term ends on the date of the 1999 annual
meeting of stockholders of MIPS Technologies. Each director will hold office
until such person's successor is duly elected and qualified. In addition, the
Amended Certificate of Incorporation and Amended By-Laws will provide that,
subject to any rights of holders of Preferred Stock, and unless the MIPS Board
of Directors otherwise determines, newly created directorships resulting from
any increase in the number of directors shall be filled by the vote of the
majority of the directors then in office, provided that following such
appointment, 20% (or, if 20% is not a whole number, then the next lower whole
number of directors that is closest to 20% of such membership) of the number of
the directors on the MIPS Board of Directors as so increased, excluding the
number of directors whom the holders of any series of Preferred Stock shall have
the exclusive right to elect, consists of directors elected by (or appointed on
behalf of) the holders of Class A Common Stock. Any director elected or
appointed in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of director in which the new
directorship was created and until such director's successor shall have been
elected and qualified.
Any vacancies on the MIPS Board of Directors created by the death,
resignation, disqualification or removal of a director may be filled by the vote
of the majority of the directors then in office elected by, or appointed on
behalf of, the same class of stock that elected that director whose death,
resignation or removal created the vacancy, unless there are no such directors,
in which case such vacancy may be filled by the vote of the majority of all
directors then in office, even if less than a quorum, or by the sole remaining
director. Notwithstanding the immediately preceding sentence, any vacancy on the
MIPS Board of Directors created by the death, resignation, disqualification or
removal of a director elected by (or appointed on behalf of) the holders of a
class of stock may also be filled by a vote of the holders of such class of
stock, unless there are no outstanding shares of such class of stock, in which
case any such vacancy may be filled by a vote of the holders of the remaining
class of stock. Any director elected to fill a vacancy created by the death,
resignation, disqualification or removal of a director shall hold office for the
remainder of the full term of the director whose vacancy is being filled and
until such director's successor shall have been elected and qualified. No
decrease in the number of directors constituting the MIPS Board of Directors
shall shorten the term of any incumbent director. Subject to any preferential
rights of any outstanding series of Preferred Stock, any director may be removed
from office, with cause, by the affirmative vote of the holders of at least a
majority of the outstanding New MIPS Common Stock, voting
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as a single class; provided, however, that prior to a Tax-Free Distribution, any
director elected by the holders of the Class B Common Stock may be removed, with
or without cause, by the affirmative vote of the holders of at least a majority
of the outstanding Class B Common Stock.
At present, the Existing Certificate of Incorporation and the Existing
By-laws provide that, subject to any rights of holders of Preferred Stock to
elect additional directors under specified circumstances, the number of
directors of MIPS Technologies will be not more than 10 and not less than three.
In addition, the Existing Certificate of Incorporation and Existing By-laws
provide that directors, other than those who may be elected by the holders of
Preferred Stock, will be classified, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as possible
and further provided that, subject to any rights of holders of Preferred Stock,
and unless the MIPS Board of Directors otherwise determines, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the MIPS Board of Directors resulting from death, resignation,
disqualification, removal or other cause will be filled by the affirmative vote
of a majority of the remaining directors then in office, even though less than a
quorum, or by the sole remaining director, and not by the stockholders. Subject
to the rights of holders of Preferred Stock, any director may be removed from
office only for cause by the affirmative vote of the holders of at least a
majority of the Existing Common Stock; provided, however, that prior to the
Trigger Date (as defined below), any director may be removed from office, with
or without cause, by the affirmative vote of the holders of at least a majority
of the Existing Common Stock.
The provisions of the corporate documents described above would preclude a
third-party from removing incumbent directors and simultaneously gaining control
of MIPS Board of Directors by filling the vacancies created by removal with its
own nominees. Under the classified board provision described above, it would
take at least two elections of directors for any individual or group to gain
control of the MIPS Board of Directors. Accordingly, these provisions could
discourage a third party from initiating a proxy contest, making a tender offer
or otherwise attempting to gain control of MIPS Technologies.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS. At present, and
upon the consummation of the Recapitalization, as of the time at which Silicon
Graphics and its affiliates cease to beneficially own an aggregate of at least a
majority of the then outstanding shares of Existing Common Stock, or New MIPS
Common Stock, as the case may be (the "Trigger Date"), any action required or
permitted to be taken by the stockholders may be effected only at a duly called
annual or special meeting of stockholders and may not be effected by a written
consent in lieu of such a meeting. Effective as of the Trigger Date, except as
otherwise required by law and subject to the rights of the holders of any
Preferred Stock, special meetings of stockholders of MIPS Technologies for any
purpose may be called only by certain specified officers of MIPS Technologies or
by any officer at the request in writing of a majority of the MIPS Board of
Directors and, effective as of the Trigger Date, the power of the stockholders
to call a special meeting is specifically denied. In addition, prior to the
Trigger Date, MIPS Technologies will call a special meeting of stockholders
promptly upon the request of Silicon Graphics. These provisions may have the
effect of delaying consideration of a stockholder proposal until the next annual
meeting unless a special meeting is called by the MIPS Board of Directors or
certain specified officers.
ADVANCE NOTICE PROCEDURES. At present, and upon the consummation of the
Recapitalization, an advance notice procedure for the nomination, other than by
or at the direction of MIPS Board of Directors, of candidates for election as
directors, as well as for other stockholder proposals, to be considered at
annual meetings of stockholders, must be followed to take such actions. In
general, notice of intent to nominate a director or raise matters at such
meetings will have to be received in writing by MIPS Technologies not less than
60 nor more than 90 days prior to the anniversary of the previous year's annual
meeting of stockholders, and must contain certain information concerning the
person to be nominated or the matters to be brought before the meeting and
concerning the stockholder submitting the proposal. If the chairman of a meeting
determines that an individual was not nominated, or other business was not
brought before the meeting, in accordance with the advance notice procedures,
such individual will not be
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eligible for election as a director, or such business will not be conducted at
such meeting, as the case may be.
The advance notice procedures do not apply to Silicon Graphics and its
affiliates prior to the Trigger Date.
CHARTER AMENDMENTS. At present, the Existing Certificate of Incorporation
provides that the affirmative vote of the holders of at least 80% of the
outstanding Common Stock is required to amend, repeal or adopt any provision
inconsistent with the foregoing provisions of such Certificate of Incorporation.
The Existing Certificate of Incorporation further provides that certain
provisions of the Existing By-laws may be altered, amended or repealed by the
affirmative vote of directors constituting not less than a majority of the
entire MIPS Board of Directors (if effected by action of the MIPS Board of
Directors) or by the affirmative vote of the holders of at least 80% of the
voting power of all classes of outstanding capital stock, voting together as a
single class (if effected by action of the stockholders).
The foregoing provisions of the Existing Certificate of Incorporation
regarding charter amendments will not be amended by the Amended Certificate of
Incorporation if the Recapitalization is approved.
SECTION 203 OF DELAWARE GENERAL CORPORATION LAW
Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, an "interested stockholder" of a Delaware corporation shall
not engage in any business combination, including mergers or consolidations or
acquisitions of additional shares of the corporation, with the corporation for a
three-year period following the date that such stockholder becomes an interested
stockholder unless (i) prior to such date, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares), or (iii) on or subsequent to such date,
the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of stockholders by
the affirmative vote of at least 66 2/3% of the outstanding voting stock of the
corporation which is not owned by the interested stockholder. Except as
otherwise specified in Section 203, an interested stockholder is defined to
include (x) any person that is the owner of 15% or more of the outstanding
voting securities of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock of
the corporation at any time within three years immediately prior to the date of
determination and (y) the affiliates and associates of any such person.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. MIPS Technologies has
not, and will not, if the Recapitalization is consummated, elect to be exempt
from the restrictions imposed under Section 203. However, Silicon Graphics and
its affiliates are excluded from the definition of "interested stockholder"
pursuant to the terms of Section 203. The provisions of Section 203 may
encourage persons interested in acquiring MIPS Technologies to negotiate in
advance with the MIPS Board of Directors, since the stockholder approval
requirement would be avoided if a majority of the directors then in office
approves either the business combination or the transaction which results in any
such person becoming an interested stockholder. Such provisions also may have
the effect of preventing changes in the management of MIPS Technologies. It is
possible that such provisions could make it more difficult to accomplish
transactions which MIPS Technologies' stockholders may otherwise deem to be in
their best interests.
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LIMITATION OF LIABILITY
The Existing Certificate of Incorporation provides that a director of MIPS
Technologies will not be personally liable to MIPS Technologies or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except, if required by the DGCL as amended from time to time, for liability (i)
for breach of the director's duty of loyalty to MIPS Technologies 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, which concerns unlawful payments of dividends, stock purchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. Neither the amendment or repeal of such provision
will eliminate or reduce the effect of such provision in respect of any matter
occurring, or any cause of action, suit or claim that, but for such provision,
would accrue or arise prior to such amendment or repeal. While the Existing
Certificate of Incorporation provides directors with protection from monetary
damages for breaches from their duty of care, it does not eliminate such duty.
Accordingly, the Existing Certificate of Incorporation will have no effect on
the availability of equitable remedies such as an injunction or rescission based
on a director's breach of his or her duty of care.
The foregoing provisions of the Existing Certificate of Incorporation
regarding limitation of liability will not be amended by the Amended Certificate
of Incorporation if the Recapitalization is approved.
LISTING
Application will be made to The Nasdaq Stock Market, Inc. to redesignate the
Existing Common Stock as Class A Common Stock. The Class A Common Stock will be
quoted on the Nasdaq National Market under the symbol "MIPS".
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the New MIPS Common Stock will be
Boston EquiServe Limited Partnership located at 150 Royall Street, Canton,
Massachusetts. Its phone number is (781) 575-2000.
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STOCKHOLDER PROPOSALS
MIPS Technologies will hold a 1999 Annual Meeting of Stockholders (the
"Annual Meeting"). The deadline for stockholders to submit proposals pursuant to
Rule 14a-8 of the Exchange Act for inclusion in MIPS Technologies' proxy
statement and form of proxy for the Annual Meeting is , 1999. The
date after which notice of a stockholder proposal submitted outside of the
processes of Rule 14a-8 of the Exchange Act is considered untimely is
, 1999. If notice of a stockholder proposal submitted outside of the
processes of Rule 14a-8 of the Exchange Act is received by MIPS Technologies
after , 1999, then MIPS Technologies' proxy for the Annual Meeting
may confer discretionary authority to vote on such matter without any discussion
of such matter in the proxy statement for the Annual Meeting.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our Annual Report on Form 10-K for the year ended June
30, 1998, as set forth in their report, which is incorporated in this proxy
statement by reference. Our financial statements are incorporated by reference
in reliance upon their report given on their authority as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
MIPS Technologies is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. The reports, proxy statements and other
information filed by MIPS Technologies with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices located at 7 World Trade Center, 13th floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material also can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, Washington, D.C. 20549.
Information regarding the Public Reference Room may be obtained by calling the
Commission at (800) 732-0330. In addition, MIPS Technologies is required to file
electronic versions of such material with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
The Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Existing
Common Stock is listed on the Nasdaq National Market and reports and other
information concerning MIPS Technologies can also be inspected at the offices of
the National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20001-1500.
The Commission allows us to "incorporate by reference" information into this
Proxy Statement, which means that we can disclose important information to you
by referring you to another document filed separately with the Commission.
Statements contained in this Proxy Statement or in any document incorporated by
reference in this Proxy Statement as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document (if
any) filed as an exhibit to such other document, each such statement being
qualified in all respects by such reference. The information incorporated by
reference is deemed to be part of this Proxy Statement. This Proxy Statement
incorporates by reference the documents set forth below that MIPS Technologies
has previously filed with the Commission. These documents contain important
information about MIPS Technologies and its finances.
MIPS Technologies (File No. 000-24487) incorporates by reference herein the
following portions of the following documents previously filed with the
Commission:
1. Items 7, 8 and 9 in Part II of MIPS Technologies' Annual Report on Form
10-K for the fiscal year ended June 30, 1998 (as amended on Form 10-K/A
filed November 17, 1998); and
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2. Items 2 and 3 in Part I of MIPS Technologies' Quarterly Report on Form
10-Q for the quarter ended September 30, 1998.
All documents and reports subsequently filed by MIPS Technologies pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement and prior to the date of the Special Meeting shall be deemed to
be incorporated by reference in this Proxy Statement and to be part hereof from
the date of filing of such documents or reports. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Proxy Statement to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
The Proxy Statement incorporates important business and financial
information about MIPS Technologies that is not included in or delivered with
this Proxy Statement. Documents incorporated by reference which are not
presented herein or delivered herewith (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference) are available
to any person, including any beneficial owner, to whom this Proxy Statement is
delivered, on written or oral request, without charge, to MIPS Technologies,
Inc., 1225 Charleston Road, Mountain View, California, 94043 (telephone number:
(650) 567-5000), Attention: Secretary. In order to ensure timely delivery of any
of such documents, any request should be made by , 1999.
No persons have been authorized to give any information or to make any
representation other than those contained in this Proxy Statement in connection
with the solicitations of proxies or the offering of securities made hereby and,
if given or made, such information or representation must not be relied upon as
having been authorized by MIPS Technologies or any other person. This Proxy
Statement does not constitute an offer to sell, or a solicitation of an offer to
buy, any securities, or the solicitation of a proxy, in any jurisdiction to or
from any person to whom it is not lawful to make any such offer or solicitation
in such jurisdiction. Neither the delivery of this Proxy Statement nor any
distribution of securities made hereunder shall under any circumstances create
an implication that there has been no change in the affairs of MIPS Technologies
since the date hereof or that the information herein is correct as of any time
subsequent to its date.
By Order of the Board of Directors of
MIPS Technologies, Inc.
Sandy Creighton
SECRETARY
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LIST OF DEFINED TERMS
<TABLE>
<S> <C>
Amended By-laws....................................................................... 12
Amended Certificate of Incorporation.................................................. 12
Annual Meeting........................................................................ 42
Change in Tax Law..................................................................... 25
Class A Common Stock.................................................................. 12
Class A Directors..................................................................... 19
Class B Common Stock.................................................................. 12
Class B Directors..................................................................... 19
Code.................................................................................. 15
Existing By-Laws...................................................................... 15
Existing Certificate of Incorporation................................................. 13
Existing Common Stock................................................................. 12
MIPS Exchange Right................................................................... 21
MIPS Public Stockholders.............................................................. 13
New MIPS Common Stock................................................................. 12
Recapitalization...................................................................... 12
Recapitalization Proposal............................................................. 12
Record Date........................................................................... 12
Required Purchase Amount.............................................................. 24
Special Committee..................................................................... 12
Special Meeting....................................................................... 12
Tax-Free Distribution................................................................. 15
Trigger Date.......................................................................... 39
</TABLE>
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ANNEX A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
MIPS TECHNOLOGIES, INC.
MIPS TECHNOLOGIES, INC., a Delaware corporation, hereby certifies as
follows:
1. The name of the corporation is MIPS Technologies, Inc. (the
"Corporation"). The date of filing of its original Certificate of Incorporation
with the Secretary of State of the State of Delaware (the "Delaware Secretary of
State") was June 8, 1992, and the Restated Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on June 30, 1998. The
original name of the Corporation was MIPS Technologies, Inc.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware (the "DGCL"), this Amended and Restated Certificate of
Incorporation restates and integrates and further amends the provisions of the
Restated Certificate of Incorporation of this Corporation. Pursuant to and in
accordance with Sections 242 and 245 of the DGCL, this Amended and Restated
Certificate of Incorporation was proposed by the directors of the Corporation
and adopted by the holders of a majority of the outstanding shares of capital
stock of the Corporation entitled to vote at a special meeting of the
stockholders.
3. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
ARTICLE I
NAME
The name of the corporation is MIPS Technologies, Inc. (the "Corporation").
ARTICLE II
REGISTERED AGENT
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of the Corporation's registered agent at such
address is The Corporation Trust Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware (the "DGCL") as the same exists or may hereafter be amended.
ARTICLE IV
CAPITAL STOCK
SECTION 1. (a) The total number of shares of all classes of capital stock
that the Corporation shall have the authority to issue is 300,000,000 shares, of
which (i) 150,000,000 shares shall be Class A Common Stock, par value $0.001 per
share (the "Class A Common Stock"), (ii) 100,000,000 shares shall be Class B
Common Stock, par value $0.001 per share (the "Class B Common Stock", and
together with the Class A Common Stock, the "Common Stock"), and (iii)
50,000,000 shares shall be preferred stock, par value $0.001 per share (the
"Preferred Stock").
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(b) Any amendment to this Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") which shall increase or decrease the number
of authorized shares of any class or classes of stock may be adopted by the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock of the Corporation, irrespective of the provisions of Section
242(b)(2) of the DGCL or any corresponding provision hereinafter enacted.
(c) Immediately upon effectiveness of this Certificate of Incorporation,
each share of common stock of the Corporation, par value $0.001 per share,
issued and outstanding immediately prior to such effectiveness, shall be changed
into and reclassified as one share of Class A Common Stock.
SECTION 2. The following is a statement of the relative powers,
preferences, rights, qualifications, limitations and restrictions of the shares
of Class A Common Stock and Class B Common Stock:
(a) GENERAL. Except as otherwise expressly provided herein or as
provided by law, the relative powers, preferences, rights, and the relative
participating, optional and other special rights, and the qualifications,
limitations and restrictions of the shares of Class A Common Stock and Class
B Common Stock shall be identical in all respects.
(b) DIVIDENDS OR DISTRIBUTIONS OF CASH OR PROPERTY. Subject to the
rights of the holders of any series of Preferred Stock, and except as
otherwise provided for herein, the holders of Class A Common Stock and the
holders of Class B Common Stock shall be entitled to receive such dividends
and other distributions in cash, stock of any corporation (other than Common
Stock of the Corporation) or property of the Corporation as may be declared
thereon by the Board of Directors of the Corporation (the "Board of
Directors") from time to time out of assets of the Corporation legally
available therefor and shall share equally on a per share basis in all such
dividends and other distributions.
(c) DIVIDENDS OR DISTRIBUTIONS OF COMMON STOCK. In the case of
dividends or other distributions payable in, or reclassifications involving,
Common Stock, including distributions pursuant to stock splits or divisions
of Common Stock, only shares of Class A Common Stock shall be paid or
distributed with respect to shares of Class A Common Stock and only shares
of Class B Common Stock shall be paid or distributed with respect to shares
of Class B Common Stock. The number of shares of Class A Common Stock and
Class B Common Stock so paid or distributed shall be equal in number on a
per share basis.
(d) STOCK SUBDIVISIONS AND COMBINATIONS. The Corporation shall not
subdivide, reclassify or combine stock of either class of Common Stock
without at the same time making a proportionate subdivision,
reclassification or combination of the other class.
(e) VOTING. Voting power shall be divided between the classes and
series of stock as follows:
(i) Subject to Section (2)(e)(ii) of this Article IV, with respect
to the election of directors of the Corporation, holders of Class A
Common Stock, voting separately as a class, shall be entitled to elect
that number of directors (the "Class A Directors") which constitutes 20%
of the number of members of the Board of Directors determined as provided
in Section 2 of Article V (or, if such 20% is not a whole number, then
the next lower whole number of directors that is closest to 20% of such
membership). Each share of Class A Common Stock shall have one vote in
the election of such directors. Subject to Section (2)(e)(ii) of this
Article IV, holders of Class B Common Stock, voting separately as a
class, shall be entitled to elect the remaining directors (other than
directors elected by the holders of Preferred Stock). Each share of Class
B Common Stock shall have one vote in the election of such directors. For
purposes of Section 2(e) and Section 2(f) of this Article IV, references
to the number of members of the Board of Directors shall not include any
directors whom the holders of any shares of Preferred Stock may have the
exclusive right to elect as granted in accordance with Section 6(a) of
this Article IV.
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(ii) At such time as all outstanding shares of Class B Common Stock
shall have been converted into or exchanged for shares of Class A Common
Stock in accordance with the provisions of this Article IV, then Section
2(e)(i) of this Article IV shall have no further force or effect, and
thereafter, subject to the rights of the holders of Preferred Stock, the
holders of the Class A Common Stock, voting as a class, shall be entitled
to elect all members of the Board of Directors.
(iii) Except as otherwise specified herein, the holders of Class A
Common Stock and holders of Class B Common Stock (A) shall in all matters
not otherwise specified in this Section (2)(e) or Section (2)(f) of this
Article IV vote together as a single class (including, without
limitation, with respect to increases or decreases in the authorized
number of shares of any class of Common Stock), with each share of Class
A Common Stock and Class B Common Stock having one vote, and (B) shall be
entitled to vote as separate classes only when required by law to do so
under mandatory statutory provisions that may not be excluded or
overridden by a provision of this Certificate of Incorporation.
(iv) Except as set forth in this Section (2)(e) or Section (2)(f) of
this Article IV, the holders of Class A Common Stock shall have exclusive
voting power (except for any voting powers of any series of Preferred
Stock) on all matters at any time when no Class B Common Stock is issued
and outstanding, and the holders of Class B Common Stock shall have
exclusive voting power (except for any voting powers of any series of
Preferred Stock) on all matters at any time when no Class A Common Stock
is issued and outstanding.
(v) Notwithstanding anything to the contrary contained in this
Section 2(e) of this Article IV, following a Tax-Free Spin-Off (as
defined in Section 2(i)(i) of this Article IV), for so long as any person
or entity or group of persons or entities acting in concert beneficially
own 10% or more of the outstanding shares of Class B Common Stock, such
person, entity or group shall not, with respect to any such shares of
Class B Common Stock, have any voting powers in respect of such shares of
Class B Common Stock or be entitled to exercise any voting rights in any
election of directors unless such person or entity is also the beneficial
owner of at least an equivalent percentage of the outstanding shares of
Class A Common Stock. For purposes of this Section (2)(e)(v), "beneficial
ownership" means ownership, directly or indirectly, including through any
contract, arrangement, understanding, relationship or otherwise, written
or oral, formal or informal, controls the voting power (which includes
the power to vote or to direct the voting) of such Common Stock.
(f) VACANCIES. Any vacancy in the office of a director created by the
death, resignation, disqualification or removal of a director may be filled
by the vote of the majority of the directors then in office (or the sole
remaining director) elected by (or appointed on behalf of) the same class of
stock that elected the director (or on behalf of which the director was
appointed) whose death, resignation, disqualification or removal created the
vacancy, unless there are no such directors or no outstanding shares of such
class of stock, in which case such vacancy may be filled by the vote of the
majority of all directors then in office, even if less than a quorum, or by
the sole remaining director. Notwithstanding anything in this Section (2)(f)
or Section (2)(e) of this Article IV to the contrary, any vacancy in the
office of a director created by the death, resignation, disqualification or
removal of a director elected by (or appointed on behalf of) the holders of
a class of stock may also be filled by a vote of holders of such class of
stock, unless there are no outstanding shares of such class of stock, in
which case any such vacancy may be filled by a vote of the holders of the
remaining class of stock. Any director elected to fill a vacancy created by
the death, resignation, disqualification or removal of a director shall hold
office for the remainder of the full term of the director whose vacancy is
being filled and until such director's successor shall have been elected and
qualified unless removed and replaced pursuant to Section 4(c) of Article V
and this Section (2)(f).
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Subject to the rights, if any, of the holders of any series of Preferred
Stock then outstanding, any vacancy on the Board of Directors that results
from an increase in the number of directors shall be filled by the vote of
the majority of the directors then in office; PROVIDED that (unless all of
the outstanding shares of Class B Common Stock shall have been converted
into or exchanged for shares of Class A Common Stock) following such
appointment, 20% of the number of members of the Board of Directors as so
increased (or, if such 20% is not a whole number, then the next lower whole
number of directors that is closest to 20% of such membership) consist of
directors elected by (or appointed on behalf of) the holders of Class A
Common Stock and the remaining members of the Board of Directors consist of
directors elected by (or appointed on behalf of) the holders of the Class B
Common Stock. Any director elected (or appointed) in accordance with the
preceding sentence shall hold office for the remainder of the full term of
the class of directors in which the new directorship was created and until
such director's successor shall have been elected and qualified, unless such
director is removed and replaced pursuant to Section 4(c) of Article V and
this Section (2)(f).
(g) MERGER OR REORGANIZATION. In the case of any reorganization or any
consolidation of the Corporation with one or more other entities or a merger
of the Corporation with another entity, each holder of a share of Class A
Common Stock shall be entitled to receive with respect to such share the
same kind and amount of shares of stock and other securities and property
(including cash) receivable upon such reorganization, consolidation or
merger by a holder of a share of Class B Common Stock, and each holder of a
share of Class B Common Stock shall be entitled to receive with respect to
such share the same kind and amount of shares of stock and other securities
and property (including cash) receivable upon such reorganization,
consolidation or merger by a holder of a share of Class A Common Stock;
PROVIDED, HOWEVER, that, in the event that the outstanding shares of Class B
Common Stock have not been converted into or exchanged for shares of Class A
Common Stock, (i) in any such reorganization, consolidation, or merger, the
holders of shares of Class A Common Stock and the holders of shares of Class
B Common Stock may receive different kinds of shares of stock if the only
difference in such shares is the inclusion of voting rights which maintain
the different voting rights of the holders of Class A Common Stock and
holders of Class B Common Stock with respect to the election of the
applicable percentage of the authorized number of members of the Board of
Directors as described in Section (2)(e)(i) of this Article IV and (ii) if,
pursuant to any such transaction all or substantially all of the Common
Stock is exchanged for stock of another entity and such transaction is
required to be accounted for as a pooling-of-interests under U.S. generally
accepted accounting principles, the holders of shares of Class A Common
Stock and the holders of shares of Class B
Common Stock shall receive shares of stock in the acquiring entity based on
the relative fair value of a share of Class A Common Stock and a share of
Class B Common Stock. For purposes of this Section (2)(g), fair value shall
be measured as of the announcement date for such transaction.
(h) LIQUIDATION. In the event of any liquidation, dissolution or
winding-up of the affairs of the Corporation, whether voluntary or
involuntary, after payment in full of the amounts required to be paid to the
holders of Preferred Stock, the remaining assets and funds of the
Corporation shall be distributed pro rata to the holders of the Class A
Common Stock and the holders of Class B Common Stock. For purposes of this
Section 2(h), the voluntary sale, conveyance, lease, exchange or transfer
(for cash, shares of stock, securities or other consideration) of all or
substantially all of the assets of the Corporation or a consolidation or
merger of the Corporation with one or more other entities (whether or not
the Corporation is the corporation surviving such consolidation or merger)
shall not be deemed to be a liquidation, dissolution or winding-up, whether
voluntary or involuntary.
(i) CONVERSION.
(i) Prior to the date on which shares of Class B Common Stock are
distributed to the stockholders of Silicon Graphics, Inc., a Delaware
corporation (Silicon Graphics, Inc., together with its successors,
"Silicon Graphics"), in a Tax-Free Spin-Off (as defined below), each
share of Class B Common Stock shall automatically convert into one share
of Class A Common Stock
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upon the transfer of such share if, after such transfer, such share is
not beneficially owned by Silicon Graphics or any subsidiary of Silicon
Graphics. Shares of Class B Common Stock shall not convert into shares of
Class A Common Stock (A) in any transfer effected in connection with a
distribution of Class B Common Stock to stockholders of Silicon Graphics
in a transaction (including any distribution in exchange for shares of
capital stock or other securities of Silicon Graphics) intended generally
to qualify under Section 355 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code") (a "Tax-Free Spin-Off") or (B) in
any transfer after a Tax-Free Spin-Off. Following a Tax-Free Spin-Off,
shares of Class B Common Stock shall no longer be convertible into shares
of Class A Common Stock except as set forth in Section (2)(i)(ii)-(v) of
this Article IV.
For purposes of this Section (2)(i), a Tax-Free Spin-Off shall be
deemed to have occurred at the time shares are first transferred to
stockholders of Silicon Graphics following receipt of an affidavit
described in Section 2(i)(viii)(C) of this Article IV. For purposes of
this Section (2)(i), the term "beneficially owned" with respect to shares
of Class B Common Stock means ownership by a person or entity that,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, controls the voting power (which includes the
power to vote or to direct the voting) of such Class B Common Stock and
the term "subsidiary" means, as to any person or entity, all corporations
(other than the Corporation), partnerships, joint ventures, associations
or other entities in which such person or entity beneficially owns
(directly or indirectly) 50% or more of the outstanding voting stock,
voting power, partnership interests or similar voting interests.
(ii) In the event of a Tax-Free Spin-Off, each share of Class B
Common Stock shall automatically convert into one share of Class A Common
Stock on the fifth anniversary of the date on which shares of Class B
Common Stock are first transferred to stockholders of Silicon Graphics in
a Tax-Free Spin-Off unless, prior to such Tax-Free Spin-Off, Silicon
Graphics delivers to the Corporation an opinion of counsel, reasonably
satisfactory to the Corporation, to the effect that, based in part on
conversations with the Internal Revenue Service (the "IRS") disclosed to
the Corporation, such automatic conversion would have a material adverse
effect on the ability of Silicon Graphics to timely obtain a favorable
ruling from the IRS regarding the tax-free status of the Tax-Free
Spin-Off. If such an opinion is received, approval of such conversion
shall be submitted to a vote of the holders of the Common Stock at a
meeting of stockholders called for such purpose, as soon as practicable
after the fifth anniversary of the Tax-Free Spin-Off, unless, prior to
such Tax-Free Spin-Off, Silicon Graphics delivers to the Corporation an
opinion of counsel, reasonably satisfactory to the Corporation, to the
effect that, based in part on conversations with the IRS disclosed to the
Corporation, such vote would have a material adverse effect on the
ability of Silicon Graphics to timely obtain a favorable ruling from the
IRS regarding the tax-free status of the Tax-Free Spin-Off. At the
meeting of stockholders called for such purpose, every holder of Common
Stock shall be entitled to one vote in person or by proxy for each share
of Common Stock standing in his or her name on the transfer books of the
Corporation. Approval of such conversion shall require the approval of a
majority of the votes entitled to be cast by the holders of the Class A
Common Stock and the holders of the Class B Common Stock present and
voting, voting together as a single class, and the holders of the Class B
Common Stock shall not be entitled to a separate class vote. Such
conversion shall be effective on the date on which such approval is given
at a meeting of stockholders called for such purpose.
(iii) In the case of any merger or consolidation of the Corporation
pursuant to which all or substantially all of the capital stock of the
Corporation is exchanged for the stock of another entity and the
stockholders of the Corporation immediately prior to such merger or
consolidation own less than 50% of the outstanding shares of such other
entity immediately after such merger or consolidation, each share of
Class B Common Stock shall automatically convert into one share
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of Class A Common Stock immediately prior to the effectiveness of such
merger or consolidation, unless, prior to a Tax-Free Spin-Off, Silicon
Graphics delivers to the Corporation an opinion of counsel, reasonably
satisfactory to the Corporation, to the effect that, based in part on
conversations with the IRS disclosed to the Corporation, such automatic
conversion would have a material adverse effect on the ability of Silicon
Graphics to timely obtain a favorable ruling from the IRS regarding the
tax-free status of the Tax-Free Spin-Off.
(iv) Prior to a Tax-Free Spin-Off, upon the closing of a merger or
consolidation involving Silicon Graphics or a tender offer for the
capital stock of Silicon Graphics, if the stockholders of Silicon
Graphics immediately prior to such merger, consolidation or tender offer
own less than 50% of the outstanding shares of capital stock of Silicon
Graphics (or, if the capital stock of Silicon Graphics is exchanged or
converted in any such transaction for capital stock of another
corporation, such corporation) immediately after such merger,
consolidation or tender offer, each share of Class B Common Stock held by
Silicon Graphics or its successor shall automatically convert into one
share of Class A Common Stock.
(v) Prior to a Tax-Free Spin-Off, each share of Class B Common Stock
shall automatically convert into one share of Class A Common Stock if at
any time prior to such Tax-Free Spin-Off the aggregate number of
outstanding shares of Class B Common Stock owned by Silicon Graphics
and/or any of its subsidiaries is less than 50% of the aggregate number
of shares of Common Stock then outstanding; PROVIDED, HOWEVER, that such
automatic conversion shall not occur if, prior to the closing of any
transaction or the occurrence of any event which would reduce the
aggregate number of outstanding shares of Class B Common Stock owned by
Silicon Graphics and/or any of its subsidiaries to less than 50% of the
aggregate number of shares of Common Stock then outstanding, the
independent directors of the Board of Directors and the Chief Executive
Officer of the Corporation unanimously determine that such automatic
conversion is not in the interests of the Corporation and its
stockholders, other than Silicon Graphics, which determination shall be
irrevocable and final. Upon the closing of any subsequent transaction or
the occurrence of any event which would further reduce the percentage of
the shares of Common Stock then outstanding held by Silicon Graphics,
each share of Class B Common Stock shall automatically convert into one
share of Class A Common Stock, unless, prior to the closing of any such
transaction or the occurrence of any such event, the independent
directors of the Board of Directors and the Chief Executive Officer of
the Corporation unanimously determine that such automatic conversion is
not in the interests of the Corporation and its stockholders, other than
Silicon Graphics, which determination shall be irrevocable and final.
Notwithstanding the foregoing, prior to a Tax-Free Spin-Off, each
share of Class B Common Stock shall automatically convert into one share
of Class A Common Stock if at any time prior to such Tax-Free Spin-Off
the aggregate number of outstanding shares of Class B Common Stock owned
by Silicon Graphics and/or any of its subsidiaries is less than 30% of
the aggregate number of shares of Common Stock then outstanding.
(vi) The Corporation will provide notice of any automatic conversion
of all outstanding shares of Class B Common Stock to holders of record of
the Common Stock as soon as practicable following such conversion;
PROVIDED, HOWEVER, that the Corporation may satisfy such notice
requirement by providing such notice prior to such conversion. Such
notice shall be provided by mailing notice of such conversion, first
class postage prepaid, to each holder of record of the Common Stock, at
such holder's address as it appears on the transfer books of the
Corporation; PROVIDED, HOWEVER, that neither the failure to give such
notice nor any defect therein shall affect the validity of the automatic
conversion of any shares of Class B Common Stock. Each such notice shall
state, as appropriate, the following:
(A) the automatic conversion date;
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(B) that all outstanding shares of Class B Common Stock are
automatically converted;
(C) the place or places at which certificates for such shares
are to be surrendered for conversion; and
(D) that no dividends will be declared on the shares of Class B
Common Stock converted after such conversion date.
Immediately upon such conversion, the rights of the holders of shares
of Class B Common Stock as such shall cease and such holders shall be
treated for all purposes as having become the record owners of the shares
of Class A Common Stock issued upon such conversion; PROVIDED, HOWEVER,
that such persons shall be entitled to receive when paid any dividends
declared on the Class B Common Stock as of a record date preceding the
time of such conversion and unpaid as of the time of such conversion,
subject to Section (2)(i)(vii) of this Article IV.
(vii) Prior to a Tax-Free Spin-Off, no one other than those persons
in whose names shares of Class B Common Stock become originally
registered on the stock ledger of the Corporation by reason of their
record ownership of shares of Class A Common Stock which were exchanged
for shares of Class B Common Stock in accordance with the terms of the
Exchange Agreement, dated as of , 1999, between the
Corporation and Silicon Graphics or Section 2(k) of this Article IV, or
transferees or successive transferees who receive shares of Class B
Common Stock in connection with a transfer which meets the qualifications
set forth in Section 2(i)(viii) of this Article IV below, shall, by
virtue of the acquisition of a certificate representing shares of Class B
Common Stock, have the status of an owner or holder of shares of Class B
Common Stock or be recognized as such by the Corporation or be otherwise
entitled to enjoy the benefit of the special voting rights of a holder of
shares of Class B Common Stock.
(viii) Prior to a Tax-Free Spin-Off, shares of Class B Common Stock
shall be transferred on the books of the Corporation and a new
certificate therefor issued, upon presentation at the office of the
Secretary of the Corporation (or at such additional place or places as
may from time to time be designated by the Secretary or any Assistant
Secretary of the Corporation) of the certificate representing such
shares, in proper form for transfer and accompanied by all requisite
stock transfer tax stamps, only if such certificate when so presented
shall also be accompanied by any one of the following:
(A) an affidavit from Silicon Graphics stating that such
certificate is being presented to effect a transfer by Silicon
Graphics of such shares to a subsidiary of Silicon Graphics; or
(B) an affidavit from Silicon Graphics stating that such
certificate is being presented to effect a transfer by any subsidiary
of Silicon Graphics of such shares to Silicon Graphics or another
subsidiary of Silicon Graphics; or
(C) an affidavit from Silicon Graphics stating that such
certificate is being presented to effect a transfer by Silicon
Graphics of such shares to the stockholders of Silicon Graphics in
connection with a Tax-Free Spin-Off.
Each affidavit of a record holder furnished pursuant to this Section
2(i)(viii) shall be verified as of a date not earlier than five days
prior to the date of delivery thereof, and, if such record holder is a
corporation or partnership, shall be verified by an officer of such
corporation or by a general partner of such partnership, as the case may
be.
If a record holder of shares of Class B Common Stock shall deliver a
certificate representing such shares, endorsed by him or her for transfer
or accompanied by an instrument of transfer signed by him or her, to a
person who receives such shares in connection with a transfer which does
not meet the qualifications set forth in this Section 2(i)(viii), then
such person or any successive transferee of such certificate may treat
such endorsement or instrument as authorizing
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him or her on behalf of such record holder to convert such shares into
shares of Class A Common Stock in the manner above provided, for the
purpose of the transfer to himself or herself of the shares of Class A
Common Stock issuable upon such conversion, and to give on behalf of such
record holder the written notice of conversion above required, and may
convert such shares of Class B Common Stock accordingly.
If such shares of Class B Common Stock shall have been improperly
registered in the name of such a person (or in the name of any successive
transferee of such certificate) and a new certificate therefor issued,
such person or transferee shall surrender such new certificate for
cancellation, accompanied by the written notice of conversion above
required, in which case (A) such person or transferee shall be deemed to
have elected to treat the endorsement on (or instrument of transfer
accompanying) the certificate so delivered by such former record holder
as authorizing such person or transferee on behalf of such former record
holder so to convert such shares and so to give such notice, (B) the
shares of Class B Common Stock registered in the name of such former
record holder shall be deemed to have been surrendered for conversion for
the purpose of the transfer to such person or transferee of the shares of
Class A Common Stock issuable upon conversion, and (C) the appropriate
entries shall be made on the books of the Corporation to reflect such
action.
In the event that the Board of Directors (or any committee of the
Board of Directors, or any officer of the Corporation, designated for the
purpose by the Board of Directors) shall determine, upon the basis of
facts not disclosed in any affidavit or other document accompanying the
certificate representing shares of Class B Common Stock when presented
for transfer, that such shares of Class B Common Stock have been
registered in violation of the provisions of Section 2(i)(viii), or shall
determine that a person is enjoying for his or her own benefit the
special rights and powers of shares of Class B Common Stock in violation
of such provisions, then the Corporation shall take such action at law or
in equity as is appropriate under the circumstances. An unforeclosed
pledge made to secure a bona fide obligation shall not be deemed to
violate such provisions.
(ix) Prior to the occurrence of a Tax-Free Spin-Off, every
certificate representing shares of Class B Common Stock shall bear a
legend on the face thereof reading as follows:
"The shares of Class B Common Stock represented by this
certificate may not be transferred to any person in connection with a
transfer that does not meet the qualifications set forth in Section
2(i)(viii) of Article IV of the Amended and Restated Certificate of
Incorporation of this Corporation, as amended, and no person who
receives such shares in connection with a transfer which does not
meet the qualifications prescribed by Section 2(i)(viii) of said
Article IV is entitled to own or to be registered as the record
holder of such shares of Class B Common Stock. Each holder of this
certificate, by accepting the same, accepts and agrees to all of the
foregoing."
Upon and after the transfer of shares in a Tax-Free Spin-Off, shares
of Class B Common Stock shall no longer bear the legend set forth above
in this Section 2(i)(ix).
(x) Upon any conversion of shares of Class B Common Stock into
shares of Class A Common Stock pursuant to the provisions of this Section
(2)(i), any dividend for which the record date or payment date shall be
subsequent to such conversion which may have been declared on the shares
of Class B Common Stock so converted shall be deemed to have been
declared, and shall be payable, with respect to the shares of Class A
Common Stock into or for which such shares of Class B Common Stock shall
have been so converted, and any such dividend which shall have been
declared on such shares payable in shares of Class B Stock shall be
deemed to have been declared, and shall be payable, in shares of Class A
Common Stock.
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(xi) The Corporation shall at all times reserve and keep available,
out of its authorized but unissued Common Stock, such number of shares of
Class A Common Stock as would become issuable upon the conversion of all
shares of Class B Common Stock then outstanding.
(xii) The Corporation will not be required to pay any documentary,
stamp or similar issue or transfer taxes payable in respect of the issue
or delivery of shares of Class A Common Stock on the conversion of shares
of Class B Common Stock pursuant to Section (2)(i) of this Article IV,
and no such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Corporation the amount of such tax
or has established, to the satisfaction of the Corporation, that such tax
has been paid.
(j) EXCHANGE. In the event a Tax-Free Spin-Off has occurred, the
Corporation may exchange all (but not less than all) of the outstanding
shares of Class B Common Stock for shares of Class A Common Stock on a
one-for-one basis, PROVIDED, HOWEVER, this Section (2)(j) of this Article IV
shall have no further force or effect if, prior to a Tax-Free Spin-Off,
Silicon Graphics delivers to the Corporation an opinion of counsel,
reasonably satisfactory to the Corporation, to the effect that, based in
part on conversations with the IRS disclosed to the Corporation, the
inclusion of this Section (2)(j) of this Article IV would have a material
adverse effect on the ability of Silicon Graphics to timely obtain a
favorable ruling from the IRS regarding the tax-free status of the Tax-Free
Spin-Off.
(k) COMMON STOCK OWNED BY SILICON GRAPHICS. Prior to the occurrence of
a Tax-Free Spin-Off and if all of the shares of Class B Common Stock held by
Silicon Graphics and any Subsidiary (as defined in Section 2(i)(i)) of
Silicon Graphics have not been previously converted into or exchanged for
shares of Class A Common Stock, each share of Class A Common Stock held by
Silicon Graphics and any Subsidiary (as defined in Section 2(i)(i)) of
Silicon Graphics, however acquired, shall, immediately upon such
acquisition, automatically convert into one share of Class B Common Stock.
Notwithstanding the foregoing, after the occurrence of a Tax-Free Spin-Off,
any shares of Class A Common Stock held by Silicon Graphics and any
Subsidiary (as defined in Section 2(i)(i)) of Silicon Graphics, however
acquired, shall remain shares of Class A Common Stock.
SECTION 3. The Corporation shall not reissue or resell any shares of Class
B Common Stock which shall have been converted into or exchanged for shares of
Class A Common Stock pursuant to or as permitted by the provisions of Section
(2)(i) or Section 2(j) of this Article IV, or any shares of Class B Common Stock
which shall have been acquired by the Corporation in any other manner. The
Corporation shall, from time to time, take such appropriate action as may be
necessary to retire such shares and to reduce the authorized number of shares of
Class B Common Stock accordingly.
SECTION 4. The holders of shares of Common Stock shall have no preemptive
or preferential rights of subscription to any shares of any class of capital
stock of the Corporation or any securities convertible into or exchangeable for
shares of any class of capital stock of the Corporation.
SECTION 5. No stockholder shall be entitled to exercise any right of
cumulative voting.
SECTION 6. The Preferred Stock may be issued, if so determined by the Board
of Directors, either as a class without series or from time to time in one or
more series and with such designation for such class or each issue of such class
or each such series as may be adopted by the Board of Directors. The Board of
Directors in any such resolution or resolutions is expressly authorized to state
and express for such class or each such series:
(a) Voting rights, if any, including, without limitation, the authority
to confer multiple votes per share, voting rights as to specified matters or
issues or, subject to the provisions of this Certificate of Incorporation,
voting rights to be exercised either together with the holders of Common
Stock as a single class, or independently as a separate class;
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(b) The rate per annum and the times at and conditions upon which the
holders of shares of such class or series shall be entitled to receive
dividends, the conditions and dates upon which such dividends shall be
payable and whether such dividends shall be cumulative or noncumulative,
and, if cumulative, the terms upon which such dividends shall be cumulative;
(c) Redemption, repurchase, retirement and sinking fund rights,
preferences and limitations, if any, the amount payable on shares of such
class or series in the event of such redemption, repurchase or retirement,
the terms and conditions of any sinking fund, the manner of creating such
fund or funds and whether any of the foregoing shall be cumulative or
noncumulative;
(d) The rights to which the holders of the shares of such class or
series shall be entitled upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation;
(e) The terms, if any, upon which the shares of such class or series
shall be convertible into or exchangeable for shares of stock of any other
class or classes or of any other series of the same or any other class or
classes, including the price or prices or the rate or rates of conversion or
exchange and the terms of adjustment, if any; and
(f) Any other designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof so far as they are not inconsistent with the provisions
of this Certificate of Incorporation (as it may be amended from time to
time) and to the full extent now or hereafter permitted by the laws of the
State of Delaware.
SECTION 7. All shares of Preferred Stock, if issued as a class without
series, or all shares of the Preferred Stock of any one series, if issued in
series, shall be identical to each other in all respects and shall entitle the
holders thereof to the same rights and privileges, except that shares of any one
series issued at different times may differ as to the dates from which dividends
thereon, if cumulative, shall be cumulative.
SECTION 8. Except as otherwise provided by law, and subject to any rights
of the holders of Preferred Stock, the provisions of this Article IV (other than
Section 1 hereof) shall not be modified, revised, altered or amended, repealed
or rescinded in whole or in part, without the affirmative vote of the holders of
at least a majority of the then outstanding shares of Class A Common Stock and
the Class B Common Stock, voting together as a single class; PROVIDED, HOWEVER,
that with respect to any proposed amendment to this Certificate of Incorporation
which would alter or change the powers, preferences or special rights of the
shares of Class A Common Stock or Class B Common Stock so as to affect them
adversely, the affirmative vote of the holders of at least a majority of the
then outstanding shares of the class affected by the proposed amendment, voting
separately as a class, shall be obtained in addition to the affirmative vote of
the holders of at least a majority of the Class A Common Stock and the Class B
Common Stock, voting together as a single class as provided above.
ARTICLE V
BOARD OF DIRECTORS
SECTION 1. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors, which may exercise all the
powers of the Corporation and do all such lawful acts and things that are not
conferred upon or reserved to the stockholders by law, by this Certificate of
Incorporation or by the By-laws of the Corporation.
SECTION 2. The Board of Directors shall consist of not less than five (5)
and not more than ten (10) directors, the exact number of directors to be
determined by resolution of the Board of Directors. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as possible, of one third of the total number of
directors constituting the entire Board of Directors, as determined by the Board
of Directors, and directors elected by a class of stock shall be divided as
evenly as possible, as determined by the Board of Directors, among Class I,
Class II and
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Class III; PROVIDED, HOWEVER, that, in the event that there shall be only one
Class A Director, such Class A Director shall be in Class I. The term of the
initial Class I directors shall terminate on the date of the 1999 annual meeting
of stockholders of the Corporation; the term of the initial Class II directors
shall terminate on the date of the 2000 annual meeting of stockholders of the
Corporation; and the term of the initial Class III directors shall terminate on
the date of the 2001 annual meeting of stockholders of the Corporation.
Directors elected by a class of stock shall be divided as evenly as possible, as
determined by the Board of Directors, among Class I, Class II and Class III. At
each annual meeting of stockholders, beginning with the 1999 annual meeting of
stockholders, successors to the class of directors whose terms expire at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes of directors established pursuant to this Article V to maintain the
number of directors in each class as nearly equal as possible. No decrease in
the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director. Notwithstanding the foregoing, each director
initially appointed on behalf of the Class A Common Stock shall hold office
initially for a term expiring at the 1999 annual meeting of stockholders.
Subject to the immediately preceding sentence, a director shall hold office
until the annual meeting for the year in which his or her term expires and until
his or her successor shall be elected and shall qualify, SUBJECT, HOWEVER, to
prior death, resignation, retirement, disqualification or removal from office.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation (as it may be amended from time to
time) or the resolution or resolutions adopted by the Board of Directors
pursuant to Section 4 of Article IV, and such directors so elected shall not be
divided into classes pursuant to this Section 2 of Article V unless expressly
provided by such terms.
SECTION 3. Election of directors need not be by written ballot unless the
By-laws of the Corporation so provide.
SECTION 4. The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of its directors and
stockholders:
(a) The By-laws of the Corporation may be altered, amended or repealed
and new By-laws may be adopted by the affirmative vote of directors
constituting not less than a majority of the total authorized number of
directors fixed from time to time by the Board of Directors pursuant to
Section 2 of this Article V.
(b) Advance notice of stockholder nominations for the election of
directors and of the proposal of business by stockholders shall be given in
the manner provided in the By-laws of the Corporation, as amended and in
effect from time to time.
(c) Subject to any preferential rights of any outstanding series of
Preferred Stock, any Class A Director may be removed from office, only with
cause, by the affirmative vote of the holders of at least a majority of the
outstanding Class A Common Stock and any director elected by the holders of
the Class B Common Stock may be removed, only with cause, by the affirmative
vote of the holders of at least a majority of the outstanding Class B Common
Stock; PROVIDED, HOWEVER, that prior to a Tax-Free Spin-Off, any director
elected by the holders of the Class B Common Stock may be removed, with or
without cause, by the affirmative vote of the holders of at least a majority
of the outstanding Class B Common Stock.
(d) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at
least 80% of the Common Stock, voting as a single class, shall be required
to amend, repeal or adopt any provision inconsistent with this Article V.
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ARTICLE VI
STOCKHOLDER ACTION
SECTION 1. Any corporate action required or permitted to be taken at any
annual or special meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the Corporation
(either by hand or by certified or registered mail, return receipt requested) at
its registered office in the State of Delaware or its principal place of
business, or to an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded; PROVIDED,
HOWEVER, that effective as of the date on which Silicon Graphics and its
affiliates cease to be the beneficial owner of an aggregate of at least a
majority of the then outstanding shares of Common Stock (the "Trigger Date"),
any corporate action required or permitted to be taken at any annual or special
meeting of stockholders may be taken only at a duly called annual or special
meeting of stockholders and may not be taken by written consent in lieu of such
a meeting.
SECTION 2. Effective as of the Trigger Date, unless otherwise prescribed by
law and subject to any preferential rights of any outstanding series of
Preferred Stock, special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the Chairman of the Board of
Directors, the President or, at the request in writing of a majority of the
members of the Board of Directors, any officer of the Corporation, and effective
as of the Trigger Date, any power of the stockholders of the Corporation to call
a special meeting is specifically denied.
SECTION 3. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
80% of the Common Stock, voting as a single class, shall be required to amend,
repeal or adopt any provision inconsistent with this Article VI.
ARTICLE VII
INDEMNIFICATION
SECTION 1. Each person who was or is made a party to or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative, investigative or otherwise (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a director
or officer of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official capacity
as a director or officer or in any other capacity while serving as a director or
officer, shall be indemnified to the fullest extent authorized by the DGCL, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, amounts paid or to be paid in settlement and excise
taxes or penalties imposed on fiduciaries with respect to (i) employee benefit
plans, (ii) charitable organizations or (iii) similar matters) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of such person's heirs, executors and
administrators; PROVIDED, HOWEVER, that the Corporation shall indemnify any such
person seeking indemnity in connection with a proceeding (or part thereof)
initiated by such person (other than pursuant to Section 2 of this Article VII)
only if such proceeding (or part thereof) was authorized by the Board of
Directors. The right to indemnification conferred in this Section 1 of Article
VII shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition; PROVIDED, HOWEVER, that, if the DGCL requires, the
payment of such expenses incurred by a director or officer in his or her
capacity as a
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director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section 1 of Article VII or
otherwise.
SECTION 2. If a claim the Corporation is obligated to pay under Section 1
of this Article VI is not paid in full by the Corporation within 60 days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim against the Corporation.
It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not yet established that
it meets the standards of conduct which make it permissible under the DGCL for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
DGCL, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
SECTION 3. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Article VII shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, provision of this Certificate
of Incorporation, By-law of the Corporation, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
SECTION 4. The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, against any expense, liability or
loss, whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the DGCL.
SECTION 5. The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification, and rights to be
paid by the Corporation the expenses incurred in defending any proceeding in
advance of its final disposition, to any employee or agent of the Corporation to
the fullest extent of the provisions in this Article VII with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
SECTION 6. If any part of this Article VII should be found to be invalid or
ineffective in any proceeding, the validity and effect of the remaining
provisions shall not be affected. Any repeal or modification of this Article VII
by the stockholders of the Corporation shall not adversely affect any rights to
indemnification and to advancement of expenses that any person may have at the
time of such repeal or modification with respect to any acts or omissions
occurring prior to such repeal or modification.
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ARTICLE VIII
BY-LAWS
SECTION 1. The By-laws of the Company may be altered, amended or repealed
and new By-laws may be adopted (i) at any annual or special meeting of
stockholders, by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock, voting together as a single class, entitled
to vote thereat, PROVIDED, HOWEVER, that any proposed alteration, amendment or
repeal of, or the adoption of any By-law inconsistent with, Sections 3, 5 or 10
of Article II of the By-laws or Sections 1 or 5 of Article III of the By-laws by
the stockholders shall require the affirmative vote of the holders of at least
80% of the Common Stock, voting as a single class, or (ii) by the affirmative
vote of directors constituting not less than a majority of the total number of
directors which the Corporation would have if there were no vacancies.
SECTION 2. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
80% of the Common Stock, voting as a single class, shall be required to amend,
repeal or adopt any provision inconsistent with this Article VIII.
ARTICLE IX
LIMITATION ON LIABILITY OF DIRECTORS
SECTION 1. A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation 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 Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
ARTICLE X
CORPORATE OPPORTUNITIES
SECTION 1. As the Corporation recently ceased to be an indirect, wholly
owned subsidiary of Silicon Graphics, but Silicon Graphics remains a substantial
stockholder of the Corporation, and in anticipation that the Corporation and
Silicon Graphics may engage in the same or similar activities or lines of
business and have an interest in the same areas of corporate opportunities, and
in recognition of the benefits to be derived by the Corporation through its
continued contractual, corporate and business relations with Silicon Graphics
(including possible service of officers and directors of Silicon Graphics as
officers and directors of the Corporation), the provisions of this Article are
set forth to regulate and define the conduct of certain affairs of the
Corporation as they may involve Silicon Graphics and its officers and directors,
and the powers, rights, duties and liabilities of the Corporation and its
officers, directors and stockholders in connection therewith.
SECTION 2. Silicon Graphics shall have no duty to refrain from engaging in
the same or similar activities or lines of business as the Corporation, and
neither Silicon Graphics nor any officer or director thereof (except as provided
in Section 3 below) shall be liable to the Corporation or its stockholders for
the breach of any fiduciary duty by reason of any such activities of Silicon
Graphics. In the event that Silicon Graphics acquires knowledge of a potential
transaction or matter which may be a corporate opportunity for both Silicon
Graphics and the Corporation, Silicon Graphics shall have no duty to communicate
or offer such corporate opportunity to the Corporation and shall not be liable
to the Corporation or its stockholders for breach of any fiduciary duty as a
stockholder of the Corporation by reason of the fact that Silicon Graphics
pursues or acquires such corporate opportunity for itself, directs such
corporate opportunity to another person, or does not communicate information
regarding such corporate opportunity to the Corporation.
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SECTION 3. In the event that a director or officer of the Corporation who
is also a director or officer of Silicon Graphics acquires knowledge of a
potential transaction or matter which may be a corporate opportunity for both
the Corporation and Silicon Graphics, such director or officer of the
Corporation shall have fully satisfied and fulfilled the fiduciary duty of such
director or officer to the Corporation and its stockholders with respect to such
corporate opportunity, if such director or officer acts in a manner consistent
with the following policy: (i) a corporate opportunity offered to any person who
is an officer of the Corporation, and who is also a director but not an officer
of Silicon Graphics, shall belong to the Corporation; (ii) a corporate
opportunity offered to any person who is a director but not an officer of the
Corporation, and who is also a director or officer of Silicon Graphics shall
belong to the Corporation if such opportunity is expressly offered to such
person in writing solely in his or her capacity as a director of the
Corporation, and otherwise shall belong to Silicon Graphics; and (iii) a
corporate opportunity offered to any person who is an officer of both the
Corporation and Silicon Graphics shall belong to the Corporation if such
opportunity is expressly offered to such person in writing solely in his or her
capacity as an officer of the Corporation, and otherwise shall belong to Silicon
Graphics.
SECTION 4. Any person purchasing or otherwise acquiring any interest in
shares of the capital stock of the Corporation shall be deemed to have notice of
and to have consented to the provisions of this Article.
SECTION 5. For purposes of this Article only:
(a) A director of the Corporation who is Chairman of the Board of
Directors or of a committee thereof shall not be deemed to be an officer of
the Corporation by reason of holding such position (without regard to
whether such position is deemed an office of the Corporation under the
By-laws of the Corporation), unless such person is a full-time employee of
the Corporation; and
(b) (i) The term "Corporation" shall mean the Corporation and all
corporations, partnerships, joint ventures, associations and other entities
in which the Corporation beneficially owns (directly or indirectly) 50% or
more of the outstanding voting stock, voting power, partnership interests or
similar voting interests, and (ii) the term "Silicon Graphics," for the
purpose of this Article only, shall mean Silicon Graphics and all
corporations, partnerships, joint ventures, associations and other entities
(other than the Corporation, defined in accordance with clause (i) of this
Section 5(b)) in which Silicon Graphics beneficially owns (directly or
indirectly) 50% or more of the outstanding voting stock, voting power,
partnership interests or similar voting interests.
SECTION 6. Notwithstanding anything in this Certificate of Incorporation to
the contrary, (i) the foregoing provisions of this Article shall expire on the
date that Silicon Graphics ceases to beneficially own Common Stock representing
at least 20% of the outstanding shares of Common Stock and no person who is a
director or officer of the Corporation is also a director or officer of Silicon
Graphics; and (ii) in addition to any vote of the stockholders required by this
Certificate of Incorporation, until the time that Silicon Graphics ceases to
beneficially own Common Stock representing at least 20% of the outstanding
shares of Common Stock, the affirmative vote of the holders of more than 80% of
the outstanding shares of Common Stock, voting as a single class, shall be
required to alter, amend or repeal in a manner adverse to the interests of
Silicon Graphics, or adopt any provision adverse to the interests of Silicon
Graphics and inconsistent with, any provision of this Article. Neither the
alteration, amendment or repeal of this Article nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article
shall eliminate or reduce the effect of this Article in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article,
would accrue or arise, prior to such alteration, amendment, repeal or adoption.
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ARTICLE XI
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend, alter, restate, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the laws of the State of Delaware, and all
rights of the stockholders herein are granted subject to this reservation.
This Amended and Restated Certificate of Incorporation shall become
effective at (Wilmington, Delaware time), , 1999.
IN WITNESS WHEREOF, MIPS TECHNOLOGIES, INC. has caused this certificate to
be signed by John E. Bourgoin, its President and Chief Executive Officer, and
attested by Kevin C. Eichler, its Vice President and Chief Financial Officer, on
this day of , 1999.
<TABLE>
<S> <C> <C>
MIPS TECHNOLOGIES, INC.
By:
-----------------------------------------
Name: John E. Bourgoin
Title: President and Chief Executive
Officer
ATTEST:
- ------------------------------
Name: Kevin C. Eichler
Title: Vice President and
Chief Financial Officer
</TABLE>
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ANNEX B
AMENDED AND RESTATED BY-LAWS
OF
MIPS TECHNOLOGIES, INC.
ARTICLE I
OFFICES
The registered office of the Corporation shall be in the City of Wilmington,
County of New Castle, State of Delaware. The Corporation may also have one or
more offices at such other places, either inside or outside of the State of
Delaware, as the Board of Directors may from time to time determine or as the
business of the Corporation may require. The books and records of the
Corporation may be kept (subject to the provisions of the laws of the State of
Delaware) at any place, either inside or outside of the State of Delaware, as
from time to time may be determined by the Board of Directors.
ARTICLE II
STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of stockholders (whether annual or
special) shall be held at such place, either inside or outside of the State of
Delaware, as the Board of Directors shall from time to time determine.
Section 2. ANNUAL MEETING. The annual meeting of the stockholders of the
Corporation shall be held on such date and at such time as may be fixed by
resolution of the Board of Directors.
Section 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or by the
Corporation's Amended and Restated Certificate of Incorporation, as amended from
time to time (the "Charter"), and subject to any preferential rights of any
outstanding series of Preferred Stock (as defined in the Charter), special
meetings of stockholders of the Corporation for any purpose or purposes may be
called only by the Chairman of the Board of Directors, the President, or, at the
request in writing of a majority of the Board of Directors, any officer. Such
request shall state the purpose or purposes of the proposed meeting. In
addition, prior to the Trigger Date (as defined in the Charter), the Corporation
shall call a special meeting of stockholders of the Corporation promptly upon
request by Silicon Graphics, Inc., a Delaware corporation, or any of its
affiliates, in each case if such entity is a stockholder of the Corporation.
Section 4. NOTICE OF MEETINGS. Except as otherwise provided by law,
written or printed notice, stating the place, day and hour of the meeting and
the purpose or purposes for which the meeting is called shall be delivered by
the Corporation not less than ten (10) calendar days nor more than sixty (60)
calendar days before the date of the meeting, either personally or by mail, to
each stockholder of record entitled to vote at such meeting. Meetings may be
held without notice if all stockholders entitled to vote are present, or if
notice is waived by those not present in accordance with Section 2 of Article X
of these By-laws. Any previously scheduled meeting of the stockholders may be
postponed, and any special meeting of the stockholders may be canceled, by
resolution of the Board of Directors upon public notice given prior to the date
previously scheduled for such meeting of stockholders.
Section 5. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.
(a) Annual Meetings of Stockholders.
(i) Nominations of persons for election to the Board of Directors and
the proposal of business to be considered by the stockholders may be made at
an annual meeting of stockholders (A) pursuant to the Corporation's notice
of meeting delivered pursuant to Section 4 of this Article II, (B) by or at
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the direction of the Board of Directors, (C) by any stockholder of the
Corporation who was a stockholder of record at the time of the giving of the
notice provided for in this Section 5, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this
Section 5, or (D) prior to the Trigger Date, by Silicon Graphics, Inc., a
Delaware corporation ("Silicon Graphics"), or any of its affiliates that is
a stockholder of the Corporation.
(ii) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (C) of paragraph (a)(i)
of this Section 5, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation, and, if the stockholder is
proposing other business, such other business must be a proper subject for
stockholder action, and, if the stockholder is nominating a person or
persons for election to the Board of Directors, such nominating stockholder
must be entitled to vote for the election of the director to be nominated.
To be timely, a stockholder's notice shall be delivered to the Secretary at
the principal executive offices of the Corporation not less than sixty (60)
days nor more than ninety (90) days prior to the first anniversary of the
preceding year's annual meeting; PROVIDED, HOWEVER, that, in the event that
the date of the annual meeting is advanced by more than thirty (30) days or
delayed by more than sixty (60) days from such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the
ninetieth day prior to such annual meeting and not later than the close of
business on the later of the sixtieth day prior to such annual meeting or
the tenth day following the day on which public announcement of the date of
such meeting is first made by the Corporation. For purposes of determining
whether a stockholder's notice shall have been delivered in a timely manner
for the annual meeting of stockholders in 1999, the first anniversary of the
previous year's meeting shall be deemed to be June , 1999. In no event
shall the public announcement of an adjournment of an annual meeting
commence a new time period for the giving of a stockholder's notice as
described above. Such stockholder's notice shall set forth (A) as to each
person whom the stockholder proposes to nominate for election or reelection
as a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an
election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as
a director if elected) and the class of stock which such director will
represent; (B) as to any other business that the stockholder proposes to
bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and
the beneficial owner, if any, on whose behalf the proposal is made; and (C)
as to the stockholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made, (1) the name and address of
such stockholder, as they appear on the Corporation's books, and of such
beneficial owner and (2) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(iii) Notwithstanding anything in the second sentence of paragraph
(a)(ii) of this Section 5 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is
no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors made by
the Corporation at least seventy (70) days prior to the first anniversary of
the preceding year's annual meeting, a stockholders' notice required by this
Section 5 shall also be considered timely, but only with respect to nominees
for any new positions created by such increase, if it shall be delivered to
the Secretary at the principal executive offices of the Corporation not
later than the close of business on the tenth day following the day on which
such public announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be conducted
at a special meeting of stockholders as shall have been brought before the
meeting pursuant to the Corporation's notice of
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meeting pursuant to Section 4 of this Article II. Nominations of persons for
election to the Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the Corporation's
notice of meeting (i) by or at the direction of the Board of Directors, (ii) by
any stockholder of the Corporation who was a stockholder of record at the time
of the giving of the notice provided for in this Section 5, who is entitled to
vote for the election of the director to be nominated at the special meeting,
and who complies with the notice procedures set forth in this Section 5, or
(iii) prior to the Trigger Date and with respect to the directors that the
holders of the Class B Common Stock (as defined in the Charter) are entitled to
elect, by Silicon Graphics, or any of its affiliates that is a stockholder of
the Corporation. In the event that the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board of
Directors, any stockholder entitled to vote for the election of the director to
be nominated may nominate such person or persons (as the case may be), for
election to the Board of Directors, if the requirements of paragraph (a)(ii) of
this Section 5 shall be met and the stockholder's notice required thereby is
delivered to the Secretary of the Corporation at the principal executive offices
of the Corporation not earlier than the ninetieth day prior to such special
meeting and not later than the close of business on the later of the sixtieth
day prior to such special meeting or the tenth day following the day on which
public announcement by the Corporation is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting.
(c) General.
(i) Only persons who are nominated in accordance with the procedures set
forth in this Section 5 shall be eligible to serve as directors and only
such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Charter or these
By-laws, the chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before
the meeting was made in accordance with this Section 5 and, if any proposed
nomination or business is not in compliance with this Section 5, to declare
that such defective proposal or nomination shall be disregarded.
(ii) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or a comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section 5, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 5. Nothing in this Section 5 shall be
deemed to affect any rights (A) of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under
the Exchange Act or (B) of the holders of any series or Preferred Stock to
elect directors.
Section 6. QUORUM. Except as otherwise provided by law or in the Charter,
at any meeting of stockholders, the holders of a majority of the aggregate
voting power of all outstanding shares of all classes of capital stock of the
Corporation entitled to vote at such meeting (the "Voting Stock"), represented
in person or by proxy, shall constitute a quorum at such meeting, except when
specified business is required to be voted on by a class or series of stock
voting as a class, the holders of a majority of the shares of such class or
series shall constitute a quorum of such class or series for the transaction of
such business. At any meeting of stockholders at which a quorum is not present,
the person serving as chairman of the meeting or the holders of a majority in
interest of the stockholders present in person or by proxy and who are entitled
to vote on every matter that is to be voted on without regard to class at such
meeting may adjourn the meeting from time to time. No notice of the time and
place of adjourned meetings need by given except as required by law.
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Section 7. ORGANIZATION AND CONDUCT OF BUSINESS. The Chairman of the Board
of Directors shall act as chairman of meetings of the stockholders. The Board of
Directors may designate any other officer or director of the Corporation to act
as chairman of any meeting in the absence of the Chairman of the Board of
Directors, and the Board of Directors may further provide for determining who
shall act as chairman of any stockholder's meeting in the absence of the
Chairman of the Board of Directors and such designee. The person serving as
chairman of any meeting of stockholders shall determine the order of business
and the procedure at the meeting, including such regulation of the manner of
voting and the conduct of discussion as seem to him or her in order.
The Secretary of the Corporation shall act as secretary of all meetings of
the stockholders, but in the absence of the Secretary the presiding officer may
appoint any other person to act as secretary of any meeting.
Section 8. PROXIES AND VOTING. At any meeting of stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument executed in writing (or in such manner prescribed by the General
Corporation Law of the State of Delaware) by the stockholder, or by such
person's duly authorized attorney in fact.
Election of directors at all meetings of the stockholders at which directors
are to be elected shall be by ballot, and, subject to the rights of the holders
of any series of Preferred Stock to elect directors, a plurality of the shares
present in person or represented by proxy at the meeting, entitled to vote in
the election and actually cast shall elect the directors. Except as otherwise
provided by law, the Charter and these By-laws and subject to the rights of the
holders of any series of Preferred Stock, in all matters other than the election
of directors, the affirmative vote of a majority of the voting power of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the matter shall be the act of the stockholders.
Section 9. INSPECTORS OF ELECTION. The Board of Directors may, and to the
extent required by law shall, in advance of any meeting of stockholders, appoint
one or more inspectors to act at the meeting, decide upon the qualification of
voters, count the votes, decide the results and make a written report thereof in
accordance with the General Corporation Law of the State of Delaware. The Board
of Directors may designate one or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of stockholders, the person presiding at the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspector(s) shall have the
duties prescribed by law.
Section 10. NO STOCKHOLDER ACTION BY WRITTEN CONSENT. Effective as of the
Trigger Date, any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of such holders and may not be effected by any consent in writing by such
holders.
ARTICLE III
BOARD OF DIRECTORS
Section 1. NUMBER AND TERM OF OFFICE. Subject to the rights, if any, of
holders of preferred stock of the Corporation, the number of directors of the
Corporation shall be fixed from time to time exclusively by resolution of the
Board of Directors adopted by the affirmative vote of directors constituting not
less than a majority of the Whole Board (as hereinafter defined), but shall
consist of not more than ten (10) nor less than five (5) directors. The
directors, other than those who may be elected by the holders of any class or
series of preferred stock of the Corporation, shall be classified, with respect
to the time they severally hold office, into three classes, as nearly equal in
number as possible, one class to be initially elected for a term expiring at the
annual meeting of stockholders to be held in 1999, another class to be initially
elected for a
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term expiring at the annual meeting of stockholders to be held in 2000, and
another class to be initially elected for a term expiring at the annual meeting
of stockholders to be held in 2001, with each director to serve until his or her
successor shall have been elected and shall have qualified, PROVIDED, HOWEVER,
that, in the event that there shall be only one Class A Director (as defined in
the Charter), such Class A Director shall be in the class of directors whose
initial term expires at the annual meeting of stockholders to be held in 1999.
Directors elected by a class of stock shall be divided as evenly as possible, as
determined by the Board of Directors, among the three classes of directors. At
each succeeding annual meeting of stockholders, directors elected to succeed
those directors whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election, with each director to serve until his or her successor shall have been
elected and shall have qualified. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes of directors
established pursuant to Article V of the Charter to maintain the number of
directors in each class as nearly equal as possible. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director. Notwithstanding the foregoing, each director initially
appointed on behalf of the Class A Common Stock shall hold office initially for
a term expiring at the 1999 annual meeting of stockholders. Subject to the
immediately preceding sentence, a director shall hold office until the annual
meeting for the year in which his or her term expires and until his or her
successor shall be elected and shall qualify, SUBJECT, HOWEVER, to prior death,
resignation, retirement, disqualification or removal from office.
For purposes of these By-laws, the term "Whole Board" shall mean the total
number of directors that the Corporation would have if there were no vacancies
on the Corporation's Board of Directors.
Section 2. MEETINGS. Regular meetings of the Board of Directors may be
held at such place, either inside or outside of the State of Delaware, and at
such time, as may from time to time be designated by the Chairman of the Board
of Directors or resolution of the Board of Directors or as may be specified in
the call of any meeting. An annual meeting of the Board of Directors shall be
held on the same day as, and as soon as practicable following, the annual
meeting of stockholders or at such other time or place as shall be determined by
the Board of Directors at its regular meeting next preceding said annual meeting
of stockholders.
Special meetings of the Board of Directors may be held at any time on the
call of the Chairman of the Board of Directors, the President or a majority of
the Board of Directors then in office. The person or persons authorized to call
special meetings of the Board of Directors may fix the time and place of the
meetings. Meetings may be held at any time or place without notice if all the
directors are present or if those not present waive notice of the meeting in
writing.
Section 3. NOTICE OF MEETINGS. Notice of the time and place of meetings of
the Board of Directors (excepting the annual meeting of directors) shall be
given to each director by the Secretary or an Assistant Secretary of the
Corporation by (i) mailing or sending via courier such notice not later than
during the second day preceding the day on which such meeting is to be held, or
(ii) by (a) sending a facsimile transmission or other form of electronic
communication containing such notice or (b) delivering such notice personally or
by telephone, in each case, not later than during the first day preceding the
day on which such meeting is to be held. Unless otherwise stated in the notice
thereof, any and all business may be transacted at any meeting.
Section 4. QUORUM AND ORGANIZATION OF MEETINGS. Subject to Section 5 of
this Article III, a whole number of directors equal to at least a majority of
the Whole Board shall constitute a quorum for the transaction of business, but
if at any meeting of the Board of Directors there shall be less than a quorum
present, a majority of the directors present may adjourn the meeting from time
to time without further notice. The act of a majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors. The directors present at a duly organized meeting may continue to
transact
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business until adjournment, notwithstanding the withdrawal of enough directors
to leave less than a quorum.
Meetings shall be presided over by the Chairman of the Board of Directors
or, in his or her absence, by such other person as the Board of Directors may
designate or the members present may select.
Section 5. VACANCIES. Any vacancy in the office of a director created by
the death, resignation, disqualification or removal of a director may be filled
by the vote of the majority of the directors then in office (or the sole
remaining director) elected by (or appointed on behalf of) the same class of
stock that elected that director (or on behalf of which that director was
appointed) whose death, resignation, disqualification or removal created the
vacancy, unless there are no such directors or no outstanding shares of such
class of stock, in which case such vacancy may be filled by the vote of the
majority of all directors then in office, even if less than a quorum, or by the
sole remaining director. Notwithstanding anything in Section (2)(f) or Section
(2)(e) of Article IV of the Charter to the contrary, any vacancy in the office
of a director created by the death, resignation, disqualification or removal of
a director elected by (or appointed on behalf of) the holders of a class of
stock may also be filled by a vote of holders of such class of stock, unless
there are no outstanding shares of such class of stock, in which case any such
vacancy may be filled by a vote of holders of the holders of the remaining class
of stock. Any director elected to fill a vacancy created by the death,
resignation or removal of a director shall hold office for the remainder of the
full term of the director whose vacancy is being filled and until such
director's successor shall have been elected and qualified unless removed and
replaced pursuant to Section 4(c) of Article V of the Charter and Section (2)(f)
of Article IV of the Charter.
Subject to the rights, if any, of the holders of any series of Preferred
Stock then outstanding, any vacancy on the Board of Directors that results from
an increase in the number of directors shall be filled by the vote of the
majority of the directors then in office. In filling such vacancies, the Board
of Directors shall take all necessary actions to ensure that, following the
appointment to such vacancies (unless all of the outstanding shares of Class B
Common Stock shall have been converted into or exchanged for shares of Class A
Common Stock), 20% of the number of members of the Board of Directors as so
increased (or, if such 20% is not a whole number, then the next lower whole
number of directors that is closest to 20% of such membership) consists of
directors elected by (or appointed on behalf of) the holders of Class A Common
Stock, and the remaining members of the Board of Directors as so increased
consists of directors elected by (or appointed on behalf of) the holders of
Class B Common Stock. Any director elected (or appointed) in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of directors in which the new directorship was created and until such
director's successor shall have been elected and qualified, unless such director
is removed and replaced pursuant to Section 4(c) of Article V and Section (2)(f)
of Article IV of the Charter.
Section 6. POWERS. In addition to the powers and authorities by these
By-laws expressly conferred upon them, the Board of Directors shall have and may
exercise all such powers of the Corporation and do all such lawful acts and
things that are not by statute, the Charter or these By-laws directed or
required to be exercised or done by the stockholders.
Section 7. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director, each
member of any committee designated by the Board of Directors and each officer,
in the performance of his or her duties, shall be fully protected in relying in
good faith upon such information, opinions, reports or statements presented to
the Corporation by any of its officers or employees, or by committees of the
Board of Directors, or by any other person, as to matters such director, member
or officer, as the case may be, reasonably believes are within such person's
professional or expert competence and who has been selected with reasonable care
by the Board of Directors or by any such committee, or in relying in good faith
upon other records of the Corporation.
Section 8. COMPENSATION OF DIRECTORS. Directors, as such, may receive,
pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors, including, without
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limitation, services as members of committees of the Board of Directors;
PROVIDED, HOWEVER, that nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 9. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise
provided by the Charter or these By-laws, members of the Board of Directors, or
any committee designated by the Board of Directors, may participate in a meeting
of the Board of Directors or such committee by means of a conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting pursuant to
this Section 9 shall constitute presence in person at such meeting.
Section 10. ACTIONS BY WRITTEN CONSENT. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
ARTICLE IV
COMMITTEES OF THE BOARD OF DIRECTORS
Section 1. COMMITTEES OF THE BOARD OF DIRECTORS. There are hereby
established as committees of the Board of Directors: an Audit Committee and a
Compensation Committee, each of which shall have the powers and functions set
forth in Sections 2 and 3 hereof, respectively, and such additional powers as
may be delegated to it by the Board of Directors. The Board of Directors may
from time to time establish additional standing committees or special committees
of the Board of Directors, each of which shall have such powers and functions as
may be delegated to it by the Board of Directors. The Board of Directors may
abolish any committee established by or pursuant to this Section 1 as it may
deem advisable. Each such committee shall consist of two or more directors, the
exact number being determined from time to time by the Board of Directors.
Designations of the chairman and members of each such committee, and, if
desired, a vice chairman and alternates for members, shall be made by the Board
of Directors. In the absence or disqualification of any member of any committee
and any alternate member in his or her place, the member or members of the
committee present at the meeting, and not disqualified from voting whether or
not he or she or they constitute a quorum, may by unanimous vote appoint another
member of the Board of Directors to act at the meeting in the place of the
absent or disqualified member. Each committee shall have a secretary who shall
be designated by its chairman. A vice chairman of a committee shall act as the
chairman of the committee in the absence or disability of the chairman. Nothing
herein shall be deemed to prevent the Board of Directors from appointing one or
more committees consisting in whole or in part of persons who are not directors
of the Corporation; PROVIDED, HOWEVER, that no such committee shall have or may
exercise any authority of the Board of Directors.
Section 2. AUDIT COMMITTEE. The Audit Committee shall select and engage,
on behalf of the Corporation, independent public accountants to (a) audit the
books of account and other corporate records of the Corporation and (b) perform
such other duties as the Audit Committee may from time to time prescribe. The
Audit Committee shall transmit financial statements certified by such
independent public accountants to the Board of Directors after the close of each
fiscal year. The selection of independent public accountants for each fiscal
year shall be made in advance of the annual meeting of stockholders in such
fiscal year and shall be submitted for ratification or rejection at such
meeting. The Audit Committee shall confer with such accountants and review and
approve the scope of the audit of the books of account and other corporate
records of the Corporation. The Audit Committee shall have the power to confer
with and direct the officers of the Corporation to the extent necessary to
review the internal controls, accounting practices, financial structure and
financial reporting of the Corporation. From time to time the Audit Committee
shall report to and advise the Board of Directors concerning the results of its
consultation and review and such other matters relating to the internal
controls, accounting practices, financial structure and financial reporting of
the Corporation as the Audit Committee believes merit
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review by the Board of Directors. The Audit Committee also shall perform such
other functions and exercise such other powers as may be delegated to it from
time to time by the Board of Directors.
Section 3. COMPENSATION COMMITTEE. The Compensation Committee shall fix
from time to time the salaries of members of the Board of Directors who are
officers or employees of the Corporation and of all Senior Vice Presidents,
Executive Vice Presidents and Vice Presidents of the Corporation. It also shall
perform such functions as may be delegated to it under the provisions of any
bonus, supplemental compensation, special compensation or stock option plan of
the Corporation.
Section 4. RULES AND PROCEDURES. Each committee may fix its own rules and
procedures and shall meet at such times and places as may be provided by such
rules, by resolution of the committee or by call of the chairman or vice
chairman of such committee. Notice of each meeting of each committee, other than
of regular meetings provided for by its rules or resolutions, shall be given to
committee members. The presence of a majority of its members, but not less than
two, shall constitute a quorum of any committee, and all questions shall be
decided by a majority vote of the members present at the meeting. All actions
taken at each committee meeting shall be recorded in minutes of the meeting.
Section 5. APPLICATION OF ARTICLE. Whenever any provision of any other
document relating to any committee of the Corporation named therein shall be in
conflict with any provision of this Article IV, the provisions of this Article
IV shall govern, except that if such other document shall have been approved by
the stockholders or by the Board of Directors, the provisions of such other
document shall govern.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the Corporation shall include a
Chairman of the Board of Directors, who shall be chosen from among the
directors, a President, a Chief Financial Officer, one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Treasurer, a General Counsel and a Secretary, each of whom shall be elected by
the Board of Directors to hold office until his or her successor shall have been
chosen and shall have qualified for office. The Board of Directors, the Chairman
of the Board of Directors and the Chief Executive Officer may elect or appoint
one or more Controllers, one or more Assistant Vice Presidents, one or more
Assistant Treasurers, one or more Assistant General Counsels and one or more
Assistant Secretaries, and the Board of Directors may elect or appoint such
other officers as it may deem necessary, or desirable, each of whom shall have
such authority, shall perform such duties and shall hold office for such term as
may be prescribed by the Board of Directors from time to time. Any person may
hold at one time more than one office, excepting that the duties of the
President and Secretary shall not be performed by one person.
Section 2. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board
of Directors shall be the Chief Executive Officer of the Corporation. Subject to
the provisions of these By-laws and to the direction of the Board of Directors,
he or she shall have ultimate authority for decisions relating to the general
management and control of the affairs and business of the Corporation and shall
perform all other duties and exercise all other powers commonly incident to the
position of Chief Executive Officer or which are or from time to time may be
delegated to him or her by the Board of Directors, or which are or may at any
time be authorized or required by law. He or she shall preside at all meetings
of the Board of Directors. He or she shall make reports to the Board of
Directors and stockholders, and shall see that all orders and resolutions of the
Board of Directors and any committee thereof are carried into effect. The
Chairman of the Board may also serve as President, if so elected by the Board of
Directors. The Board of Directors may also elect a Vice Chairman to act in the
place of the Chairman upon his or her absence or inability to act.
Section 3. PRESIDENT. Subject to the provisions of these By-laws and to
the direction of the Board of Directors and of the Chief Executive Officer, the
President shall have such powers and shall perform such duties as from time to
time may be delegated to him or her by the Board of Directors or by the Chief
Executive Officer, or which are or may at any time be authorized or required by
law.
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Section 4. EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS AND VICE
PRESIDENTS. Each of the Executive Vice Presidents, each of the Senior Vice
Presidents and each of the other Vice Presidents shall have such powers and
shall perform such duties as may be delegated to him or her by the Board of
Directors, the Chairman of the Board of Directors, the President or such other
officer or officers to whom he or she is directly responsible.
Section 5. TREASURER AND ASSISTANT TREASURER. The Treasurer, subject to
the direction of the Board of Directors, shall have the care and custody of all
funds and securities of the Corporation. When necessary or proper he or she
shall endorse on behalf of the Corporation for collection, checks, notes and
other obligations, and shall deposit all funds of the Corporation in such banks
or other depositaries as may be designated by the Board of Directors or by such
officers or employees as may be authorized by the Board of Directors so to
designate. He or she shall perform all acts incident to the office of Treasurer,
subject to the control of the Board of Directors and such other officer or
officers to whom he or she is directly responsible. He or she may be required to
give a bond for the faithful discharge of his or her duties, in such sum and
upon such conditions as the Board of Directors may require.
At the request and direction of the Treasurer or, in the case of his or her
absence or inability to act, any Assistant Treasurer may act in his or her
place. In the case of the death of the Treasurer, or in the case of his or her
absence or inability to act without having designated an Assistant Treasurer to
act temporarily in his or her place, the Assistant Treasurer or other person so
to perform the duties of the Treasurer shall be designated by the Chairman of
the Board of Directors, the President or an Executive Vice President.
Section 6. SECRETARY AND ASSISTANT SECRETARY. The Secretary shall keep
full and accurate minutes of the meetings of the stockholders and of the Board
of Directors in the proper record book of the Corporation provided therefor,
and, when required, the minutes of meetings of the committees, and shall be
responsible for the custody of all such minutes. Subject to the direction of the
Board of Directors, the Secretary shall have custody of the stock ledgers and
documents of the Corporation. He or she shall have custody of the corporate seal
of the Corporation and shall affix and attest such seal to any instrument whose
execution under seal shall have been duly authorized. He or she shall give due
notice of meetings and, subject to the direction of the Board of Directors,
shall perform all other duties commonly incident to his or her office or as
properly required of him or her by the Chairman of the Board of Directors and
such other officer or officers to whom he or she is directly responsible and
shall enjoy all other powers commonly incident to his or her office.
At the request and direction of the Secretary or, in the case of his or her
absence or inability to act, any Assistant Secretary may act in his or her
place. In the case of the death of the Secretary, or in the case of his or her
absence or inability to act without having designated an Assistant Secretary to
act temporarily in his or her place, the Assistant Secretary or other person so
to perform the duties of the Secretary shall be designated by the Chairman of
the Board of Directors, the President or an Executive Vice President.
Section 7. ASSISTANT VICE PRESIDENTS AND OTHER OFFICERS. Each Assistant
Vice President and other officers shall perform such duties commonly incident to
his or her office or as properly required of him or her by the Chairman of the
Board of Directors and such other officer or officers to whom he or she is
directly responsible.
Section 8. GENERAL COUNSEL. The General Counsel shall have general
supervision of all matters of a legal nature concerning the Corporation. He or
she shall perform all such duties commonly incident to his or her office or as
properly required of him or her by the Chairman of the Board of Directors and
such other officer or officers to whom he or she is directly responsible.
Section 9. SALARIES. Salaries of officers, agents or employees shall be
fixed from time to time by the Board of Directors or by such committee or
committees, or person or persons, if any, to whom such power shall have been
delegated by the Board of Directors. An employment contract, whether with an
officer, agent or employee, if expressly approved or specifically authorized by
the Board of Directors, may fix a
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term of employment thereunder; and such contract, if so approved or authorized,
shall be valid and binding upon the Corporation in accordance with the terms
thereof, PROVIDED that this provision shall not limit or restrict in any way the
right of the Corporation at any time to remove from office, discharge or
terminate the employment of any such officer, agent or employee prior to the
expiration of the term of employment under any such contract.
Section 10. VACANCIES. A vacancy in any office filled by election of the
Board of Directors may be filled by the Board of Directors by the election of a
new officer who shall hold office, subject to the provisions of this Article V,
until the regular meeting of the directors following the next annual meeting of
the stockholders and until his or her successor is elected.
Section 11. REMOVAL OR DISCHARGE. Any officer may be removed or discharged
by the Chairman of the Board of Directors at any time excepting an officer who
is also a director. Any officer who also is a director may be discharged at any
time by the Board of Directors.
ARTICLE VI
RESIGNATIONS
Any director or officer of the Corporation, whether elected or appointed,
may resign at any time by giving written notice of such resignation to the
Chairman of the Board of Directors, the President, or the Secretary, and such
resignation shall be deemed effective as of the close of business on the date
said notice is received by the Chairman of the Board of Directors, the
President, or the Secretary, or at such later time as is specified therein. No
formal action shall be required of the Board of Directors or the stockholders to
make any such resignation effective.
ARTICLE VII
CAPITAL STOCK; DIVIDENDS; SEAL
Section 1. STOCK CERTIFICATES AND TRANSFERS. The interest of each
stockholder of the Corporation shall be evidenced by certificates for shares of
stock in such form as the appropriate officers of the Corporation may from time
to time prescribe. The shares of the stock of the Corporation shall be
transferred on the books of the Corporation by the holder thereof in person or
by such person's attorney upon surrender for cancellation of certificates for at
least the same number of shares, with an assignment and power of transfer
endorsed thereon or attached thereto, duly executed, and with such proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require. The certificates of stock shall be numbered and signed by the Chairman
of the Board of Directors, the President, an Executive Vice President, a Senior
Vice President or a Vice President, and also by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary. Any and all signatures
may be facsimiles. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he or
she were such officer, transfer agent or registrar at the date of issue.
Section 2. LOST, DESTROYED OR STOLEN CERTIFICATES. Any person claiming a
stock certificate in lieu of one lost, destroyed or stolen, shall give the
Corporation an affidavit as to his, her or its ownership of the certificate and
of the facts which go to prove that it has been lost, destroyed or stolen. If
required by the Board of Directors or any financial officer of the Corporation,
he, she or it also shall give the Corporation a bond, in such form as may be
approved by the Board of Directors or such financial officer, sufficient to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss of the certificate or the issuance of a new
certificate. A new certificate shall be issued upon receipt of such an affidavit
and, if required, upon the giving of such a bond.
Section 3. RECORD OF HOLDER OF SHARES. The Corporation shall be entitled
to treat the holder of record of any share or shares as the holder in fact
thereof, and accordingly shall not be bound to recognize
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any equitable or other claims to or interest in such shares on the part of any
other person, whether or not it shall have express or other notice thereof, save
as expressly provided by the General Corporation Law of the State of Delaware.
The Corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends and to vote
as such owner.
Section 4. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares of
capital stock in the manner and upon the terms and conditions provided by law
and the Charter.
Section 5. CORPORATE SEAL. The corporate seal shall be in such form as
shall from time to time be approved by the Board of Directors. If and when so
authorized by the Board of Directors, a duplicate of the seal may be kept and
used by the Secretary or Treasurer or by any Assistant Secretary or Assistant
Treasurer.
ARTICLE VIII
EXECUTION OF CONTRACTS AND OTHER DOCUMENTS
Section 1. CONTRACTS, ETC. Except as otherwise required by law, the
Charter or these By-laws, such officers, employees or agents of the Corporation
as shall be specified by the Board of Directors shall sign, in the name and on
behalf of the Corporation, all deeds, bonds, contracts, mortgages and other
instruments or documents, the execution of which shall be authorized by the
Board of Directors; and such authority may be general or confined to specific
instances. Except as so authorized by the Board of Directors, no officer, agent
or employee of the Corporation shall have the power or authority to bind the
Corporation by any contract or engagement or to pledge, mortgage, sell or
otherwise dispose of its credit or any of its property or to render it
pecuniarily liable for any purpose or in any amount.
Section 2. CHECKS, DRAFTS, ETC. Except as otherwise provided in these
By-laws, all checks, drafts, notes, bonds, bills of exchange or other orders,
instruments or obligations for the payment of money shall be signed by such
officer or officers, employee or employees, or agent or agents, as the Board of
Directors shall by resolution direct. The Board of Directors may, in its
discretion, also provide by resolution for the countersignature or registration
of any or all such orders, instruments or obligations for the payment of money.
Section 3. PROXIES. Unless otherwise prescribed by resolution adopted by
the Board of Directors, the Chairman of the Board of Directors, the President or
any Executive Vice President, Senior Vice President or Vice President may from
time to time appoint an attorney or attorneys or agent or agents of the
Corporation, in the name and on behalf of the Corporation, to cast the votes
which the Corporation may be entitled to cast as the holder of stock or other
securities in any other corporation, any of whose stock or other securities may
be held by the Corporation, at meetings of the holders of the stock or other
securities of such other corporation, or to consent in writing, in the name of
the Corporation as such holder, to any action by such other corporation, and may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent, and may execute or cause to be executed in the
name and on behalf of the Corporation and under its corporate seal or otherwise,
all such written proxies or other instruments as he or she may deem necessary or
proper in the premises.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall begin the first day of July in each
year.
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<PAGE>
ARTICLE X
MISCELLANEOUS
Section 1. NOTICES AND WAIVERS THEREOF. Whenever any notice whatever is
required by these By-laws, the Charter or any of the laws of the State of
Delaware to be given to any stockholder, director or officer, such notice,
except as otherwise provided by the laws of the State of Delaware, may be given
personally or by telephone or be given by facsimile transmission or other form
of electronic communication, addressed to such stockholder at such person's
address as it appears on the stock transfer books of the Corporation, or to such
director or officer at his or her Corporation location, if any, or at such
address as appears on the books of the Corporation, or the notice may be given
in writing by depositing the same in a post office, or in a regularly maintained
letter box, or by sending it via courier, postage prepaid, in a sealed wrapper
addressed to such stockholder at such person's address as it appears on the
stock transfer books of the Corporation, or to such director or officer at his
or her Corporation location, if any, or such address as appears on the books of
the Corporation.
Any notice given by facsimile transmission or other form of electronic
communication shall be deemed to have been given when it shall have been
transmitted. Any notice given by mail or courier shall be deemed to have been
given when it shall have been mailed or delivered to the courier.
A waiver of any such notice in writing, including by facsimile transmission,
signed or dispatched by the person entitled to such notice or by his or her duly
authorized attorney, whether before or after the time stated therein, shall be
deemed equivalent to the notice required to be given, and the presence at any
meeting of any person entitled to notice thereof shall be deemed a waiver of
such notice as to such person.
Section 2. AUDITS. The accounts, books and records of the Corporation
shall be audited upon the conclusion of each fiscal year by an independent
certified public accountant selected by the Board of Directors, and it shall be
the duty of the Board of Directors to cause such audit to be done annually.
ARTICLE XI
AMENDMENTS
These By-laws may be altered, amended or repealed, and new By-laws may be
adopted (a) at any annual or special meeting of stockholders by the affirmative
vote of the holders of a majority of the voting power of the stock issued and
outstanding and entitled to vote thereat, PROVIDED, HOWEVER, that any proposed
alteration, amendment or repeal of, or the adoption of any By-law inconsistent
with, Section 3, 5 or 10 of Article II or Section 1 or 5 of Article III of the
By-laws by the stockholders shall require the affirmative vote of the holders of
at least 80% of the voting power of all Voting Stock then outstanding, voting
together as a single class, and PROVIDED FURTHER, HOWEVER, that, in the case of
any such stockholder action at a special meeting of stockholders, notice of the
proposed alteration, amendment, repeal or adoption of the new By-law or By-laws
must be contained in the notice of such special meeting, or (b) by the
affirmative vote of a majority of the Whole Board.
B-12
<PAGE>
ANNEX C
EXCHANGE AGREEMENT
BETWEEN
SILICON GRAPHICS, INC.
AND
MIPS TECHNOLOGIES, INC.
DATED AS OF , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<C> <S> <C>
ARTICLE I
THE EXCHANGE
1.01. The Exchange....................................................................................... 1
1.02. Closing Date....................................................................................... 1
1.03. Exchange of Certificates........................................................................... 2
ARTICLE II
PURCHASE OBLIGATION
2.01. Required Purchase Amount........................................................................... 2
2.02. Common Stock to be Purchased....................................................................... 2
2.03. Purchase Price for Shares of Class B Common Stock.................................................. 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01. Organization and Qualification..................................................................... 3
3.02. Amended and Restated Certificate of Incorporation and By-Laws...................................... 4
3.03. Capitalization..................................................................................... 4
3.04. Authority Relative to This Agreement............................................................... 4
3.05. No Conflict; Required Filings and Consents......................................................... 4
3.06. Brokers............................................................................................ 5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SILICON GRAPHICS
4.01. Organization and Qualification; Subsidiaries....................................................... 5
4.02. Certificate of Incorporation and By-Laws........................................................... 5
4.03. Authority Relative to This Agreement............................................................... 5
4.04. No Conflict; Required Filings and Consents......................................................... 6
4.05. Ability to Consummate the Distribution............................................................. 6
4.06. Brokers............................................................................................ 6
ARTICLE V
ADDITIONAL AGREEMENTS
5.01. Ability to Consummate the Distribution............................................................. 6
5.02. Indemnification by Silicon Graphics................................................................ 6
5.03. Transfer Restrictions.............................................................................. 7
5.04. Tax Indemnification Agreement...................................................................... 7
ARTICLE VI
CONDITIONS TO THE EFFECTIVENESS OF THE AGREEMENT
6.01. Conditions to the Obligations of Each Party........................................................ 8
6.02. Conditions to the Obligations of Silicon Graphics.................................................. 8
6.03. Conditions to the Obligations of the Company....................................................... 9
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01. Termination........................................................................................ 9
7.02. Effect of Termination.............................................................................. 9
</TABLE>
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<TABLE>
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7.03. Amendment.......................................................................................... 9
7.04. Waiver............................................................................................. 10
7.05. Expenses........................................................................................... 10
ARTICLE VIII
GENERAL PROVISIONS
8.01. Notices............................................................................................ 10
8.02. Certain Definitions................................................................................ 10
8.03. Severability....................................................................................... 11
8.04. Assignment; Binding Effect; Benefit................................................................ 11
8.05. Specific Performance............................................................................... 11
8.06. Governing Law...................................................................................... 11
8.07. Headings........................................................................................... 11
8.08. Counterparts....................................................................................... 11
8.09. Entire Agreement................................................................................... 11
</TABLE>
<TABLE>
<C> <S> <C>
ANNEX A Certain Terms and Provisions of Tax Indemnification Agreement
</TABLE>
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EXCHANGE AGREEMENT dated as of , 1999 (this "AGREEMENT") between
SILICON GRAPHICS, INC., a Delaware corporation ("SILICON GRAPHICS"), and MIPS
TECHNOLOGIES, INC., a Delaware corporation (the "COMPANY").
W I T N E S S E T H
WHEREAS, on the date hereof, the authorized capital stock of the Company
consists of 200,000,000 shares, of which 150,000,000 shares are common stock,
par value $0.001 per share (the "EXISTING COMMON STOCK"), and 50,000,000 shares
are preferred stock, par value $0.001 per share (the "PREFERRED STOCK");
WHEREAS, pursuant to an amended and restated certificate of incorporation of
the Company (the "AMENDED AND RESTATED CERTIFICATE OF INCORPORATION"), the
Company intends to effect a recapitalization (the "RECAPITALIZATION") pursuant
to which (i) the authorized capital stock of the Company will increase to
300,000,000 shares, of which 150,000,000 shares will be shares of Class A Common
Stock, par value $0.001 per share (the "CLASS A COMMON STOCK"), 100,000,000
shares will be shares of Class B Common Stock, par value $0.001 per share (the
"CLASS B COMMON STOCK" and, together with the Class A Common Stock, the "COMMON
STOCK"), and 50,000,000 shares will be shares of Preferred Stock, and (ii) each
issued and outstanding share of Existing Common Stock will be changed into and
reclassified as one share of Class A Common Stock.
WHEREAS, immediately following the Recapitalization, Silicon Graphics will
be the beneficial owner of 31,750,000 shares of Class A Common Stock;
WHEREAS, upon the terms and subject to the conditions contained in this
Agreement, Silicon Graphics has agreed to exchange all of the issued and
outstanding shares of Class A Common Stock it will beneficially own immediately
following the Recapitalization for an equal number of shares of Class B Common
Stock (the "EXCHANGE");
WHEREAS, Silicon Graphics has indicated its present intention to divest of
its interest in the Company in one or more public and/or private offerings
followed by a distribution (the "DISTRIBUTION") generally intended to qualify
under Section 355 of the United States Internal Revenue Code of 1986, as amended
(the "CODE"); and
WHEREAS, in the event that the Distribution has not occurred prior to
December 31, 2000, Silicon Graphics shall become obligated to purchase a
specified number of shares of Common Stock on a quarterly basis, upon the terms
and subject to the conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Silicon Graphics and the Company hereby agree as follows:
ARTICLE I
THE EXCHANGE
SECTION 1.01. THE EXCHANGE. Upon the terms and subject to the conditions
set forth in Article VI, on the Closing Date (as defined below), each share of
Class A Common Stock beneficially owned by Silicon Graphics immediately
following the Recapitalization shall, in accordance with Section 1.03 herein, be
exchanged by Silicon Graphics for one share of Class B Common Stock, with each
such share of Class B Common Stock having the relative powers, preferences,
rights, qualifications, limitations and restrictions attaching to the Class B
Common Stock as specified in the Amended and Restated Certificate of
Incorporation.
SECTION 1.02. CLOSING DATE. The term "CLOSING DATE" means the date when
the Amended and Restated Certificate of Incorporation becomes effective under
the General Corporation Law of the State
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of Delaware. On the Closing Date, a closing will be held at the offices of
Shearman & Sterling, 555 California Street, 20(th) Floor, San Francisco, CA
94104 (or such other place as the parties may agree).
SECTION 1.03. EXCHANGE OF CERTIFICATES. On or prior to the Closing Date,
Silicon Graphics shall deposit, or shall cause to be deposited, with the Company
the certificate or certificates representing the shares of Class A Common Stock
beneficially owned by Silicon Graphics as of the Closing Date. On the Closing
Date, the Company shall issue to Silicon Graphics a new certificate or
certificates representing an aggregate number of shares of Class B Common Stock
equal to the aggregate number of shares of Class A Common Stock beneficially
owned by Silicon Graphics as of the Closing Date.
ARTICLE II
PURCHASE OBLIGATION
SECTION 2.01. REQUIRED PURCHASE AMOUNT. (a) Subject to terms and
conditions of this Agreement, if Silicon Graphics shall not have disposed of its
entire interest in the Company (whether through a Distribution or otherwise)
prior to December 31, 2000, Silicon Graphics shall, on the last day of each
fiscal quarter of the Company beginning on December 31, 2000 and ending on the
last day of the fiscal quarter immediately preceding any such disposition (the
last day of each such quarter being a "QUARTER END DATE"), accrue an obligation
to purchase, with respect to such Quarter End Date, the number of shares of
Common Stock set forth below (the total number of shares of Common Stock with
respect to any Quarter End Date, as reduced in accordance with Section 2.01(b)
below, being a "REQUIRED PURCHASE AMOUNT"):
<TABLE>
<CAPTION>
QUARTER END DATE REQUIRED PURCHASE AMOUNT
- --------------------------------------------------------------------------------------- -------------------------
<S> <C>
December 31, 2000...................................................................... 1,800,000
March 31, 2001......................................................................... 1,700,000
June 30, 2001.......................................................................... 1,800,000
September 30, 2001..................................................................... 1,700,000
December 31, 2001...................................................................... 1,800,000
March 31, 2002......................................................................... 1,700,000
June 30, 2002.......................................................................... 1,700,000
September 30, 2002..................................................................... 2,000,000
December 31, 2002 and each Quarter End Date............................................ 2,000,000
</TABLE>
(b) If, prior to the Purchase Date (as defined in Section 2.02) for any
Required Purchase Amount, the Company notifies Silicon Graphics in writing (such
writing hereinafter referred to as a "PURCHASE WAIVER") that the independent
directors and the Chief Executive Officer of the Company have unanimously
determined that the purchase of shares of Common Stock equal to such Required
Purchase Amount is not in the interests of the Company and its stockholders
other than Silicon Graphics and its affiliates (other than the Company), then
the Required Purchase Amount with respect to the related Quarter End Date shall
be reduced by the number of shares of Common Stock set forth in such Purchase
Waiver.
SECTION 2.02. COMMON STOCK TO BE PURCHASED. (a) At its sole option,
Silicon Graphics may satisfy its obligation to purchase shares of Common Stock
equal to any Required Purchase Amount by purchasing (i) newly issued shares of
Class B Common Stock from the Company, (ii) issued and outstanding shares of
Class A Common Stock in the public market or otherwise from a third party or
(iii) any combination of Class B Common Stock and Class A Common Stock pursuant
to (i) and (ii) above, in each case on or prior to the applicable Purchase Date.
If Silicon Graphics elects to purchase shares of Class B Common Stock from the
Company in full or partial satisfaction of its obligation to purchase shares of
Common Stock equal to the Required Purchase Amount, Silicon Graphics shall,
prior to the relevant Purchase Date for such Required Purchase Amount, deliver
to the Company a written notice (a "PURCHASE NOTICE") to such effect specifying
(A) the number of shares of Class B Common Stock to be purchased by Silicon
Graphics from the Company and (B) a calculation of the purchase price for such
shares as determined pursuant to
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<PAGE>
the terms of Section 2.03 of this Agreement. As soon as practicable following
receipt by the Company of a Purchase Notice, the Company will deliver to Silicon
Graphics, against payment therefor, certificates (issued in the name of Silicon
Graphics) representing the shares of Class B Common Stock being purchased
pursuant to such Purchase Notice. Payment for such shares shall be made by wire
transfer of immediately-available funds to such account as shall be specified by
the Company for the full purchase price of such shares. Each share of Common
Stock purchased by Silicon Graphics pursuant to this Section 2.02 shall also be
deemed to be a "Registered Security" under Article II of the Corporate
Agreement, dated as of July 6, 1998, between the Company and Silicon Graphics
(the "CORPORATE AGREEMENT") and therefore entitled to the benefits of said
Article III and the parties shall amend the Corporate Agreement to implement the
foregoing.
(b) The following shall apply in determining whether Silicon Graphics has
satisfied its obligation to purchase shares of Common Stock equal to the
Required Purchase Amount with respect to any Quarter End Date: (i) each share of
Class A Common Stock purchased by Silicon Graphics in the public market or
otherwise from a third party on or prior to the applicable Purchase Date shall
be counted as four (4) shares of Common Stock purchased in satisfaction of the
Required Purchase Amount and (ii) each share of Class B Common Stock purchased
by Silicon Graphics from the Company on or prior to the applicable Purchase Date
shall be counted as one (1) share of Common Stock purchased in satisfaction of
the Required Purchase Amount; PROVIDED, HOWEVER, that any shares of Class A
Common Stock purchased by Silicon Graphics in the public market or otherwise
from a third party shall only be applied in satisfaction of a Required Purchase
Amount one time.
(c) With respect to each Quarter End Date, Silicon Graphics shall make such
purchase or purchases of shares of Common Stock equal to the Required Purchase
Amount prior to the date (the "PURCHASE DATE") which is thirty (30) days
following the public announcement of financial results for the fiscal quarter of
the Company ending on such Quarter End Date.
SECTION 2.03. PURCHASE PRICE FOR SHARES OF CLASS B COMMON STOCK. The
purchase price per share for any newly issued shares of Class B Common Stock
purchased by Silicon Graphics from the Company in satisfaction of Silicon
Graphics' obligation to purchase a Required Purchase Amount shall be the average
of the closing prices per share of the Class A Common Stock on the Nasdaq
National Market for the last ten (10) trading days of the quarter immediately
preceding the applicable Purchase Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Silicon Graphics that:
SECTION 3.01. ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has all requisite corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing or in good standing or to have such corporate power,
authority and governmental approvals have not had, and could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect (as defined below). The Company is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that have not had, and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. The term
"COMPANY MATERIAL ADVERSE EFFECT" means any change in or effect on the business
of the Company that is materially adverse to the financial condition or results
of operations of the Company.
SECTION 3.02. AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND
BY-LAWS. The Company has heretofore made available to Silicon Graphics a
complete and correct copy of the Restated Certificate of
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Incorporation and the By-Laws of the Company. Such Restated Certificate of
Incorporation and By-Laws are in full force and effect. The Company is not in
violation of any of the provisions of its Restated Certificate of Incorporation
or By-Laws.
SECTION 3.03. CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 250,000,000 shares of Common Stock, of which 150,000,000 shares
are designated as Class A Common Stock and 100,000,000 shares are designated as
Class B Common Stock and (b) 50,000,000 shares of Preferred Stock. As of the
date of this Agreement (after giving effect to the Recapitalization but prior to
giving effect to the Exchange contemplated hereby), (i) [37,265,000] shares of
Class A Common Stock are issued and outstanding, all of which are validly
issued, fully paid and nonassessable, (ii) no shares of Class B Common Stock are
issued and outstanding, (iii) no shares of Common Stock are held in the treasury
of the Company, (iv) no shares of the Preferred Stock are issued and outstanding
and (v) [ ] shares are reserved for future issuance pursuant to options
(the "COMPANY STOCK OPTIONS"). Other than pursuant to the 1998 Long-Term
Incentive Plan and the Employee Stock Purchase Plan (the "COMPANY STOCK OPTION
PLANS") and the Corporate Agreement, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or obligating the Company to
issue or sell any shares of capital stock of, or other equity interests in, the
Company. All shares of Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. There are no outstanding contractual obligations of the Company
to repurchase, redeem or otherwise acquire any shares of Common Stock.
SECTION 3.04. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and, subject to the filing of the Amended and Restated Certificate of
Incorporation of the Company with the Secretary of State of the State of
Delaware, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The Recapitalization has been
approved and adopted by (i) the affirmative vote of the holders of a majority of
the issued and outstanding shares of Existing Common Stock and (ii) the
affirmative vote of the holders of a majority of the issued and outstanding
shares of Existing Common Stock (excluding Silicon Graphics and its affiliates
as a stockholder for the purposes of this clause (ii)) and in accordance with
the Company's Restated Certificate of Incorporation. The execution and delivery
of this Agreement by the Company and the consummation by the Company of the
Recapitalization and the transactions contemplated by this Agreement have been
duly and validly authorized by all necessary corporate action and, except for
the filing of the Amended and Restated Certificate of Incorporation of the
Company with the Secretary of State of the State of Delaware, no other corporate
proceedings on the part of the Company are necessary to authorize the
Recapitalization, this Agreement or to consummate the transactions contemplated
by this Agreement. This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery by Silicon Graphics, constitutes a legal, valid and binding obligation
of the Company.
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Amended and Restated Certificate of Incorporation or the Amended and
Restated By-laws of the Company, (ii) conflict with or violate any foreign or
domestic law, statute, ordinance, rule, regulation, order, judgment or decree
("LAW") applicable to the Company or by which any property or asset of the
Company is bound or affected, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Company pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation, except, with respect to clause (iii), for any
such conflicts, violations, breaches, defaults or other occurrences that have
not had, and could not reasonably be expected to have, individually or in the
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<PAGE>
aggregate, a Company Material Adverse Effect, and that could not reasonably be
expected to prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
domestic or foreign governmental or regulatory authority ("GOVERNMENTAL
ENTITY"), except (i) for applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the "EXCHANGE ACT"), state securities or "blue sky" laws
("BLUE SKY LAWS") and The Nasdaq Stock Market, Inc. and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, has not had, and could not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, and
could not reasonably be expected to prevent or materially delay the consummation
of the transactions contemplated by this Agreement.
SECTION 3.06. BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Recapitalization or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SILICON GRAPHICS
Silicon Graphics hereby represents and warrants to the Company that:
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of
Silicon Graphics and each subsidiary of Silicon Graphics other than the Company
(the "SILICON GRAPHICS SUBSIDIARIES") is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all corporate requisite power and authority and all
necessary governmental approvals to own, lease and operate its properties and to
carry on its business as it is now being conducted, except where the failure to
be so organized, existing or in good standing or to have such corporate power,
authority and governmental approvals have not had, and could not reasonably be
expected to have, individually or in the aggregate, a Silicon Graphics Material
Adverse Effect (as defined below). Each of Silicon Graphics and the Silicon
Graphics Subsidiaries is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that have not had, and could not
reasonably be expected to have, individually or in the aggregate, a Silicon
Graphics Material Adverse Effect. The term "SILICON GRAPHICS MATERIAL ADVERSE
EFFECT" means any change in or effect on the business of Silicon Graphics or the
Silicon Graphics Subsidiaries that is materially adverse to the financial
condition or results of operations of Silicon Graphics and the Silicon Graphics
Subsidiaries taken as a whole.
SECTION 4.02. CERTIFICATE OF INCORPORATION AND BY-LAWS. Silicon Graphics
has heretofore made available to the Company a complete and correct copy of the
Certificate of Incorporation and the By-Laws of Silicon Graphics. Such
Certificate of Incorporation and By-Laws are in full force and effect. Silicon
Graphics is not in violation of any of the provisions of its Certificate of
Incorporation or By-Laws.
SECTION 4.03. AUTHORITY RELATIVE TO THIS AGREEMENT. Silicon Graphics has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Silicon Graphics and the consummation by Silicon Graphics of the
transactions contemplated by this Agreement have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of Silicon Graphics are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement. This Agreement has
been duly and validly executed and delivered by Silicon Graphics and, assuming
the due authorization, execution and delivery by the Company, constitutes a
legal, valid and binding obligation of Silicon Graphics.
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SECTION 4.04. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Silicon Graphics do not, and the
performance of this Agreement by Silicon Graphics will not, (i) conflict with or
violate the certificate of incorporation or by-laws of Silicon Graphics or any
other Silicon Graphics Subsidiary, (ii) conflict with or violate any Law
applicable to Silicon Graphics or any Silicon Graphics Subsidiary or by which
any property or asset of Silicon Graphics or any Silicon Graphics Subsidiary is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Silicon Graphics or any Silicon Graphics Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation, except, with
respect to clause (iii), for any such conflicts, violations, breaches, defaults,
or other occurrences that have not had, and could not reasonably be expected to
have, individually or in the aggregate, a Silicon Graphics Material Adverse
Effect, and that could not reasonably be expected to prevent or materially delay
the consummation of the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by Silicon Graphics do not,
and the performance of this Agreement by Silicon Graphics will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except (i) for applicable requirements, if any, of
the Exchange Act and Blue Sky Laws, and (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, has not had, and could not reasonably be expected to have,
individually or in the aggregate, a Silicon Graphics Material Adverse Effect,
and could not reasonably be expected to prevent or materially delay the
consummation of the transactions contemplated by this Agreement
SECTION 4.05. ABILITY TO CONSUMMATE THE DISTRIBUTION. As of the date of
this Agreement, Silicon Graphics is not aware of any legal or contractual
restriction affecting it or any of its assets or properties that could
reasonably be expected to prevent or materially delay the consummation of the
Distribution.
SECTION 4.06. BROKERS. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Recapitalization or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Silicon Graphics.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. ABILITY TO CONSUMMATE THE DISTRIBUTION. Silicon Graphics
shall use its reasonable efforts to avoid becoming voluntarily or involuntarily
subject to any legal or contractual restriction that could reasonably be
expected to prevent the consummation of the Distribution; PROVIDED, HOWEVER,
that Silicon Graphics shall be permitted to enter into commercially reasonable
agreements in the ordinary course of business and consistent with past practice
which may contain provisions restricting Silicon Graphics' ability to consummate
the Distribution, including, but not limited to, provisions that restrict the
ability of Silicon Graphics to declare, set aside or pay any dividend or other
distribution in respect of its capital stock.
SECTION 5.02. INDEMNIFICATION BY SILICON GRAPHICS. (a) Silicon Graphics
shall indemnify and hold harmless the Company, its affiliates and their
successors and assigns, and the officers, directors, employees and agents of the
Company, its affiliates and their successors and assigns (each an "INDEMNIFIED
PARTY") from and against any and all liabilities, losses, damages, claims, costs
and expenses, interest, awards, judgments and penalties (including, without
limitation, attorneys' and consultants' fees and expenses) actually suffered or
incurred by them (including, without limitation, any action brought or otherwise
initiated by any of them) (hereinafter a "LOSS") by reason of or in connection
with any claim or cause of action of any third party (a "THIRD PARTY CLAIM"), to
the extent, but only to the extent, such Third Party
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Claim arises out of the Recapitalization or the Distribution; PROVIDED, HOWEVER,
that any such Third Party Claim shall have been brought prior to the expiration
of the applicable statute of limitations period governing such claim.
(b) Notwithstanding anything to the contrary in Section 5.02(a), Silicon
Graphics shall not be obligated under Section 5.02(a) to indemnify and hold
harmless any Indemnified Party for any Losses suffered or incurred by an
Indemnified Party by reason of or in connection with any secondary sales by
Silicon Graphics of Common Stock following the Recapitalization.
(c) If an Indemnified Party shall receive notice of any Third Party Claim,
the Indemnified Party shall give Silicon Graphics notice of such Third Party
Claim within 30 days of the receipt by the Indemnified Party of such notice;
PROVIDED, HOWEVER, that the failure to provide such notice shall not release
Silicon Graphics from any of its obligations under this Section 5.02 except to
the extent Silicon Graphics is materially prejudiced by such failure and shall
not relieve Silicon Graphics from any other obligation or liability that it may
have to any Indemnified Party otherwise than under this Section 5.02. If Silicon
Graphics acknowledges in writing its obligation to indemnify the Indemnified
Party hereunder against any Losses that may result from such Third Party Claim,
then Silicon Graphics shall be entitled to assume and control the defense of
such Third Party Claim at its expense and through counsel of its choice if it
gives notice of its intention to do so to the Indemnified Party within five days
of the receipt of such notice from the Indemnified Party; PROVIDED, HOWEVER,
that if there exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate in the judgment of the Indemnified Party, in
its sole and absolute discretion, for the same counsel to represent both the
Indemnified Party and Silicon Graphics, then the Indemnified Party shall be
entitled to retain its own counsel, in each jurisdiction for which the
Indemnified Party determines counsel is required, at the expense of Silicon
Graphics. In the event Silicon Graphics exercises the right to undertake any
such defense against any such Third Party Claim as provided above, the
Indemnified Party shall cooperate with Silicon Graphics in such defense and make
available to Silicon Graphics, at Silicon Graphics' expense, all witnesses,
pertinent records, materials and information in the Indemnified Party's
possession or under the Indemnified Party's control relating thereto as is
reasonably required by Silicon Graphics. Similarly, in the event the Indemnified
Party is, directly or indirectly, conducting the defense against any such Third
Party Claim, Silicon Graphics shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party, at Silicon Graphics'
expense, all such witnesses, records, materials and information in Silicon
Graphics' possession or under Silicon Graphics' control relating thereto as is
reasonably required by the Indemnified Party. No such Third Party Claim may be
settled by Silicon Graphics without the prior written consent of the Indemnified
Party.
SECTION 5.03. TRANSFER RESTRICTIONS. Silicon Graphics has been advised and
understands that all shares of Class B Common Stock acquired by Silicon Graphics
in satisfaction of its obligations under Article II or as a result of the
automatic conversion of shares of Class A Common Stock into shares of Class B
Common Stock in accordance with Article IV of the Amended and Restated
Certificate of Incorporation have not been registered under the Securities Act
of 1933, as amended (the "SECURITIES ACT"). The parties hereto agree that such
shares may be resold, pledged or otherwise transferred by Silicon Graphics only
(a) to the Company (upon exchange or redemption thereof or otherwise), (b)
pursuant to an exemption from registration under the Securities Act, or (c) in
accordance with Article III of the Corporate Agreement.
SECTION 5.04. TAX INDEMNIFICATION AGREEMENT. Prior to the Distribution,
the Company and Silicon Graphics shall enter into a Tax Indemnification
Agreement regarding such Distribution which shall contain (i) each of the terms
and provisions included in Appendix A hereto and (ii) such other terms and
provisions as are customary for such agreements and as shall be mutually agreed
to by the parties.
SECTION 5.05. EXCHANGE OF SHARES UPON CHANGE IN TAX LAW. (a) If, prior to
a Distribution, (i) the Code has been amended by the enactment of new
legislation which generally imposes a requirement to the
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effect that in a tax-free spin-off of a subsidiary, the distributing company
must hold not less than 80% of the value of all or a portion of the subsidiary's
stock (such change in the Code being a "CHANGE IN TAX LAW") AND (ii) Silicon
Graphics receives from the Company an opinion of counsel reasonably satisfactory
to Silicon Graphics that such Change in Tax Law would apply to a Distribution,
then Silicon Graphics shall, and shall cause each of its subsidiaries (other
than the Company) to, exchange each share of Class B Common Stock owned by it
for one share of Class A Common Stock.
(b) Within twenty (20) days of its receipt of the opinion referred to in
clause (ii) of Section 5.05(a), Silicon Graphics shall, and shall cause each of
its subsidiaries (other than the Company) to, deliver to the Company the
certificate or certificates representing the shares of Class B Common Stock it
owns and, upon receipt of such certificate or certificates, the Company shall
issue a certificate or certificates to Silicon Graphics or such subsidiary, as
the case may be, for the aggregate number of shares of Class A Common Stock
issuable in exchange therefor pursuant to Section 5.05(a).
ARTICLE VI
CONDITIONS TO THE EFFECTIVENESS OF THE AGREEMENT
SECTION 6.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations
of the Company and Silicon Graphics to consummate this Agreement are subject to
the satisfaction or waiver (where permissible) of the following conditions:
(a) the Amended and Restated Certificate of Incorporation shall have
become effective in accordance with the General Corporation Law of the State
of Delaware;
(b) no Governmental Entity or court of competent jurisdiction located or
having jurisdiction in the United States shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, judgment,
decree, executive order or award (an "Order") which is then in effect and
has the effect of making the Recapitalization or the transactions
contemplated by this Agreement illegal or otherwise prohibiting consummation
of the Recapitalization or the transactions contemplated by this Agreement;
(c) the shares of Class A Common Stock to be issued in the
Recapitalization shall have been approved for quotation on the Nasdaq
National Market;
(d) a registration statement on Form 8-A (the "REGISTRATION STATEMENT")
registering the Class A Common Stock under the Exchange Act shall have
become effective upon filing with the Securities and Exchange Commission
("SEC") and no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall
have been initiated by the SEC; and
(e) all consents, approvals and authorizations legally required to be
obtained to consummate this Agreement shall have been obtained from and made
with all Governmental Entities, except for such consents, approvals and
authorizations the failure of which to obtain would not have a material
adverse effect on the ability of the Company or Silicon Graphics to
consummate the transactions contemplated hereby.
SECTION 6.02. CONDITIONS TO THE OBLIGATIONS OF SILICON GRAPHICS. The
obligations of Silicon Graphics to consummate this Agreement are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) each of the representations and warranties of the Company contained
in this Agreement shall be true and correct as of the Closing Date as though
made on and as of the Closing Date, except where failure to be so true and
correct would not have a Company Material Adverse Effect, and except that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, except where
failure to be so true and correct would not
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have a Company Material Adverse Effect, and Silicon Graphics shall have
received a certificate of the Chief Executive Officer or Chief Financial
Officer of the Company to such effect; and
(b) the Company shall have performed or complied with in all material
respects all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date, and
Silicon Graphics shall have received a certificate of the Chief Executive
Officer or Chief Financial Officer of the Company to that effect.
SECTION 6.03. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate this Agreement are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) each of the representations and warranties of Silicon Graphics
contained in this Agreement shall be true and correct as of the Closing
Date, as though made on and as of the Closing Date, except where the failure
to be so true and correct would not have a Silicon Graphics Material Adverse
Effect, and except that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of
such date, except where the failure to be so true and correct would not have
a Silicon Graphics Material Adverse Effect, and the Company shall have
received a certificate of an executive officer of Silicon Graphics to such
effect; and
(b) Silicon Graphics shall have performed or complied with in all
material respects all agreements and covenants required by this Agreement to
be performed or complied with by it on or prior to the Closing Date, and the
Company shall have received a certificate of an executive officer of Silicon
Graphics to such effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. TERMINATION. This Agreement, including without limitation
the obligations of Silicon Graphics under Article II hereof, may be terminated,
and the other transactions contemplated by this Agreement may be abandoned at
any time, notwithstanding any requisite approval and adoption of this Agreement
and the transactions contemplated by this Agreement, as follows:
(a) by mutual written consent of the parties, duly authorized by their
respective boards of directors based on, in the case of the Company, the
unanimous recommendation of the independent directors of the Company; and
(b) by either party, upon the occurrence of a Change in Tax Law.
SECTION 7.02. EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 7.01, this Agreement shall forthwith become void,
there shall be no liability under this Agreement on the part of Silicon Graphics
or the Company or any of their respective officers or directors, and all rights
and obligations of each party hereto shall cease; PROVIDED, HOWEVER, that
nothing herein shall relieve any party from liability for the wilful breach of
any of its representations, warranties, covenants or agreements set forth in
this Agreement; and PROVIDED, FURTHER, that the obligations of Silicon Graphics
(i) under Section 5.02(a) to indemnify an Indemnified Party for Losses suffered
or incurred by reason of or in connection with a Third Party Claim arising out
of the Recapitalization or Distribution and (ii) under Section 7.05 to reimburse
certain fees and expenses incurred by the Company in connection with the
Recapitalization and the Distribution, shall survive.
SECTION 7.03. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 7.04. WAIVER. At any time any party hereto may (a) extend the time
for the performance of any obligation or other act of any other party hereto,
(b) waive any inaccuracy in the representations
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and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party to be bound thereby.
SECTION 7.05. EXPENSES. Silicon Graphics shall reimburse the Company for
the fees and expenses of legal counsel to the Special Committee incurred by the
Company in connection with the Recapitalization and the Distribution, whether or
not the Recapitalization or Distribution is consummated, in an amount set forth
in a budget to be agreed to between the parties (the "BUDGET"). In the event
that the scope or expected amount of legal work on which the Budget was based
changes, the parties shall agree to a revised budget for legal fees and expenses
(the "REVISED BUDGET") and Silicon Graphics shall pay for such revised legal
fees and expenses in accordance with the Revised Budget. Silicon Graphics shall
also reimburse the Company for (i) the reasonable fees and expenses of its
financial advisor and (ii) all other reasonable out-of-pocket expenses incurred
by the Company in connection with the Recapitalization and the Distribution.
Silicon Graphics will be responsible for all of the fees, costs and expenses
incurred by Silicon Graphics in connection with the Recapitalization and the
Distribution, whether or not consummated.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, facsimile, telegram or telex or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 8.01):if to Silicon Graphics:
Silicon Graphics, Inc.
2011 N. Shoreline Boulevard
Mountain View, CA 94043
Facsimile No.: (650) 933-7096
Attention: Director, Corporate Legal Services
if to the Company:
MIPS Technologies, Inc.
1225 Charleston Avenue
Mountain View, CA 94043
Facsimile No.: (650) 567-5150
Attention: Chief Executive Officer
SECTION 8.02. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "AFFILIATE" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or
is under common control with such specified person;
(b) "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise; and
(c) "PERSON" means an individual, corporation, partnership, limited
partnership, syndicate, person (including, without limitation, a "PERSON" as
defined in section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government.
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SECTION 8.03. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
be consummated as originally contemplated to the fullest extent possible.
SECTION 8.04. ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Except as provided
in Section 5.02, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
SECTION 8.05. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 8.06. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California applicable to
contracts executed in and to be performed in that state and without regard to
any applicable conflicts of law.
SECTION 8.07. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 8.08. COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 8.09. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings among the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon any party hereto unless made in writing and
signed by all parties hereto.
IN WITNESS WHEREOF, Silicon Graphics and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
<TABLE>
<S> <C> <C> <C>
SILICON GRAPHICS, INC.
Attest
by: By
------------------------------------ ------------------------------------
Name: Name:
Title: Title:
MIPS TECHNOLOGIES, INC.
Attest
by: By
------------------------------------ ------------------------------------
Name: Name:
Title: Title:
</TABLE>
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APPENDIX A
CERTAIN TERMS AND PROVISIONS OF TAX INDEMNIFICATION AGREEMENT
1. LIMITATIONS ON CERTAIN ACTIONS. MIPS covenants and agrees that
following the Distribution it will not take, or cause or allow any MIPS
Affiliate to take, any of the following actions:
(A) for the thirty (30)-month period beginning on the date of the
Distribution, issue stock of MIPS in an acquisition or public or private
offering, except that MIPS or any MIPS Affiliate may issue stock:
(1) pursuant to the exercise of employee, director or consultant stock
options, stock awards, stock purchase rights or other employment related
arrangements under any stock incentive plan then in existence; and
(2) up to a cumulative amount of ten percent (10%) of the outstanding
stock of MIPS at the time of the Distribution;
(B) for the five (5)-year period beginning on the date of the Distribution,
amend its certificate of incorporation (or other organizational documents),
whether through a stockholder vote or otherwise, in a manner that affects the
relative voting rights of the separate classes of MIPS stock (including, without
limitation, through the conversion Class B Stock into Class A Stock);
(C) for the five (5)-year period beginning on the date of the Distribution,
exchange any shares of Class B Stock for Class A Stock, including pursuant to
the MIPS Exchange Right;
(D) take, or fail to take, any action where such action or failure to act
would be inconsistent with any material, information, covenant or representation
in the Ruling Documents, Supplemental Ruling Documents, Ruling or Supplemental
Ruling.
(E) for the thirty (30)-month period beginning on the date of the
Distribution, knowingly and voluntarily take any action which it believes will
more likely than not result in the Distribution failing to qualify under Section
355 or cause the Distribution otherwise to be taxable under Section 355(e).
2. INDEMNITY BY MIPS. Except as provided in Section 3, MIPS and each MIPS
Affiliate shall jointly and severally indemnify SGI, each SGI Affiliate and
their directors, officers and employees and hold them harmless from and against
any federal, state or local income or franchise taxes imposed as a result of the
Distribution failing to qualify under Section 355 or otherwise being taxable
under Section 355(e) as a result of:
(A) MIPS or a MIPS Affiliate breaching any of the covenants contained in
Section 1;
(B) any acquisition of stock of MIPS or any MIPS Affiliate by any person or
persons (including, without limitation, as a merger of another entity with and
into MIPS or any MIPS Affiliate) or any acquisition of assets of MIPS or any
MIPS Affiliate (including, without limitation, as a result of a merger) by any
person or persons.
3. PERMITTED ACTIONS. Notwithstanding the provisions of Sections 1 and 2,
MIPS and each MIPS Affiliate shall have no obligation to indemnify under Section
2 (and may take any action otherwise prohibited by Section 1) if:
(A) SGI obtains a Supplemental Ruling that rules that such action will not
cause the Distribution to fail to qualify under Section 355 or otherwise to be
taxable under Section 355(e);
(B) SGI consents to such action; or
(C) MIPS delivers to SGI an opinion, in form reasonably satisfactory to SGI,
of nationally recognized tax counsel, to the effect that such action will not
cause the Distribution to fail to qualify under Section 355 or otherwise to be
taxable under Section 355(e).
<PAGE>
4. SUPPLEMENTAL RULINGS.
(A) REQUEST BY SGI. SGI shall have the right to obtain a Supplemental Ruling
in its sole and exclusive discretion. If SGI determines to obtain a Supplemental
Ruling, MIPS shall cooperate with SGI and take any and all actions reasonably
requested by SGI in connection with obtaining the Supplemental Ruling
(including, without limitation, by making any representation or covenant or
providing any materials or information requested by the Internal Revenue
Service; provided that, MIPS shall not be required to make any representation or
covenant that is inconsistent with historical facts or as to future matters or
events over which it has no control). In connection with obtaining a
Supplemental Ruling, (i) SGI shall cooperate with and keep MIPS informed in a
timely manner of all material actions taken or proposed to be taken by SGI in
connection therewith; (ii) SGI shall (A) reasonably in advance of the submission
of any Supplemental Ruling Documents, provide MIPS with a draft copy thereof,
(B) reasonably consider MIPS's comments on such draft copy, and (C) provide MIPS
with a final copy; and (iii) SGI shall provide MIPS with notice reasonably in
advance of, and MIPS shall have the right to attend, any formally scheduled
meetings with the Internal Revenue Service (subject to the approval of the
Internal Revenue Service) that relate to such Supplemental Ruling.
(B) REQUEST BY MIPS. SGI agrees that at the reasonable request of MIPS, SGI
shall cooperate with MIPS and use its reasonable best efforts to seek to obtain,
as expeditiously as possible, a Supplemental Ruling or other guidance from the
Internal Revenue Service for the purpose of confirming the continuing validity
of (A) the Ruling or (B) any Supplemental Ruling issued previously. Further, in
no event shall SGI file any Supplemental Ruling under this Section 4 unless MIPS
represents that (1) it has read the request for the Supplemental Ruling and any
Supplemental Ruling Documents and (2) all information and representations, if
any, relating to MIPS and any MIPS Affiliate contained in the Supplemental
Ruling Documents are true, correct and complete in all material respects. MIPS
shall reimburse SGI for all reasonable costs and expenses incurred by SGI in
obtaining a Supplemental Ruling requested by MIPS. MIPS hereby agrees that SGI
shall have sole and exclusive control over the process of obtaining a
Supplemental Ruling, and that only SGI shall apply for a Supplemental Ruling.
MIPS further agrees that it shall not seek any guidance from the Internal
Revenue Service or any other tax authority concerning the Distribution except as
set in this Section 4(B). In connection with obtaining any such Supplemental
Ruling, (i) SGI shall cooperate with and keep MIPS informed in a timely manner
of all material actions taken or proposed to be taken by SGI in connection
therewith; (ii) SGI shall (A) reasonably in advance of the submission of any
Supplemental Ruling Documents, provide MIPS with a draft copy thereof, (B)
reasonably consider MIPS's comments on such draft copy, and (C) provide MIPS
with a final copy; and (iii) SGI shall provide MIPS with notice reasonably in
advance of, and MIPS shall have the right to attend, any formally scheduled
meetings with the Internal Revenue Service (subject to the approval of the
Internal Revenue Service) that relate to such Supplemental Ruling.
2
<PAGE>
FORM OF PROXY FORM OF PROXY
MIPS TECHNOLOGIES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING -- [MEETING DATE], 1999
JOHN E. BOURGOIN, KEVIN C. EICHLER and SANDY CREIGHTON, or any of them, each
with the power of substitution, are hereby authorized to represent as proxies
and vote all shares of stock of MIPS Technologies, Inc. (the "Company") the
undersigned is entitled to vote with respect to the proposals set forth below
and in the discretion of such proxies on all other matters that may properly
be presented for action at the Special Meeting of Stockholders of the Company
to be held at the [Place], [Address], [City], [State] on [DAY], [MEETING
DATE], 1999 at [____a.m.] or at any postponement or adjournment
thereof, and instructs said proxies to vote as follows:
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO SUCH DIRECTIONS ARE INDICATED, THE PROXIES WILL HAVE
AUTHORITY TO VOTE FOR PROPOSAL.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
^ FOLD AND DETACH HERE ^
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
Please mark your votes as
indicated in this example /X/
1. To approve the Recapitalization FOR AGAINST ABSTAIN
Proposal, including the approval / / / / / /
and adoption of the proposed
amended and restated Certificate
of Incorporation and By-laws of
the Company and the exchange by
Silicon Graphics, Inc. of each
share of Class A common stock it
will own for one share of Class B
common stock.
PLEASE MARK, SIGN, DATE AND
PROMPTLY RETURN THIS PROXY IN THE
ENCLOSED ENVELOPE.
Signature(s)__________________________ Dated:_____________________________, 1999
Please sign exactly as your name or name(s) appear in this proxy. When
signing as attorney, executor, administrator, trustee or guardian, please
give your full title as such. If shares are held jointly, each holder should
sign.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
^ FOLD AND DETACH HERE ^
